Preliminary results for year ended 31st March 2019

Companies

Johnson Matthey (JMAT)

UK 100

Latest directors dealings

6 hours ago ASOS
7 hours ago MJ Gleeson
7 hours ago Rolls-Royce Holdings
7 hours ago Crest Nicholson Holdings
8 hours ago Naked Wines

All directors dealings today

Reported results		Year ended 31^st March		% change
Reported results		2019	2018	% change
Revenue¹	£ million	10,745	10,274	+5
Operating profit	£ million	531	359	+48
Profit before tax (PBT)	£ million	488	320	+53
Earnings per share (EPS)	pence	215.2	155.2	+39
Ordinary dividend per share	pence	85.5	80.0	+7

Underlying performance²			Year ended 31^st March		% change	% change, constant rates³
			2019	2018
Sales excluding precious metals (Sales)⁴		£ million	4,214	3,846	+10	+10
Operating profit		£ million	566	525	+8	+8
Profit before tax		£ million	523	486	+8	+7
Earnings per share		pence	228.8	208.4	+10
Underlying performance²
·	Sales grew 10% and underlying operating profit grew 8% at constant rates³ driven by strong growth in Clean Air
·	Underlying EPS was up 10% and ahead of operating profit, benefiting from a lower tax rate
·	Free cash was an outflow of £13 million impacted by platinum group metal (pgm) refinery downtime, driving higher precious metal working capital and higher capex
·	Average working capital days excluding precious metals improved by three days to 59 days
·	Return on invested capital (ROIC), excluding net pension assets, decreased from 17.0% to 16.4% mainly due to higher precious metal working capital
·	Strong balance sheet with net debt of £866 million; net debt to EBITDA of 1.3 times

By sector
·	Continued strong sales and operating profit growth in Clean Air, and achieved our planned market share of c.65% in European light duty diesel. Sector sales grew 11%, well ahead of the decline in global vehicle production, driven by double digit growth in both light and heavy duty catalysts
·	Sales grew 4% in Efficient Natural Resources with strong operating profit driven by higher average precious metal prices and net benefits from improved efficiency and weaker performance in Advanced Glass Technologies
·	In Health, sales were up 3% and operating profit was slightly down reflecting product mix and net costs associated with footprint optimisation
·	New Markets saw strong sales growth but lower operating profit mainly due to Battery Materials as we invest in eLNO. We continue to make progress on commercialising eLNO and customer feedback remains positive. We recently secured a site in Poland for our first commercial plant as well as our first long term supply agreement for raw materials with Nemaska Lithium

Reported results
·	Reported revenue increased 5%
·	Reported operating profit was £531 million, up 48%. In the prior year, we recognised a major impairment and restructuring charge of £90 million, and a legal settlement of £50 million
·	Reported EPS was therefore up 39%, reflecting the higher operating profit in the current year
·	Cash inflow from operating activities was £334 million
·	Recommended ordinary dividend up 7% to 85.5 pence for the full year, reflecting our strong performance and confidence in the group's future prospects

Outlook for the year ending 31^st March 2020
·	For 2019/20, we expect growth in operating performance at constant rates to be within our medium term guidance of mid to high single digit growth
·	At current foreign exchange rates (£:$ 1.295, £:€ 1.157, £:RMB 8.72), translational foreign exchange movements for the year ending 31^st March 2020 are expected to adversely impact sales and underlying operating profit by £6 million and £2 million respectively

Notes:
1.	Revenue for the year ended 31^st March 2018 has been restated, see note 16 on pages 35 to 38
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 and significant tax rate changes. For definitions and reconciliations of other non-GAAP measures, see pages 39 to 41
3.	Unless otherwise stated, sales and operating profit commentary refers to performance at constant rates. Growth at constant rates excludes the translation impact of foreign exchange movements, with 2017/18 results converted at 2018/19 average exchange rates
4.	Revenue excluding sales of precious metals to customers and the precious metal content of products sold to customers
eLNO is a trade mark of Johnson Matthey Public Limited Company

Our vision is for a world that is cleaner and healthier, today and for future generations. We deliver this through our strategy, which is underpinned by the fundamental changes we are continuing to drive across the group. This will leave us better positioned to deal with the fast pace of change in the world around us and take advantage of the opportunities that it presents.

The strategy we have outlined will deliver sustained growth in Clean Air, market leading growth in Efficient Natural Resources and break out growth in Health and Battery Materials. Over the medium term, it will deliver the following financial outcomes:

·	Mid to high single digit EPS CAGR
·	Expanding group ROIC to 20%
·	Progressive dividend

Creating a more agile and efficient business to drive growth
We are delivering good growth despite a more challenging external environment, demonstrating the resilience of the group. As we execute on our strategy, we are making changes to our people, processes and systems, creating a more agile and efficient business. We are focusing on areas including procurement, restructuring and manufacturing footprint optimisation in Health which, as previously guided, will together deliver over £100m of savings. Not all of these benefits will be visible in the income statement, with some being reinvested to drive further efficiencies.

The roll out of our single global enterprise resource planning (ERP) system (SAP) is progressing well. The first implementation was successfully completed during the year and eight further roll outs will take place in 2019/20. We are moving from over 40 ERP systems to one global system which will reduce complexity; drive standardisation to help us to better simplify our processes to deliver future cost savings; and make us more agile and responsive to our customers.

The changes we are driving across the group are enabling us to strengthen our platform for growth, allowing us to invest into sustainable opportunities for the future. These include opportunities in Health, Battery Materials and those that are more nascent such as Fuel Cells and battery materials recycling. Whilst the speed and degree of change is high, our science, technology and customers remain at the core of our business.

Summary of efficiency initiatives

·		Global procurement - as our global procurement process builds, we are beginning to realise benefits and are on track to deliver the expected £60 million of savings over three years, with three quarters benefiting the income statement. In 2018/19, we achieved £26 million of savings, of which £19 million benefited the income statement. We anticipate a similar level of savings in 2019/20
·		Group restructuring programme - this is substantially complete with delivery of the vast majority of annualised cost savings of around £25 million
·		Health footprint optimisation - closure of our manufacturing plant in Riverside, US, is now complete as we build our platform for breakout growth

Initiative £ million	Total	Achieved in the year	Achieved to date
Procurement	60	26	28
Restructuring	25	12	24
Footprint optimisation	20	15	15
Total	105	53	67

Sustained growth in Clean Air
Our strategy in Clean Air provides clear visibility of sustained growth, as we help solve the challenges of air quality across the world. Share gains in Europe and tighter legislation globally, particularly in Europe and China are helping us deliver this growth.

·	We have grown our Light Duty diesel market share in Europe from c.45% in 2017/18 to c.65% at the end of 2018/19. The annualisation of these share gains will drive growth in 2019/20
·	The recent introduction of Euro 6c/d could double the sales value to us compared with Euro 6b for the majority of gasoline vehicles in Europe by 2025. We have reallocated R&D spend on gasoline given developments in the market and this uplift in value
·	Sustained growth in light duty in the US
·	The pull forward of China heavy duty legislation to July 2019 and implementation of Bharat 6 in India in 2020 will drive growth in 2020/21. Both of these developments result in a tripling of the value per truck to us compared with China 5 and Bharat 4
·	In light duty in China, implementation of China 6 from 2020 could double the value per vehicle for us compared with China 5, and drive growth in 2020/21
·	Delivering planned efficiencies from optimising our cost base and processes. Expect to maintain a margin of c.14% in the medium term
·	Construction of our new manufacturing facilities in Poland and China is well underway and we will begin construction on our India plant next year. This increased capacity will drive efficiency and enable us to meet higher demand driven by new legislation in Europe, China and India

Market leading growth in Efficient Natural Resources
Our strategy for Efficient Natural Resources is to leverage our market leading technologies through focused resource allocation to outperform in selected, higher growth segments. Increased operational efficiency will enhance performance to deliver profit growth ahead of sales growth. Developments against this strategy include:

·	In Catalyst Technologies, sales outperformed our markets in aggregate and profit growth was ahead of sales
·	Good progress in commercialising newly developed technology such as waste to aviation fuel
·	Continued to simplify our product portfolio with the removal of a number of products to optimise our offering to the market
·	Surveyed customers across Efficient Natural Resources to drive deeper engagement and understanding of their requirements, and continued improvement of our customer experience
·	Strong progress implementing our key account management and channel strategy to drive resources to areas where we can create the most value for our customers
·	Restructuring substantially complete, delivering planned annualised cost savings of £12 million

Break out growth in Health
Our Health strategy will deliver break out growth as we benefit from the commercialisation of our pipeline of new generic and innovator products. The generic pipeline is expected to deliver incremental operating profit of around £100 million by 2025, driving margin for the sector to the high 20%s. Developments include:

·	Taking the right actions on optimising our manufacturing footprint and efficiency, focusing on our operations to ensure we have the most appropriate platform to deliver breakout growth:
	·	The previously announced closure of our manufacturing plant in Riverside, US is now complete
	·	Our plant in Annan, UK is ramping up and made its first commercial sales in the year. The plant will be fully operational by the end of 2019/20
	·	Improved the efficiency of our existing plants to incrementally increase our capacity
·	With the right operational structure in place, we will now further increase our focus on the pipeline. During the year:
	·	Further progress has been made on developing and commercialising our pipeline of new generic API products. The generic pipeline remains substantially on track although there are delays to some products. At the year end, we had 46 products in the pipeline, an increase of seven in the period, and one of our products was launched
	·	Our pipeline of innovator API products also continued to progress with three products nearing commercialisation

Significant progress in commercialisation of Battery Materials
eLNO is our portfolio of leading ultra-high energy density materials which will compete with future materials such as NMC 811. eLNO will suit a broad range of applications in electric vehicles (EV) and, in particular, enable greater adoption of long range, pure battery EV.

Over the past twelve months, we have made significant progress in commercialising eLNO. We continue to test our materials with our target customers and feedback remains very positive. It is especially pleasing that as the market for cathode materials develops, auto OEMs are increasingly looking for customised solutions to solve their specific problems, which plays to our strengths in science and technology. Consequently, we have been tailoring eLNO for our customers and now have a portfolio of materials. As we progress through various stages of testing, we will work with customers to test eLNO in their own specific applications. To facilitate this, we are constructing three customer application centres - two in the UK and one in Japan. One of the UK centres will be completed in 2019 and the remaining two centres will be completed in 2020.

In scaling up, we have moved from lab scale to our pilot plant which is now complete. We recently selected a site in Poland for the first 10,000 metric tonnes commercial plant, which has the potential for expansion to 100,000 metric tonnes, and we are carefully planning how we scale beyond our initial 10,000 metric tonnes. We also signed our first long term supply agreement for raw materials with Nemaska Lithium.

Sales (£ million)	Year ended 31^st March		% change	% change, constant rates
Sales (£ million)	2019	2018	% change	% change, constant rates
Clean Air	2,720	2,454	+11	+11
Efficient Natural Resources	991	956	+4	+4
Health	257	247	+4	+3
New Markets	362	312	+16	+17
Eliminations	(116)	(123)
Sales	4,214	3,846	+10	+10

Underlying operating profit (£ million)	Year ended 31^st March		% change	% change, constant rates
Underlying operating profit (£ million)	2019	2018	% change	% change, constant rates
Clean Air	393	349	+13	+13
Efficient Natural Resources	181	158	+15	+15
Health	43	44	-3	-4
New Markets	2	17	-85	-85
Corporate	(53)	(43)
Underlying operating profit	566	525	+8	+8

Reconciliation of underlying operating profit to operating profit (£ million)	Year ended 31^st March
	2019	2018
Underlying operating profit	566	525
Loss on disposal of businesses¹	(12)	(7)
Loss on significant legal proceedings¹	(17)	(50)
Amortisation of acquired intangibles	(14)	(19)
Major impairment and restructuring charges¹	8	(90)
Operating profit	531	359

Double digit sales growth in both LDV and HDD catalysts
·	Light Duty Europe sales up 21% with strong growth in both diesel and gasoline
·	Achieved share gains in European light duty diesel and a market share of c.65% at March 2019
·	Light Duty Asia sales grew 3%, ahead of market production
·	Light Duty Americas sales were down 4% driven by weaker diesel sales
·	Sales of HDD catalysts were up 11% primarily due to continued strength in higher value US Class 8
·	Operating profit was up 13% and margin improved 0.2 percentage points to 14.4%

	Year ended 31^st March		% change	% change, constant rates
	2019	2018
	£ million	£ million
Sales
LDV Europe	1,031	855	+20	+21
LDV Asia	361	351	+3	+3
LDV Americas	346	358	-3	-4
Total Light Duty Vehicle Catalysts	1,738	1,564	+11	+12

HDD Americas	476	395	+20	+19
HDD Europe	334	320	+4	+4
HDD Asia	128	131	-2	-1
Total Heavy Duty Diesel Catalysts	938	846	+11	+11

Other - stationary	44	44	-	-

Total sales	2,720	2,454	+11	+11

Underlying operating profit	393	349	+13	+13
Margin	14.4%	14.2%
Return on invested capital (ROIC)	30.0%	30.5%
Reported operating profit	390	296	+32

Growth in sales and margin improved
·	Sales growth driven by double digit growth in catalyst refills and higher average pgm prices, partly offset by lower catalyst first fills
·	Operating profit grew strongly and margin improved by 1.8 percentage points to 18.3%, benefiting from higher average pgm prices and net benefits from improved efficiency partly offset by reinvestment in the safety and resilience of our pgm refineries and weaker performance in Advanced Glass Technologies
		Year ended 31^st March		% change	% change, constant rates
		2019	2018
		£ million	£ million
Sales
Catalyst Technologies		567	564	-	+1
Pgm Services		281	253	+11	+10
Advanced Glass Technologies		75	82	-9	-9
Diagnostic Services		68	57	+21	+24
Total sales		991	956	+4	+4

Underlying operating profit		181	158	+15	+15
Margin		18.3%	16.5%
Return on invested capital (ROIC)		12.6%	11.8%
Reported operating profit		175	138	+27

Sales growth with operating profit slightly down
·	Generics sales were broadly flat whilst Innovators continued to grow
·	Operating profit was slightly down as expected and margin was 1.3 percentage points lower. This was mainly due to a weaker product mix because of a continued decline in high margin products as they moved through their life cycle and net costs associated with footprint optimisation
·	There are 46 molecules in our generic API pipeline, which includes one launch in the year. We remain on track to deliver an additional £100 million of operating profit by 2025

Strong sales growth; commercialisation of eLNO on track
·	Sales growth driven by strong demand for our non-automotive battery systems and fuel cells
·	Operating profit declined 85% due to further investment in our Battery Materials business and weaker profitability in Medical Device Components
·	Continued progress in commercialising eLNO with board approval for the initial capital investment and site selection for our first commercial plant

	Share of 2018/19 non-sterling denominated underlying operating profit	Average exchange rate Year ended 31^st March		% change
		Average exchange rate Year ended 31^st March
		2019	2018
US dollar	39%	1.310	1.328	-1
Euro	37%	1.134	1.134	-
Chinese renminbi	9%	8.81	8.79	-

		Year ended 31^st March		%
		2019	2018	%
		millions	millions	change
North America	Sales	20.6	20.8	-1
	Production	16.9	16.9	-

Total Europe	Sales	20.4	20.8	-2
	Production	22.0	22.2	-1

Asia	Sales	43.4	44.8	-3
	Production	47.2	48.8	-3

Global	Sales	93.0	95.8	-3
	Production	91.8	94.0	-2

		Year ended 31^st March
		2019	2018	%
		thousands	thousands	change
North America	Sales	615	535	+15
	Production	624	540	+16

Total Europe	Sales	506	502	+1
	Production	645	653	-1

Asia	Sales	2,257	2,297	-2
	Production	2,298	2,314	-1

Global	Sales	3,515	3,450	+2
	Production	3,710	3,631	+2


			2019	2018
		Notes	£ million	£ million

Profit for the year			413	298
Other comprehensive income
	Items that will not be reclassified to the income statement
	Remeasurements of post-employment benefit assets and liabilities	14	(69)	103
	Fair value losses on equity investments at fair value through other
	comprehensive income		(3)	-
	Tax on items that will not be reclassified to the income statement		13	(31)
			(59)	72
	Items that may be reclassified to the income statement
	Exchange differences on translation of foreign operations		22	(95)
	Fair value losses on other investments at fair value through other
	comprehensive income		(1)	-
	Amounts credited to hedging reserve		4	5
	Fair value (losses) / gains on net investment hedges		(1)	6
			24	(84)
Other comprehensive income for the year			(35)	(12)
Total comprehensive income for the year			378	286

¹ See note 16.

UK's withdrawal from European Union
Although JM relies extensively on an agile, flexible supply chain, we have paid significant attention to the potential impact of the UK's withdrawal from the European Union under a 'no deal' scenario. Our well established working group, which is composed of a number of functional and sector experts, has assessed the implications of a 'no-deal' withdrawal. A number of mitigating activities were put in place ahead of 29^th March 2019 in preparation for this eventuality, for example through building inventory.

As part of the preparations, the project team conducted scenario analysis to assess the impact of individual risks and combinations of risks. As the probability of a hard withdrawal (without a transition agreement recognising the existing trading rules) increased, the working group approved the acceleration of the project team's contingency plans, with the primary objective of ensuring the continuity of the European business across the whole business model.

To that end, we remain comfortable that our current contingency planning will be effective should the UK withdraw from the European Union without a deal. We remain vigilant and alert to changes in the UK and EU's stance and the potential implications these may have on our operations.

Capital expenditure
Capital expenditure was £323 million in the year, 2.1 times depreciation and amortisation (excluding amortisation of acquired intangibles). In the period, projects included:
·	Clean Air manufacturing plants in Poland, China and India. This increased capacity will drive efficiency and improve flexibility, enabling us to support demand from tightening legislation in Europe and Asia
·	Investment in development and commercialisation of eLNO. We completed our pilot plant and began construction of three customer application centres - two in the UK and one in Japan. We selected a site in Poland for the first 10,000 metric tonnes commercial plant, which has the potential for expansion to 100,000 metric tonnes. The first commercial plant is on track to start production in 2021/22 and supply platforms in production in 2022/23
·	Upgrading our core IT business systems
·	Investment in our Health manufacturing and development facilities in Annan, UK and continued investment in our API product pipeline
·	Improving the efficiency and resilience of our pgm refineries within Efficient Natural Resources

Capital expenditure for 2019/20 is expected to be up to £500 million as our investments into growth projects increase. Key projects include:
·	Investment in eLNO as we continue to commercialise our market-leading ultra-high energy battery cathode material
·	Clean Air plants in Poland, China and India to meet the growing demand
·	Upgrade of our IT systems as we continue to roll out our single global ERP system, with eight roll outs in 2019/20

Depreciation and amortisation (excluding amortisation of acquired intangibles) is expected to increase by around £16 million in 2019/20 primarily as we depreciate our investment in upgrading our core IT systems.

Free cash flow and working capital
Free cash flow was an outflow of £13 million. This was due to a working capital outflow of £224 million, of which £198 million related to precious metal primarily reflecting downtime at one of our pgm refineries during the first half.

Excluding precious metal, working capital days improved to 48 days compared to 50 days at 31^st March 2018, better than our target for year-end working capital days excluding precious metal of 50 to 60 days. Average working capital days excluding precious metals improved by three days to 59 days, despite planned inventory build ahead of the first implementation of SAP and the UK's planned withdrawal from the European Union.

Dividend
The board has recommended an increase of 7% in the final dividend to 62.25 pence per share. Together with the interim dividend of 23.25 pence per share this gives a total ordinary dividend for the year ended 31^st March 2019 of 85.5 pence per share (2017/18: 80.0 pence per share). Subject to approval by shareholders, the final dividend will be paid to shareholders on 6^th August 2019, with an ex dividend date of 6^th June 2019.

Return on invested capital (ROIC)
ROIC excluding net pension fund assets slightly declined to 16.4% from 17.0% at 31^st March 2018 driven by higher precious metal working capital. ROIC including net pension fund assets would have been 15.4% compared with 16.4% at full year 2017/18.
Capital structure
Net debt at 31^st March 2019 was £866 million. This is a decrease of £170 million from 30^th September 2018 and an increase of £187 million from 31^st March 2018. Net debt increases to £911 million when adjusted for the post tax pension deficits. The group's net debt (including post tax pension deficits) to EBITDA was 1.3 times (31^st March 2018: 1.1 times). Our target range is 1.5 to 2.0 times, as this ensures we have flexibility to invest further in the future growth of the business.

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. 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.

On a specific matter, Johnson Matthey previously disclosed that it had been informed by two customers of failures in certain engine systems for which the group supplied a particular coated substrate as a component for their customers' emissions after-treatment systems. The particular coated substrate was sold to only these two customers. Johnson Matthey has not been contacted by any regulatory authority about these engine system failures. The reported failures have not been demonstrated to be due to the coated substrate supplied by Johnson Matthey. In the period, we settled with one of these customers on mutually acceptable terms with no admission of fault. Under this settlement, Johnson Matthey recognised a charge of £17 million in the year ended 31^stMarch 2019 and made the associated cash settlement post year end. This charge has been excluded from underlying operating profit.

Having reviewed its contractual obligations and the information currently available to it, the group believes it has defensible warranty positions in respect of its supplies of coated substrate for the after-treatment systems in the affected engines remaining at issue (as it believes it had in respect of the matter settled in the period). If required, it will vigorously assert its available contractual protections and defences. The outcome of any discussions relating to the matters raised is not certain, nor is the group able to make a reliable estimate of the possible financial impact at this stage, if any. While Johnson Matthey works with all its customers to ensure appropriate product quality, we have not received claims in respect of other emissions after-treatment components from these or any other customers. Our vision is for a world that's cleaner and healthier; today and for future generations. We are committed to enabling improving air quality and we work constructively with our customers to achieve this.

Going concern
The directors have assessed the future funding requirements of the group and are of the opinion that the group has adequate resources to fund its operations for the foreseeable future. Therefore they believe that it is appropriate to prepare the accounts on a going concern basis.


			2019	2018
				Restated¹
		Notes	£ million	£ million

Revenue		2	10,745	10,274
Cost of sales			(9,729)	(9,366)
Gross profit			1,016	908
Distribution costs			(126)	(123)
Administrative expenses			(324)	(260)
Loss on disposal of businesses		5	(12)	(7)
Loss on significant legal proceedings		6	(17)	(50)
Amortisation of acquired intangibles		7	(14)	(19)
Major impairment and restructuring charges		8	8	(90)
Operating profit		4	531	359
Finance costs			(107)	(63)
Finance income			64	25
Share of loss of joint venture and associate			-	(1)
Profit before tax			488	320
Tax expense			(75)	(22)
Profit for the year			413	298

			pence	pence

Earnings per ordinary share
	Basic		215.2	155.2
	Diluted		214.6	155.0


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

At 1st April 2017	221	148	(55)	147	1,776	(20)	2,217
Impact of adoption of IFRS 15 (note 16)	-	-	-	-	1	-	1
At 1st April 2017 (restated)	221	148	(55)	147	1,777	(20)	2,218
Total comprehensive income	-	-	-	(84)	370	-	286
Dividends paid (note 9)	-	-	-	-	(146)	-	(146)
Share-based payments	-	-	-	-	17	-	17
Cost of shares transferred to employees	-	-	7	-	(14)	-	(7)
Purchase of non-controlling interests	-	-	-	-	(9)	20	11
At 31st March 2018 (restated)	221	148	(48)	63	1,995	-	2,379
Impact of adoption of IFRS 9 (note 16)	-	-	-	(1)	-	-	(1)
At 31st March 2018 (restated)	221	148	(48)	62	1,995	-	2,378
Total comprehensive income	-	-	-	21	357	-	378
Dividends paid (note 9)	-	-	-	-	(156)	-	(156)
Share-based payments	-	-	-	-	17	-	17
Cost of shares transferred to employees	-	-	3	-	(10)	-	(7)
Tax on share-based payments	-	-	-	-	1	-	1
Reclassification	-	-	-	4	(4)	-	-
At 31st March 2019	221	148	(45)	87	2,200	-	2,611

2	Segmental information
			Efficient
		Clean	Natural		New
		Air	Resources	Health	Markets	Corporate	Eliminations	Total
		£ million	£ million	£ million	£ million	£ million	£ million	£ million

	Year ended 31st March 2019
	Revenue from external customers	4,948	5,074	259	464	-	-	10,745
	Inter-segment revenue	210	2,608	-	9	-	(2,827)	-
	Revenue	5,158	7,682	259	473	-	(2,827)	10,745

	External sales	2,719	880	256	359	-	-	4,214
	Inter-segment sales	1	111	1	3	-	(116)	-
	Sales	2,720	991	257	362	-	(116)	4,214

	Underlying operating profit	393	181	43	2	(53)	-	566

Year ended 31st March 2018
Revenue from external customers¹	4,248	5,389	252	385	-	-	10,274
Inter-segment revenue	260	2,342	-	18	-	(2,620)	-
Revenue¹	4,508	7,731	252	403	-	(2,620)	10,274

External sales	2,454	845	247	300	-	-	3,846
Inter-segment sales	-	111	-	12	-	(123)	-
Sales	2,454	956	247	312	-	(123)	3,846

Underlying operating profit	349	158	44	17	(43)	-	525

¹ Restated (see note 16).

3	Effect of exchange rate movements on translation of sales and underlying
	operating profit of foreign operations


	Average exchange rates used for translation of the results of foreign operations
		2019	2018

	US dollar / £	1.310	1.328
	Euro / £	1.134	1.134
	Chinese renminbi / £	8.81	8.79


	Year ended	Year ended 31st March 2018		Change at
	31st March 2019	At last year's rates	At this year's rates	this year's rates
	£ million	£ million	£ million	%

Sales
Clean Air	2,720	2,454	2,451	+11
Efficient Natural Resources	991	956	956	+4
Health	257	247	250	+3
New Markets	362	312	310	+17
Inter-segment sales	(116)	(123)	(124)
Sales	4,214	3,846	3,843	+10

Underlying operating profit
Clean Air	393	349	349	+13
Efficient Natural Resources	181	158	158	+15
Health	43	44	45	-4
New Markets	2	17	17	-85
Corporate	(53)	(43)	(43)
Underlying operating profit	566	525	526	+8

4	Underlying profit reconciliations
		2019	2018
		£ million	£ million

	Underlying operating profit (note 2)	566	525
	Loss on disposal of businesses (note 5)	(12)	(7)
	Loss on significant legal proceedings (note 6)	(17)	(50)
	Amortisation of acquired intangibles (note 7)	(14)	(19)
	Major impairment and restructuring charges (note 8)	8	(90)
	Operating profit	531	359

	Underlying profit before tax	523	486
	Loss on disposal of businesses (note 5)	(12)	(7)
	Loss on significant legal proceedings (note 6)	(17)	(50)
	Amortisation of acquired intangibles (note 7)	(14)	(19)
	Major impairment and restructuring charges (note 8)	8	(90)
	Profit before tax	488	320

	Tax on underlying profit before tax	(83)	(86)
	Tax on loss on disposal of businesses (note 5)	4	-
	Tax on loss on significant legal proceedings (note 6)	3	16
	Tax on amortisation of acquired intangibles (note 7)	3	4
	Tax on major impairment and restructuring charges (note 8)	(2)	21
	Tax thereon	8	41
	Tax rate changes¹	-	23
	Income tax expense	(75)	(22)

	Underlying profit for the year	440	400
	Loss on disposal of businesses (note 5)	(12)	(7)
	Loss on significant legal proceedings (note 6)	(17)	(50)
	Amortisation of acquired intangibles (note 7)	(14)	(19)
	Major impairment and restructuring charges (note 8)	8	(90)
	Tax thereon	8	41
	Tax rate changes¹	-	23
	Profit for the year	413	298
	¹Effective 1st January 2018, the US federal tax rate was reduced, which led to a revaluation of US deferred tax assets and liabilities during the year ended 31st March 2018.

		million	million

	Weighted average number of shares in issue	192	192

		pence	pence

	Underlying earnings per share	228.8	208.4

10	Net debt
		2019		2018
				Restated¹
		£ million	£ million

	Cash and deposits	90		203
	Money market funds	347		171
	Bank overdrafts	(59)		(70)
	Cash and cash equivalents	378		304
	Other current borrowings and related swaps	(184)		(38)
	Non-current borrowings and related swaps	(1,073)		(951)
	Non-current interest rate swap assets	13		6
	Net debt	(866)		(679)

	¹See note 16.

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 1st April 2018	225	1	(9)	(20)	(26)	(34)	137
Current service cost - in operating profit	(12)	(17)	-	(8)	-	(3)	(40)
Past service cost - in operating profit	7	-	-	2	-	-	9
Administrative expenses - in operating profit	(3)	-	-	(1)	-	-	(4)
Interest	7	(1)	-	(1)	(1)	(1)	3
Remeasurements	(61)	(2)	-	(1)	(1)	(4)	(69)
Company contributions	36	18	-	16	2	3	75
Exchange	-	-	-	(2)	(3)	1	(4)
At 31st March 2019	199	(1)	(9)	(15)	(29)	(38)	107

The post-employment benefit assets and liabilities are included in the balance sheet as follows:

	2019	2019	2019	2018	2018	2018
	Post-			Post-
	employment	Employee		employment	Employee
	benefit	benefit		benefit	benefit
	net assets	obligations	Total	net assets	obligations	Total
	£ million	£ million	£ million	£ million	£ million	£ million
UK pension - legacy section	199	-	199	225	-	225
UK pension - cash balance section	-	(1)	(1)	1	-	1
UK post-retirement medical benefits	-	(9)	(9)	-	(9)	(9)
US pensions	-	(15)	(15)	-	(20)	(20)
US post-retirement medical benefits	8	(37)	(29)	8	(34)	(26)
Other	2	(40)	(38)	2	(36)	(34)
Total post-employment plans	209	(102)	107	236	(99)	137
Other long-term employee benefits		(4)			(4)
Total long-term employee benefit obligations		(106)			(103)

	2019	2018	Fair value hierarchy
		Restated¹
	£ million	£ million	Level
Financial instruments measured at fair value

Non-current
Quoted bonds purchased to fund pension deficit	52	53	1
Unquoted investments	-	3	3
Investments at fair value through other comprehensive income	52	56
Interest rate swaps	13	6	2
Borrowings and related swaps	(5)	(8)	2

Current
Trade receivables²	173	160	2
Other receivables³	9	10	2
Cash and cash equivalents - money market funds	347	171	2
Other financial assets	22	15	2
Other borrowings and related swaps	-	(2)	2
Other financial liabilities	(13)	(12)	2

Financial instruments not measured at fair value

Non-current
Borrowings and related swaps	(1,068)	(943)

Current
Cash and cash equivalents - cash and deposits	90	203
Cash and cash equivalents - bank overdrafts	(59)	(70)
Other borrowings and related swaps	(184)	(36)

¹ See note 16. ² Trade receivables held in a part of the group with a business model to hold trade receivables for collection or sale. ³ Other receivables with cash flows that do not represent solely the payment of principal and interest.

The fair value of financial instruments, excluding accrued interest, is approximately equal to book value except for:

	2019		2018
	Carrying amount	Fair value	Carrying amount	Fair value
	£ million	£ million	£ million	£ million


US Dollar Bonds 2022, 2023, 2025 and 2028	(481)	(477)	(448)	(420)
Euro Bonds 2021, 2023, 2025 and 2028	(251)	(264)	(104)	(118)
Euro EIB loan 2019	(107)	(108)	(109)	(113)
Sterling Bonds 2024 and 2025	(110)	(118)	(65)	(71)
KfW US dollar loan 2024	(38)	(39)	(36)	(35)

Consolidated Income Statement

	Year ended 31st March 2018


	As previously reported	IFRS 15	Location swaps and sale and repurchase agreements	Restated
	£ million	£ million	£ million	£ million

Revenue	14,122	(217)	(3,631)	10,274
Cost of sales	(13,214)	217	3,631	(9,366)
Gross profit	908	-	-	908

Finance costs	(43)	-	(20)	(63)
Finance income	5	-	20	25

Profit before tax	320	-	-	320


Consolidated Balance Sheet

	As at 31st March 2018


	As previously reported	IFRS 15	Location swaps and sale and repurchase agreements	Cash and borrowings	Restated
	£ million	£ million	£ million	£ million	£ million

Total non-current assets	2,428	-	-	-	2,428
Current assets
Inventories	783	(20)	161	-	924
Current income tax assets	35	-	-	-	35
Trade and other receivables	1,228	22	54	-	1,304
Cash and cash equivalents - cash and deposits	329	-	-	(126)	203
Cash and cash equivalents - money market funds	-	-	-	171	171
Other financial assets	15	-	-	-	15
Total current assets	2,390	2	215	45	2,652
Total assets	4,818	2	215	45	5,080
Current liabilities
Trade and other payables	(1,012)	(1)	(215)	-	(1,228)
Current income tax liabilities	(149)	-	-	-	(149)
Cash and cash equivalents - bank overdrafts	(53)	-	-	(17)	(70)
Other borrowings and related swaps	(10)	-	-	(28)	(38)
Other financial liabilities	(12)	-	-	-	(12)
Provisions	(37)	-	-	-	(37)
Total current liabilities	(1,273)	(1)	(215)	(45)	(1,534)
Total non-current liabilities	(1,167)	-	-	-	(1,167)
Total liabilities	(2,440)	(1)	(215)	(45)	(2,701)
Net assets	2,378	1	-	-	2,379

Working capital (excluding precious metals)

	2019	2018
		Restated¹
	£ million	£ million

Inventories	1,316	924
Trade and other receivables	1,553	1,304
Trade and other payables	(1,647)	(1,228)
Total working capital	1,222	1,000
Less: Precious metal working capital	(590)	(404)
Working capital (excluding precious metals)	632	596

¹ See note 16.

Working capital days (excluding precious metals)
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.