Interim Results

Halma PLC 09 December 2003 HALMA p.l.c. INTERIM RESULTS FOR THE HALF YEAR TO 4 OCTOBER 2003 9 DECEMBER 2003 Halma, the leading safety and environmental technology group, today announced its interim results for the half year to 4 October 2003. Highlights include: • 15% growth in profit before taxation* reflects good worldwide performance (2003: £24.4m; 2002: £21.2m) • Continued high levels of return on investment and cash generation • Organic growth plus BEA contribution produces 19% sales growth (2003: £146.9m; 2002: £123.8m) • Increased investment in R&D leads to improved market shares and enhanced product offering • Progressive dividend policy maintained with 7% growth * before goodwill amortisation of £2.1m (2002: £1.1m). See Consolidated Profit and Loss Account. Commenting on the results, Stephen O'Shea, Chief Executive of Halma, said: 'We are encouraged by our progress in the first half and, provided business levels remain stable, the outlook for the year is in line with the Board's expectations. Our strategy remains firmly focused on delivering value today while building a secure foundation of strong market positions. 'We recognise that growth in the short term will be determined by our own efforts, with little prospect of an imminent improvement in market conditions. There is therefore a focus on good management of our businesses and a continued commitment to innovation.' For further information, please contact: Halma p.l.c. Stephen O'Shea, Chief Executive +44 (0)1494 721111 Kevin Thompson, Finance Director +44 (0)1494 721111 Hogarth Partnership Limited Rachel Hirst/Andrew Jaques +44 (0)20 7357 9477 A copy of this announcement, together with other information about Halma, may be viewed on its website: www.halma.com A copy of the Interim Report will be sent to shareholders and will be available to the general public on written request to the Company's registered office at: Misbourne Court, Rectory Way, Amersham, Bucks HP7 0DE. PHOTOGRAPHS High resolution photos of Halma senior management, including Chief Executive Stephen O'Shea, 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 +44 (0)20 8205 0038, e-mail: dwaller@halmapr.com. NOTE TO EDITORS Halma develops products used worldwide to enhance safety and to minimise hazards. The Group comprises six business sectors: • Fire and Gas detection • Water leak detection and UV treatment • Elevator and Door Safety • Bursting discs and sequential locking for Process Safety • High power electrical Resistors • Ophthalmic Optics and Specialist technology The key characteristics of Halma's businesses are that they are based on advanced technology and offer strong growth potential. Each business group is a clear market leader in its specialist field and, in a number of cases, is the dominant world supplier. HALMA p.l.c. Interim Results for the 27 weeks to 4 October 2003 Financial Highlights Turnover +19% to £146.9 million Overseas sales +20% to £103.5 million Profit before taxation * +15% to £ 24.4 million Earnings per share ** +16% to 4.53p Dividend per share + 7% to 2.44p Net margin on sales * 16.6% Return on capital employed *** 50.2% * Before goodwill amortisation of £2,116,000 (2002: £1,138,000) ** Before goodwill amortisation of 0.53p (2002: 0.27p) per share. Earnings per share figures are shown on the Consolidated Profit and Loss Account *** Return on capital employed is defined as the annualised profit before taxation* expressed as a % of net tangible assets Financial Overview Profit before tax was up by 15% at £24.4 million and earnings per share increased by 16% to 4.53 pence. Both figures are before goodwill amortisation*. Turnover increased by 19% to £146.9 million and overseas sales increased by 20% representing 70% of our turnover. The Group benefited from a full six months' contribution from BEA, which performed according to our expectations. Return on capital employed was strong at 50%, allowing us to continue to self-fund organic growth, acquisition activity and rising dividends. * See Consolidated Profit and Loss Account Chief Executive's Review Stephen O'Shea, Chief Executive of Halma, said: 'Over the past six months, our businesses have succeeded in growing both organically and through the contribution of acquisitions. Despite no overall improvement in market conditions, our continued investment in new products, equipment and people has helped us to grow sales, increase profits to a new record and maintain our strong net cash position. Organic and acquisition growth created worldwide 'Our success in achieving organic growth in static markets is primarily a result of three factors: increased market shares, making products of higher value to our customers and geographical expansion. Sales were driven up in the UK, mainland Europe, Far East and Australasia and exports to the Near and Middle East also increased. This resulted in record sales of £147 million, an increase of £23 million. Of this figure, around £17 million of sales can be attributed to acquisitions while organic growth accounted for approximately £6 million. 'It is now a year since we acquired BEA, the automatic door sensor company. It is living up fully to our expectations. There have also been some spin-off benefits to other companies in the Group from cross-selling BEA products and transferring management processes. Market positions strengthened 'In addition to benefiting from the BEA acquisition, our Elevator and Door Safety sector achieved an encouraging level of organic growth and now accounts for 22% of total Group sales. Our Process Safety sector is making steady progress. Of our six sectors, only Resistors did not increase sales. We have made it clear in the past that in order to reach former record profit levels in this sector, we will need to see improved conditions within US industrial markets. This has yet to occur, so our efforts are continuing, with some success, to increase sales to other territories and to new customers. New products have been important in each sector but particularly in Fire and Gas, Water and in our Optics and Specialist sectors. We have introduced a new range of fire detectors, a novel UV water steriliser and sterilisable lenses to aid eye surgery, amongst a wide variety of new products. International third party approvals and other product launch costs have been fully funded within the period, as have increased pension, payroll tax and insurance costs. Research and development successes 'Over the years, we have developed strong positions in carefully selected safety-related markets that are largely resilient to economic disturbance. This has been one factor in our success, but of even greater significance is the effectiveness of our stream of new products. Our record investment in R&D, combined with much hard work by our businesses to identify new opportunities across the world, is yielding visible results. Product innovation is deeply rooted in our culture, as reflected in our high R&D spend which has increased to £6 million, 4% of turnover. We see this as a major growth engine for the Group going forward. Outlook 'We are encouraged by our progress in the first half and, provided business levels remain stable, the outlook for the year is in line with the Board's expectations. Our strategy remains firmly focused on delivering value today while building a secure foundation of strong market positions. 'We recognise that growth in the short term will be determined by our own efforts, with little prospect of an imminent improvement in market conditions. There is therefore a focus on good management of our businesses and a continued commitment to innovation.' Chairman's Review Geoff Unwin, Chairman of Halma, said: 'In line with our progressive dividend policy, the interim dividend will amount to 2.44 pence per share, an increase of 7%, and will be paid on 9 February 2004 to shareholders on the register at the close of business on 9 January 2004. 'We are still waiting to see any signs of improvement in market conditions, likely to be led by positive stirrings which we expect will arise first in our largest single market - the USA. 'Meanwhile, we continue to concentrate on those factors which are clearly under our control: costs, people development, sales effectiveness and continuous innovation. These are all actions which will build strength for the medium term.' Interim Results for the 27 weeks to 4 October 2003 Consolidated Profit and Loss Account £000 Unaudited 27 weeks to 4 October 2003 Unaudited Audited Before 26 weeks to 52 weeks to goodwill Goodwill 28 September 29 March amortisation amortisation Total 2002 2003 Turnover 146,900 - 146,900 123,846 267,293 ======= ======= ======= ======= ======= Operating profit before goodwill amortisation 24,434 - 24,434 20,723 46,100 Goodwill amortisation (note 2) - (2,116) (2,116) (1,138) (3,235) Operating profit 24,434 (2,116) 22,318 19,585 42,865 Interest 15 - 15 496 408 _______ _______ _______ _______ _______ Profit on ordinary activities before taxation 24,449 (2,116) 22,333 20,081 43,273 Taxation (note 3) (7,876) 165 (7,711) (6,769) (14,914) _______ _______ _______ _______ _______ Profit for the financial period 16,573 (1,951) 14,622 13,312 28,359 _______ _______ _______ _______ _______ Dividends Ordinary dividends (8,963) (8,355) (21,246) _______ _______ _______ Profit transferred to reserves 5,659 4,957 7,113 ======= ======= ======= Ordinary dividend per share 2.44p 2.285p 5.812p Earnings per ordinary share before goodwill amortisation 4.53p 3.91p 8.55P Earnings per ordinary share 4.00p 3.64p 7.76p Diluted earnings per ordinary share 3.99p 3.63p 7.75p Consolidated Balance Sheet £000 Unaudited Unaudited Audited 4 October 28 September 29 March 2003 2002 2003 Fixed assets Intangible assets (note 2) 73,996 38,837 76,592 Tangible assets 50,267 42,833 49,883 _______ _______ _______ 124,263 81,670 126,475 _______ _______ _______ Current Assets Stocks 36,947 31,872 35,186 Debtors 64,913 62,580 73,076 Short-term deposits 22,417 42,207 14,309 Cash at bank and in hand 16,244 10,246 13,265 _______ _______ _______ 140,521 146,905 135,836 _______ _______ _______ Creditors: amounts falling due within one year Borrowings 29,485 15,524 27,667 Creditors 43,217 32,054 46,090 Current taxation 6,923 6,779 5,286 Dividends payable 8,945 8,353 12,892 _______ _______ _______ 88,570 62,710 91,935 _______ _______ _______ Net current assets 51,951 84,195 43,901 _______ _______ _______ Total assets less current liabilities 176,214 165,865 170,376 Creditors: amounts falling due after one year 496 488 1,665 Provisions for liabilities and charges 6,150 4,990 5,265 _______ _______ _______ 169,568 160,387 163,446 ======= ======= ======= Capital and reserves Called up share capital 36,659 36,545 36,549 Share premium account 7,558 6,336 6,375 Other reserves 185 185 185 Profit and loss account 125,166 117,321 120,337 _______ _______ _______ Equity shareholders' funds (note 4) 169,568 160,387 163,446 ======= ======= ======= Consolidated Cash Flow Statement £000 Unaudited Unaudited Audited 27 weeks to 26 weeks to 52 weeks to 4 October 28 September 29 March 2003 2002 2003 Cash flow from operating activities (note 5) 31,779 27,450 60,309 _______ _______ _______ Return on investments and servicing of finance Interest received 407 876 1,280 Interest paid (410) (298) (622) _______ _______ _______ (3) 578 658 Taxation Current taxation paid (5,575) (6,544) (15,498) Capital expenditure Purchase of tangible fixed assets (5,856) (3,733) (11,257) Sale of tangible fixed assets 731 253 1,872 _______ _______ _______ (5,125) (3,480) (9,385) Acquisitions and disposals Acquisition of businesses (1,478) (25) (49,857) Cash and overdrafts acquired - - 2,655 _______ _______ _______ (1,478) (25) (47,202) Equity dividends paid (12,910) (11,714) (20,066) _______ _______ _______ 6,688 6,265 (31,184) Management of liquid resources (Increase)/decrease in short-term deposits (8,114) (7,856) 20,064 Financing Issue of ordinary share capital 1,293 777 820 Increase in loans 2,683 - 13,399 _______ _______ _______ 3,976 777 14,219 _______ _______ _______ Increase/(decrease) in cash (note 5) 2,550 (814) 3,099 ======= ======= ======= Segmental Analysis £000 Geographical analysis By destination By origin Unaudited Unaudited Unaudited Unaudited 27 weeks to 26 weeks to 27 weeks to 26 weeks to 4 October 28 September 4 October 28 September 2003 2002 2003 2002 Turnover United Kingdom 43,381 37,748 85,730 78,265 United States of America 44,326 38,783 45,298 39,717 Europe excluding UK 35,377 26,281 22,205 9,585 Far East and Australasia 14,132 12,608 7,336 4,149 Africa, Near and Middle East 4,973 4,277 - - Other 4,711 4,149 1,420 1,556 Inter-segmental sales - - (15,089) (9,426) _______ _______ _______ _______ 146,900 123,846 146,900 123,846 ======= ======= ======= ======= Profit before taxation United Kingdom 12,531 11,960 United States of America 7,045 6,477 Other countries 4,858 2,286 _______ _______ 24,434 20,723 Goodwill amortisation (2,116) (1,138) Interest 15 496 _______ _______ Profit on ordinary activities before taxation 22,333 20,081 ======= ======= Sector analysis Unaudited Unaudited 27 weeks to 26 weeks to 4 October 28 September 2003 2002 Turnover Fire and Gas 37,008 33,049 Water 17,129 15,842 Elevator and Door Safety 32,785 16,022 Process Safety 18,064 17,352 Resistors 14,097 14,363 Optics and Specialist 28,370 27,547 Inter-segmental sales (553) (329) _______ _______ 146,900 123,846 ======= ======= Notes on the Interim Report 1 Basis of preparation The interim report for the 27 weeks to 4 October 2003 is prepared on the basis of the accounting policies set out in the accounts for the 52 weeks to 29 March 2003. The figures shown for the 52 weeks to 29 March 2003 are an abridged version of the Group's statutory accounts for that period, which received an unqualified audit report and have been filed with the Registrar of Companies. 2 Intangible assets Goodwill arising on acquisitions after 28 March 1998 is capitalised and is classified as an intangible asset in the Consolidated Balance Sheet. Goodwill arising on acquisitions prior to that date was written off to reserves, and would be included in the determination of profit or loss arising from the sale or closure of the business to which it relates. Capitalised goodwill is amortised through the Consolidated Profit and Loss Account on a straight line basis over its estimated economic life of 20 years. 3 Taxation The tax charge for the 27 weeks to 4 October 2003 of £7,711,000 (2002: £6,769,000) comprises a current taxation charge of £7,224,000 (2002: £6,464,000) and a deferred tax charge of £487,000 (2002: £305,000). The current taxation charge is based on the estimated effective tax rate for the year. The tax charge includes £4,159,000 (2002: £2,665,000) in respect of overseas tax. 4 Reconciliation of equity £000 shareholders' funds Unaudited Unaudited Audited 27 weeks to 26 weeks to 52 weeks to 4 October 28 September 29 March 2003 2002 2003 Equity shareholders' funds brought forward 163,446 157,557 157,557 Profit transferred to reserves 5,659 4,957 7,113 Net proceeds of shares issued 1,293 777 820 Exchange adjustments (830) (2,904) (2,044) _______ _______ _______ Equity shareholders' funds carried forward 169,568 160,387 163,446 _______ _______ _______ 5 Notes on cash flow statement £000 Unaudited Unaudited Audited 27 weeks to 26 weeks to 52 weeks to 4 October 28 September 29 March 2003 2002 2003 Reconciliation of operating profit to net cash inflow from operating activities Operating profit 22,318 19,585 42,865 Depreciation 4,105 3,592 7,554 Goodwill amortisation 2,116 1,138 3,235 Loss/(profit) on sale of tangible fixed assets 74 125 (155) Decrease/(increase) in SSAP 24 pension prepayment 62 (591) (916) Property sale receivable 1,100 - (1,100) (Increase)/decrease in stocks (2,310) 2,444 3,288 Decrease in debtors 6,113 4,383 122 (Decrease)/increase in creditors (1,799) (3,226) 5,416 _______ _______ _______ Net cash inflow from operating activities 31,779 27,450 60,309 _______ _______ _______ Reconciliation of net cash flow to movement in net cash/(debt) Increase/(decrease) in cash 2,550 (814) 3,099 Increase/(decrease) in liquid resources 8,114 7,856 (20,064) Loan notes issued - (1,083) (1,083) Cash inflow from loans (2,683) - (13,399) Exchange adjustments 1,288 360 744 _______ _______ _______ 9,269 6,319 (30,703) Net (debt)/cash brought forward (93) 30,610 30,610 _______ _______ _______ Net cash/(debt) carried forward 9,176 36,929 (93) _______ _______ _______ This information is provided by RNS The company news service from the London Stock Exchange

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