Johnson Matthey FY results and strategy update

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Johnson Matthey (JMAT)

UK 100

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Catalysing the net zero transition to drive value creation

Reinvigorated strategy and new Leadership Team driving high performance culture
·	Completed in-depth review of the business and strategy, assessing full range of options
·	Simplified business portfolio focused on four businesses enabling the automotive, chemical and energy industries transition to net zero
·	New transformation programme to deliver £150 million annualised cost savings by 2024/25, enhance decision-making pace and exploit synergy potential between sectors
·	New global leadership team to drive high-performance culture and pace of strategic execution
·	Focus on sustainable value creation accelerating to high single digit growth¹ over the medium term, and strong long-term growth, supported by a reliable dividend

Enquiries:
Investor Relations
Martin Dunwoodie Louise Curran Carla Fabiano	Director of Investor Relations Senior Investor Relations Manager Senior Investor Relations Manager	+44 20 7269 8241 +44 20 7269 8235 +44 20 7269 8004
Media
Barney Wyld Harry Cameron	Group Corporate Affairs Director Tulchan Communications	+44 20 7269 8001 +44 7799 152148

Notes:
1.	At constant precious metal prices and FX rates (2021/22 average).
2.	Underlying is before profit or loss on disposal of businesses, gain or loss on significant legal proceedings together with associated legal costs, amortisation of acquired intangibles, major impairment and restructuring charges and, where relevant, related tax effects. For definitions and reconciliations of other non-GAAP measures, see pages 51 to 54.
3.	2020/21 is restated to reflect the group's updated reporting segments and removal of inter-segment copper zeolite sales in Efficient Natural Resources as well as the classification of Health as a discontinued operation.
4.	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 2020/21 results converted at 2021/22 average rates. In 2021/22, the translational impact of exchange rates on group sales and underlying operating profit was an adverse impact of c.£101 million and c.£17 million respectively.
5.	Revenue excluding sales of precious metals to customers and the precious metal content of products sold to customers.
6.	Vara consensus for full year group underlying operating profit in 2021/22 was £545 million (range: £532 million to £561 million) as at 25^th May 2022. 2020/21 group underlying operating profit was £504 million.
7.	Based on average precious metal prices in May 2022 (month to date).
8.	A $100 change in the average annual platinum, palladium and rhodium metal prices each have an impact of approximately £1 million, £1.5 million and £1 million respectively on full year underlying operating profit.
9.	Based on foreign exchange rates in May 2022 (month to date).
10.	Vara consensus for full year group underlying operating profit in 2022/23 was £562 million (range: £491 million to £641 million) as at 25^th May 2022. 2021/22 group underlying operating profit on an adjusted basis was £559 million (adjusted for disposals of Health, Battery Materials and Advanced Glass Technologies).

Strategy update from the Chief Executive
Throughout my career I have only ever worked for companies that combine science with a strong sense of purpose. And what tremendous science and purpose Johnson Matthey (JM) has. Since becoming Chief Executive in March 2022, I have been struck by how passionate JM's people are about using their expertise in metals chemistry, catalysis and process design to create a cleaner, healthier world. However, it is also clear that we have not performed well in recent years and have done a poor job of value creation, which is something that my new team and I are committed to changing.

Reinvigorated strategy to drive value creation
In my conversations with employees and customers, I have heard a consistent message: JM is a great company - with great people and technology. But we need a much clearer strategy that outlines how we will create more value for both shareholders and society as we help the world accelerate progress to net zero, and how we will allocate resources in a more disciplined manner and transform our culture to enable a successful strategic execution.

In the past couple of months, three things have become much clearer to me. The first is that we already have the core talent and technology required to help accelerate progress towards net zero. In fact, as the world looks to decarbonise, key markets for our products will increase significantly, opening up tremendous new growth opportunities for JM. We just need to define where we want to focus our energy and resources.

My second observation is that our complex business structure and lack of commercial focus is getting in the way of our ability to create significant value. That's why we need to simplify and drive a stronger emphasis on accountability and faster decision making.

The third observation is that in new growth ventures, JM needs to focus on where we have a right to win and then we need to play to win. That requires developing a strong performance culture that is disciplined in execution of strategy and delivers consistent results. We have to do better and create significantly more value for shareholders and society, and this is something we are completely committed to. We need to focus, simplify and execute at pace with a high degree of discipline.

Focusing our portfolio on core strengths
Our expertise in (platinum group metals) PGMs chemistry and catalysis, combined with our process technology skills, is the beating heart of this company. It is that expertise that has helped remove harmful emissions from vehicles for almost 50 years. And it is expertise that is essential for decarbonising our world: we are enabling low and zero carbon technologies in Catalyst Technologies and Hydrogen Technologies with a focus on sustainable fuels, fuel cells and green hydrogen electrolysers. Our technology has the potential to transform traditionally carbon-intensive sectors, such as chemicals, energy and transportation.

As part of the strategic review I have considered the full range of options and concluded that focusing on our core strengths offers a much clearer path to value creation than simply splitting up the group. JM has tremendous synergies across the group that can drive competitive advantage and create significant additional value. By using our deep understanding of PGM chemistry, catalysis and process design, JM can be a market leader in sustainable technologies across multiple industries. As a company we are shifting gears and moving from playing not to lose, towards playing to win.

We are focusing our business on four areas to create significant value - Clean Air, Catalyst Technologies, Hydrogen Technologies and our enabling business PGM Services. They are areas in which we already have world-class skills and technologies, and they are all areas in which we can, and are committed to play to win.

PGM Services - the backbone of our business
JM is the world's largest recycler of PGMs - around twice the size of our nearest competitor. PGM Services provides the flexible precious metal sourcing and price risk management that are necessary to run the rest of JM, and is key to the trust our customers place in us. For example, our Clean Air and hydrogen fuel cell customers depend on PGM Services for access to a reliable supply of sustainable, scarce precious metals, and recycling services to support a circular economy. We have a competitive advantage that is both very hard to replicate and essential for helping the world reach net zero. Our PGM Services backbone supports our other three focused business divisions - Clean Air, Catalyst Technologies and Hydrogen Technologies, which in turn enable PGM Services to maintain its scale and leadership.

1.	Clean Air - continuing to play a leading role in the autocatalyst market
Clean Air will remain a significant business well into the next decade even as the world transitions towards lower and zero-carbon technologies. That transition will take time, and in the meantime governments around the world intend to roll out more stringent air quality regulations, which offer new opportunities for our innovative technology. Clean Air will create significant value and we are highly confident that we will generate at least £4 billion of cash over the decade to 2030/31, with more thereafter.

2.	Catalyst Technologies - decarbonising chemicals and creating sustainable fuels
We are already an established, leading provider of process technology and catalysts to the chemicals and energy sectors, especially in synthesis gas (syngas). Our Catalyst Technologies business will strengthen our focus on the syngas value chain, growing our existing business alongside newer opportunities in blue hydrogen, sustainable fuels and low-carbon solutions. Fueled by the net zero transition, we expect these markets to grow rapidly in the medium term as future production needs to decarbonise. We intend to move quickly and strengthen our leading positions across Catalyst Technologies to deliver high single digit growth over the medium term.

3.	Hydrogen Technologies - decarbonising transport and energy
Combining our PGM and catalysis expertise with our fuel cell and green hydrogen activities, our Hydrogen Technologies business will help decarbonise the transport and energy sectors and create very significant growth in the medium-longer term. We already have an established hydrogen business, having been active in fuel cells for over 20 years. Importantly, we already have customer contracts and partnerships today with leading hydrogen players including a major German automotive supplier for the supply of next generation catalyst coated membranes into the global automotive market.

We have taken the next step in our strategic partnership with Plug Power, a leading provider of cutting-edge green hydrogen and fuel cell solutions, with JM bringing extensive precious metals and catalysis expertise and potential to develop a closed-loop PGM recycling system. The partnership extends across advanced components for both fuel cells and electrolysis and embodies a commitment to rapidly scale up to meet accelerating market demand, combining the strengths of both businesses to drive the capacity needed to 2030 and beyond. The collaboration is expected to generate significant value.
In addition, we expanded our presence in green hydrogen by investing into Enapter, a pioneer and commercial leader in anion exchange membrane (AEM) electrolysis. Our partnership encompasses joint development of advanced components, supply of specialist catalysts and we are jointly investigating opportunities for recycling.

We aim to become the market leader in high value performance components that are essential to power fuel cells and green hydrogen electrolysers. We are targeting more than £200 million of sales in Hydrogen Technologies by the end of 2024/25.

Simplifying our business
To successfully deliver our strategy, we need to simplify our business. JM needs to become simpler, more agile, and more cost-effective. Across our entire organisation, we must reduce complexity. This means leaner processes, less duplication and clear lines of accountability. Achieving this will help unlock our potential by increasing speed of decision making, eliminating duplication and reducing costs.

Executing at pace and transforming our culture
Our strategy will be underpinned by a rigorous performance culture. We are launching a transformation programme to drive stronger execution, unlock near-term cost opportunity and position us strategically to more strongly drive growth. We will strengthen our capabilities in two ways:

1.	Capital project execution - clear governance, accountability and enhanced capabilities will ensure we are highly disciplined in capital allocation and much stronger in execution

2.	Commercial skills - strengthening capabilities and cross-group commercial synergies, with a strong focus on value creation and more strategic partnerships

In respect of the near-term cost opportunity, we will deliver £150 million in annualised cost efficiencies by 2024/25 which reflects simplification of our group functions, procurement and operations including areas such as real estate.

Strengthening our leadership team for a successful future
As part of transforming our culture, we have also strengthened our Group Leadership Team (GLT). We recently appointed Anne Chassagnette as Chief Sustainability Officer, and we are also appointing four new business leads for our four businesses, two of whom are external appointments. Anish Taneja, formerly a €3 billion P&L leader with Michelin will take over as Chief Executive, Clean Air. Anish will also chair the JM cross-group Commercial Council. Alastair Judge, currently interim CEO of Clean Air, will become CEO of our enabling PGM Services business. Jane Toogood, currently CEO of Efficient Natural Resources, will become Chief Executive, Catalyst Technologies. Mark Wilson, formerly of bp amongst others and a highly experienced leader in the energy industry will become the new Chief Executive, Hydrogen Technologies. Christian Günther, an acknowledged leader in transformation, will lead our strategy and transformation work. In addition, the scope of role for our Head of Operations, Ron Gerrard, will be expanded to include all strategic capex, in order to ensure clear accountability for capital projects planning, design and execution. With this mix of new colleagues, and the strong team I inherited, we now have a world-class leadership team capable of driving execution of our strategy at pace and creating significant value.

Disciplined capital allocation to drive success
As we execute our strategy, we will maintain a strong balance sheet and ensure we allocate capital in a very disciplined way. That means: investing for growth and attractive returns and ensuring a reliable dividend, while returning excess capital to shareholders.

For the next three years to 2024/25, we expect cumulative capital expenditure to be around £1 billion. This will be focused on our core activities where we have a right to win and need to invest to drive growth: our PGM refineries, Catalyst Technologies and Hydrogen Technologies. We may also consider acquisitions, but we will be highly selective in our approach, with a focus on bolt-on deals to acquire technology or accelerate growth in our core growth businesses. For our shareholders, we will at least maintain and aim to grow the dividend, targeting a c.40% pay-out ratio over the medium term. Our aim is to maintain a strong balance sheet with our target level of net debt to EBITDA¹ of 1.5-2.0 times.

Embedding sustainability into everything we do
JM already has a strong sustainability framework in place, with targets that focus on current and future technologies that we know will be fundamental to addressing the climate challenge. We track progress by measuring the percentage of our sales that come from products that contribute to our four priority UN Sustainable Development Goals (UN SDGs). Further details on our targets can be found in our annual report and accounts².

Strategic milestones to the end of 2023/24
Our strategic milestones will ensure we track and report progress against our plan:

Customers:

	·	Win at least 2 large scale strategic partnerships in Hydrogen Technologies
	·	Win targeted Euro 7 business and deliver on £4 billion+ cash trajectory for Clean Air
	·	Win >10 additional large scale projects by 2023/24 (across Hydrogen Technologies and Catalyst Technologies)

Investments:

	·	Expand PGM Services refining capacity in China
	·	Complete construction of Hydrogen Technologies CCM plant in UK to expand our total capacity from 2GW to 5GW
	·	Targeted capacity expansion (fuel cells catalyst, formaldehyde catalyst)
	·	Complete divestment of Value Businesses

People: Increase employee engagement score by 1ppt in 2022/23 and 3ppt by 2023/24

Sustainability:

	·	Achieve c.10% reduction in scope 1+2 CO2e (carbon dioxide equivalent) emissions
	·	Help customers reduce CO2e emissions by >1mt p.a. through use of our products

Notes:
1.	Net debt including post tax pension deficits.
2.	SDG 3 (Good Health and Wellbeing), SDG 7 (Affordable and Clean Energy), SDG 12 (Responsible Consumption and Production) and SDG 13 (Climate Action).
Reporting structure changes
To provide greater transparency and reflect how we manage our businesses, we are changing our reporting structure for 2022/23. Under this basis, we have provided sales and underlying operating profit for 2021/22 and 2020/21 below:

Sales (£ million)	Year ended 31^st March		% change, constant FX rates
Sales (£ million)	2022	2021¹	% change, constant FX rates
Clean Air	2,457	2,412	+5
PGM Services	587	531	+13
Catalyst Technologies	454	443	+5
Hydrogen Technologies	25	41	-39
Value Businesses¹	280	274	+8
Eliminations	(99)	(113)
Total sales (adjusted)	3,704	3,588	+6
Adjustments²	236	334
Total sales	3,940	3,922	+3

Underlying operating profit (£ million)	Year ended 31^st March		% change, constant FX rates
Underlying operating profit (£ million)	2022	2021¹	% change, constant FX rates
Clean Air	302	269	+17
PGM Services	308	244	+28
Catalyst Technologies	50	32	+67
Hydrogen Technologies	(33)	1	n/a
Value Businesses¹	18	5	+260
Corporate	(86)	(73)
Total operating profit (adjusted)	559	478	+21
Adjustments³	(3)	26
Total operating profit	556	504	+14

Notes:
1.	Includes Battery Systems, Medical Device Components and Diagnostic Services.
2.	Sales adjustments reflect removal of Health (2021/22: £162m, 2020/21: £237m), Advanced Glass Technologies (2021/22: £62m, 2020/21: £66m), Battery Materials (2021/22: £12m, 2020/21: £14m) and Other - Water and Atmosphere Control Technologies (2021/22: nil, 2020/21: £17m).
3.	Underlying operating profit adjustments reflect removal of Health (2021/22: £3m, 2020/21: £31m), Advanced Glass Technologies (2021/22: £16m, 2020/21: £17m), Battery Materials (2021/22: -£22m, 2020/21: -£23m) and Other - Water and Atmosphere Control Technologies (2021/22: nil, 2020/21: £1m).

Sales (£ million)	Year ended 31^st March		% change	% change, constant FX rates
Sales (£ million)	2022	2021¹	% change	% change, constant FX rates
Clean Air	2,457	2,412	+2	+5
Efficient Natural Resources	1,041	974	+7	+9
Other Markets	379	412	-8	-4
Eliminations	(99)	(113)
Sales (continuing)	3,778	3,685	+3	+5
Health (discontinued)	162	237		-29
Total sales	3,940	3,922	-	+3

Underlying operating profit (£ million)	Year ended 31^st March		% change	% change, constant FX rates
Underlying operating profit (£ million)	2022	2021¹	% change	% change, constant FX rates
Clean Air	302	269	+12	+17
Efficient Natural Resources	358	276	+30	+33
Other Markets	(21)	1	n/a	n/a
Corporate	(86)	(73)
Underlying operating profit (continuing)	553	473	+17	+21
Health (discontinued)	3	31		-90
Total underlying operating profit	556	504	+10	+14

Reconciliation of underlying operating profit (continuing) to operating profit (£ million)	Year ended 31^st March
	2022	2021¹
Underlying operating profit (continuing)	553	473
Profit on disposal of businesses	106	-
Gains and losses on significant legal proceedings²	42	-
Amortisation of acquired intangibles	(6)	(10)
Major impairment and restructuring charges²	(440)	(154)
Operating profit	255	309

Sales up driven by a partial recovery in demand
·	Sales were up 5% driven by a partial recovery in demand, although volumes were constrained by supply chain disruption, principally shortages of semi-conductor chips
·	Underlying operating profit increased 17%. Margins increased driven by operational leverage and benefits from our transformation programme, but were held back by the impact of chip shortages and inflation
·	Strong cash generation of around £800 million in the year¹

	Year ended 31^st March		% change	% change, constant FX rates
	2022	2021
	£ million	£ million
Sales
Light duty diesel	1,005	1,017	-1	+2
Light duty gasoline	574	624	-8	-7
Heavy duty diesel	878	772	+14	+17
Total sales	2,457	2,412	+2	+5

Underlying operating profit	302	269	+12	+17
Underlying margin	12.3%	11.2%
Reported operating profit	273	165

Notes:
1.	Delivered around £800 million of cash at actual precious metal prices, which equates to just over £600 million at constant prices (March 2021).
2.	At least £4 billion of cash under our range of scenarios from 1^st April 2021 to 31^st March 2031. Cash target pre-tax and post restructuring costs.

Good performance driven by PGM Services and recovery in Catalyst Technologies
·	Good performance with sales up 9%. PGM Services grew strongly primarily benefiting from higher average precious metal prices. Catalyst Technologies also grew driven by higher refill catalysts across industrial and consumer, principally in methanol
·	Underlying operating profit up 33% and margin expanded 6.1 percentage points driven by strong growth in PGM Services

Performance impacted by lower demand and pricing pressure in Generics, US labour shortage and supply chain constraints
·	Sale of Health to Altaris Capital Partners agreed on 17^th December 2021, with the transaction expected to complete at the end of May
·	Performance impacted by lower demand and pricing pressure in opioid analgesics (Generics), labour shortages in the US pharma market and global supply chain constraints

	Share of 2021/22 non-sterling denominated underlying operating profit	Average exchange rate Year ended 31^st March		% change
		Average exchange rate Year ended 31^st March
		2022	2021
US dollar	30%	1.36	1.31	+4
Euro	29%	1.18	1.12	+5
Chinese renminbi	19%	8.75	8.85	-1

Investing to support growth in Hydrogen Technologies whilst driving value from non-core businesses
·	Performance in Hydrogen Technologies reflected increased investment to support growth and manufacturing constraints as we scale up the business and utilised capacity to qualify new customer products
·	Completed the sale of Advanced Glass Technologies on 31^st January 2022 for a total consideration of £178 million
·	Shortly completing our exit from our Battery Materials business

Notes:
1.	The sale of Advanced Glass Technologies was completed on 31^st January 2022. On a continuing basis (excluding Advanced Glass Technologies and other divested businesses in 2020/21 from both 2020/21 and 2021/22), sales in Value Businesses increased 8%.

Notes:
1.	Savings achieved in 2021/22 exclude £7 million relating to Health.
2.	Annualised benefits by 2023/24 exclude £10 million relating to Health.
Items outside underlying operating profit

Non-underlying charge/income (£ million)		As at 31^st March 2022	As at 31^st March 2021
Major impairments and restructuring		(440)	(154)
Battery Materials		(363)	-
Russia - Ukraine conflict		(32)	-
Diagnostic Services		(45)	-
Gains and losses on significant legal proceedings		42	-
Disposal of Advanced Glass Technologies		106	-
Amortisation of acquired intangibles		(6)	(10)
Total		(298)	(164)

Major impairment and restructuring costs
Following the announcement of our intention to exit our Battery Materials business we have impaired the carrying value of the assets to fair value and communicated associated exit costs, which is net of anticipated proceeds from asset sales. Together, these resulted in an exceptional item outside underlying operating profit of £363 million.

As announced on 7^th March 2022, we discontinued with immediate effect all new commercial activities in Russia and Belarus in light of the ongoing conflict with Ukraine. Our operations in Russia include a small Clean Air manufacturing plant, and a small Catalyst Technologies office. We have fully impaired the assets associated with both businesses resulting in a charge of £32 million.

As part of our annual impairment testing of goodwill, we updated our long-term market assumptions for the oil and gas industry in which Diagnostic Services serves its customers. The growth rate and discount rate assumptions for Diagnostic Services have also been updated to reflect the faster paced transition to non-carbon intensive industries and the simplification of our portfolio to focus on core markets. This resulted in an impairment to goodwill of £45 million.

Gains and losses on significant legal proceedings
During the period, the group recognised a net gain of £42 million largely reflecting damages and interest from a company found to have unlawfully copied one of JM's technology designs.

Disposal of Advanced Glass Technologies
On 31^st January 2022, the group completed the sale of its Advanced Glass Technologies business for a total consideration of £178 million and recognised a non-underlying gain of £106 million.

Discontinued operations - Health
We announced the sale of Health on 17^th December 2021 to Altaris Capital Partners. The expected proceeds fair value less costs to sell is £272 million leading to an impairment to Health's net assets of £228 million. The non-underlying impairment has been recognised in 2021/22 upon reclassing Health to 'held for sale' and discontinued operations. Non-underlying transaction and separation costs of c.£14 million have been incurred and expensed in the current year.
Finance charges
Net finance charges in the period amounted to £60 million, down from £85 million last year. Finance costs on metal borrowings have decreased due to lower metal borrowings and the focus across the group on reducing precious metal working capital.

Taxation
The tax charge on underlying profit before tax for the year ended 31^st March 2022 was £86 million, an effective underlying tax rate of 17.4%, slightly up from 16.3% in 2020/21.

The effective tax rate on reported loss for the year ended 31^st March 2022 was -56.4%, from 13.9% in the prior period. This represents a tax charge of £57 million, compared with £33 million in the prior year. The increased effective rate is due to major impairments and disposals arising in the year where no tax relief is available.

We currently expect the tax rate on underlying profit for the year ending 31^st March 2023 to be around 19%, and then increase progressively to around 21% by 2024/25 reflecting rising corporate tax rates.

Post-employment benefits
IFRS - accounting basis
At 31^st March 2022, the group's net post-employment benefit position, excluding bond assets held in a special purpose vehicle, was a surplus of around £283 million.

The cost of providing post-employment benefits in the year was £62 million, down from £65 million last year. The prior year charge included a £3 million credit, compared to a £11 million credit this year.

Capital expenditure
Capital expenditure (excluding Health) was £446 million in the year, 2.6 times depreciation and amortisation (excluding amortisation of acquired intangibles). In the period, projects included:

·	In Efficient Natural Resources, investing to increase the resilience and capacity of our PGM refining assets
·	Development and commercialisation of eLNO, our portfolio of high nickel cathode materials within Battery Materials
·	Upgrading our core IT business systems

Strong balance sheet
Net debt (excluding Health) at 31^st March 2022 was £856 million, an increase from £770 million from 31^st March 2021. Net debt is £25 million higher at £881 million when post tax pension deficits are included. The group's net debt (including post tax pension deficits) to EBITDA was 1.2 times (31^st March 2021: 1.3 times), slightly below 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. These amounted to £140 million as at 31^st March 2022 (31^st March 2021: £437 million).

Free cash flow and working capital
Free cash flow was £221 million in the year, compared to £295 million in the prior period, largely reflecting a non-precious metal working capital outflow.

Excluding precious metal, average working capital days to 31^st March 2022 decreased to 36 days compared to 45 days to 31^st March 2021. The prior period was higher due to the lower average sales volume through the period.

Going concern
As at 31^st March 2022, the group maintains a strong balance sheet with around £1.5 billion of available cash and undrawn committed facilities. Cash generation was strong during the period with free cash flow of around £221 million, however net debt increased by £86 million since 31^st March 2021 to £856 million (excluding Health) driven by the share buyback and repayment of metal leases. Net debt (including post tax pension deficits) to EBITDA, was below our target range at 1.2 times.

The directors have reviewed the base case scenario forecasts for the Group and are of the opinion that the group has adequate resources to fund its operations for at least 12 months from the date of approving these financial statements, and so it is appropriate to prepare the accounts on a going concern basis. In arriving at this view, the base case scenario was stress tested to a severe but plausible downside case, which assumed a lower demand profile and slower recovery in end user market growth. Additionally, the group considered scenarios including the impact from carbon pricing costs, metal price volatility and increases in the amount of metal that we would have to hold.

Risks and uncertainties

The principal risks and uncertainties, together with the group's strategies to manage them, are set out on pages 74 to 79 of the 2022 annual report. Updated risks are:

Strategic growth: Business transition to low-carbon economy - Our strategy is focused on managing our existing businesses effectively, while pivoting away from fossil fuel-based industries to those based on sustainable chemicals and fuels, and clean energy.

Our overall risk is that we may not have a financially viable future business model and/or capability as we transition to a low-carbon economy and are unable to make and/or sell the products and services our customers' demand.

Our new growth platforms include:

·	Green hydrogen and fuel cells within Hydrogen Technologies.
·	Low-carbon hydrogen, sustainable aviation fuels and low-carbon solutions within Catalyst Technologies.

Maintaining competitive advantage of our products and operations - This risk addresses failing to maintain our competitive advantage in existing markets and so not meet our customers' evolving needs as effectively and profitably as our competitors can. This could reduce the value of our brand.

Customers use our products in a wide range of their own end products, processes and systems. It is crucial then that our products work properly and meet the established quality criteria.

Performance failure or quality defects could harm consumers or leave us open to liability claims. This could lead to loss of future business and our license to operate and to reputational damage

Environment, health and safety (EHS) - 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.

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 reputation, our employees or the environment.

This could also mean we lose production time and attract negative interest from the media and regulators, which could lead to fines and penalties.

Supply failure (excluding platinum group metals - see Managing our metal commitments) - Given the types of products and services we develop, there are only a few suppliers from which we can source certain important raw materials.

If there was a significant breakdown in their supply, we would be unable to manufacture our products and satisfy customer demand.

Our work on the effects of climate change means we understand that more frequent extreme weather events and natural disasters - like droughts, floods, storms, cyclones, heavy rain, sea level rise and heatwaves - may disrupt our supply and value chains, upstream and downstream. Getting raw materials and delivering products would be harder and costs would increase.

People, culture and leadership - A great culture is essential to executing our strategy, delivering growth and being more efficient. High-quality leaders can create inclusive, engaged and diverse teams, and inspire and motivate them.

We will make sure we have the capability to identify new business, capture opportunities and grow.

Managing our metal commitments - Our products contain precious metals sourced from either primary, secondary (recycled) or financial institutions. There is a risk that we have insufficient metal for our manufacturing businesses / metal commitments. Our primary and secondary metal needs are diversified in type and geography, and we have very little exposure to Russian PGM supply.

Our trading business ensures the Group has sufficient metal to meet business demands and manages our liquidity levels. There is a risk that we do not have sufficient metal available. We operate within tight trading limits and defined liquidity levels / policies to manage the volatility of demand. How much our trading business earns depends on metal price volatility.

We hedge all of our metal transactions centrally through looking at the overall group supply / demand. Accordingly, we do not carry significant exposure to price risk. Our refining business earnings also depend on metal price; a fall in price reduces revenue and operating profit. Any metal gains or losses that are generated through the refining process are settled regularly to ensure we are not exposed to short-term price fluctuations. In addition, a failure of our security management systems may result in a loss of theft of precious metal, which could lead to financial loss and / or a failure to satisfy our customers. This could reduce customer confidence or result in legal action.

Intellectual property management - By not adequately managing our own or third-party intellectual property (IP), knowledge and information, we risk losing business advantage. This could happen through:

·	Loss of IP
·	Failing to protect and exploit our investment in research and development
·	Loss of freedom to operate
·	Reputational damage associated with litigation

Asset failure - 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 - like droughts, floods, storms, cyclones, heavy rain, sea level rise and heatwaves - may disrupt our operations, increase our costs and have a detrimental effect on our employees' wellbeing.

Ethics and compliance - If we fail to comply with ethical and regulatory standards, we could face reputational damage, and leave the company or individuals open to potential criminal or legal action.

Business transformation - If we fail to manage and deliver business change in a controlled manner, we may not achieve the business benefits we expect. If we don't effectively implement the efficiencies of a simpler and more streamlined business structure, we may not see the cultural improvements and new ways of working we expect.

Information, technology and cybersecurity - If we fail to adapt our IT systems to changing business requirements or suffer a significant disruption to those systems or a major cybersecurity incident, we could see our financial position and reputation harmed, or face regulatory penalties, or unintentionally break the law.

Customer contract liability - Unfavourable customer contract terms could lead to significant loss or damage and expose us to high or unlimited liability. Quality management needs to be effective across the entire end-to-end process within our business, i.e., from raw material supply through to product delivery to customer expectations. It could also lead to broader negative consequences, such as damage to our reputation or losing customers.


			2022	2021*
		Notes	£ million	£ million

Revenue		2,3	16,025	15,435
Cost of sales			(14,971)	(14,481)
Gross profit			1,054	954
Distribution costs			(101)	(103)
Administrative expenses			(400)	(377)
Profit / (loss) on disposal of businesses		13	106	(1)
Amortisation of acquired intangibles		4	(6)	(10)
Gains and losses on significant legal proceedings		4	42	-
Major impairment and restructuring charges		5	(440)	(154)
Operating profit			255	309
Finance costs			(101)	(158)
Finance income			41	73
Profit before tax from continuing operations			195	224
Tax expense			(79)	(30)
(Loss) / profit after tax from discontinued operations			(217)	11
(Loss) / profit for the year			(101)	205

			pence	pence

(Loss) / earnings per ordinary share
	Basic	6	(52.6)	106.5
	Diluted	6	(52.6)	106.4

Earnings per ordinary share from continuing operations
	Basic	6	60.9	100.9
	Diluted	6	60.8	100.8

	* Restated to reflect classification of the Health segment as discontinued operations (see note 12).


		Share	Shares
	Share	premium	held in	Other	Retained	Total
	capital	account	ESOT	reserves	earnings	equity
	£ million	£ million	£ million	£ million	£ million	£ million

At 1^st April 2020	221	148	(32)	142	2,345	2,824
Total comprehensive (expense) / income	-	-	-	(142)	92	(50)
Dividends paid (note 7)	-	-	-	-	(99)	(99)
Share-based payments	-	-	-	-	16	16
Cost of shares transferred to employees	-	-	3	-	(10)	(7)
Tax on share-based payments	-	-	-	-	1	1
At 31^st March 2021	221	148	(29)	-	2,345	2,685
Total comprehensive income	-	-	-	47	41	88
Dividends paid (note 7)	-	-	-	-	(139)	(139)
Purchase of treasury shares	(3)	-	-	3	(200)	(200)
Share-based payments	-	-	-	-	15	15
Cost of shares transferred to employees	-	-	5	-	(13)	(8)
At 31^st March 2022	218	148	(24)	50	2,049	2,441

2	Segmental information

	Revenue, sales, underlying operating profit and net assets by sector
	Year ended 31^st March 2022

			Efficient
		Clean	Natural	Other
		Air	Resources	Markets	Corporate	Eliminations	Total
		£ million	£ million	£ million	£ million	£ million	£ million

	Revenue from external customers	7,085	8,461	479	-	-	16,025
	Inter-segment revenue	4	4,555	1	-	(4,560)	-
	Revenue	7,089	13,016	480	-	(4,560)	16,025

	External sales	2,455	945	378	-	-	3,778
	Inter-segment sales	2	96	1	-	(99)	-
	Sales¹	2,457	1,041	379	-	(99)	3,778

	Underlying operating profit / (loss) from continuing operations¹	302	358	(21)	(86)	-	553
	Segmental net assets	2,108	41	220	330	-	2,699

	Net debt (note 19)						(856)
	Post-employment benefits net assets and liabilities (note 14)						280
	Deferred tax net asset						80
	Provisions and non-current other payables						(86)
	Investments in joint ventures and associates						2
	Net assets held for sale (note 12)						322

	Net assets						2,441

Year ended 31^st March 2021*

		Efficient
	Clean	Natural		Other
	Air	Resources	Health	Markets	Corporate	Eliminations
	(restated)	(restated)	(restated)	(restated)	(restated)	(restated)	Total
	£ million	£ million	£ million	£ million	£ million	£ million	£ million

Revenue from external customers	6,985	7,952	-	498	-	-	15,435
Inter-segment revenue	2	4,877	-	1	-	(4,880)	-
Revenue	6,987	12,829	-	499	-	(4,880)	15,435

External sales	2,412	862	-	411	-	-	3,685
Inter-segment sales	-	112	-	1	-	(113)	-
Sales¹	2,412	974	-	412	-	(113)	3,685

Underlying operating profit / (loss) from continuing operations¹	269	276	-	1	(73)	-	473
Segmental net assets	2,686	(668)	469	476	354	-	3,317

Net debt							(775)
Post-employment benefit net assets and liabilities (note 14)							96
Deferred tax net asset							112
Provisions and non-current other payables							(67)
Investments in joint ventures and associates							2

Net assets							2,685

¹ Sales and underlying operating profit are non-GAAP measures (see note 19). 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 and revised inter-segment revenue and sales for Efficient Natural Resources and eliminations for copper zeolite sales. Also restated to reflect classification of the Health segment as discontinued operations (see note 12) and to allocate precious metal inventory to segments in line with how the business is managed.


3	Revenue (continued)

	Revenue from external customers by principal products and services

	Year ended 31^st March 2022
		Continuing operations
		Clean Air	Efficient Natural Resources	Other Markets	Total	Health (discontinued)
		£ million	£ million	£ million	£ million	£ million



	Metal	4,630	7,516	101	12,247	3
	Heavy Duty Catalysts	849	-	-	849	-
	Light Duty Catalysts	1,578	-	-	1,578	-
	Catalyst Technologies	-	508	-	508	-
	Platinum Group Metal Services	-	437	-	437	-
	Generics	-	-	-	-	77
	Innovators	-	-	-	-	84
	Fuel Cells	-	-	25	25	-
	Battery Materials	-	-	12	12	-
	Battery Systems	-	-	151	151	-
	Advanced Glass Technologies	-	-	62	62	-
	Diagnostic Services	-	-	54	54	-
	Medical Device Components	-	-	74	74	-
	Other	28	-	-	28	-

	Revenue	7,085	8,461	479	16,025	164



	Year ended 31^st March 2021*
		Continuing operations
			Efficient Natural Resources	Other Markets		Health
		Clean Air	(restated)	(restated)	Total	(discontinued)
		£ million	£ million	£ million	£ million	£ million
	Metal	4,573	7,090	87	11,750	2
	Heavy Duty Catalysts	741	-	-	741	-
	Light Duty Catalysts	1,641	-	-	1,641	-
	Catalyst Technologies	-	487	-	487	-
	Platinum Group Metal Services	-	375	-	375	-
	Generics	-	-	-	-	146
	Innovators	-	-	-	-	90
	Fuel Cells	-	-	41	41	-
	Battery Materials	-	-	14	14	-
	Battery Systems	-	-	169	169	-
	Advanced Glass Technologies	-	-	66	66	-
	Diagnostic Services	-	-	43	43	-
	Medical Device Components	-	-	60	60	-
	Other	30	-	18	48	-

	Revenue	6,985	7,952	498	15,435	238



	* The comparative period is restated to reflect the group's updated reporting segments. Also restated to reflect classification of the Health segment as discontinued operations (see note 12).

4	Operating profit

	Operating profit from continuing operations is arrived at after charging / (crediting):
		2022	2021
		£ million	£ million*


	Total research and development expenditure	201	185
	Less: Development expenditure capitalised	(22)	(17)


	Research and development expenditure charged to the income statement	179	168
	Less: External funding received - from governments	(18)	(12)


	Net research and development expenditure charged to the income statement	161	156



	Inventories recognised as an expense	14,121	13,638
	Write-down of inventories recognised as an expense	26	20
	Reversal of write-down of inventories from increases in net realisable value	(16)	(10)

	Net gains on foreign exchange	(2)	(56)
	Net losses on foreign currency forwards at fair value through profit or loss	6	58
	Past service credit	(11)	(3)


	Depreciation of:
	Property, plant and equipment	125	126
	Right-of-use assets	13	13


	Depreciation	138	139


	Amortisation of:
	Internally generated intangible assets	1	2
	Acquired intangibles	6	10
	Other intangible assets	32	19


	Amortisation	39	31


	Gains and losses on significant legal proceedings	(42)	-

	Profit on disposal of businesses (note 13)	(106)	-

	Impairment losses included in administrative expenses	3	31


	Impairment losses	3	31


	Impairment losses included in major impairment and restructuring charges	401	80
	Restructuring charges included in major impairment and restructuring charges	39	74



	Major impairment and restructuring charges (note 5)	440	154

	Fees payable to the company's auditor and its associates for:
	The audit of these accounts	2.1	2.0
	The audit of the accounts of the company's subsidiaries	2.4	2.3
	The audit of prior period accounts	0.2	0.7


	Total audit fees	4.7	5.0

	Audit-related assurance services	0.4	0.3


	Total non audit fees	0.4	0.3


	Total fees payable to the company's auditor and its associates	5.1	5.3

	* Restated to reflect classification of the Health segment as discontinued operations (see note 12).

	Gains and losses on significant legal proceedings
	During the 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. The net gain is reported as non-underlying.


8	Property, plant and equipment

			Freehold			Assets in
			land and	Leasehold	Plant and	the course of
			buildings	improvements	machinery	construction	Total
			£ million	£ million	£ million	£ million	£ million

		Cost
		At 1^st April 2021	667	31	2,310	377	3,385
		Additions	1	1	38	339	379
		Transferred to assets classified as held for sale (note 12)	(107)	(5)	(392)	(282)	(786)
		Transfers from assets in the course of construction	11	1	120	(132)	-
		Disposals	(1)	-	(25)	(1)	(27)
		Disposal of businesses (note 13)	(13)	(1)	(44)	(1)	(59)
		Exchange adjustments	12	-	48	4	64


		At 31^st March 2022	570	27	2,055	304	2,956


		Accumulated depreciation and impairment
		At 1^st April 2021	321	17	1,606	17	1,961
		Charge for the year	18	2	117	-	137
		Impairment losses	21	-	64	210	295
		Transferred to assets classified as held for sale (note 12)	(91)	(4)	(335)	(210)	(640)
		Disposals	(1)	-	(23)	-	(24)
		Disposal of businesses (note 13)	(8)	(2)	(38)	-	(48)
		Exchange adjustments	5	1	33	(2)	37

		At 31^st March 2022	265	14	1,424	15	1,718

		Carrying amount at 31^st March 2022	305	13	631	289	1,238
		Carrying amount at 1^st April 2021	346	14	704	360	1,424


9	Other intangible assets

			Customer
			contracts		Patents,	Acquired
			and	Computer	trademarks	research and	Development
			relationships	software	and licences	technology	expenditure	Total
			£ million	£ million	£ million	£ million	£ million	£ million

		Cost
		At 1^st April 2021	133	367	65	42	226	833
		Additions	-	66	1	-	33	100
		Transferred to assets classified as held for sale (note 12)	-	(15)	(20)	(5)	(127)	(167)
		Disposal of businesses (note 13)	(1)	(2)	-	-	-	(3)
		Exchange adjustments	-	3	1	-	3	7

		At 31^st March 2022	132	419	47	37	135	770

		Accumulated amortisation and impairment
		At 1^st April 2021	108	144	46	41	135	474
		Charge for the year	4	31	1	2	1	39
		Impairment losses	-	15	12	-	75	102
		Transferred to assets classified as held for sale (note 12)	-	(13)	(18)	(5)	(79)	(115)
		Reclassification	-	-	2	(2)	-	-
		Disposal of businesses (note 13)	(1)	(2)	-	-	-	(3)
		Exchange adjustments	1	3	1	-	1	6

		At 31^st March 2022	112	178	44	36	133	503

		Carrying amount at 31^st March 2022	20	241	3	1	2	267
		Carrying amount at 1^st April 2021	25	223	19	1	91	359


12	Discontinued operations and assets and liabilities classified as held for sale


		Battery
	Health	Materials	Total
	£ million	£ million	£ million


Non-current assets
Property, plant and equipment	107	39	146
Right-of-use assets	1	1	2
Other Intangible Assets	41	11	52

Current assets
Inventories	137	1	138
Current tax assets	1	-	1
Trade and other receivables	59	4	63

Assets classified as held for sale	346	56	402

Current liabilities
Trade and other payables	(60)	-	(60)
Lease liabilities	(1)	(1)	(2)
Cash and cash equivalents - bank overdrafts	(8)	-	(8)
Provisions	(2)	-	(2)

Non-current liabilities
Lease liabilities	(2)	(5)	(7)
Provisions	(1)	-	(1)

Liabilities classified as held for sale	(74)	(6)	(80)

Net assets of disposal group	272	50	322

										Advanced
										Glass
										Technologies
										£ million
	Proceeds

	Cash consideration									173

	Cash and cash equivalents disposed									(3)


	Net cash consideration									170


	Disposal costs paid									(10)


	Cash inflow per cash flow statement									160


	Assets and liabilities disposed
	Non-current assets
	Property, plant and equipment									11
	Right-of-use assets									2
	Goodwill									2

	Current assets
	Inventories									17
	Trade and other receivables									14
	Cash and cash equivalents - cash and deposits									3

	Current liabilities
	Trade and other payables									(10)


	Net assets disposed									39


	The profit on disposal of businesses totalled £106 million

										Advanced
										Glass
										Technologies
										£ million


	Net cash consideration									173

										(39)
	Less: carrying amount of net assets sold									(39)


	Less: disposal costs									(10)
	Cumulative currency translation gain recycled from other comprehensive income									(18)


	Profit recognised in the income statement									106

	Financial assumptions

			2022		2022		2022		2021		2021		2021
			UK plan		US plans		Other plans		UK plan		US plans		Other plans
			%		%		%		%		%		%


	First year's rate of increase in salaries		3.85		3.00		2.20		3.40		3.00		2.06
	Ultimate rate of increase in salaries		3.85		3.00		2.20		3.40		3.00		2.06
	Rate of increase in pensions in payment		3.20		-		2.11		3.05		-		1.70
	Discount rate		2.80		3.70		2.13		2.10		3.00		1.53
	Inflation		-		2.20		2.15		-		2.20		1.64
	- UK Retail Prices Index (RPI)		3.60		-		-		3.20		-		-
	- UK Consumer Prices Index (CPI)		3.10		-		-		2.65		-		-

Financial information
Movements in the net post-employment benefit assets and liabilities, including reimbursement rights, were:
						UK post-				US post-
		UK pension -		UK pension -		retirement				retirement
		legacy		cash balance		medical		US		medical
		section		section		benefits		pensions		benefits	Other	Total
		million		million		£ million		£ million		£ million	£ million	£ million
At 1^st April 2021		186		(6)		(8)		(20)		(25)	(27)	100
Current service cost - in operating profit		(8)		(26)		-		(9)		(1)	(1)	(45)
Past service credit - in operating profit		-		-		-		-		11	-	11
Administrative expenses - in operating profit		(2)		-		-		(1)		-	-	(3)
Interest		4		(1)		-		-		(1)	-	2
Remeasurements		162		(7)		(1)		21		2	-	177
Company contributions		9		22		-		9		1	1	42
Exchange		-		-		-		(2)		-	1	(1)
At 31^st March 2022		351		(18)		(9)		(2)		(13)	(26)	283

15	Fair values (continued)
			2022	2021	Fair value hierarchy
			£ million	£ million	Level
		Financial instruments measured at fair value

		Non-current
		Investments at fair value through other comprehensive income¹	45	53	1
		Interest rate swaps - assets	11	20	2
		Interest rate swaps - liabilities	(2)	-	2
		Borrowings and related swaps	(2)	(3)	2
		Other financial liabilities ²	(12)	-	2

		Current
		Trade receivables³	492	423	2
		Other receivables⁴	44	58	2
		Cash and cash equivalents - money market funds	137	462	2
		Other financial assets ²	27	44	2
		Interest rate swaps	1	-	2
		Other financial liabilities ²	(44)	(18)	2

		Financial instruments not measured at fair value

		Non-current
		Borrowings and related swaps	(897)	(1,249)	-
		Lease liabilities	(40)	(51)	-

		Current
		Amounts receivable under precious metal sale and repurchase agreements	114	308	-
		Amounts payable under precious metal sale and repurchase agreements	(793)	(1,442)	-
		Cash and cash equivalents - cash and deposits	254	119	-
		Cash and cash equivalents - bank overdrafts	(37)	(36)	-
		Borrowings and related swaps	(265)	(26)	-
		Lease liabilities	(10)	(11)	-

		¹ Investments at fair value through other comprehensive income are quoted bonds purchased to fund pension deficit.
		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.

	2022		2021
	Carrying amount	Fair value	Carrying amount	Fair value
	£ million	£ million	£ million	£ million


US Dollar Bonds 2022, 2023, 2025, 2027, 2028 and 2030	(688)	(662)	(662)	(689)
Euro Bonds 2023, 2025, 2028 and 2030	(176)	(179)	(186)	(193)
Sterling Bonds 2024 and 2025	(110)	(107)	(110)	(116)
KfW US Dollar loan 2024	(38)	(36)	(36)	(39)

Definitions - Measure	Definition	Purpose
Sales¹	Revenue excluding sales of precious metals to customers and the precious metal content of products sold to customers.	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.
Underlying operating profit²	Operating profit excluding non-underlying items.	Provides a measure of operating profitability that is comparable over time.
Underlying operating profit margin^{1, 2}	Underlying operating profit divided by sales.	Provides a measure of how we convert our sales into underlying operating profit and the efficiency of our business.
Underlying profit before tax²	Profit before tax excluding non-underlying items.	Provides a measure of profitability that is comparable over time.
Underlying profit for the year²	Profit for the year excluding non-underlying items and related tax effects.	Provides a measure of profitability that is comparable over time.
Underlying earnings per share^{1, 2}	Underlying profit for the year divided by the weighted average number of shares in issue.	Our principal measure used to assess the overall profitability of the group.
Return on invested capital (ROIC)¹	Annualised underlying operating profit divided by the 12 month average equity, excluding post tax pension net assets, plus average net debt for the same period.	Provides a measure of the group's efficiency in allocating the capital under its control to profitable investments.
Average working capital days (excluding precious metals)¹	Monthly average of non-precious metal related inventories, trade 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.	Provides a measure of efficiency in the business with lower days driving higher returns and a healthier liquidity position for the group.
Free cash flow	Net cash flow from operating activities after net interest paid, net purchases of non-current assets and investments, dividends received from joint ventures and associates and the principal element of lease payments.	Provides a measure of the cash the group generates through its operations, less capital expenditure.
Net debt (including post tax pension deficits) to underlying EBITDA	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.	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.