Tim Stevenson gives an overview of performance, strategic focus, talent, culture and values

Tim Stevenson, Chairman of Johnson Matthey

Summary

  • Strategic focus and effective management enabled the group to deliver a robust performance despite the challenging macroeconomic environment.
  • Continued investment to support future growth.
  • Special dividend of 150 pence per share paid in February 2016, proposed ordinary dividend of 71.5 pence up 5% on last year.
  • Board focused on the development and execution of strategy, board effectiveness and the company's people, culture and values.
  • Ongoing emphasis on the development of value adding sustainable technologies. The group remains well placed for continued growth.
Overview

The macroeconomic environment this year has created difficult trading conditions for some of our businesses. In that context I am pleased to report that Johnson Matthey has maintained momentum overall, delivering a robust performance. At the same time, we have continued to invest in R&D, our facilities and our business systems to enable future growth. Underlying earnings per share of 178.7 pence were slightly down on last year.

We have further refined our strategy of focusing on value adding sustainable technologies and have responded to the difficult conditions in some markets by taking action to reduce our costs. Since early March 2015, two non-core businesses have been sold and the proceeds returned to shareholders through a special dividend. At the same time we have also made a number of bolt-on acquisitions that have strengthened our capabilities.

Health and safety is a priority across the group; it is the first item on every board and management committee agenda. Tragically, last summer an accident at our Fine Chemicals' Riverside facility in the US resulted in the death of one of our colleagues. This has reinforced our determination to ensure that at all times our people are aware of the importance of managing our business in a way that prevents accidents and injuries across the group. The 26% reduction in our lost time injury and illness rate illustrates that progress towards this goal is well underway.

Performance

The solid performance for the group as a whole was underpinned by another strong year for Emission Control Technologies. With air quality remaining high on the global agenda, sales of our emission control catalysts continued to grow. Elsewhere, Fine Chemicals made progress and in New Businesses we have continued our investment to drive future growth, notably in the area of battery materials.

Challenging macroeconomic conditions in the markets for Process Technologies and Precious Metal Products, which are expected to remain for a number of years to come, demanded a high level of management responsiveness. In both divisions, costs have been reduced which will benefit the group over the coming year. However, we recognise and regret the difficulties this will have caused to those employees who, as a result, left the group during the year.

Strategic Focus

Our strategy is clear and we will continue to review and refine it. Our overall ambition is to create value for our shareholders by investing in both our established areas of expertise and in developing the next generation of sustainable technologies.

We have continued to invest over 5% of sales on R&D which is directed towards those areas of the business which best align with our strategy and enable us to expand our portfolio of short, medium and long term technology options. Likewise, we have increased our investment in capital expenditure to support future anticipated growth.

Talent, Culture and Values

Making sure we have the right people and a pipeline of talent for the future needs of the business is critical to the continuing success of the group and we have in place comprehensive plans to make this happen. Providing employees with the right opportunities for career development in a culture in which they are encouraged to succeed will help build a more sustainable and profitable company for our shareholders, a better place to work for our people and will create value adding sustainable technologies for our customers.

As a board we understand that setting the tone from the top starts with us. It is important that we ensure that there is the right emphasis on health and safety and on doing the right thing wherever we do business. Programmes are in place to help our employees understand what is expected of them.
Board Matters

The board's role is to set the group's strategic direction, manage risk and have financial and operational oversight of the group. During the year, we have particularly focused on the three priorities which I have already mentioned: the development and execution of strategy; ensuring we have the right people; and encouraging and supporting the embedding of appropriate culture and values throughout the group.

To be effective in its role, the board requires a balance of skills, experience and appropriate diversity in our directors. The board's needs in this regard will change over time and we are alert to the necessity to keep the membership appropriately refreshed.

Reflecting on the changes to the board announced this year, I would like to thank Larry Pentz, who retired on 31st March 2016, for his tremendous contribution over 13 years as a member of our board and over 32 years as an employee of Johnson Matthey.

On behalf of the board, I also wish to thank Den Jones who, for personal reasons and following a mutual agreement with the company, will step down as Group Finance Director over the summer this year. We wish him well in his future endeavours.

Following nine years on the board, including the last two as Chair of our Remuneration Committee, Dorothy Thompson will step down as a Non-Executive Director in July this year. We have greatly valued her input to the work of the board and thank her for her contribution.

I am delighted that from 1st January 2017 we will welcome Jane Griffiths to the board as a Non-Executive Director. Jane, who is currently Company Group Chairman of Janssen EMEA, the research based pharmaceutical arm of Johnson & Johnson, will bring significant experience and understanding of the management of global businesses, particularly across the pharmaceutical sector, together with a strong interest in diversity and the encouragement of women's careers in business. I look forward to working with her and to her contribution to the board.

In Conclusion

Although the macroeconomic conditions we encountered over the last year are likely to persist in 2016/17, we have taken the necessary short term actions where needed and at the same time continued to invest for the long term to drive future growth.

Key to the group's performance during the year has been our employees. It has been a difficult and demanding year and as usual they have risen to the challenge. On behalf of all our shareholders, I give our thanks and appreciation to them all. You can read more about their contributions over the past 12 months to the company's success in this report.

The long term drivers for the group, in particular the need for improved air quality, a growing and ageing population and the efficient use of natural resources, remain firm. We are well placed to benefit from them. I am confident that this, in combination with our unrivalled technical expertise, deep understanding of customers' applications and excellent people, will ensure the continued success of Johnson Matthey.

Tim Stevenson
Chairman