Half Yearly Report

RNS Number : 0035X

Halma PLC

30 November 2010

 



HALMA p.l.c. HALF YEAR REPORT FOR THE 26 WEEKS TO 2 OCTOBER 2010 30 NOVEMBER 2010 Record profit growth of 29 per cent at the half year Halma, the leading safety, health and sensor technology group, today announces its half year results for the 26 weeks to 2 October 2010.

Highlights include:
●	Pre-tax profit from continuing operations1 up 29% to £49.3m (2009/10:  £38.1m) on revenue up 12% at £249.1m (2009/10:  £222.1m).
●	Organic growth2 at constant currency: Profit up 28%, Revenue up 10%.
●	High and increased level of returns achieved with Return on Sales3 of 19.8% (2009/10:  17.1%).
●	All three sectors reported growth in revenue and profit with strong growth in Health & Analysis, solid progress in Infrastructure Sensors and significantly improved profitability in Industrial Safety.
●	Revenue outside of the UK/Europe and USA reaches 23% of total revenue, in line with the Group's strategic objective of international expansion with a focus on Asia.
●	Adjusted earnings per share from continuing operations4 up 32% at 9.75p (2009/10: 7.37p).  Statutory earnings per share up 37% at 9.38p (2009/10:  6.87p).
●	Order intake in the first half in line with revenue.
●	Increase in the interim dividend of 7%, reflecting the Board's continued confidence in Halma's long-term growth prospects.
●	Strong balance sheet with significant headroom for M&A.  Solid cash generation resulting in net cash of £27.6m.  Acquisition of Alicat Scientific for $25.2m (£15.7m) completed since the period end.

Commenting on the results, Andrew Williams, Chief Executive of Halma, said: "We have seen increased revenue and profit in each of our sectors, continuing the earnings momentum we maintained throughout the financial downturn.  Market conditions are much steadier than they have been over the previous two years and, therefore, this year we expect a much more evenly balanced split between first half and second half trading.  We made an attractive acquisition following the period end and continue our search for high quality opportunities within our existing markets." Notes:

1	Adjusted to remove the amortisation of acquired intangible assets of £2.0m (2009/10: £2.7m).
2	Organic growth rates are non-GAAP measures used by management to assess underlying performance.  See note 9 for details.
3	Return on Sales is defined as adjusted1 profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations.
4	Adjusted to remove the amortisation of acquired intangible assets and the associated tax.  See note 6 for details.

For further information, please contact:

Halma p.l.c. Andrew Williams, Chief Executive Kevin Thompson, Finance Director	[phone]
MHP Communications 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	Products which detect hazards to protect assets and people in public and commercial buildings.
	●	Health and Analysis	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	Products which protect assets 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 clear market leaders 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 the latest Half Year and Annual Reports from the website at www.halma.com or request free printed copies by contacting [e-mail].

4.

This 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.

HALMA p.l.c. Half year results for the 26 weeks to 2 October 2010 Financial Highlights

	Change	Unaudited 26 weeks to 2 October 2010	Unaudited 27 weeks to 3 October 2009
Continuing Operations
Revenue	+ 12%	£249.1m	£222.1m
Adjusted Profit before Taxation1	+ 29%	£49.3m	£38.1m
Statutory Profit before Taxation	+ 34%	£47.3m	£35.4m
Adjusted Earnings per Share2	+ 32%	9.75p	7.37p
Statutory Earnings per Share	+ 37%	9.38p	6.87p
Interim Dividend per Share	+ 7%	3.54p	3.31p
Return on Sales3		19.8%	17.1%
Return on Total Invested Capital4		15.5%	12.6%
Return on Capital Employed4		72.3%	52.4%

Pro-forma information:
1	Adjusted to remove the amortisation of acquired intangible assets of £2.0m (2009/10: £2.7m).
2	Adjusted to remove the amortisation of acquired intangible assets and the associated tax.  See note 6 for details.
3	Return on Sales is defined as adjusted1 profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations.
4	Organic growth rates, Return on Total Invested Capital (ROTIC) and Return on Capital Employed (ROCE) are non-GAAP performance measures used by management in measuring the returns achieved from the Group's asset base.  See note 9 for details.

Chairman's Statement Geoff Unwin, Chairman of Halma, said: Half year results maintain momentum Halma: What we do and our strategy Our business is to make 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 market niches where the demand is global. Our businesses are autonomous and highly entrepreneurial.

Results For the first half, revenue from continuing operations of £249.1m was 12% up compared with the prior year (2009/10: £222.1m); organic revenue1 growth was 12% and, at constant currency, was 10%. Adjusted1 profit before tax from continuing operations increased 29% to £49.3m (2009/10: £38.1m), almost entirely organic growth, and including 1% benefit from currency translation. Statutory profit before tax increased by 34% to £47.3m. Return on Total Invested Capital1 was 15.5% (2009/10: 12.6%). Cash flow continued to be strong in the half year, resulting in a net cash balance of £27.6m compared with £9.1m at 3 April 2010.

Dividends The Board declares a 7% increase in the interim dividend to 3.54 pence per share, maintaining the higher rate of dividend increase established last year.  This dividend will be paid on 9 February 2011 to shareholders on the register at 7 January 2011. This increase reflects the Board's continuing confidence in Halma's long-term growth prospects. Progress Halma's half year results reflect the efforts of our employees over the past 18+ months to improve our effectiveness, controlling costs yet still delivering revenue growth.  This is demonstrated by the 2.7% improvement in the Group's half-year Return on Sales to 19.8% (2009/10: 17.1%). We invest strongly in products, markets and people and expect to continue to see the results of these investments, particularly in new products and in China, in the short to medium term.

Acquisition Earlier this month, Halma purchased Alicat Scientific, Inc. for $25.2m (£15.7m).  Alicat provides Halma with complementary technology for its Fluid Technology sub-sector and is a first step in investing some of the £100m we identified as available for acquisitions. Outlook After the volatility of the past two years, there is greater stability in our markets although customer visibility is still shorter-term than before the credit crunch.  Prospects for the deployment of further capital in quality acquisitions continue to improve. Looking at our performance sequentially, following a strong second half last year (£48.1m adjusted profit), we have continued to make progress in the first half of this year (£49.3m adjusted1 profit).  We are well placed to perform equally strongly in the second half of 2010/11. 1 See Financial Highlights

Chief Executive's Review Andrew Williams, Chief Executive of Halma, said: Growth in every sector and all geographic regions Record performance with strong organic growth Halma performed strongly during the first half year, achieving record revenue and profit with growth in every sector and all geographic regions. We achieved revenue growth of 12% and this, together with continued good control of costs, enabled us to deliver adjusted1 profit growth of 29%. There was only a small positive contribution from currency exchange movement and acquisitions. Therefore, underlying organic revenue and profit growth at constant currency was impressive, at 10% and 28% respectively. We have continued to achieve record levels of performance throughout the downturn.  After the significant volatility experienced in 2009, there was a clear change in demand levels at the start of 2010. We saw both a step-up in order intake and greater month-to-month stability. This has continued throughout the year. We expect to make further progress in the second half, with a more evenly balanced first half to second half trading pattern than we saw last year.

High and increased levels of return All three sectors increased Return on Sales1, which for the Group improved to 19.8% (2009/10: 17.1%).  Our companies maintained product margins even though some experienced raw material cost rises whilst certain suppliers struggled to ramp-up their output to keep pace with rapidly increasing demand.  Overhead costs grew more slowly than revenue and we will continue to balance this cost control with the need for investment to ensure we meet our longer-term strategic growth objectives. Solid cash generation reflected good operational discipline by our subsidiary management teams.  Return on Capital Employed1 increased to 72% (2009/10: 52%) whilst Return on Total Invested Capital1 was 15.5% (2009/10: 12.6%) - both excellent performances given the level of revenue growth achieved.  We ended the first half with net cash of £27.6m and our financial position remains strong.

Growth in all sectors All three sectors grew revenue and profit at the interim stage. Infrastructure Sensors made solid progress, growing revenue 5% to £96.0m (2009/10: £91.3m) and profit2 by 8% to £17.9m (2009/10: £16.6m).  All four sub-sector businesses, Fire Detection, Security Sensors, Automatic Door Sensors and Elevator Safety increased revenue.  Unsurprisingly, this good performance across the sector was driven by growth in developing regions. Outside UK/USA/Mainland Europe revenue was up by 24%, more than compensating for flat revenue in these developed markets. We will continue to increase resources and investment in faster growing countries like China and India.

Health and Analysis performed very impressively becoming our largest sector, with revenue up 22% to £102.4m (2009/10: £83.6m) and profit2 up 39% to £22.1m (2009/10: £15.9m).  All four sub-sector businesses increased revenue and profit.  There were particularly strong performances in Photonics, Fluid Technology and Water whilst Health Optics made steady progress. Encouragingly, the geographic growth trends were good in both developed and developing regions. There was double-digit revenue growth in both the UK and the USA whilst Mainland Europe was slightly ahead of the prior year.  Outside of these regions, revenue grew by 40% with Far East and Australasia revenue rising by 48%. Here our photonics businesses are achieving high levels of growth, benefiting from the fast growing market in low energy lighting and displays.

Industrial Safety grew revenue by 8% to £50.8m (2009/10: £47.2m) and, impressively, increased profit2 by 36% to £11.4m (2009/10: £8.4m).  All four sub-sector businesses grew revenue and profit.  Gas Detection, Bursting Disks and Asset Monitoring performed strongly, whilst Safety Interlocks made steadier progress. These businesses delivered 8% revenue growth in UK/USA/Mainland Europe combined and 5% growth elsewhere. Clearly, the regional trends in Industrial Safety are different to our other two sectors since industrial Health and Safety regulation tends to be introduced later in the growth cycle in developing countries than, for example, basic healthcare. However, we remain committed to investing in these new territories and working with our customers towards improving safety in the workplace.

Growth in all major geographic regions The strong performance in Health and Analysis boosted the Group's total revenue from the USA by 15% and the UK by 6%. Revenue from Mainland Europe rose by 4% with the major contributor being improved demand for our Industrial Safety products. Outside of UK/USA/Mainland Europe, revenue increased 26% to £58.1m (2009/10: £46.2m) contributing 23% to total Group revenue (2009/10: 21%). This improvement is in line with our goal for these regions to represent over 30% of the Group by 2015. In China revenue increased by 34% to £10.6m, double that of two years ago although still only a step towards our objective of it being 10% of the Group by 2015. We continue to look at new ways to help our companies grow faster here.

Greater investment in strategic growth initiatives We have successfully maintained investment for growth throughout the downturn and are clearly seeing the benefit of this in our financial performance.  We are committed to further increased investment aligned with our key strategic objectives. Notable features of the first half included:
●	High rate of innovation - our R&D expenditure increased in line with revenue growth by 12% to £12.2m (2009/10: £10.9m). At 4.9% of revenue, this is well above our minimum 4% KPI target level.
●	International expansion with focus on Asia - we opened new China regional offices in Chengdu (western China) and Guangzhou (southern China) supplementing our existing presence in Shanghai and Beijing.  A further regional office in Shenyang for northern China will become operational before the year end.
●	Management development - 20 engineers and scientists from our subsidiary companies started the first module of the new Halma Certificate in Applied Technology (HCAT) training programme in June 2010.  HCAT will develop engineering talent across the Group with a particular focus on improving the return from our investment in innovation.
Acquisition completed, stronger pipeline of opportunities Following the period end, in November 2010, we acquired Alicat Scientific, Inc. for $25.2m (£15.7m).  Based in Arizona, USA, Alicat adds new precision flow control technology to our Fluid Technology sub-sector within Health and Analysis. In their last unaudited accounts for the financial year to end of September 2010, Alicat produced operating profit of $3.2m and has sustained a Return on Sales above our 18% - 22% target range for the past five years.  We have a stronger pipeline of acquisition opportunities than a year ago and vendor valuation expectations are becoming better aligned with our own.

Risks and uncertainties There are no significant changes to the risks and uncertainties outlined in our Annual Report and on our website, www.halma.com.  These are summarised in note 11 of this Half Year Report.

Outlook We have seen increased revenue and profit in each of our sectors, continuing the earnings momentum we maintained throughout the financial downturn.  Market conditions are much steadier than they have been over the previous two years and, therefore, this year we expect a much more evenly balanced split between first half and second half trading.  We made an attractive acquisition following the period end and continue to search for other high quality opportunities within our existing markets. 1 See Financial Highlights 2 See note 2 to the Condensed Financial Statements

Half year results for the 26 weeks to 2 October 2010

Condensed Financial Statements

Consolidated Income Statement

	Unaudited 26 weeks to  2 October  2010			Unaudited  27 weeks to 3 October  2009			Audited 53 weeks to 3 April 2010
	Before acquired intangibles amortisation £000	Amortisation of acquired intangibles £000	Total £000	Before acquired intangibles amortisation £000	Amortisation of acquired intangibles £000	Total £000	Total £000
Continuing operations
Revenue (note 2)	249,080	-	249,080	222,050	-	222,050	459,118
Operating profit	49,645	(1,987)	47,658	39,732	(2,693)	37,039	84,295
Finance income (note 3)	4,758	-	4,758	3,332	-	3,332	6,566
Finance expense (note 4)	(5,144)	-	(5,144)	(5,001)	-	(5,001)	(9,487)
Profit before taxation	49,259	(1,987)	47,272	38,063	(2,693)	35,370	81,374
Taxation (note 5)	(12,561)	596	(11,965)	(10,468)	824	(9,644)	(20,937)
Profit for the period from continuing operations attributable to equity shareholders	36,698	(1,391)	35,307	27,595	(1,869)	25,726	60,437
Earnings per ordinary share (note 6)
From continuing operations
Basic	9.75p		9.38p	7.37p		6.87p	16.10p
Diluted			9.36p			6.85p	16.05p
Dividends in respect of  the period (note 7)
Declared (£000)			13,336			12,459	32,009
Declared per share			3.54p			3.31p	8.50p

Consolidated Statement of Comprehensive Income and Expenditure

	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Profit for the period	35,307	25,726	60,437
Exchange differences on translation of foreign operations	(5,762)	(9,902)	(8,613)
Actuarial losses on defined benefit pension plans	(8,396)	(4,709)	(4,644)
Effective portion of changes in fair value of cash flow hedges	137	(186)	(47)
Tax relating to components of other comprehensive income	1,836	2,803	2,917
Other comprehensive expense for the period	(12,185)	(11,994)	(10,387)
Total comprehensive income for the period attributable to equity shareholders	23,122	13,732	50,050

Consolidated Balance Sheet

	Unaudited 2 October  2010 £000	(Restated)* Unaudited 3 October  2009 £000	Audited 3 April 2010 £000
Non-current assets
Goodwill	194,203	191,317	195,334
Other intangible assets	30,849	36,797	33,705
Property, plant and equipment	65,923	68,009	66,786
Deferred tax assets	13,095	12,766	10,612
	304,070	308,889	306,437
Current assets
Inventories	51,325	45,792	47,014
Trade and other receivables	96,901	90,078	98,077
Tax receivable	97	-	1,067
Cash and cash equivalents	41,210	40,420	31,323
Derivative financial instruments	320	22	232
	189,853	176,312	177,713
Total assets	493,923	485,201	484,150
Current liabilities
Borrowings	517	-	317
Trade and other payables	71,095	54,284	66,955
Provisions	2,138	1,724	1,515
Tax liabilities	15,014	6,535	7,843
Derivative financial instruments	247	367	331
	89,011	62,910	76,961
Net current assets	100,842	113,402	100,752
Non-current liabilities
Borrowings	13,054	61,843	21,924
Retirement benefit obligations	48,497	45,591	43,071
Trade and other payables	3,858	1,490	4,554
Provisions	1,897	1,480	1,954
Deferred tax liabilities	13,329	15,490	13,193
	80,635	125,894	84,696
Total liabilities	169,646	188,804	161,657
Net assets	324,277	296,397	322,493
Equity
Share capital	37,802	37,632	37,765
Share premium account	21,426	19,239	20,959
Treasury shares	(3,163)	(1,786)	(2,581)
Capital redemption reserve	185	185	185
Hedging and translation reserve	33,388	37,585	39,013
Other reserves	2,261	3,072	4,178
Retained earnings	232,378	200,470	222,974
Shareholders' funds	324,277	296,397	322,493
*Provisions, previously within 'Trade and other payables', have been separately disclosed.

Consolidated Statement of Changes in Equity

	Share  capital  £000	Share  premium   account  £000	Treasury  shares  £000	Capital  redemption  reserve  £000	Hedging and  translation  reserve  £000	Other   reserves  £000	Retained  earnings £000	Total  £000
At 3 April 2010 (audited)	37,765	20,959	(2,581)	185	39,013	4,178	222,974	322,493
Profit for the period	-	-	-	-	-	-	35,307	35,307
Other comprehensive income and expense:
Exchange differences on translation of foreign operations	-	-	-	-	(5,762)	-	-	(5,762)
Actuarial losses on defined benefit pension plans	-	-	-	-	-	-	(8,396)	(8,396)
Effective portion of changes in fair value of cash flow hedge	-	-	-	-	137	-	-	137
Tax relating to components of other comprehensive income	-	-	-	-	-	-	1,836	1,836
Total other comprehensive income and expense	-	-	-	-	(5,625)	-	(6,560)	(12,185)
Share options exercised	37	467	-	-	-	-	-	504
Dividends paid	-	-	-	-	-	-	(19,550)	(19,550)
Share-based payments	-	-	-	-	-	(1,808)	-	(1,808)
Deferred tax on share-based payment transactions	-	-	-	-	-	(109)	-	(109)
Excess tax deductions relating to share-based payments on exercised options	-	-	-	-	-	-	207	207
Net movement in treasury shares	-	-	(582)	-	-	-	-	(582)
At 2 October 2010 (unaudited)	37,802	21,426	(3,163)	185	33,388	2,261	232,378	324,277
At 28 March 2009 (audited)	37,539	18,146	(2,759)	185	47,673	4,246	194,585	299,615
Profit for the period	-	-	-	-	-	-	25,726	25,726
Total other comprehensive income and expense	-	-	-	-	(10,088)	-	(1,906)	(11,994)
Share options exercised	93	1,093	-	-	-	-	-	1,186
Dividends paid	-	-	-	-	-	-	(17,935)	(17,935)
Share-based payments	-	-	-	-	-	(1,682)	-	(1,682)
Deferred tax on share-based payment transactions	-	-	-	-	-	508	-	508
Net movement in treasury shares	-	-	973	-	-	-	-	973
At 3 October 2009 (unaudited)	37,632	19,239	(1,786)	185	37,585	3,072	200,470	296,397
At 28 March 2009 (audited)	37,539	18,146	(2,759)	185	47,673	4,246	194,585	299,615
Profit for the period	-	-	-	-	-	-	60,437	60,437
Total other comprehensive income and expense	-	-	-	-	(8,660)	-	(1,727)	(10,387)
Share options exercised	226	2,813	-	-	-	-	-	3,039
Dividends paid	-	-	-	-	-	-	(30,394)	(30,394)
Share-based payments	-	-	-	-	-	(1,017)	-	(1,017)
Deferred tax on share-based payment transactions	-	-	-	-	-	949	-	949
Excess tax deductions relating to share-based payments on exercised options	-	-	-	-	-	-	73	73
Net movement in treasury shares	-	-	178	-	-	-	-	178
At 3 April 2010 (audited)	37,765	20,959	(2,581)	185	39,013	4,178	222,974	322,493

Consolidated Cash Flow Statement

	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Net cash inflow from operating activities (note 8)	49,460	51,637	100,338
Cash flows from investing activities
Purchase of property, plant and equipment	(5,906)	(5,560)	(9,781)
Purchase of computer software	(522)	(576)	(1,260)
Purchase of intangibles	(17)	(33)	(38)
Proceeds from sale of property, plant and equipment	344	498	854
Development costs capitalised	(1,994)	(1,703)	(3,072)
Interest received	184	108	189
Acquisition of businesses	(241)	(5)	(1,676)
Disposal of businesses	-	267	520
Net cash used in investing activities	(8,152)	(7,004)	(14,264)
Financing activities
Dividends paid	(19,550)	(17,935)	(30,394)
Proceeds from issue of share capital	504	1,186	3,039
Net purchase of treasury shares	(3,469)	(1,426)	(2,252)
Interest paid	(331)	(606)	(1,047)
Repayment of borrowings	(8,348)	(19,316)	(58,845)
Net cash used in financing activities	(31,194)	(38,097)	(89,499)
Increase/(decrease) in cash and cash equivalents (note 8)	10,114	6,536	(3,425)
Cash and cash equivalents brought forward	31,006	34,987	34,987
Exchange adjustments	(427)	(1,103)	(556)
Cash and cash equivalents carried forward	40,693	40,420	31,006

Notes to the Condensed Financial Statements

1    Basis of preparation General information The Half Year Report, which includes the Interim Management Report and Condensed Financial Statements for the 26 weeks to 2 October 2010, has not been audited or reviewed by the Group's auditors and was approved by the Directors on 30 November 2010. The Report has been prepared in accordance with International Accounting Standard 34, applying the accounting policies and presentation that were applied in the preparation of the Group's statutory accounts for the 53 weeks to 3 April 2010, except as noted below. The figures shown for the 53 weeks to 3 April 2010 are based on the Group's statutory accounts for that period and do not constitute the Group's statutory accounts for that period as defined in section 434 of the Companies Act 2006. These statutory accounts, which were prepared under International Financial Reporting Standards, have been filed with the Registrar of Companies. They were unqualified, did not include a reference to any matters for which the auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under sections 498 (2) or (3) of the Companies Act 2006. The Report has been prepared solely to provide additional information to shareholders as a body to assess the Board's strategies and the potential for those strategies to succeed. It should not be relied on by any other party or for any other purpose. The Report 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 Report. 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. The Directors believe the Group is well placed to manage its business risks successfully.  The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities.  The Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future.  Thus they continue to adopt the going concern basis in preparing the half-year Condensed Financial Statements.

Accounting policies The Group has adopted IFRS 3 (Revised) 'Business Combinations' for transactions arising after 3 April 2010. This has changed the Group's definition of the cost of business combinations and the treatment of deferred and contingent consideration as follows: a)   previously, acquisition costs were included in the cost of investment, but under IFRS 3 (Revised) these costs are expensed; and b)   previously, subsequent adjustments to deferred or contingent consideration were made against goodwill, but under IFRS 3 (Revised) may now be expensed depending on whether the deferred or contingent consideration is initially recognised as equity or as a liability and whether the event is considered a measurement period adjustment. The adoption of IFRS 3 (Revised) has not had a material impact on assets, profit or earnings per share in the current interim period, but may impact the Group's accounting for any future business combinations.

2    Segmental Analysis Sector analysis The Group has three main reportable segments (Infrastructure Sensors, Health and Analysis and Industrial Safety), which are defined by markets rather than product type. Each segment includes businesses with similar operating and market characteristics. These segments are consistent with the internal reporting as reviewed by the Chief Executive Officer. These reportable segments remain unchanged from the 3 April 2010 consolidated accounts.

Segment revenue and results
	Revenue (all continuing operations)
	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Infrastructure Sensors	96,008	91,260	182,923
Health and Analysis	102,405	83,649	175,988
Industrial Safety	50,781	47,214	100,462
Inter-segmental sales	(114)	(73)	(255)
Revenue for the period	249,080	222,050	459,118

	Profit (all continuing operations)
	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Segment profit before allocation of amortisation of acquired intangible assets
Infrastructure Sensors	17,911	16,574	35,510
Health and Analysis	22,063	15,867	35,254
Industrial Safety	11,391	8,354	19,795
	51,365	40,795	90,559
Segment profit after allocation of amortisation of acquired intangible assets
Infrastructure Sensors	17,911	16,574	35,510
Health and Analysis	20,355	14,126	31,755
Industrial Safety	11,112	7,402	18,454
Segment profit	49,378	38,102	85,719
Central administration costs	(1,720)	(1,063)	(1,424)
Net finance expense	(386)	(1,669)	(2,921)
Group profit before taxation	47,272	35,370	81,374
Taxation	(11,965)	(9,644)	(20,937)
Profit for the period	35,307	25,726	60,437

Inter-segmental sales are charged at prevailing market prices and have not been disclosed separately by segment as they are not considered material. The Group does not analyse revenue by product group. The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit before amortisation of acquired intangible assets is disclosed separately above as this is the measure reported to the Chief Executive Officer for the purpose of allocation of resources and assessment of segment performance. The total assets have not been disclosed as there have been no material changes to those disclosed in the 2010 Annual Report.

Geographical analysis The Group's revenue from external customers (by location of customer) is as follows:
	Revenue by destination
	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
United Kingdom	51,220	48,466	135,676
United States of America	74,400	64,696	127,152
Mainland Europe	65,404	62,641	98,339
Asia Pacific and Australasia	35,061	28,080	59,143
Africa, Near and Middle East	14,037	11,112	23,695
Other countries	8,958	7,055	15,113
Group revenue	249,080	222,050	459,118

3    Finance income
	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Interest receivable	184	108	189
Expected return on pension assets	4,539	3,224	6,377
	4,723	3,332	6,566
Fair value movement on derivative financial instruments	35	-	-
	4,758	3,332	6,566

4    Finance expense
	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Interest payable on bank loans and overdrafts	313	584	972
Interest charge on pension scheme liabilities	4,760	4,236	8,375
Other interest payable	18	22	75
	5,091	4,842	9,422
Fair value movement on derivative financial instruments	-	159	52
Unwinding of discount on provisions	53	-	13
	5,144	5,001	9,487

5    Taxation

The total Group tax charge for the 26 weeks to 2 October 2010 of £11,965,000 (27 weeks to 3 October 2009: £9,644,000; 53 weeks to 3 April 2010: £20,937,000) comprises a current tax charge of £12,245,000 (27 weeks to 3 October 2009: £9,460,000; 53 weeks to 3 April 2010: £19,787,000) and a deferred tax credit of £280,000 (27 weeks to 3 October 2009: charge of £184,000; 53 weeks to 3 April 2010: charge of £1,150,000). The tax charge is based on the estimated effective tax rate for the year. The tax charge includes £7,202,000 (27 weeks to 3 October 2009: £5,933,000; 53 weeks to 3 April 2010: £10,941,000) in respect of overseas tax. Deferred tax assets have been recognised at the rate at which they are expected to reverse.  In the UK, this is at the standard rate of corporation tax, which from 1 April 2011 will reduce from 28% to 27%.  This reduction in rate has resulted in a debit to deferred tax of £368,000, of which £431,000 was taken to Other Comprehensive Income and £63,000 credited to the Income Statement.

6     Earnings per ordinary share

Basic earnings per ordinary share are calculated using the weighted average of 376,493,113 (3 October 2009: 374,670,385; 3 April 2010: 375,485,642) shares in issue during the period (net of shares purchased by the Company and held as treasury shares). Diluted earnings per ordinary share are calculated using 377,361,172 (3 October 2009: 375,570,655; 3 April 2010: 376,513,219) shares which includes dilutive potential ordinary shares of 868,059 (3 October 2009: 900,270; 3 April 2010: 1,027,577). Dilutive potential ordinary shares are calculated from those exercisable share options where the exercise price is less than the average price of the Company's ordinary shares during the period. Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation of acquired intangible assets after tax. The Directors consider that adjusted earnings represent a more consistent measure of underlying performance. A reconciliation of earnings and the effect on basic earnings per share figures are presented below:

	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Earnings from continuing operations	35,307	25,726	60,437
Add back amortisation of acquired intangible assets after taxation	1,391	1,869	2,970
Adjusted earnings	36,698	27,595	63,407

	Per ordinary share
	Unaudited 26 weeks to 2 October 2010 pence	Unaudited 27 weeks to 3 October 2009 pence	Audited 53 weeks to 3 April 2010 pence
Earnings from continuing operations	9.38	6.87	16.10
Add back amortisation of acquired intangible assets after taxation	0.37	0.50	0.79
Adjusted earnings	9.75	7.37	16.89

7    Dividends
	Per ordinary share
	Unaudited 26 weeks to 2 October 2010 pence	Unaudited 27 weeks to 3 October 2009 pence	Audited 53 weeks to 3 April 2010 pence
Amounts recognised as distributions to shareholders in the period
Final dividend for the year to 3 April 2010 (28 March 2009)	5.19	4.78	4.78
Interim dividend for the year to 3 April 2010	-	-	3.31
	5.19	4.78	8.09
Dividends declared in respect of the period
Interim dividend for the year to 2 April 2011 (3 April 2010)	3.54	3.31	3.31
Final dividend for the year to 3 April 2010	-	-	5.19
	3.54	3.31	8.50

	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Amounts recognised as distributions to shareholders in the period
Final dividend for the year to 3 April 2010 (28 March 2009)	19,550	17,935	17,935
Interim dividend for the year to 3 April 2010	-	-	12,459
	19,550	17,935	30,394
Dividends declared in respect of the period
Interim dividend for the year to 2 April 2011 (3 April 2010)	13,336	12,459	12,459
Final dividend for the year to 3 April 2010	-	-	19,550
	13,336	12,459	32,009

8     Notes to the Consolidated Cash Flow Statement
	Unaudited 26 weeks to 2 October 2010 £000	Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Reconciliation of profit from operations to net cash inflow from operating activities
Profit from continuing operations before finance income and expense	47,658	37,039	84,295
Profit on disposal of operations before taxation	-	-	(382)
Depreciation of property, plant and equipment	5,665	5,747	11,461
Amortisation of computer software	616	542	1,116
Amortisation of capitalised development costs and other intangibles	2,142	1,710	3,815
Retirement of capitalised development costs	30	-	19
Amortisation of acquired intangible assets	1,987	2,693	4,840
Share-based payment expense in excess of amounts paid	1,162	694	1,333
Additional payments to pension scheme	(3,191)	(3,166)	(6,902)
(Profit)/loss on sale of property, plant and equipment and computer software	(114)	131	42
Operating cash flows before movement in working capital	55,955	45,390	99,637
(Increase)/decrease in inventories	(4,934)	3,585	2,990
(Increase)/decrease in receivables	(181)	9,530	3,636
Increase/(decrease) in payables	2,852	(5,238)	6,427
Cash generated from operations	53,692	53,267	112,690
Taxation paid	(4,232)	(1,630)	(12,352)
Net cash inflow from operating activities	49,460	51,637	100,338
Reconciliation of net cash flow to movement in net cash/(debt)
Increase/(decrease) in cash and cash equivalents	10,114	6,536	(3,425)
Cash outflow from borrowings	8,348	19,316	58,845
Exchange adjustments	95	3,911	4,848
	18,557	29,763	60,268
Net cash/(debt) brought forward	9,082	(51,186)	(51,186)
Net cash/(debt) carried forward	27,639	(21,423)	9,082
Analysis of net cash/(debt)
Cash and cash equivalents	40,693	40,420	31,006
Bank loans falling due after one year	(13,054)	(61,843)	(21,924)
	27,639	(21,423)	9,082

9    Non-GAAP measures
	Unaudited 26 weeks to 2 October 2010 £000	(Restated)* Unaudited 27 weeks to 3 October 2009 £000	Audited 53 weeks to 3 April 2010 £000
Return on Capital Employed
Operating profit from continuing operations before amortisation of acquired intangible assets	49,645	39,732	89,135
Computer software costs within intangible assets	2,907	2,893	3,050
Capitalised development costs within intangible assets	8,997	9,929	9,202
Other intangibles within intangible assets	177	236	223
Property, plant and equipment	65,923	68,009	66,786
Inventories	51,325	45,792	47,014
Trade and other receivables	96,901	90,078	98,077
Trade and other payables	(71,095)	(54,284)	(66,955)
Provisions	(2,138)	(1,724)	(1,515)
Net tax liabilities	(14,917)	(6,535)	(6,776)
Non-current trade and other payables	(3,858)	(1,490)	(4,554)
Non-current provisions	(1,897)	(1,480)	(1,954)
Add back retirement benefit accruals included within payables	-	295	-
Add back accrued deferred purchase consideration	5,047	55	2,921
Capital employed	137,372	151,774	145,519
Return on Capital Employed (annualised)	72.3%	52.4%	61.3%
*Provisions, previously within 'Trade and other payables', have been separately disclosed.
Return on Total Invested Capital
Post-tax profit from continuing operations before amortisation of acquired intangibles	36,698	27,595	63,407
Total shareholders' funds	324,277	296,397	322,493
Add back retirement benefit accruals included within payables	-	295	-
Add back retirement benefit obligations	48,497	45,591	43,071
Less associated deferred tax assets	(13,095)	(12,766)	(12,060)
Cumulative amortisation of acquired intangible assets	23,723	19,864	21,919
Goodwill on disposals	5,441	5,441	5,441
Goodwill amortised prior to 3 April 2004	13,177	13,177	13,177
Goodwill taken to reserves prior to 3 April 1998	70,931	70,931	70,931
Total invested capital	472,951	438,930	464,972
Return on Total Invested Capital (annualised)	15.5%	12.6%	13.6%

Organic growth Organic growth measures the change in revenue and profit from continuing operations.  The effect of acquisitions and disposals during the current and prior financial periods has been equalised by adjusting for their contributions based on their revenue and profit at the dates of acquisition and disposal.

10    Other matters Seasonality The Group's financial results have not historically been subject to significant seasonal trends. Equity and borrowings Issues and repurchases of Halma p.l.c.'s ordinary shares and drawdowns and repayments of borrowings are shown in the Consolidated Cash Flow Statement. Related party transactions There were no significant changes in the nature and size of related party transactions for the period to those reported in the 2010 Annual Report. Events after the balance sheet date On 2 November 2010 the Group acquired the entire share capital of Alicat Scientific, Incorporated (Alicat) for a cash consideration of $25.2m (£15.7m).  The cash consideration is adjustable $1 for $1 if the completion accounts demonstrate net tangible assets above or below $1.5m.  Due to the proximity of the acquisition date to the date of approval of the Half Year Report, it is impracticable to provide further information as the accounting for the business combination is not complete.  Alicat designs and manufactures mass flow meters and controllers which are used in life science and industrial applications for high-precision measurement of fluid flows.  Alicat provides Halma with complementary technology for its Fluid Technology sub-sector.

11    Principal risks and uncertainties A number of potential risks and uncertainties exist which could have a material impact on the Group's performance over the second half of the financial year and could cause actual results to differ materially from expected and historical results. The Group has in place processes for identifying, evaluating and managing key risks. These risks, together with a description of the approach to mitigating them, are set out in the 2010 Annual Report on pages 40 and 41 which is available on the Group's website at www.halma.com. The principal risks and uncertainties relate to:

●	Operational risk
●	Organic growth, supplier risk and competition
●	Research and Development
●	Intangible resources
●	Laws and regulations
●	Information Technology/Business Interruption
●	Acquisitions
●	Financial irregularities and increasing span of control
●	Treasury and cash risks
●	Current economic conditions
●	Pension deficit.

The Directors do not consider that the principal risks and uncertainties have changed since the publication of the 2010 Annual Report.

12     Responsibility statement We confirm that to the best of our knowledge:
(a)	these Condensed Financial Statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union;
(b)	this Half Year Report includes a fair review of the information required by Disclosure and Transparency Rule (DTR) 4.2.7R (indication of important events during the period and description of principal risks and uncertainties for the remainder of the financial year); and
(c)	this Half Year Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board Andrew Williams Chief Executive 30 November 2010

Kevin Thompson Finance Director

 

END

 

 

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