Final Results

RNS Number : 8446W

Halma PLC

17 June 2008

 



HALMA p.l.c. PRELIMINARY RESULTS FOR THE YEAR TO 29 MARCH 2008 17 JUNE 2008 Double digit growth in revenue and profit

Halma, the leading safety, health and sensor technology group, today announces its preliminary results for the year to 29 March 2008.

Highlights include:
	Strong organic growth* in all three business sectors and across geographic regions.
	Revenue from continuing operations up 13% to £395.1 million (2007: £351.1 million), including  8% organic growth*.
	Pre-tax profit from continuing operations** up 11% to £72.8 million (2007: £65.6 million), including  7% organic growth*.
	Adjusted earnings per share*** up 12% to 13.86p (2007: 12.42p). Statutory earnings per share from continuing operations 12.97p (2007: 11.77p).
	Strong margins and returns maintained with Return on sales** of 18.4% (2007: 18.7%) and ROTIC* of  14.1% (2007: 14.0%).
	Good cash generation supports a record dividend, increased by 5%, reflecting the Board's confidence  in Halma's ability to deliver sustainable long-term growth.
	Acquisition of Riester adds new products and sales channels to Halma's existing Health Optics  business. Substantial resources available for further investment in acquisitions in accordance with  Halma's demanding criteria.
* ** ***		Organic growth rates, Return on capital employed (ROCE) and Return on total invested capital (ROTIC) are non-GAAP  performance measures used by management in measuring the returns achieved from the Group's asset base. See note 7 for details.  Adjusted to remove the amortisation of acquired intangible assets of £4.8 million (2007: £3.5 million). Adjusted to remove the amortisation of acquired intangible assets. See note 4 for details.

Commenting on the results, Andrew Williams, Chief Executive of Halma, said: 'Halma continues to deliver strong growth across our businesses and territories. This reflects our well-balanced portfolio and our focus on unique and high performance products that promote health and safety where customer investment is often non-discretionary. Our end markets remain robust and our financial position is strong. This gives us significant headroom to continue investing in innovation and organic growth and making acquisitions as the right opportunities present themselves. Therefore I am confident that we are well-positioned to make further progress in the current year and beyond.'

For further information, please contact:
Halma p.l.c. Andrew Williams, Chief Executive Kevin Thompson, Finance Director	[phone]
Hogarth Partnership Limited Rachel Hirst/Andrew Jaques	[phone]

A copy of this announcement, together with other information about Halma, may be viewed on its website: www.halma.com.
NOTE TO EDITORS
1.	Halma develops and markets products used worldwide to protect life and improve the quality of life. The Group comprises three business sectors:
	Infrastructure Sensors	We make products which detect hazards to protect people and property in public and commercial buildings.
	Health and Analysis	We make components and products used to improve personal and public health. We also develop technologies and products which are used for analysis in safety, environmental and leisure related markets including water.
	Industrial Safety	We make products which protect property and people at work.
	The key characteristics of Halma's businesses are that they are based on advanced technology and offer strong growth potential. Many Group businesses are a clear market leader in their specialist field and, in a number of cases, are the dominant world supplier.
2.	High resolution photos of Halma senior management, including Chief Executive Andrew Williams, and images illustrating Halma business activities can be downloaded from its website: www.halma.com. Click on the 'News' link, then 'Image Library'. Photo queries: David Waller [phone], e-mail: [e-mail].
3.	You can view or download copies of this announcement and our latest Half year and Annual reports from our website at www.halma.com or request free printed copies by contacting [e-mail].
A copy of the Annual report and accounts will be made available to shareholders on 1 July 2008 either by post or on-line and will be available to the general public on-line or on written request to the Company's registered office at Misbourne Court, Rectory Way, Amersham, Bucks HP7 0DE, UK.

HALMA p.l.c. Group results for the 52 weeks to 29 March 2008 Financial highlights
	Change	52 weeks 29 March 2008	52 weeks 31 March 2007
Continuing operations: Revenue	+ 13%	£395.1m	£351.1m
Adjusted profit before taxation (1)	+ 11%	£72.8m	£65.6m
Statutory profit before taxation	+ 9%	£68.0m	£62.1m
Adjusted earnings per share (2)	+ 12%	13.86p	12.42p
Statutory earnings per share	+ 10%	12.97p	11.77p
Total dividends (paid and proposed) per share	+ 5%	7.55p	7.18p
Return on sales (3)		18.4%	18.7%
Return on total invested capital (4)		14.1%	14.0%
Return on capital employed (4)		55.8%	60.1%

Pro-forma information:

(1)  Adjusted to remove the amortisation of acquired intangible assets of £4,757,000 (2007: £3,458,000).

(2)  Adjusted to remove the amortisation of acquired intangible assets. See note 4 for details.

(3)  Return on sales is defined as adjusted(1) profit before taxation from continuing operations expressed as a        percentage of revenue from continuing operations.

(4)  Organic growth rates, Return on total invested capital and Return on capital employed are non-GAAP performance         measures used by management in measuring the returns achieved from the Group's asset base. See note 7 for         details.

Chairman's statement  We enter the new year in good shape, continuing to see organic and acquisitive growth opportunities Halma: What we do and our strategy Our business is to produce products which protect lives and improve the quality of life for people worldwide. We do this through continuous innovation in market-leading products, which meet the increasing demands for improvements to health, safety and the environment. We build strong positions in markets where the demand is global. Our businesses are autonomous and highly entrepreneurial.  Strategically we aim to grow profit and revenue in excess of 5% p.a. organically, to have Return on sales in the region of 18% or above and generate post-tax Return on total invested capital of more than 12%. As a result we are highly cash generative and re-invest back into our businesses through people, product and market development, continue to acquire more companies with like characteristics, and strive to give annual dividend growth of 5% or more to our shareholders. The latter we have achieved for 29 consecutive years.  Results Once again, we have seen good progress over the last financial year. Revenue from continuing operations increased 13% to £395.1m (2007: £351.1m) with underlying organic growth* of 8.0% despite adverse currency effects of 1.4%, i.e. 9.4% at constant currency. Profit before tax and amortisation of acquired intangibles on continuing operations was £72.8m (2007: £65.6m) an increase of 11%, organic growth* was 6.7%; 7.6% at constant currency. Statutory profit before tax increased 9% to £68.0m. The Board is recommending a final dividend of 4.55p per share, an increase of 5.1%. Our dividend cover has increased to 1.83 times (2007: 1.74 times). Return on total invested capital* was 14.1% (2007: 14.0%).

Acquisitions and disposals During the year we acquired Sonar Research & Development (SRD) for £2.6m which now operates as part of Tritech in the Industrial Safety sector and Riester (manufacturer of small medical and ophthalmic diagnostic devices) for €55m (£40m) in our Health and Analysis sector. In Infrastructure Sensors we concluded a joint venture agreement with a leading Chinese fire detector supplier which will result in an investment of approximately £2.5m in 2008/09. We disposed of Post Glover Lifelink for US$6m (£3m).  Market development We expanded our banking facilities in February 2008 with a new 5-year £165m syndicated revolving credit facility, replacing our existing £60m facility on similar attractive terms. This increases our firepower to acquire more first-class companies that fit our strategic direction. We have allocated increased management resource to seek out and evaluate potential opportunities and the pipeline is improving.  Progress in China has been solid thanks to the investment we have made in our China hubs which are there to help our subsidiaries set up direct operations. Sales increased by 19% to £9m and the number of Group companies with in-country operations since we established the hubs has increased from 3 to 16. We are now setting up a similar hub in India, which will assist Group companies in developing operations there.  These investments are in line with our strategy of devoting more resources to the faster growing economies.

Governance At the beginning of the year we announced the appointment of Jane Aikman to the Board. Jane is the Financial Director of Infinis Limited (the UK's largest purely renewable energy generator) and she brings extensive financial and East Asia experience to the Board.  At the end of the year we announced that Keith Roy had given notice that he would retire and resign as a Director with effect from 31 July 2008. Keith's contribution as an executive Director has been immense. Among the many qualities that Keith demonstrates, his mentoring and people development skills are outstanding. Many managers and directors within the Group owe their strong development to encouragement and advice from Keith. On behalf of the Board I would like to thank him and wish him well in the next stage of his life.  In April we appointed Adam Meyers as an executive Director to the Board. He is responsible for the Health Optics and Photonics division within Halma's Health and Analysis sector. His knowledge of many of our Health and Analysis markets, particularly in the USA brings an added dimension to the Board.  People We owe these results to the quality of people within Halma, to their continued innovation and their dedication to our customers. A sincere thank you to them all.  We continue to invest in the development of our people, in particular through our management training programmes. It is encouraging to see an increasing number of internal promotions within the Group, particularly cross-company promotions.

Summary Another year of strong progress. We enter the new year in good shape, continuing to see organic and acquisitive growth opportunities and this gives us confidence for the future.  Geoff Unwin Chairman * See Financial highlights

Chief Executive's review   Record revenue and profit We have achieved another year of record revenue and profit, demonstrating the strength of our business model and strategy which has created value consistently for shareholders, customers and employees over nearly four decades. We continue to maintain a healthy balance between short-term performance and investment for sustainable growth in the longer term. The diversity of our products, markets and customer base provide good opportunities for organic and acquisitive growth and our underlying order intake trend remains strong.

Good organic growth and strong returns We grew revenue from continuing operations by 13% to £395m (2007: £351m) and profit before amortisation of acquired intangibles by 11% to £72.8m. Organic revenue growth* of 8.0% and organic profit growth* of 6.7% exceeded the 5% p.a. minimum objective for a third consecutive year. Return on sales* of 18.4%, Return on capital employed* of 55.8% and Return on total invested capital* of 14.1% were all strong performances and meet my overall objective to deliver growth without diluting the high quality of returns.

Growth in all three sectors All three reporting sectors (Infrastructure Sensors, Health and Analysis and Industrial Safety) achieved organic revenue and profit growth. In Infrastructure Sensors, our Fire Detection business performed very strongly whilst Elevator Safety and Security Sensors ended the year with improved momentum as planned following the major strategic changes implemented in the first half of the year. Our Health and Analysis sector made good progress with Labsphere, acquired in February 2007, contributing to another positive year for Photonics. Industrial Safety continued its record of strong organic growth and also benefited from a good performance from Tritech, the subsea asset monitoring business acquired in November 2006.  Revenue to all major geographic regions increased with double digit growth in the UK (+13%), Mainland Europe (+18%) and Asia Pacific/Australasia (+21%) - the latter meeting our objective of increasing our rate of revenue growth in Asia. Revenues into the USA grew by 7% despite an adverse currency impact. The geographic diversity of our customer base and, increasingly, our cost base ensured that the overall impact of currency movement on the Group's revenue and profit was modest.

Acquisition activity continues with increased resources Three acquisitions and one disposal were completed during the last year. In December 2007, we bought Riester (a German manufacturer of handheld instruments for the eyecare and general healthcare markets) for £40m, making it the second largest acquisition in our history. Earlier in the year we acquired SRD (£2.6m) to add new technology to our existing subsea Asset Monitoring business and BKKI for £0.3m to establish a stronger platform for our Gas Detection products in China. In January 2008, we sold Post Glover Lifelink Inc for £3m.  Our pipeline of acquisition opportunities remains good due to our increased 'search' activities and a stable marketplace for high quality small to mid-size technology businesses. We ended the year with net debt of £44m having extended our core borrowing facilities in February 2008 to £165m and leaving us well placed to take any suitable opportunities when they arise.

More investment in product and process innovation We launched over 90 new products during the year and increased expenditure on R&D by 22% to £18.6m. This R&D expenditure supports a wide range of activities from leading edge technology to modifying existing products to meet precise customer needs.  Increasingly we are seeing opportunities to gain competitive advantage through our manufacturing capabilities. Investment is increasing in manufacturing automation across the Group. Examples include the latest Optical Thin Film coating technology in Photonics and the latest electron beam welding equipment to help our Bursting Disc business sell into new OEM markets. Strategically, this increased automation also simplifies manufacturing processes and opens up the opportunity to replicate operations closer to our customers in other regions.

A resilient value-creation strategy Halma has changed a lot in recent years but our core values of Achievement through Empowerment, Innovation and Customer Satisfaction have remained the same.  Our value-creation strategy is a 'twin-track' approach.  As a business 'investor', we actively manage a portfolio of businesses, allocating capital and people resources according to where we see the best return. Since April 2005, we have made 11 acquisitions and 9 disposals.

As a business 'developer', we provide resources and highly relevant expertise to help our high return companies grow on a sustained basis. These resources and expertise include not only our Divisional Chief Executives, who chair the Group companies, but increasingly the knowledge shared between our companies. In addition to ensuring strong financial control and good governance, the role of our small Head Office is increasingly one of enabling companies to grow faster. Since April 2005, we have created Halma hubs in China, established senior management training programmes, held technology transfer events, increased the opportunities for cross-selling between Group companies and increased capital investment in new manufacturing capability. The consistently high returns achieved by Halma are a direct consequence of selecting a diverse range of businesses which have common characteristics. These include robust market growth drivers, strong barriers to entry, products which target 'non-discretionary' customer spend and untapped international growth opportunities. Our consistent good performance through macro-economic cycles shows the resilience of this integrated financial, operating and market drivers strategy.

Corporate responsibility and sustainability Halma's commitment to the environment, safety and health and improving the quality of life for individuals is reflected in both the way we do business and the products we create for our customers.

Our 'operational' commitment is shown in the clear objectives we set ourselves in areas ranging from carbon policy to the safety of our employees. We set objectives because they make good business sense. These are regularly reviewed and, where necessary, acted upon by the Board. The positive impact that our products have on society and the environment is significant and is a source of satisfaction for employees. Examples include protecting people from hazardous gases at work, providing safe access to public buildings for those with physical disabilities, enabling eye specialists to prevent sight loss or protecting the environment by conserving water through leakage reduction.

Stronger talent and succession planning processes We achieve and sustain our high levels of performance because we have talented and hard working teams of people throughout the Group. The quality and depth of talent has improved significantly over recent years and I thank everyone who has contributed to another excellent year. We have transformed the way in which we identify, develop and reward people. During the year, a new Halma Management Development Programme was created to support our Executive Development Programme and drive our investment in people development deeper into our organisation. A key benefit of this overall investment has been improved succession planning and increased internal promotions.

During the past year, three new Divisional Chief Executives were appointed. All were internal promotions, with each one earned through a strong track record of achievement at Managing Director level.  In April 2008, one of our existing DCEs Adam Meyers was promoted to the Halma p.l.c. Board following Keith Roy's announcement of his intention to retire in July 2008. I congratulate Adam on his well deserved promotion and also wish Keith a long and happy retirement. Keith's generosity in sharing his experience and developing others is reflected in the strength of our Executive team and many of our subsidiary company boards. He leaves with the Group in good shape.

Outlook Our businesses are well-positioned to sustain growth in the short and medium term due to their diversity of product range, customer base and geographic footprint as well as the 'non-discretionary' spend aspect of our safety-related products. In Infrastructure Sensors, these factors, a focus on commercial rather than residential buildings and a strong bias towards refit/refurbishment rather than new construction, gives us confidence of continued progress in 2008/09. All of our Health and Analysis markets look positive for the coming year and beyond. In addition to good organic growth prospects we are still targeting much of our acquisition search efforts in this sector.

Order intake trends have continued to be positive as we move into the next financial year. A major contributor to this is in Industrial Safety where many of our customers in the oil and gas market have an ever lengthening pipeline of orders to fulfil. Halma continues to deliver strong growth across our businesses and territories. This reflects our well-balanced portfolio and our focus on unique and high performance products that promote health and safety where customer investment is often non-discretionary. Our end markets remain robust and our financial position is strong. This gives us significant headroom to continue investing in innovation and organic growth and making acquisitions as the right opportunities present themselves. Therefore I am confident that we are well-positioned to make further progress in the current year and beyond. Andrew Williams Chief Executive * See Financial highlights

Financial review Another strong performance with growth in all three sectors and all territories Profit from continuing operations before amortisation of acquired intangible assets increased by 11% to £72.8m on revenue from continuing operations up 13% to £395.1m. This is the fifth consecutive year we are announcing record results. Organic profit growth* of 6.7% was achieved on organic revenue growth* of 8.0%, exceeding our target of 5% year on year improvement. Organic growth* is calculated before adding in the benefit of acquisitions. Currency translation had a more modest impact than previously expected. At constant currency, revenue and profit growth would have been approximately 1% higher.  There was one small disposal in the year so the prior year figures have been adjusted to give comparability. The trading result of that business, Post Glover Lifelink, and the gain on disposal are disclosed under discontinued operations.  Overall another strong performance continuing the pattern of delivering growth across all sectors and territories.

All three sectors grew Infrastructure Sensors, still our largest sector, grew revenue by 8% and profit by 2%. Our Health and Analysis sector had another very good year with revenue growth of 16% and profit growth of 16% becoming a higher proportion of Group revenue and profit and closing the gap on Infrastructure Sensors. Industrial Safety had another outstanding year of growth with revenue 17% higher producing profits 21% ahead. All three sectors achieved both organic revenue and organic profit growth.

Revenue growth in all territories There was once again widespread growth in revenue. The revenue from continuing operations by destination was as follows:
£ million	Revenue	%  growth
United Kingdom	109.3	13.1%
Mainland Europe	107.9	18.1%
United States of America	103.0	7.1%
Asia Pacific and Australasia	42.9	20.8%
Other countries	32.0 _______	1.6% _______
	395.1 _______	12.5% _______

Strong UK growth came from our Infrastructure Sensors businesses and from Tritech (in the Industrial Safety sector) acquired part way through the prior financial year. Good performances in most sub-sectors drove the increase in Mainland Europe especially by our businesses selling into the oil and gas industries. There was a useful addition coming from the Riester acquisition in Europe with considerable future benefit likely to come from its presence in Spanish speaking territories across the world.

Our Photonics businesses performed very well in the USA. Our good revenue growth in the USA would have been even greater if not for a US Dollar that was on average 6% weaker than the prior year relative to Sterling. Sales to Asia Pacific and Australasia grew well supported by a 19% growth in sales to China and 36% growth in sales to India. The China and India growth is from a small base with more infrastructure being put in place by Halma to accelerate future growth by our subsidiary companies.

Continued high margins Return on sales* for continuing operations was again at a high level of 18.4% (2007: 18.7%). This metric reflects the considerable value we consistently deliver to our customers through our products. We continue to invest in our businesses to give them the capacity they need to take future opportunities. Our KPI target in this area is a Return on sales of around 18% or higher and we aim always to couple that with growth as we have done again this year.  The cost of reorganisation in our Security Sensors business slightly reduced the Infrastructure Sensors margin this year as anticipated from 18.1% to 17.0%. Looking back at the performance of the Infrastructure Sensors sector in the years 2000 to 2004 and even in the early to mid-1990s we see its resilience. Taking the results of the companies we owned both now and then we see that during those periods sector revenue and profit grew and the Return on sales remained above 18%. This is a sector which has demonstrated that it is able to make progress in tougher economic conditions.

One business sold in the year In January 2008 we sold Post Glover Lifelink, a US business which was no longer core to the Health and Analysis sector, for US$6m (£3m). It had annualised revenue of £3.4m and profit of £0.6m. The gain on sale of £1.7m together with the post-tax trading result is shown on the Consolidated income statement as a discontinued operation.  A lower effective tax rate  The effective tax rate on profit from continuing operations before amortisation of acquired intangible assets was 29.0% (2007: 29.7%). This reflects the mix of geographic locations in which tax is paid. We expect the effective tax rate to reduce a little in the foreseeable future with the benefit of the reduction in the UK rate of corporation tax. Tax paid in the year was below the figure in the prior year due to the tax deductibility of higher payments into the Group's pension plans, and also due the timing of tax payments in advance which are expected to even out in the coming year.

Increased finance cost The net finance expense in the Consolidated income statement increased from £1.8m to £2.1m. This resulted from a lower net pension finance charge with a higher cost of financing debt. We increased our level of debt at the end of the third quarter of the year with the acquisition of Riester and expect that the debt financing cost will therefore be higher in 2008/09.

Earnings per share and dividends grow  Adjusted earnings per share* were up 12% to 13.86p.  Statutory earnings per share were 10% higher at 12.97p, a lower rate of increase due to the additional amortisation of intangible assets associated with the Riester acquisition. The Board has recommended a further 5.1% increase in the final dividend which together with a similar increase in the interim dividend gives a total dividend of 7.55p per share, subject to shareholder approval. This is in line with our progressive dividend policy and is the 29th consecutive year of dividend increases of 5% or more. Given the strong earnings growth the dividend cover (calculated on earnings from continuing operations before amortisation of acquired intangible assets) increased to 1.83 times, moving further towards our target of 2 times cover.

ROCE* of 55.8% and ROTIC* of 14.1% Strong growth was accompanied by our typical high returns. High returns are an important part of the Halma model with the objective of consistently creating value whilst growing our business. ROCE was 55.8% (2007: 60.1%) and is our measure of the effective use of operating assets. ROTIC is a post-tax return on the total asset base including all historic goodwill relating to ongoing and disposed businesses. This year ROTIC was 14.1% (2007: 14.0%) and this compares very favourably with a Weighted average cost of capital (WACC) for us calculated as currently being 8.4% (2007: 7.7%). See note 7 for the definition of Return on capital employed (ROCE) and Return on total invested capital (ROTIC).

Capital structure We finished the year with net debt of £44.3m (2007: £7.7m) in line with our strategy to use our balance sheet to accelerate business development. The major increase came in the second half following the Riester acquisition. The Group continues to be able to borrow at competitive rates and therefore sees a modest level of borrowing as an effective way of funding the development of the Group. During the year we expanded our 5-year syndicated revolving credit facility from £60m to £165m with a core group of banks and on similar attractive terms. The Group's good cash generation is used to invest in expanding the business organically and through high quality acquisitions using third party borrowings where needed. There are no material funds outside the UK where repatriation is restricted. Our treasury policies seek to ensure sufficient liquidity whilst minimising risk. No speculative transactions are undertaken. Our strong balance sheet and the new credit facilities give us valuable headroom to take opportunities as they are created and to finance the continued growth of the Group.

Continued good cash flow generation Cash generated from operations (excluding taxation paid) was £76.0m (2007: £70.3m). The main elements of the Group's cash flow are set out below:

Change in net (debt)/cash £ million	2008	2007
Cash generated from operations	76.0	70.3
Acquisition of businesses	(46.5)	(27.5)
Disposal of businesses	2.4	-
Development costs capitalised	(3.8)	(3.9)
Net capital expenditure	(14.9)	(7.3)
Dividends paid	(27.3)	(25.9)
Taxation paid	(17.6)	(19.5)
Issue of shares net of treasury shares purchased	0.2	3.6
Net interest paid	(1.8)	(0.8)
Exchange adjustments	(3.3) _______	(0.2) _______
	(36.6) _______	(11.2) _______
Net (debt)/cash brought forward	(7.7) _______	3.5  _______
Net debt carried forward	(44.3) _______	(7.7) _______
Cash generated from operations was 104% (2007: 106%) of adjusted profit*. The investment in working capital increased in the year in line with the growth of revenue. There is no significant change in the risk profile of the Group. Working capital receives regular attention at local and Group level and this remains an important focus as there are increasing demands placed on our generated cash to fund the investment needed for organic growth, acquisitions, our dividend and pension obligations.

Further valuable acquisitions Expenditure on acquisitions in the year was £46.5m (2007: £27.5m). The largest acquisition this year was that of Riester and its associated group companies in December 2007. We paid a consideration of €55m (including a small adjustment relating to the actual net asset value at acquisition). There is no earn out. Riester, which manufactures handheld medical and ophthalmic devices, fits into our Health and Analysis sector. At the time of acquisition Riester was generating profit of £4.6m on revenue of £17m. We undertook a very active integration process immediately on acquisition to bring the business in line with Group reporting standards and also to quickly deliver the benefits of collaboration with our related Group companies. The acquisition is immediately earnings enhancing.

At the start of the year we signed an agreement to pay £0.3m for the business of BKKI, a gas detector manufacturer in China. This forms the platform for expansion of our Gas Detection business in Asia.  In October 2007 we acquired Sonar Research & Development Limited (SRD) for £2.6m. This has been merged into our subsea asset monitoring business Tritech, part of the Industrial Safety sector.  During the year we increased our resources and capacity for acquisition search, due diligence and integration and together with our expanded credit facilities we hope to make further progress on acquisitions in the coming years.

Increased capital expenditure Expenditure on property, plant and computer software was £15.7m in the year, above the figure of £10.9m last year. Much of the increase was due to investment in property for two Group companies as noted last year - both building projects have been completed successfully. Capital expenditure represents 172% of depreciation, historically a high figure. We expect capital expenditure excluding property to continue at a relatively high level for the coming year at least as we make further investments in particular in our Photonics businesses to increase capacity in line with growing demand.

Pension contributions increased At year end the pension deficit on an IAS 19 basis for our defined benefit plans was £36.0m before the related deferred tax asset, a little lower than the previous year end figure of £37.3m. The movement is due to a combination of factors, the main ones being the increased pension contributions, the use of conservative assumptions in line with common practice, a reduction in the value of equity investments and an increase in the discount rate resulting in a reduction in the value of liabilities.  As indicated last year we increased further the extra contributions into the defined benefit plans, which were closed to new entrants in 2003, up to £6m per year. We anticipate making extra contributions of this level at least for the foreseeable future as we work toward our objective of eliminating the deficit as measured on an IAS 19 basis, over a 10-year period. These extra contributions are not an insignificant use of our cash but are not expected to impair our opportunities for further growth.  The Board reviews pension strategy in full at each pension fund valuation date and monitors for significant changes in between. The next valuation of the main pension plan will be based on figures as at 1 December 2008 and as part of that process mortality assumptions will be reviewed as will the level of contributions needed to meet our obligations.

Currency headwind reduced Currency translation turned out to have less of an adverse impact on Group results than anticipated mid-way through the year. Approximately 30% of Group revenue is denominated in US Dollars with the Euro accounting for around 15% on an annualised basis. Foreign currency profits are not hedged but sales and purchase transactions are hedged into the functional currency of each operating company. Balance sheet net currency assets are substantially hedged using currency loans.  We translate revenue and profit at the average exchange rates for the year and translate the year end balance sheet at the year end exchange rates. For our main currencies these rates relative to Sterling were as follows:
		US Dollar		Euro
Exchange rates	2008	2007	2008	2007
Average rate	2.01	1.89	1.42	1.48
Year end rate	1.99	1.96	1.26	1.47

As a guide, 1% movement in the Euro relative to Sterling is expected to change profit by £0.2m and revenue by £0.7m in a full year. In the first half of the year there was a 3% adverse currency impact due mainly to the weak US Dollar relative to Sterling. The trend reversed somewhat in the second half so that for the year as a whole revenue and profit were both reduced by approximately 1% due to currency translation. If current exchange rates continue we would expect a benefit to the coming year's results in terms of translation.

R&D investment grows Innovation is one of our core values and one aspect of this is the commitment we make to Research and Development (R&D) for new products. Group expenditure this year increased to £18.6 million, 4.7% (2007: 4.3%) of revenue and was 22% higher than last year's record amount. Expenditure on R&D as a percentage of revenue is one of the KPIs we monitor and report on and both Infrastructure Sensors and Health and Analysis are well clear of our benchmark level of 4% of revenue, with Industrial Safety increasing this year to 3.6% having historically been below 3%. International Financial Reporting Standards (IFRS) require us to capitalise certain development expenditure and amortise this asset over an appropriate period. In 2008 we capitalised £3.8m (2007: £3.9m) of such development expenditure and amortised £2.0m (2007: £1.5m) giving rise to an asset carried on the March 2008 Consolidated balance sheet of £8.2m (2007: £6.1m). R&D is by its nature an activity with some risk, so we monitor closely all costs carried forward. The increased investment in R&D expenditure and the resultant new products are a key part of the growth and resilience of Halma.

Spreading risks, developing our people The main risks facing Halma are discussed in the Strategic and Sector reviews. Risk is spread across our closely managed businesses, each one having its own high quality team including a senior finance executive. There is a significant level of review of the operations at each business; locally, via our Divisional Chief Executives who chair the local boards, by Divisional Finance Directors, and by our Internal Auditors. During the year we have added to our divisional finance resources, strengthened finance staff at a number of operating companies and added resource dedicated to acquisition integration. In 2008/09 we will be adding further to our Internal Audit team. For the first time we are reporting our progress on the Halma Executive Development Programme (HEDP) as a KPI and note that of the HEDP graduates some 17 have been amongst our senior finance executives. This careful addition and development of specific resource, focusing on risk and opportunity, gives us the capacity to grow our business actively whilst retaining the autonomy and accountability central to our business model.

Investing in the environment During the year we have invested additional resources across the Group in reducing our impact on the environment. We set ourselves an initial target of reducing by 10% the tonnes of CO2 we produce per £m of revenue over the three years to 2010 and progress so far is good. We see the reduction of our impact on the environment as part of relentless business improvement, consistent with our objective of delivering sustainable value to our customers and shareholders. Kevin Thompson Finance Director * See Financial highlights

Strategic review Group overview

We operate in relatively non-cyclical markets with resilient growth drivers. This enables us to increase shareholder value via organic growth and acquisitions.

Business overview Halma is made up of three sectors operating in over 20 countries. You will find a description of sector strategies, trends in our markets and sector performance in the sector reviews below. These sectors are:

Infrastructure Sensors	detecting hazards and protecting people and property in buildings
Health and Analysis	improving public and personal health; protecting the environment
Industrial Safety	protecting property and people at work

Strategic principles We apply five strategic principles to create shareholder value.

1.	Operate in specialised global markets offering long-term growth underpinned by robust growth drivers achieving organic growth rates above the blended long-term growth rate of our markets of around 5%.
2.	Build businesses which lead specialised global markets through innovative products differentiated on performance and quality rather than price alone.
3.	Recruit and develop top quality boards to lead our businesses and nurture an entrepreneurial culture within a framework of rigorous financial discipline.
4.	Acquire companies and intellectual assets that extend our existing activities, enhance our entrepreneurial culture, fit into our decentralised operating structure and meet our demanding financial performance expectations.
5.	Achieve a high Return on capital employed to generate cash efficiently to fund organic growth, closely targeted acquisitions and sustained dividend growth.

Macro-economic, regulatory and competitive environment Our expectation for 2008/09 is that the macro-economic environment will be generally favourable to our growth strategy. We expect a higher risk of instability in the global economy but anticipate that for us any demand reduction in specific markets will be more than offset by: rising demand in developing regions; extending sales channels and gaining market share in developed regions; and more value-enhancing acquisitions.  Increasing environmental and safety legislation in our markets is favourable to us since it creates demand for our products. Global, national and regional product approvals and technical validations are an increasing cost and technical challenge, but also form an increasing barrier to market entrants.

While a slowdown in the more mature economies may moderate our rate of organic growth, we have a resilient business mix. Many Halma products sell into highly regulated markets characterised by low sales cyclicality. Demand resilience due to many of our products being driven by 'non-discretionary' customer spend, together with the diversity of our product portfolio, geographic market spread and a significant contribution from service income, upgrading and replacement products provide protection from unfavourable macro-economic trends.  While our markets are competitive, sales are spread across a wide range of industries; our largest single market is fire detection (approximately 15% of revenue) and our largest individual customer constitutes less than 3% of Halma revenue. This wide spread of activity means that competition issues are analysed at subsidiary company or operating sector level and our competitive environment is considered in the sector reviews.

Group strategy and forward vision We have a clear vision of how the world is changing. Increased regulation and legislation, long-term demographic trends and generally higher safety, health and environmental expectations are relevant examples. As the world changes, our customers and their needs change too.  Within our operating businesses growth strategies tend to have a three to five-year horizon. However, at Group level, our strategy for acquiring businesses, developing positions in markets and investing in manufacturing resources has a horizon of 10 years or more.  We position our businesses in markets which we identify as relatively non-cyclical. We select markets with good prospects of long-term, sustained growth whatever the prevailing macro-economic conditions. Our criteria for choosing markets is that they are underpinned by resilient growth drivers.

Our primary growth drivers

Demand for energy and water resources Worldwide growth in energy and water consumption is relentless. The total world consumption of marketed energy is projected to increase by 57% from 2004 to 2030. Despite the predicted economic slowdown in the USA, Asian economies are forecast to grow by 7.6% in 2008, with the PRC economy expanding by 10%. As an indicator of rising energy demand, Asian electricity generation is predicted to rise annually by more than 4% from 2004 to 2030. These trends favour our Industrial Safety businesses as investment in oil exploration and power generation continues to rise.

Growth in population, ageing and urbanisation While population growth, ageing and urbanisation are sales drivers with a global dimension, their impact on our businesses is different regionally. For example, population growth and urbanisation drives demand for our Infrastructure Sensor products in Asia while the ageing population in the Western World drives demand for health products.  By the end of 2008 more than half of the world's population, 3.3 billion people, will be living in urban areas, rising to almost 5 billion by 2030. The next few decades will see unprecedented urban growth, particularly in the developing world. Urbanisation drives investment in non-residential buildings like shops, offices, schools and hospitals, the primary market for our infrastructure sensors.  Poor water quality and the urgent need to conserve water resources stimulates demand for our water leak location equipment, water quality testing kits and UV water treatment systems.

Increasing demand for healthcare Many factors are fuelling the growing worldwide demand for healthcare and our health related products. The USA, the world's largest healthcare market, is expected to grow at an annual rate of 6.7% from 2007 to 2017. US healthcare spending will rise from 16.3% of GDP in 2007 to 19.5% in 2017. In the developed world population ageing creates rising demand, whereas in the developing world economic development is making healthcare affordable to an increasing number of people. Throughout the world, advances in medical technology enable new medical procedures, stimulating demand for new instruments and equipment.

Increasing regulation and rising expectations of health and safety Each year as many as 270 million people suffer occupational accidents and 160 million contract occupational diseases. Approximately two million people die from work-related accidents and diseases annually. To combat this, governments worldwide introduce increasingly rigorous safety and environmental legislation to provide improved safety and quality of life. Failure to address these risks carries a huge potential cost to our customers. Globalisation also drives demand for safety equipment. Western multinational businesses see the development of transnational safety and health standards as good business practice, effectively exporting high safety standards to the countries they operate in. In time, these practices become integrated into the regulatory frameworks of the 'host' countries. This is a process we see evolving in Asia currently.

New technology During the past year, Halma companies spent 4.7% of revenue (£18.6m) on R&D and introduced around 90 new products into their market niches. Although we develop leading edge technology in some businesses, for example our Photonics business, most of our R&D is spent on taking proven technology and applying it in new ways using our market leading understanding of the application challenges. Our R&D resources are placed in each of the subsidiary companies to ensure market needs are understood and met efficiently. This agility results in products with superior performance and value for customers delivering strong product margins and sustained revenue growth.

Our strategic priorities Organic growth Our strategic priorities for 2008/09 are to continue to deliver organic growth and maintain a balance between investment and profitability. The ability to grow and to make additional investments is an important element of our progress over the past three years.

Acquisitions We want to accelerate our rate of growth by acquisition. We have invested more resources in our search for acquisitions and to ensure newly acquired businesses are integrated effectively. The characteristics of target businesses and their markets are most important. They have to be a good fit with our operating culture and strategy in addition to being value-enhancing financially.

Asian business expansion We are seeing continued progress and opportunities in Asia - where revenue grew by 21% this year and represents around 11% of the Group total. The Halma China hubs created in 2006 resulted in 16 Group companies with a presence in the country, up from three originally. Since then we have made small investments in Fire and Gas Detection and are creating a manufacturing hub in Shanghai which will be operational in mid-2008. We are establishing a new Halma India hub in Mumbai which will be operational by the end of 2008.

Management development We will continue to strengthen our management. Our increased investment in training has improved the quality and flexibility of our senior management and resulted in greater movement of managers across Group companies. Active management of our people resources is a key factor in our ability to sustain long-term growth. Executive Board responsibilities are adjusted regularly to match our strategic priorities.

High rate of innovation Innovation is continually improving from an already high standard. Our emphasis is on both product and process innovation since the latter often results in significant competitive advantage for niche businesses. The quality of entries in our monthly and annual innovation awards, together with the high number of new products launched each year, underline this success.

Infrastructure Sensors sector review We make products which detect hazards to protect people and property in public and commercial buildings. Infrastructure Sensors contributed 42% of Group revenue (£167m) and 38% (£29m) of Group profit*. Our principal products are sensors for fire, security, automatic doors and elevator controls.  * see note 1 to the Preliminary Announcement

Market trends and growth drivers Legislation remains the primary growth driver in the Fire market. There is a continuing global trend towards increasingly rigorous fire safety regulations. In the developing world, fire product standards are often based on North American and European norms, which favour our products. Recent revisions to Chinese fire detector standards are causing several smaller local suppliers to exit the market. Worldwide, demand for fire detectors is steady with an annual estimated growth rate of just under 5%, predicted to continue until at least 2011. Asia is the fastest growing sector with average annual growth of 6.5%. In the past year we saw continuing fire market consolidation with more independent manufacturers acquired by multinationals. Customers are moving towards more sophisticated fire detection technologies such as addressable detectors, network systems and video-based smoke detection. We work alongside our customers to ensure we are well placed to meet these needs in the future.

Our Security Sensors sell into a global security market with a projected annual growth rate to 2012 of 7.8%. We see opportunities to increase our market share through better product innovation and customer service levels - particularly outside our traditional strongholds, the UK and South Africa.  We estimate the market for Automatic Door sensors is growing by 3% to 4% annually. However, within this there are geographic and specific application niches which are growing at a faster rate due to rising safety standards - for example industrial door sensors and access for those with disabilities.

Elevators are typically refurbished and upgraded every 15 to 25 years to meet current safety regulations. Worldwide, there is an installed base of 8 million elevators and each year around 400,000 new elevators are installed. We expect the global elevator market to continue to grow at 5% to 6% annually, but with wide regional variation in the ratio of more profitable modernisation work to new construction. The US market is an even mix of new build and modernisation, concentrated in large cities, where building fire codes are the main sales drivers. The mature European market is mostly modernisation work with demand strongly driven by the EN81 safety standards which continue to be gradually adopted by individual countries. New construction dominates the Asian elevator market, with the notable exception of Japan.

Sector strategy In this sector our principal strategic goal is to be the leading supplier of safety-critical sensor products and supporting technology for infrastructure monitoring in non-residential buildings. We choose safety-critical products because these are 'non-discretionary' spend items for non-residential buildings driven by regulatory requirements. Our businesses are positioned as the expert supplier of safety-critical components, not as complete system builders or installers. We aim not to compete with the global businesses that install complete building monitoring systems and position ourselves as an independent supplier to all of them. This demands that we continue to expand our commercial, technical and manufacturing presence internationally.

For example, to increase Fire product sales we are strengthening local customer relationships and improving market intelligence. To achieve this, we continue to set up new sales offices in Europe, the USA and Asia. We also plan to increasingly decentralise product development to accelerate new products designed to meet local standards. To defend our market positions, we regularly review our intellectual property portfolio, ensuring global protection and policing our patented technologies.  A continuing strategy is to build competitive advantage through manufacturing excellence. The goal is to achieve advances in both quality and productivity so that our customers get market leading service levels consistently - wherever they are located. In early 2008, we agreed a new manufacturing joint venture for Fire sensors in China to help satisfy increasing demand in Asia.

In our Security business, we will continue to invest in new products, processes and people to grasp our international expansion opportunities, particularly into North America and Asia. Strategic partners are in place to assist our aim of being a strong global player, complementing our market leadership in the UK and South Africa. We have obtained new international product approvals, improved our manufacturing platform and rationalised our new product development programmes. We are developing new intruder detection systems based on microwave and infrared sensors and have developed novel wireless communications technology for easier system installation and integration. In addition to strengthening our position as the dominant world supplier of Automatic Door sensors for pedestrian doors, we are introducing novel new products to increase our share of the industrial door market. A major new product to be launched in 2008/09, featuring a laser sensor, will reinforce our technology leadership and drive sales growth in this market.  During the past year we completed the implementation of the regional Elevator strategic reorganisation started in late 2006. The creation of product focused manufacturing and R&D resources with a regionally aligned sales organisation is aimed at increasing profits through stronger revenue growth. We believe we can shorten product lifecycles, maintain technological leadership via R&D, cut production costs and extend sales channels thereby maintaining a strong competitive advantage even against low cost competitors. An international 'in-country' sales presence is a key differentiator and we now operate 23 elevator sales offices worldwide. Three new offices were opened in France, the USA and India during 2007/08 alone.

Sector performance Fire sector revenue and profits were at record levels as we continued to gain market share, notably in Europe. Product margins improved due to product design and process innovations.  We achieved record sales of Security Sensors despite significant internal reorganisation to ensure success in our future global expansion plans. Underlying profitability improved during the second half of the year indicating that the benefits of these strategic changes are starting to emerge as planned. Revenue and profit at our Automatic Door sensor business also set new records. During 2007/08 we achieved strong progress in the USA and China and more modest progress in Europe. Greater penetration of our products into specialist markets such as hospitals and schools contributed to growth.  Performance of our Elevator businesses was flat during the first half of 2007/08 due to higher investment and overhead costs and showed some improvement during the second half.

Sector outlook Our markets in this sector are underpinned by robust regulatory drivers for non-residential buildings generating demand from both modernisation of existing structures and new construction. Therefore, they have proved to be resilient throughout the macro-economic downturns of the past. We expect stable trading conditions to continue in our major market, Europe (61% of sector revenue including the UK), whilst our relative exposure to the US market (only 19% of sector revenue) will mitigate the impact on the sector of any major downturn in that region.  New sales channels, investment in worldwide product approvals and new products will create further opportunities in developing regions. The Infrastructure Sensors sector is well placed for continued growth in 2008/09.

Health and Analysis sector review We make components and products used to improve personal and public health. We also develop technologies and products which are used for analysis in safety, environmental and leisure related markets, including water. Health and Analysis contributed 34% (£135m) of Group revenue and 37% (£28m) of Group profit*.  * see note 1 to the Preliminary Announcement

Market trends and growth drivers Demand for Water management products is driven by increasing regulatory control and water shortages due to finite resources, population growth and climate change. Estimates suggest that the US water industry is growing at 4% to 6% per year and at even faster rates elsewhere. However, in absolute terms, the major markets remain in the UK and Europe. Third party patent protection, covering the use of UV to treat drinking water in the USA, ended thereby reopening the US market. Our systems recently achieved NWRI validation for wastewater reuse; USEPA drinking water validation will follow during 2008/09. System validations are increasingly important, with US validation standards now required by many countries. Our Photonics products sell into highly diverse niche markets. These include biomedical, life sciences, analytical instrumentation, research, education, space, defence, homeland security, semiconductor and industrial applications. At the leading edge of science and technology, our businesses continually spin off new applications and new customers. For example, the widespread change to low-energy lighting, driven by environmental concerns, is creating strong demand for our light measurement products used for quality control, validation and new product development.

We maintained global leadership in light integrating spheres (which capture light) and miniature spectrometers (which analyse light). Whilst we are growing internationally, about two-thirds of Photonics sales are in the USA. Growth depends on government science budgets (for education, defence and homeland security) and corporate spending by our OEM customers. However, demand for products used in health analysis is underpinned by regulatory drivers which make these markets relatively resilient and non-cyclical. We anticipate continued growth even in unfavourable economic conditions due to the flexibility of our technology and the diversity of our end markets. Demand for our Health Optics products continues to grow in response to rising incomes and access to healthcare in the developing world, and an ageing population and rising health expectations in the developed countries. We estimate that the health optics market is growing 5% annually in developed economies and 2% to 3% worldwide. Rising international and local product registration requirements add cost to new healthcare product development but also represent an increasingly high barrier to market entrants reinforcing the strong brand strength we have in our chosen markets. The strength of the Euro boosted export growth for both our US and UK based optics companies to record levels. In Fluid Technology, demand remains strong, especially from the fast-growing medical and environmental monitoring markets. We have seen further consolidation of customers and expect this merger and acquisition trend to continue, and believe this offers us further opportunity for growth.

Sector strategy To remain the world market leader in Water leak reduction instrumentation, our strategy is to offer water utilities worldwide the most comprehensive range of leakage monitoring equipment available from one source supported by strong local sales and technical resources. This requires continual investment in establishing resources in export markets and in new product development, increasingly in close cooperation with our customers.  Our Water UV companies are organised to focus on either municipal or industrial applications. This strategy allows the companies to develop specialist applications experience and deliver enhanced customer service for the precise customer needs in their market segment. In Photonics and Health Optics our primary strategy is to drive organic profit growth by extending our geographical presence in sales, product development and manufacturing. We will also increase exploitation of our proprietary knowledge and patents. R&D spending will continue at above average rates to maintain technology leadership. We will encourage greater inter-company collaboration and seek complementary acquisitions. Our Fluid Technology strategy is to extend our product portfolio and increase sales representation in new markets via organic growth and acquisitions.

Sector performance Sales of Water products set new records and delivered good organic profit growth. Growth was particularly high in the UK where new products penetrated new wastewater monitoring markets and we also saw useful progress in Europe. Our Photonics businesses achieved record revenue and profit. The new Chinese photonics facility has contributed to sales growth and is now starting to play a key role in procurement and product development.  Our Health Optics companies also achieved record revenue aided by expansion of their worldwide distribution network and record numbers of sales staff in overseas markets. There was growth in all major geographic regions. The recent Riester acquisition will help to increase our footprint outside the USA and UK with the expectation that Europe and the Rest of World revenue will grow as the further contribution from Riester comes through in the coming year. Riester manufacture 'premium' handheld instruments for general medical practitioners. These include blood pressure monitors, ear nose and throat instruments, ophthalmoscopes and stethoscopes. Good collaboration is already underway between Riester and our existing Health Optics businesses. They can sell Riester's instruments to their ophthalmology market and also supply ophthalmoscopes for Riester to sell into their general medical market. Geographically, Riester's strength in South America and other Spanish speaking territories (plus one or two markets in Asia) complements our existing strength in the UK and USA. Riester gives us new distribution into the general medical market which may benefit other businesses in our Health and Analysis sector in the longer term. Record revenue and profit were achieved by our Fluid Technology businesses. This stemmed from continued higher investment in distribution and engineering resources focused on growing market share. Growth came from a strong core business demand plus new customers.

Sector outlook There are positive, resilient market drivers creating favourable conditions for growth in our Health and Analysis sector. Across this sector increased manufacture, procurement and product development in developing countries will protect margins and enable continued revenue growth. Increasing demand and regulation to raise Water supply efficiency and drinking water quality, plus environmental pressures on wastewater usage, will create favourable conditions for our Water businesses. Increased cooperation on international sales distribution and new product development, between our Water businesses, should deliver continued growth during 2008/09. In Photonics, we expect continued rapid growth in developing markets, particularly China. This growth should more than offset any disruption to US government spending caused by the presidential election in November. The overall outlook for Health Optics is for continuing sales and profit growth at market rates. The first full year of trading at our recent acquisition, Riester, will boost this sub-sector's results in 2008/09. We expect demand to stay steady for our Fluid Technology products and look forward to continuing profits growth in the year ahead. New operations are to be established in China and the Czech Republic to strengthen our presence in Asia and Europe.

Industrial Safety sector review We make products which protect property and people at work. Industrial Safety contributed 24% of Group revenue (£94m) and 25% of Group profit* (£19m).  * see note 1 to the Preliminary Announcement

Market trends and growth drivers Research published in 2007 suggests that the global market for Gas Detection products was £350m in 2005, estimated to reach £486m in 2012. Demand for gas detection products in the developed world remains robust, supported by a relatively high proportion of aftermarket sales. The adoption of enhanced safety standards in the developing economies will drive additional demand.  Internal data suggests Bursting Disc market growth of about 4% annually with higher rates in the developing world.  Market conditions for our Safety Interlock businesses were broadly favourable during 2007/08 with particular buoyancy in the global oil and gas market and in the supply chain supporting the expansion of utilities in China and India. Customers are placing orders earlier in the project cycle to 'lock in' supplies and ensure on-time delivery. Industrial safety is not yet fully embedded in Asian legislation but is often driven by engineering best-practice adopted from developed countries. Europe leads the world in worker protection. Signs that the USA is moving towards European industrial safety practice are favourable to us.  We estimate that the global market niches for Asset Monitoring that our businesses serve is £150m; we expect to see an average annual growth rate of 8% to 10%. Rising global demand for closer monitoring of energy usage and for capturing data relating to high value or sensitive infrastructure assets, offer excellent growth prospects. This sub-sector was strengthened by the acquisition of Sonar Research & Development (SRD) in October 2007. SRD has been fully integrated within our existing Tritech subsea technology business.

Sector strategy To grow our Gas Detection business against strong global competition we have a dual strategy of a regular stream of new products and relentless cost reduction of existing ones. From our new base in China we will design and manufacture for the local market and source components for our UK manufacturing base. We have set up a design resource in India to accelerate new product development. Our strategy for Bursting Disc growth is to capture significant market share in both developed markets and the high growth BRIC economies. We have set up new distribution agreements in Russia and South America, and are exploring expansion opportunities in China and India. Market share gains can also be achieved through superior customer service and we have an active capital investment programme to improve our manufacturing capabilities.

For Safety Interlocks, we aim to protect our strong market position and drive sales growth by increased investment on new product development and establishing a sales and operational presence in developing markets. Leading edge technological innovation is less critical in the safety interlocking market than the ability to adapt existing technology to solve new problems. Customers will pay premium prices in return for responsive sales and engineering support and reliable deliveries.  Our Asset Monitoring business is positioned to satisfy growing worldwide demand for remote monitoring of valuable or safety-critical assets - particularly those in hazardous or remote locations. Our companies work closely with customers to develop solutions based on customer need rather than technological advancement. We will continue to integrate wireless data capture and communications technology, originally developed for water network management, into other Halma sub-sectors. For example, a unique wireless-monitored bursting disc was recently launched. This strategy of inter-company collaboration and technology exchange has the potential to add value to existing and future products across the Group.

Sector performance Gas Detection revenue and profit grew above market rates. Revenue grew most strongly in export markets, notably in the USA, Europe, the Middle East and Asia.  Our concentration on global expansion of our Bursting Disc sales channels resulted in record revenue and profit with growth rates above the market level.  We achieved record revenue and profit from our Safety Interlock businesses with particularly strong growth in Germany and Asia and in those businesses serving the oil and gas markets.  Our Asset Monitoring businesses performed well in 2007/08 benefiting from a particularly good performance from our subsea business, Tritech, acquired in late 2006. SRD, acquired in October 2007, was successfully integrated into the Tritech group of companies.

Sector outlook The major demand drivers in our Industrial Safety markets are relatively resilient. There is a worldwide progression towards better protection for industrial workers and increasing safety regulation in all types of workplace. Businesses have to comply with safety legislation even during an economic downturn. Underpinned by relatively non-cyclical demand drivers, our Industrial Safety businesses have the qualities to maintain growth and outperform the market. Our strategy of new product investment, additional sales offices, and significant investment in manufacturing improvements should ensure that we continue to achieve healthy organic growth in 2008/09.

Preliminary results for the 52 weeks to 29 March 2008

Consolidated income statement

		52 weeks to 29 March 2008			52 weeks to 31 March 2007
	Notes	Before acquired                intangibles              amortisation                          £000	Amortisation          of acquired           intangibles                     £000	Total                     £000	Before acquired                  intangibles                amortisation                             £000	Amortisation          of acquired            intangibles                      £000	Total                     £000
Continuing operations
Revenue	1	395,061	–	395,061	351,119	–	351,119
Operating profit Finance income Finance expense		74,923  8,159  (10,303) ______	(4,757) –  –  ______	70,166  8,159  (10,303) ______	67,437  7,272  (9,101) ______	(3,458) –  –  ______	63,979  7,272  (9,101) ______
Profit before taxation		72,779	(4,757)	68,022	65,608	(3,458)	62,150
Taxation	3	(21,101) ______	1,413  ______	(19,688) ______	(19,518) ______	1,065  ______	(18,453) ______
Profit for the year from continuing operations		51,678	(3,344)	48,334	46,090	(2,393)	43,697
Discontinued operations
Net profit for the year from discontinued operations	8	1,950  ______	–  ______	1,950  ______	314  ______	–  ______	314  ______
Profit for the year attributable to equity shareholders	1	53,628  ______	(3,344) ______	50,284  ______	46,404  ______	(2,393) ______	44,011  ______
Earnings per ordinary share	4
From continuing operations Basic Diluted		13.86p		12.97p  12.90p	12.42p		11.77p  11.68p
From continuing and discontinued operations Basic Diluted				13.49p  13.42p			11.86p  11.77p
Dividends in respect of the year Paid and proposed (£000) Paid and proposed per share	5			28,172  7.55p			26,753  7.18p

Consolidated balance sheet

	29 March 2008 £000	31 March  2007 £000
Non-current assets Goodwill	161,230	129,521
Other intangible assets	33,252	15,338
Property, plant and equipment	57,452	49,580
Deferred tax assets	10,069 _______	11,178 _______
	262,003 _______	205,617 _______
Current assets Inventories	44,267	39,134
Trade and other receivables	99,741	81,650
Cash and cash equivalents	28,118 _______	22,051 _______
	172,126 _______	142,835 _______
Total assets	434,129 _______	348,452 _______
Current liabilities Borrowings	7,035	29,762
Trade and other payables	69,420	62,590
Tax liabilities	8,273 _______	6,043 _______
	84,728 _______	98,395 _______
Net current assets	87,398 _______	44,440 _______
Non-current liabilities Borrowings	65,358	-
Retirement benefit obligations	35,957	37,260
Trade and other payables	2,874	3,005
Deferred tax liabilities	6,108 _______	3,184 _______
	110,297 _______	43,449 _______
Total liabilities	195,025 _______	141,844 _______
Net assets	239,104 _______	206,608 _______
Capital and reserves Share capital	37,446	37,312
Share premium account	16,949	15,239
Treasury shares	(3,292)	(1,664)
Capital redemption reserve	185	185
Translation reserve	7,144	(4,272)
Other reserves	5,106	3,654
Retained earnings	175,566 _______	156,154 _______
Shareholders’ funds	239,104 _______	206,608 _______

 

Consolidated statement of recognised income and expense

	52 weeks to 29 March  2008 £000	52 weeks to 31 March 2007 £000
Exchange differences on translation of foreign operations	11,352	(10,216)
Exchange differences transferred to profit on disposal of foreign operations	64	–
Actuarial (losses)/gains on defined benefit pension plans	(3,886)	7,084
Tax on items taken directly to reserves	343 _______	(2,122) _______
Net loss recognised directly in reserves	7,873	(5,254)
Profit for the year	50,284 _______	44,011 _______
Total recognised income and expense for the year	58,157 _______	38,757 _______

Reconciliation of movements in shareholders' funds

	52 weeks to 29 March 2008 £000	52 weeks to 31 March 2007 £000
Shareholders’ funds brought forward	206,608	188,080
Profit for the year	50,284	44,011
Dividends paid	(27,329)	(25,922)
Exchange differences on translation of foreign operations	11,352	(10,216)
Exchange differences transferred to profit on disposal of foreign operations	64	–
Actuarial (losses)/gains on defined benefit pension plans	(3,886)	7,084
Tax on items taken directly to reserves	343	(2,122)
Issue of shares	1,844	4,916
Treasury shares purchased	(1,628)	(1,285)
Movement in other reserves	1,452 _______	2,062 _______
Total movement in shareholders’ funds	32,496 _______	18,528 _______
Shareholders’ funds carried forward	239,104 _______	206,608 _______

Consolidated cash flow statement

	Notes	52 weeks to 29 March 2008 £000	52 weeks to 31 March 2007 £000
Net cash inflow from operating activities	6	58,401	50,754
Cash flows from investing activities Purchase of property, plant and equipment Purchase of computer software Proceeds from sale of property, plant and equipment Development costs capitalised Interest received Acquisition of businesses Disposal of businesses		(14,787) (952) 831  (3,796) 721  (46,537) 2,405  _______	(10,053) (847) 3,609  (3,893) 1,035  (27,499) -  _______
Net cash used in investing activities		(62,115) _______	(37,648) _______
Financing activities Dividends paid Proceeds from issue of share capital Purchase of treasury shares Interest paid Drawdown of borrowings	6	(27,329) 1,844  (1,632) (2,473) 37,796  _______	(25,922) 4,916  (1,272) (1,894) -  _______
Net cash from/(used in) financing activities		8,206 _______	(24,172) _______
Increase/(decrease) in cash and cash equivalents Cash and cash equivalents brought forward Exchange adjustments	6	4,492  22,051  1,575  _______	(11,066) 35,826  (2,709) _______
Cash and cash equivalents carried forward		28,118  _______	22,051  _______

Notes to the Preliminary Announcement

1  Segmental analysis

Sector analysis

	2008 £000	Revenue 2007 £000	2008 £000	Profit 2007 £000
Infrastructure Sensors	167,262	154,830	28,504	27,975
Health and Analysis	134,630	116,483	27,842	23,980
Industrial Safety	93,731	79,940	19,355	15,998
Inter-segmental sales	(562)	(134)	–	–
Central companies	–	–	(778)	(516)
	_______	_______	_______	_______
Continuing operations	395,061	351,119	74,923	67,437
Discontinued operations	2,894	3,487	436	483
Net finance expense	–	–	(2,144)	(1,829)
	_______	_______	_______	_______
Group revenue/profit before amortisation of acquired intangibles	397,955	354,606	73,215	66,091
Amortisation of acquired intangible assets	–	–	(4,757)	(3,458)
Profit on disposal of operations before tax	–	–	1,669	–
Taxation	–	–	(19,843)	(18,622)
	_______	_______	_______	_______
Revenue/profit for the year	397,955	354,606	50,284	44,011
	_______	_______	_______	_______

Geographical analysis

	Revenue by destination		Revenue by origin
	2008 £000	2007 £000	2008 £000	2007 £000
United Kingdom	109,253	96,556	228,090	199,859
United States of America	103,013	96,173	115,932	107,407
Mainland Europe	107,883	91,371	61,709	56,047
Asia Pacific and Australasia	42,859	35,481	19,422	18,277
Africa, Near and Middle East	22,136	22,027	–	–
Other countries	9,917	9,511	–	–
Inter-segmental sales	–	–	(30,092)	(30,471)
	_______	_______	_______	_______
Revenue from continuing operations	395,061	351,119	395,061	351,119
Discontinued operations	2,894	3,487	2,894	3,487
	_______	_______	_______	_______
Group revenue	397,955	354,606	397,955	354,606
	_______	_______	_______	_______
Inter-segmental sales are charged at prevailing market prices.
			2008 £000	Profit 2007 £000
United Kingdom			37,608	32,626
United States of America			22,710	21,775
Mainland Europe			12,597	10,860
Asia Pacific and Australasia			2,008 _______	2,176 _______
Operating profit from continuing operations before amortisation of acquired intangibles			74,923	67,437
Discontinued operations			436	483
Net finance expense			(2,144)	(1,829)
			_______	_______
Group profit before amortisation of acquired intangibles			73,215	66,091
Amortisation of acquired intangible assets			(4,757)	(3,458)
Profit on disposal of operations before tax			1,669	–
Taxation			(19,843)	(18,622)
			_______	_______
Profit for the year			50,284 _______	44,011 _______

2 Basis of preparation  The financial information included within the preliminary results for the year to 29 March 2008 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with the Companies Act 1985.   This Preliminary Announcement does not constitute the Group's statutory accounts for the years ended 29 March 2008 or 31 March 2007, but is derived from those accounts. Statutory accounts for the year to 31 March 2007 have been delivered to the Registrar of Companies. Statutory accounts for the year to 29 March 2008 will be delivered before the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under s237 (2) or (3) of the Companies Act 1985. This Preliminary Announcement was approved by the Board of Directors on 17 June 2008.

3   Taxation
Current tax	2008 £000	2007 £000
UK corporation tax at 30% (2007: 30%)	8,970	8,651
Overseas taxation	10,046	8,985
Adjustments in respect of prior years	(74)	69
	________	________
Total current tax charge	18,942	17,705
Deferred tax
Origination and reversal of timing differences	462	622
Adjustments in respect of prior years	284 _______	126 _______
Total deferred tax charge	746 _______	748 _______
Tax on profit from continuing operations	19,688	18,453
Tax on profit from discontinued operations	155 _______	169 _______
Total tax charge recognised in the Consolidated income statement	19,843 _______	18,622 _______
Reconciliation of the effective tax rate:
Profit before tax – continuing operations	68,022	62,150
Profit before tax – discontinued operations	2,105 _______	483 _______
	70,127	62,633
Tax at the UK corporation tax rate of 30% (2007: 30%)	21,038	18,790
Overseas tax rate differences	633	1,141
Items not subject to tax	(2,038)	(1,504)
Adjustments in respect of prior years	210 _______	195 _______
	19,843 _______	18,622 _______
Effective tax rate on continuing and discontinued operations	28.3%	29.7%

4   Earnings per ordinary share Basic earnings per ordinary share are calculated using the weighted average of 372,769,853 shares in issue during the year (net of shares purchased by the Company and held as treasury shares) (2007: 371,221,629). Diluted earnings per ordinary share are calculated using the weighted average of 374,604,505 shares (2007: 374,036,077) which includes dilutive potential ordinary shares of 1,834,652 (2007: 2,814,448). Dilutive potential ordinary shares are calculated from those exercisable share options where the exercise price is less than the average price of the Group’s ordinary shares during the year. Earnings from continuing operations excludes the net profit from discontinued operations. Adjusted earnings is calculated as earnings from continuing operations excluding the amortisation of acquired intangible assets after tax. The Directors consider that adjusted earnings represents a more consistent measure of underlying performance. A reconciliation of earnings and the effect on basic earnings per share figures is as follows:
	Per ordinary share
	2008 £000	2007 £000	2008 pence	2007 pence
Earnings from continuing and discontinued operations	50,284	44,011	13.49	11.86
Remove earnings from discontinued operations	(1,950)	(314)	(0.52)	(0.09)
	________	_______	_______	_______
Earnings from continuing operations	48,334	43,697	12.97	11.77
Add back amortisation of acquired intangibles (after tax)	3,344 _______	2,393 _______	0.89 _______	0.65 _______
Adjusted earnings	51,678 _______	46,090 _______	13.86 _______	12.42 _______

5   Ordinary dividends				Per ordinary share
				2008 pence		2007 pence		2008 £000	2007 £000
Amounts recognised as distributions to shareholders in the year Final dividend for the year to 31 March 2007 (1 April 2006)				4.33		4.12		16,139	15,308
Interim dividend for the year to 29 March 2008 (31 March 2007)				3.00 _______		2.85 _______		11,190 _______	10,614 _______
				7.33 _______		6.97 _______		27,329 _______	25,922 _______
Dividends declared in respect of the year Interim dividend for the year to 29 March 2008 (31 March 2007)				3.00		2.85		11,190	10,614
Proposed final dividend for the year to 29 March 2008 (31 March 2007)				4.55 _______		4.33 _______		16,982 _______	16,139 _______
				7.55 _______		7.18 _______		28,172 _______	26,753 _______
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. If approved, the final dividend for 2007/08 will be paid on 20 August 2008 to shareholders on the register at the close of business on 18 July 2008.

6   Notes to the consolidated cash flow statement				2008 £000	2007 £000
Reconciliation of profit from operations to net cash inflow from operatingactivities Profit from continuing operations before taxation				70,166	63,979
Profit from discontinued operations before taxation				436	483
Depreciation and amortisation of computer software				9,142	8,147
Amortisation of capitalised development costs				1,981	1,528
Amortisation of acquired intangible assets				4,757	3,458
Share-based payment expense in excess of amounts paid				1,997	1,317
Additional payments to pension plans				(6,352)	(4,233)
Profit on sale of property, plant and equipment and computer software				(1,186)	(314)
				_______	_______
Operating cash flows before movement in working capital				80,941	74,365
Increase in inventories				(2,278)	(1,648)
Increase in receivables				(9,605)	(3,673)
Increase in payables				6,970 _______	1,215 _______
Cash generated from operations				76,028	70,259
Taxation paid				(17,627)	(19,505)
				_______	_______
Net cash inflow from operating activities				58,401 _______	50,754 _______
				2008 £000	2007 £000
Reconciliation of net cash flow to movement in net cash/(debt) Increase/(decrease) in cash and cash equivalents				4,492	(11,066)
Cash inflow from borrowings				(37,796)	–
Exchange adjustments				(3,260)	(163)
				________	_______
Net (debt)/cash brought forward				(36,564) (7,711)	(11,229) 3,518
				________	_______
Net debt carried forward				(44,275)	(7,711)
				________	_______
	At 31 March 2007 £000	Cash flow £000	Exchange  adjustments £000		At 29 March  2008 £000
Analysis of net debt Cash and cash equivalents	22,051	4,492	1,575		28,118
Bank loans	(29,762)	(37,796)	(4,835)		(72,393)
	________	________	________		_______
	(7,711)	(33,304)	(3,260)		(44,275)
	________	________	________		_______

7     Non-GAAP measures Return on capital employed								2008 £000	2007 £000
Operating profit from continuing operations before amortisation of acquired intangibles Operating profit from discontinued operations in prior period before amortisation of acquired intangibles								74,923 - _______	67,437 483 _______
Operating return								74,923 _______	67,920 _______
Computer software costs within intangible assets								1,911	1,577
Capitalised development costs within intangible assets								8,240	6,115
Property, plant and equipment								57,452	49,580
Inventories								44,267	39,134
Trade and other receivables								99,741	81,650
Trade and other payables								(69,420)	(62,590)
Tax liabilities								(8,273)	(6,043)
Non-current trade and other payables								(2,874)	(3,005)
Add back retirement benefit accruals included within payables								2,087	3,071
Add back accrued deferred purchase consideration								1,189 _______	3,559 _______
Capital employed								134,320 _______	113,048 _______
Return on capital employed								55.8%	60.1%
Return on total invested capital								2008 £000	2007 £000
Post-tax profit from continuing operations before amortisation of acquired intangibles								51,678	46,090
Post-tax profit from discontinued operations in prior period before amortisation of acquired intangibles								- _______	314 _______
Return								51,678 _______	46,404 _______
Total shareholders’ funds								239,104	206,608
Add back retirement benefit accruals included within payables								2,087	3,071
Add back retirement benefit obligations								35,957	37,260
Less associated deferred tax assets								(10,069)	(11,178)
Cumulative amortisation of acquired intangibles								10,112	5,348
Goodwill on disposals								5,441	5,441
Goodwill amortised prior to 3 April 2004								13,177	13,177
Goodwill taken to reserves prior to 28 March 1998								70,931 _______	70,931 _______
Total invested capital								366,740 _______	330,658 _______
Return on total invested capital								14.1%	14.0%
Organic growth Organic growth measures the change in revenue and profit from continuing Group operations. The effect of acquisitions made during the current or prior financial year has been equalised by subtracting from the current year results a pro-rated contribution based on their revenue and profit at the date of acquisition, and has been calculated as follows:
	Revenue					Profit* before taxation
	2008 £000	2007 £000		% growth		2008 £000		2007 £000	% growth
Continuing operations Acquired revenue/profit	395,061  (15,762) _______	351,119 - _______				72,779  (2,794) _______		65,608 - _______
	379,299 _______	351,119 _______		8.0%		69,985 _______		65,608 _______	6.7%
* Before amortisation of acquired intangible assets.
8    Discontinued operations
The discontinued operations relate to Post Glover Lifelink, Inc. (‘PGL’) which was sold in January 2008. PGL is incorporated in the United States of America and formed part of the Health and Analysis sector. PGL’s results, which have been included in the Consolidated income statement, were as follows:
								2008 £000	2007 £000
Revenue								2,894	3,487
Operating expenses								(2,458) _______	(3,004) _______
Operating profit								436	483
Taxation								(155) _______	(169) _______
Profit from operations after taxation								281	314
Profit on disposal of operations								1,733	-
Exchange differences transferred to profit on disposal of operations								(64) _______	- _______
Profit on disposal of operations before and after taxation								1,669 _______	- _______
Net profit from discontinued operations								1,950 _______	314 _______
The profit on disposal of operations includes gross disposal proceeds received and receivable of £3,035,000. The net cash inflow in the year on disposal of operations was £2,405,000.

 

Cautionary note This Preliminary Announcement contains certain forward-looking statements which have been made by the Directors in good faith using information available up until the date they approved the Announcement. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events.

 

END

 

 

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