HALMA plc
HalF YEAR RESULTS 2015/16
Record first half results and continued dividend growth
Halma, the leading safety, health and environmental technology group, today announces its half year results for the 27 weeks to 3 October 2015. |
|
|
|
Change |
2015 |
2014 |
Continuing Operations |
|
|
|
Revenue |
+ 11% |
£379.7m |
£340.9m |
Adjusted Profit before Taxation1 |
+ 8% |
£74.7m |
£69.0m |
Statutory Profit before Taxation |
+ 5% |
£64.2m |
£61.2m |
|
|
|
|
Adjusted Earnings per Share2 |
+ 8% |
15.19p |
14.05p |
Statutory Earnings per Share |
+ 6% |
13.27p |
12.57p |
Interim Dividend per Share3 |
+ 7% |
4.98p |
4.65p |
|
|
|
|
Return on Sales4 |
|
19.7% |
20.2% |
Return on Total Invested Capital5 |
|
14.7% |
15.6% |
Net Debt |
|
£93.4m |
£136.3m |
● |
Revenue increased 11% with Adjusted1 pre-tax profit up 8%. Organic constant currency growth5: revenue up 7%, profit up 4%. |
● |
Organic constant currency revenue growth5 in all major regions. Strong growth in the US and Europe; solid progress in UK and Asia Pacific. |
● |
Revenue growth in all sectors. Strong organic constant currency revenue and profit growth in Infrastructure Safety, Medical and Environmental & Analysis. Lower profit in Process Safety, reflecting a balance of tighter overhead control with a need to invest for market diversification. |
● |
Firetrace acquisition completed since half year end for £73m, in addition to one acquisition in May 2015. Acquisition pipeline becoming more balanced across all sectors. |
● |
Strong cash flow and increased financial capacity for investment in organic growth and acquisitions. Net debt of £93m (March 2015: £101m). |
● |
Interim dividend up 7% to 4.98p per share (2014/15: 4.65p). |
Andrew Williams, Chief Executive of Halma, commented:
"Halma has made strong progress in the first half, achieving record revenue and profit in varied market conditions. The diversity of our products, customers and end market niches is a cornerstone of our success. Since the period end, order intake has continued to be ahead of revenue and order intake last year. We have also completed the purchase of Firetrace, demonstrating our ability to supplement organic growth with high quality acquisitions. Halma remains on track to make progress in the second half of the year in line with our expectations."
|
|
Pro-forma Information:
|
|
1 |
Adjusted to remove the amortisation of acquired intangible assets, acquisition items and profit or loss on disposal of operations of £10.4m charge (2014/15: £7.8m charge). See Note 2 to the Condensed Financial Statements for details.
|
2 |
Adjusted to remove the amortisation of acquired intangible assets, acquisition items, profit or loss on disposal of operations, and the associated tax thereon. See Note 6 to the Condensed Financial Statements for details.
|
3 |
Interim dividend declared per share.
|
4 |
Return on Sales is defined as adjusted1 profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations.
|
5 |
Organic growth rates 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. ROTIC is now calculated using the average Total Invested Capital. The prior period has been restated. See note 9 to the Condensed Financial Statements for details. |
For further information, please contact: |
Halma plc
|
+44 (0)1494 721 111 |
MHP Communications |
+44 (0)20 3128 8100 |
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 four business sectors:
|
|
|
· Process Safety |
Products which protect assets and people at work.
|
|
· Infrastructure Safety |
Products which detect hazards to protect assets and people in public spaces and commercial buildings.
|
|
· Medical |
Products used to improve personal and public health.
|
|
· Environmental & Analysis |
Products and technologies for analysis in safety, life sciences and environmental markets. |
|
The key characteristics of Halma's businesses are that they are based on specialist technology and application knowledge, offering strong growth potential. Many Group businesses are market leaders in their specialist field.
|
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 & Media' link, then 'Image Library'. Photo queries: David Waller +44 (0)1494 721111, e-mail: dwaller@halmapr.com.
|
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 halma@halma.com.
|
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. |
Review of Operations
Record half year results Halma has made excellent progress during the first half of this year. Revenue for the half year increased by 11% to £380m (2014/15: £341m) including a positive currency translation impact of 3%. Organic revenue growth at constant currency was an impressive 7%.
Adjusted1 profit before taxation increased by 8% to £74.7m (2014/15: £69.0m) after a positive currency translation impact of 2%. Organic constant currency profit growth was 4%.
Profitability remained strong with Return on Sales1 of 19.7% (2014/15: 20.2%), well within our 18% to 22% target range. Gross margin (revenue less direct material and direct labour) also remained strong across the Group.
These results once again demonstrate Halma's ability to sustain growth and high returns. Demand for our products is underpinned by the long-term market growth drivers of increasing safety regulation, increasing demand for healthcare and increasing demand for life-critical resources. These external growth drivers are supplemented by a relentless commitment to increasing investment in innovation, international expansion and talent development enabling us to grow above our end-market rates.
7% dividend increase The Board declares an increase of 7% in the interim dividend to 4.98p per share (2014/15: 4.65p per share). The interim dividend will be paid on 10 February 2016 to shareholders on the register on 4 January 2016. For the past 36 years we have increased our full year dividend by 5% or more each year.
Revenue growth in all major regions The table below shows the pattern of revenue growth in each region including the underlying rates of organic growth at constant currency which are calculated by excluding the effect of currency, acquisitions and disposals. Despite varied market conditions we achieved revenue growth in all major regions. The USA performed very strongly and increased by 20% with Mainland Europe, the UK and Asia Pacific also showing good progress.
Revenue from outside our traditional home markets in the USA, Mainland Europe and the UK grew by 9%, contributing 26.0% of total revenue (2014/15: 26.5%). There was strong growth in Near and Middle East while revenue was lower in South America, mainly due to weakness in the energy markets impacting our Process Safety sector. In Asia Pacific, good growth in India, South Korea and China more than offset a weaker performance in Australasia. |
External revenue by destination |
Half year 2015/16 |
Half year 2014/15 |
|
|
|
||
|
£m |
% of total |
£m |
% of total |
Change |
% |
% organic growth at constant currency |
United States of America |
124.5 |
33% |
104.1 |
31% |
20.4 |
20% |
10% |
Mainland Europe |
85.2 |
22% |
79.2 |
23% |
6.0 |
8% |
10% |
United Kingdom |
71.5 |
19% |
67.2 |
20% |
4.3 |
6% |
5% |
Asia Pacific |
59.7 |
16% |
56.3 |
16% |
3.4 |
6% |
1% |
Other countries |
38.8 |
10% |
34.1 |
10% |
4.7 |
14% |
6% |
|
379.7 |
100% |
340.9 |
100% |
38.8 |
11% |
7% |
Revenue growth in all four sectors |
External revenue by sector |
Half year 2015/16 |
Half year 2014/15 |
|
|
|
|
£m |
£m |
Change |
% |
% organic growth at constant currency |
Process Safety |
77.8 |
73.6 |
4.2 |
6% |
(1%) |
Infrastructure Safety |
122.4 |
112.7 |
9.7 |
9% |
8% |
Medical |
92.3 |
78.4 |
13.9 |
18% |
12% |
Environmental & Analysis |
87.2 |
76.2 |
11.0 |
14% |
10% |
|
379.7 |
340.9 |
38.8 |
11% |
7% |
Process Safety revenue increased by 6% to £78m (2014/15: £74m) with positive contributions of 1% from currency translation and 6% from prior year acquisitions. Organic constant currency revenue declined by 1%, reflecting the tougher conditions in the oil and gas market, which contributes just under half of the sector revenue. Geographically, organic constant currency revenue growth was strongest in the USA and Near and Middle East with organic revenue decline in Asia Pacific and South America.
Profit2 was 7% lower at £19.1m (2014/15: £20.4m), including an organic constant currency decline of 14%. Despite this, Return on Sales remained strong at 24.5% (2014/15: 27.8%), with those businesses already serving diverse markets, such as Gas Detection and Trapped-Key Interlocks, performing well. We do not expect the oil and gas market to improve in the near future and therefore we are balancing tight control of overheads with the need to invest to further increase diversification both regionally and by end market.
Infrastructure Safety had a good first half with revenue up by 9% to £122m (2014/15: £113m) with organic constant currency growth of 8%. The Fire and Automatic Door Sensor businesses made good progress, while Elevator Safety and Security performed less well. Overall, the rates of organic constant currency growth were higher in the USA, Mainland Europe and the UK than the less mature markets, such as Asia Pacific and South America, although market conditions were stronger in Near and Middle East.
Profit2 improved by 8% to £24.6m (2014/15: £22.8m) including organic constant currency growth of 7%. Return on Sales was 20.1% (2014/15: 20.3%). The sector achieved volume growth while maintaining gross margins, reflecting the benefits of increasing investment in new product development. In addition to this, the recent acquisition of the fire suppression business, Firetrace (see below), gives us confidence for growth to continue in the second half.
The Medical sector performed strongly. Revenue grew by 18% to £92m (2014/15: £78m) including organic constant currency revenue growth of 12%. All three businesses (Ophthalmology, Vital Signs Monitoring and Fluidics) made excellent progress. There was revenue growth in all major geographic regions including double-digit growth in Mainland Europe, Asia Pacific and the USA, which represents almost half of sector revenue.
Profit2 rose by a very impressive 18% to £24.6m (2014/15: £20.9m) including an organic constant currency increase of 13%. Return on Sales was unchanged at 26.6% (2014/15: 26.6%) with a slight improvement in gross margins. This encouraging underlying trading momentum should enable our Medical sector to continue to make good progress in the second half.
Environmental & Analysis made an encouraging recovery after a tough time last year. Revenue increased by 14% to £87m (2014/15: £76m) including organic constant currency growth of 10%. The Water, Photonics and Environmental Monitoring businesses all increased revenue. There was also growth in all major geographic regions, with double-digit organic growth rates in the USA and Mainland Europe (at constant currency).
Profit2 increased by 25% to £14.8m (2014/15: £11.9m) including organic constant currency growth of 18%. As with revenue, there was a useful contribution from all three business segments even though the benefit from the UK water utilities beginning their next five-year investment cycle will not start to be felt until the second half of the year. Consequently, this sector is well placed to continue its encouraging recovery in the second half.
VAS LLC and Firetrace USA LLC acquisitions completed In May 2015, we completed the purchase of Value Added Solutions, LLC (VAS), based in Connecticut, USA, which designs and manufactures fluidic assemblies for life sciences and analytical instruments. VAS has been integrated with one of our Medical sector companies, Diba Industries, which is also based in Connecticut, USA. The initial cash consideration was US$5m (£3m).
In October 2015, Halma acquired Firetrace USA, LLC, based near Phoenix, Arizona. Firetrace designs and manufactures customised fire suppression systems for confined spaces serving a range of end markets including transportation, process machinery, computer server hubs, defence and aerospace. This stand-alone addition to our Infrastructure Safety sector brings fire suppression technology to our long-standing and successful fire detection business. The initial consideration was US$110m (£73m).
These transactions demonstrate our ability to find attractive, high quality businesses within our existing sectors which fit both our financial and operating characteristics. Under the leadership of our four Sector Chief Executives, our acquisition pipeline is steadily becoming more balanced across all sectors. This more focused effort should strengthen further the current acquisition pipeline and ensure we continue to deliver this important component of our growth strategy.
Continued strategic investment for growth Despite the varied and challenging trading environment, Halma has continued to deliver organic growth above the rate of its end markets for more than a decade through our businesses gaining market share, growing internationally and diversifying into new market niches. Achieving this sustained success over such a long period has required a relentless determination to increase strategic investment in innovation, international expansion and talent development both centrally and within individual sectors.
Our companies increased R&D expenditure by 21% to £19.8m (2014/15: £16.4m) with increases in all sectors, and representing 5.2% of Group revenue. However, our investment in innovation is not restricted to new product development and we encourage our businesses to collaborate and share best practice in all areas of their businesses as we believe this is a very effective catalyst for broader business innovation. This is exemplified by the biennial Halma Innovation and Technology Exposition (HITE) event which was held in April this year in Barcelona.
Currency volatility Halma reports its results in Sterling with approximately 40% of Group revenue denominated in US Dollars and 10% in Euros. In the half year, Sterling weakened on average by 8% relative to the US Dollar and strengthened 12% against the Euro, resulting in a 3% positive currency translation impact on revenue and 2% positive impact on profit as noted above. If exchange rates continue at current levels for the full year, we estimate that the currency translation impact will be broadly neutral year on year.
Funding capacity increased via US Private Placement Cash generation remains strong. Cash conversion (adjusted operating cash flow as a percentage of adjusted operating profit) was 88% (2014/15: 87%), ahead of our 85% cash conversion target. Net debt at the end of the period reduced to £93m (March 2015: £101m) having continued organic investment, increased dividend and taxation payments and completed one acquisition. Capital expenditure of £9.0m (2014/15: £9.9m) showed a good underlying increase but was lower due to greater property expenditure in the prior year. Gross cash balances were untypically high at £134m due mainly to holding cash at the half year end for completion of the Firetrace acquisition immediately after.
On 2 November 2015 a US Private Placement was agreed for $250m, in a mix of Sterling, US Dollars, and Euros, at a weighted average interest rate of 2.5% over the outstanding borrowing period of five, seven and ten years. Funds will be drawn down in January 2016. This underpins Group funding with the diversification of term debt in addition to the existing syndicated bank facility of £360m which runs to November 2018.
Gearing (the ratio of net debt to EBITDA) at half year end was 0.5 times, increasing to 0.9 times following the Firetrace acquisition. We feel comfortable operating with up to 1.25 times gearing, and would be prepared to exceed this level temporarily if the timing of acquisitions required it.
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 on pages 28 to 31 of the 2015 Annual Report and Accounts, which is available on the Group's website at www.halma.com. The principal risks and uncertainties relate to operational, strategic, legal, financial, people and economic issues. See note 15 to the Condensed Financial Statements for further details.
The Directors do not consider that the principal risks and uncertainties have changed since the publication of the 2015 Annual Report and Accounts and confirm that they remain relevant for the second half of the financial year. As part of their ongoing assessment of risk throughout the period the Directors have considered the above risks in the context of the new Executive Board structure and the Group's delivery of its financial objectives. Macro-economic uncertainty and movements in foreign exchange rates continue to remain a risk to financial performance.
Going concern After conducting a review of the Group's financial resources the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the Condensed Financial Statements.
The Directors have adopted the requirements of the updated UK Corporate Governance Code which are relevant for the first time for the current reporting period and will be reporting their first Viability Statement in the Annual Report and Accounts for the year ending 2 April 2016.
Board changes Stephen Pettit retired from the Halma Board at our Annual General Meeting in July 2015. Stephen joined Halma in 2003 and served as our Senior Independent Director and Chairman of the Remuneration Committee. We would like to thank Stephen for his contribution over more than a decade, during which time our business has grown and changed substantially. His willingness to support both the Board and the businesses in any way he could is greatly appreciated. Tony Rice succeeds Stephen as Senior Independent Director and Remuneration Committee Chairman.
Outlook Halma has made strong progress in the first half, achieving record revenue and profit in varied market conditions. The diversity of our products, customers and end-market niches is a cornerstone of our success. We continue to capitalise on this foundation by increasing our investment in innovation, international expansion and talent development every year. This, together with our agile organisational model, enables us to grow faster than our markets over the medium term for example by gaining market share or entering new market niches.
Since the period end, order intake has continued to be ahead of revenue and order intake last year. We have also completed the purchase of Firetrace, demonstrating our ability to supplement organic growth with high quality acquisitions. Halma remains on track to make progress in the second half of the year in line with our expectations.
|
|
Andrew Williams Chief Executive |
Kevin Thompson |
1 See Financial Highlights. 2 See note 2 to the Condensed Financial Statements. |
Half year results 2015/16
Condensed Financial Statements
Consolidated Income Statement |
|||||||||
|
|
Unaudited 27 weeks to 3 October 2015 |
Unaudited 26 weeks to 27 September 2014 |
Audited |
|||||
|
Notes |
Before |
Adjustments* |
Total |
Before |
Adjustments* |
Total |
Total |
|
Continuing operations |
|
|
|
|
|
|
|
|
|
Revenue |
2 |
379,657 |
- |
379,657 |
340,903 |
- |
340,903 |
726,134 |
|
Operating profit |
|
77,657 |
(11,004) |
66,653 |
71,425 |
(9,275) |
62,150 |
137,063 |
|
Share of results of associates |
|
(79) |
- |
(79) |
65 |
- |
65 |
64 |
|
Profit on disposal of operations |
|
- |
592 |
592 |
- |
1,430 |
1,430 |
1,430 |
|
Finance income |
3 |
128 |
- |
128 |
64 |
- |
64 |
167 |
|
Finance expense |
4 |
(3,049) |
- |
(3,049) |
(2,536) |
- |
(2,536) |
(5,113) |
|
Profit before taxation |
|
74,657 |
(10,412) |
64,245 |
69,018 |
(7,845) |
61,173 |
133,611 |
|
Taxation |
5 |
(17,170) |
3,143 |
(14,027) |
(15,874) |
2,243 |
(13,631) |
(29,610) |
|
Profit for the period attributable to equity shareholders |
|
57,487 |
(7,269) |
50,218 |
53,144 |
(5,602) |
47,542 |
104,001 |
|
Earnings per share |
6 |
|
|
|
|
|
|
|
|
From continuing operations |
|
|
|
|
|
|
|
|
|
Basic |
|
15.19p |
|
13.27p |
14.05p |
|
12.57p |
27.49p |
|
Diluted |
|
|
|
13.27p |
|
|
12.56p |
27.48p |
|
Dividends in respect |
7 |
|
|
|
|
|
|
|
|
Dividends paid and proposed (£000) |
|
|
|
18,855 |
|
|
17,599 |
45,229 |
|
Per share |
|
|
|
4.98p |
|
|
4.65p |
11.96p |
|
* |
Adjustments include the amortisation of acquired intangible assets, acquisition items, profit or loss on disposal of operations, and the associated taxation thereon. |
||||||||
Consolidated Statement of Comprehensive Income and Expenditure
|
|||
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Profit for the period |
50,218 |
47,542 |
104,001 |
Items that will not be reclassified subsequently to the Income Statement: |
|
|
|
Actuarial gains/(losses) on defined benefit pension plans |
13,122 |
(9,663) |
(34,795) |
Tax relating to components of other comprehensive income that will not be reclassified |
(2,625) |
1,865 |
6,791 |
Items that may be reclassified subsequently to the Income Statement: |
|
|
|
Effective portion of changes in fair value of cash flow hedges |
(343) |
4 |
71 |
Exchange (losses)/gains on translation of foreign operations and net investment hedge |
(14,096) |
(2,587) |
30,900 |
Exchange losses transferred to Income Statement on disposal of operation |
22 |
- |
189 |
Tax relating to components of other comprehensive income that may be reclassified |
80 |
(1) |
(23) |
Other comprehensive (expense)/income for the period |
(3,840) |
(10,382) |
3,133 |
Total comprehensive income for the period attributable to equity shareholders |
46,378 |
37,160 |
107,134 |
The exchange losses of £14,096,000 (26 weeks to 27 September 2014: losses of £2,587,000; 52 weeks to 28 March 2015: gains of £30,900,000) includes losses of £211,000 (26 weeks to 27 September 2014: gains of £103,000; 52 weeks to 28 March 2015: gains of £862,000) which relate to net investment hedges. |
Consolidated Balance Sheet |
|
|
|
|
Unaudited 3 October 2015 £000 |
Unaudited 27 September 2014 £000 |
Audited 28 March 2015 £000 |
Non-current assets |
|
|
|
Goodwill |
400,237 |
385,593 |
406,190 |
Other intangible assets |
128,781 |
138,686 |
138,691 |
Property, plant and equipment |
86,000 |
78,359 |
86,303 |
Interests in associates |
3,763 |
4,216 |
4,236 |
Deferred tax asset |
25,512 |
22,020 |
28,596 |
|
644,293 |
628,874 |
664,016 |
Current assets |
|
|
|
Inventories |
83,014 |
77,720 |
79,734 |
Trade and other receivables |
143,144 |
135,225 |
156,464 |
Tax receivable |
547 |
703 |
20 |
Cash and cash equivalents |
133,716 |
49,177 |
41,230 |
Derivative financial instruments |
173 |
622 |
1,069 |
|
360,594 |
263,447 |
278,517 |
Total assets |
1,004,887 |
892,321 |
942,533 |
Current liabilities |
|
|
|
Trade and other payables |
90,721 |
85,004 |
102,717 |
Borrowings |
- |
5,225 |
1,705 |
Provisions |
2,179 |
11,003 |
11,746 |
Tax liabilities |
9,978 |
12,382 |
12,405 |
Derivative financial instruments |
270 |
338 |
636 |
|
103,148 |
113,952 |
129,209 |
Net current assets |
257,446 |
149,495 |
149,308 |
Non-current liabilities |
|
|
|
Borrowings |
227,103 |
180,228 |
140,419 |
Retirement benefit obligations |
51,405 |
44,209 |
66,790 |
Trade and other payables |
4,058 |
3,335 |
3,756 |
Provisions |
2,534 |
1,631 |
1,549 |
Deferred tax liabilities |
49,783 |
51,310 |
51,862 |
|
334,883 |
280,713 |
264,376 |
Total liabilities |
438,031 |
394,665 |
393,585 |
Net assets |
566,856 |
497,656 |
548,948 |
Equity |
|
|
|
Share capital |
37,965 |
37,960 |
37,965 |
Share premium account |
23,608 |
23,548 |
23,608 |
Own shares* |
(6,452) |
(4,885) |
(8,450) |
Capital redemption reserve |
185 |
185 |
185 |
Hedging reserve |
(92) |
126 |
171 |
Translation reserve |
31,255 |
11,653 |
45,329 |
Other reserves |
(8,387) |
(6,468) |
(4,073) |
Retained earnings |
488,774 |
435,537 |
454,213 |
Shareholders' funds |
566,856 |
497,656 |
548,948 |
* Referred to in prior periods as Treasury shares
Consolidated Statement of Changes in Equity |
|||||||||
|
|
For the 27 weeks ended 3 October 2015 |
|||||||
|
Share capital £000 |
Share premium account £000 |
Own shares £000 |
Capital redemption reserve £000 |
Hedging reserve* £000 |
Translation reserve* £000 |
Other reserves £000 |
Retained earnings £000 |
Total £000 |
At 28 March 2015 (audited) |
37,965 |
23,608 |
(8,450) |
185 |
171 |
45,329 |
(4,073) |
454,213 |
548,948 |
Profit for the period |
- |
- |
- |
- |
- |
- |
- |
50,218 |
50,218 |
Other comprehensive income and expense: |
|
|
|
|
|
|
|
|
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
- |
(14,096) |
- |
- |
(14,096) |
Exchange losses transferred to Income Statement on disposal of operation |
- |
- |
- |
- |
- |
22 |
- |
- |
22 |
Actuarial gains on defined benefit pension plans |
- |
- |
- |
- |
- |
- |
- |
13,122 |
13,122 |
Effective portion of changes in fair value of cash flow hedges |
- |
- |
- |
- |
(343) |
- |
- |
- |
(343) |
Tax relating to components of other comprehensive income and expense |
- |
- |
- |
- |
80 |
- |
- |
(2,625) |
(2,545) |
Total other comprehensive income |
- |
- |
- |
- |
(263) |
(14,074) |
- |
10,497 |
(3,840) |
Dividends paid |
- |
- |
- |
- |
- |
- |
- |
(27,630) |
(27,630) |
Share-based payments charge** |
- |
- |
- |
- |
- |
- |
1,952 |
- |
1,952 |
Deferred tax on share-based |
- |
- |
- |
- |
- |
- |
(575) |
- |
(575) |
Excess tax deductions related to share-based payments on exercised options |
- |
- |
- |
- |
- |
- |
- |
1,476 |
1,476 |
Purchase of Employee Benefit Trust shares** |
- |
- |
(1,216) |
- |
- |
- |
- |
- |
(1,216) |
Performance share plan awards vested** |
- |
- |
3,214 |
- |
- |
- |
(5,691) |
- |
(2,477) |
At 3 October 2015 (unaudited) |
37,965 |
23,608 |
(6,452) |
185 |
(92) |
31,255 |
(8,387) |
488,774 |
566,856 |
* |
The presentation of the hedging and translation reserves, which were previously netted, has been amended to show the two reserves and their movements in the period separately. The comparatives have been adjusted to reflect this amended presentation. There has been no impact on Shareholders' funds in any period. |
** |
The purchase of Employee Benefit Trust shares/treasury shares and performance share plan awards vested were shown net in Own shares in prior periods, as were the share based payments charge and performance share plan awards vested in Other reserves. The prior period comparatives have been adjusted to show these gross amounts. There has been no impact on Shareholders' funds in any period. |
Own shares are ordinary shares in Halma plc purchased by the Company and held to fulfil the Company's obligations under the Company's share plans. As at 3 October 2015 the number of treasury shares held was 940,421 (27 September 2014: 853,631; 28 March 2015: 1,371,785) and the number of shares held by the Employee Benefit Trust was 89,198 (27 September 2014 and 28 March 2015: nil). |
|
|
For the 26 weeks ended 27 September 2014 |
|||||||
|
Share capital £000 |
Share premium account £000 |
Own shares £000 |
Capital redemption reserve £000 |
Hedging reserve* £000 |
Translation reserve* £000 |
Other reserves £000 |
Retained earnings £000 |
Total £000 |
At 29 March 2014 (audited) |
37,902 |
22,778 |
(7,054) |
185 |
123 |
14,240 |
(2,745) |
420,571 |
486,000 |
Profit for the period |
- |
- |
- |
- |
- |
- |
- |
47,542 |
47,542 |
Other comprehensive income and expense: |
|
|
|
|
|
|
|
|
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
- |
(2,587) |
- |
- |
(2,587) |
Actuarial losses on defined benefit pension plans |
- |
- |
- |
- |
- |
- |
- |
(9,663) |
(9,663) |
Effective portion of changes in fair value of cash flow hedges |
- |
- |
- |
- |
4 |
- |
- |
- |
4 |
Tax relating to components of other comprehensive income and expense |
- |
- |
- |
- |
(1) |
- |
- |
1,865 |
1,864 |
Total other comprehensive income |
- |
- |
- |
- |
3 |
(2,587) |
- |
(7,798) |
(10,382) |
Share options exercised |
58 |
770 |
- |
- |
- |
- |
- |
- |
828 |
Dividends paid |
- |
- |
- |
- |
- |
- |
- |
(25,800) |
(25,800) |
Share-based payments charge** |
- |
- |
- |
- |
- |
- |
1,929 |
- |
1,929 |
Deferred tax on share-based payment transactions |
- |
- |
- |
- |
- |
- |
(441) |
- |
(441) |
Excess tax deductions related to share-based payments on exercised options |
- |
- |
- |
- |
- |
- |
- |
1,022 |
1,022 |
Purchase of treasury shares** |
- |
- |
(3,042) |
- |
- |
- |
- |
- |
(3,042) |
Performance share plan awards vested** |
- |
- |
5,211 |
- |
- |
- |
(5,211) |
- |
- |
At 27 September 2014 (unaudited) |
37,960 |
23,548 |
(4,885) |
185 |
126 |
11,653 |
(6,468) |
435,537 |
497,656 |
* |
The presentation of the hedging and translation reserves, which were previously netted, has been amended to show the two reserves and their movements in the period separately. The comparatives have been adjusted to reflect this amended presentation. There has been no impact on Shareholders' funds in any period. |
** |
The purchase of Employee Benefit Trust shares/treasury shares and performance share plan awards vested were shown net in Own shares in prior periods, as were the share based payments charge and performance share plan awards vested in Other reserves. The prior period comparatives have been adjusted to show these gross amounts. There has been no impact on Shareholders' funds in any period. |
|
|
For the 52 weeks ended 28 March 2015 |
|||||||
|
Share capital £000 |
Share premium account £000 |
Own shares £000 |
Capital redemption reserve £000 |
Hedging reserve* £000 |
Translation reserve* £000 |
Other reserves £000 |
Retained earnings £000 |
Total £000 |
At 29 March 2014 (audited) |
37,902 |
22,778 |
(7,054) |
185 |
123 |
14,240 |
(2,745) |
420,571 |
486,000 |
Profit for the period |
- |
- |
- |
- |
- |
- |
- |
104,001 |
104,001 |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
Exchange differences on translation |
- |
- |
- |
- |
- |
30,900 |
- |
- |
30,900 |
Exchange losses transferred to Income Statement on disposal of operation |
- |
- |
- |
- |
- |
189 |
- |
- |
189 |
Actuarial losses on defined benefit pension plans |
- |
- |
- |
- |
- |
- |
- |
(34,795) |
(34,795) |
Effective portion of changes in fair value of cash flow hedges |
- |
- |
- |
- |
71 |
- |
- |
- |
71 |
Tax relating to components of other comprehensive income and expense |
- |
- |
- |
- |
(23) |
- |
- |
6,791 |
6,768 |
Total other comprehensive income |
- |
- |
- |
- |
48 |
31,089 |
- |
(28,004) |
3,133 |
Share options exercised |
63 |
830 |
- |
- |
- |
- |
- |
- |
893 |
Dividends paid |
- |
- |
- |
- |
- |
- |
- |
(43,399) |
(43,399) |
Share-based payments charge** |
- |
- |
- |
- |
- |
- |
3,828 |
- |
3,828 |
Deferred tax on share-based |
- |
- |
- |
- |
- |
- |
291 |
- |
291 |
Excess tax deductions related to share-based payments on exercised options |
- |
- |
- |
- |
- |
- |
- |
1,044 |
1,044 |
Purchase of treasury shares** |
- |
- |
(6,843) |
- |
- |
- |
- |
- |
(6,843) |
Performance share plan awards vested** |
- |
- |
5,447 |
- |
- |
- |
(5,447) |
- |
- |
At 28 March 2015 (audited) |
37,965 |
23,608 |
(8,450) |
185 |
171 |
45,329 |
(4,073) |
454,213 |
548,948 |
* |
The presentation of the hedging and translation reserves, which were previously netted, has been amended to show the two reserves and their movements in the period separately. The comparatives have been adjusted to reflect this amended presentation. There has been no impact on Shareholders' funds in any period. |
** |
The purchase of Employee Benefit Trust shares/treasury shares and performance share plan awards vested were shown net in Own shares in prior periods, as were the share based payments charge and performance share plan awards vested in Other reserves. The prior period comparatives have been adjusted to show these gross amounts. There has been no impact on Shareholders' funds in any period. |
Consolidated Cash Flow Statement |
|
|
|
|
|
Notes |
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Net cash inflow from operating activities |
8 |
61,886 |
61,924 |
137,231 |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchase of property, plant and equipment |
|
(8,244) |
(9,419) |
(22,164) |
Purchase of computer software |
|
(778) |
(473) |
(1,021) |
Purchase of other intangibles |
|
(81) |
(268) |
(382) |
Proceeds from sale of property, plant and equipment |
|
468 |
543 |
1,411 |
Development costs capitalised |
|
(3,990) |
(3,239) |
(7,213) |
Interest received |
|
128 |
64 |
134 |
Acquisition of businesses, net of cash acquired |
10 |
(12,902) |
(87,145) |
(87,743) |
Disposal of business, net of cash disposed |
11 |
908 |
4,221 |
4,248 |
Net cash used in investing activities |
|
(24,491) |
(95,716) |
(112,730) |
|
|
|
|
|
Financing activities |
|
|
|
|
Dividends paid |
|
(27,630) |
(25,800) |
(43,399) |
Proceeds from issue of share capital |
|
- |
828 |
893 |
Purchase of own shares |
|
(1,216) |
(3,042) |
(6,843) |
Interest paid |
|
(1,589) |
(1,499) |
(3,118) |
Proceeds from borrowings |
|
87,000 |
152,435 |
68,962 |
Repayment of borrowings |
|
- |
(77,367) |
(35,341) |
Net cash from/(used in) financing activities |
|
56,565 |
45,555 |
(18,846) |
|
|
|
|
|
Increase in cash and cash equivalents |
|
93,960 |
11,763 |
5,655 |
Cash and cash equivalents brought forward |
|
39,525 |
33,126 |
33,126 |
Exchange adjustments |
|
231 |
(329) |
744 |
Cash and cash equivalents carried forward |
|
133,716 |
44,560 |
39,525 |
|
|
|
|
|
|
Unaudited 3 October 2015 £000 |
Unaudited 27 September 2014 £000 |
Audited 28 March 2015 £000 |
|
Reconciliation of net cash flow to movement in net debt |
|
|
|
|
Increase in cash and cash equivalents |
93,960 |
11,763 |
5,655 |
|
Cash inflow from drawdowns of borrowings |
(87,000) |
(75,068) |
(33,621) |
|
Net debt acquired |
- |
(468) |
(468) |
|
Loan notes issued* |
(263) |
(608) |
(657) |
|
Loan notes repaid* |
368 |
2,731 |
2,731 |
|
Exchange adjustments |
442 |
(130) |
(38) |
|
|
7,507 |
(61,780) |
(26,398) |
|
Net debt brought forward |
(100,894) |
(74,496) |
(74,496) |
|
Net debt carried forward |
(93,387) |
(136,276) |
(100,894) |
* |
£368,000 of the £657,000 loan notes issued in the prior period was converted at par into cash on 17 July 2015. The remaining loan notes are outstanding. Loan notes totalling £263,000 were issued on 15 April 2015 and 16 July 2015 as part of the consideration payable in relation to the acquisition of Advanced Electronics Limited on 14 May 2014. The loan notes, which attract interest of 1%, are convertible into cash by the holder at par on each anniversary of the acquisition date until 14 May 2019. |
Notes to the Condensed Financial Statements |
1 Basis of preparationGeneral informationThe Half Year Report, which includes the Interim Management Report and Condensed Financial Statements for the 27 weeks to 3 October 2015, has not been audited or reviewed by the Group's Auditor and was approved by the Directors on 17 November 2015.
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 52 weeks to 28 March 2015.
The figures shown for the 52 weeks to 28 March 2015 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. The audit report on those accounts was not qualified, did not include a reference to any matters to which the Auditor 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, which includes a £360m five-year revolving credit facility due to expire in November 2018 and the recently agreed United States Private Placement of $250m which matures over intervals of five, seven and ten years up to 2026 with funds to be drawn in January 2016.
With this in mind, 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. |
2 Segmental analysis
Sector analysisThe Group has four main reportable segments (Process Safety, Infrastructure Safety, Medical and Environmental & Analysis), 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. |
Segment revenue and results |
|
Revenue (all continuing operations) |
||
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Process Safety |
77,773 |
73,579 |
158,372 |
Infrastructure Safety |
122,411 |
112,693 |
234,063 |
Medical |
92,297 |
78,464 |
169,333 |
Environmental & Analysis |
87,243 |
76,256 |
164,412 |
Inter-segmental sales |
(67) |
(89) |
(46) |
Revenue for the period |
379,657 |
340,903 |
726,134 |
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 and has no material revenue derived from the rendering of services. |
|
Profit (all continuing operations) |
||
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Segment profit before allocation of adjustments* |
|
|
|
Process Safety |
19,090 |
20,439 |
44,772 |
Infrastructure Safety |
24,591 |
22,821 |
49,992 |
Medical |
24,579 |
20,847 |
45,385 |
Environmental & Analysis |
14,767 |
11,861 |
27,403 |
|
83,027 |
75,968 |
167,552 |
Segment profit after allocation of adjustments* |
|
|
|
Process Safety |
17,393 |
18,187 |
40,280 |
Infrastructure Safety |
23,707 |
23,165 |
49,585 |
Medical |
18,826 |
15,227 |
31,981 |
Environmental & Analysis |
12,689 |
11,590 |
25,699 |
Segment profit |
72,615 |
68,169 |
147,545 |
Central administration costs |
(5,449) |
(4,478) |
(8,988) |
Costs to close the defined benefit pension plan to future accrual in the prior period |
- |
(46) |
- |
Net finance expense |
(2,921) |
(2,472) |
(4,946) |
Group profit before taxation |
64,245 |
61,173 |
133,611 |
Taxation |
(14,027) |
(13,631) |
(29,610) |
Profit for the period |
50,218 |
47,542 |
104,001 |
* Adjustments include the amortisation of acquired intangible assets, acquisition items, and profit or loss on disposal of operations.
The accounting policies of the reportable segments are the same as the Group's accounting policies. For acquisitions after 3 April 2010, acquisition transaction costs and adjustments to contingent purchase consideration are recognised in the Consolidated Income Statement. Segment profit before these acquisition costs, the amortisation of acquired intangible assets and the profit or loss on disposal of continuing operations is disclosed separately above as this is the measure reported to the Chief Executive for the purpose of allocation of resources and assessment of segment performance.
These adjustments are analysed as follows: |
|
|
|
Unaudited for the 27 weeks ended 3 October 2015 |
||||
|
|
Acquisition items |
|
|
|
||
|
Amortisation of acquired intangibles £000 |
Transaction costs £000 |
Adjustments to contingent consideration £000 |
Total amortisation charge and acquisition items £000 |
Disposal of operations (note 11) £000 |
Total £000 |
|
Process Safety |
(1,697) |
- |
- |
(1,697) |
- |
(1,697) |
|
Infrastructure Safety |
(411) |
(148) |
(325) |
(884) |
- |
(884) |
|
Medical |
(6,217) |
(114) |
(14) |
(6,345) |
592 |
(5,753) |
|
Environmental & Analysis |
(2,078) |
- |
- |
(2,078) |
- |
(2,078) |
|
Total Segment & Group |
(10,403) |
(262) |
(339) |
(11,004) |
592 |
(10,412) |
|
The transaction costs arose mainly on the acquisitions of Value Added Solutions LLC (see note 10) and Firetrace USA, LLC (Firetrace) (see note 13), which were acquired on 19 May 2015 and 5 October 2015 respectively.
The £325,000 charge to contingent consideration related to the revision of the estimate of the remaining Advanced Electronics Limited payable. The payable was settled during the period.
The £592,000 profit on disposal relates to the disposal of 8.8% of the Group's ownership interest in Optomed Oy on 26 August 2015. See note 11 for further details. |
|
|
|
Unaudited for the 26 weeks ended 27 September 2014 |
||||
|
|
Acquisition items |
|
|
|
|
|
|
Amortisation of acquired intangibles £000 |
Transaction costs £000 |
Adjustments to contingent consideration £000 |
Total amortisation charge and acquisition items £000 |
Disposal of operations (note 11) £000 |
Effects of closure to future benefit accrual of Defined Benefit pension plans* £000 |
Total £000 |
Process Safety |
(1,344) |
(908) |
- |
(2,252) |
- |
- |
(2,252) |
Infrastructure Safety |
(354) |
(386) |
- |
(740) |
1,084 |
- |
344 |
Medical |
(5,962) |
(4) |
- |
(5,966) |
346 |
- |
(5,620) |
Environmental & Analysis |
(1,935) |
- |
1,664 |
(271) |
- |
- |
(271) |
Total Segment |
(9,595) |
(1,298) |
1,664 |
(9,229) |
1,430 |
- |
(7,799) |
Central administration costs |
- |
- |
- |
- |
- |
(46) |
(46) |
Total Group |
(9,595) |
(1,298) |
1,664 |
(9,229) |
1,430 |
(46) |
(7,845) |
* The £46,000 relates to the costs to close the defined benefit pension plan to future accrual in the prior period.
The transaction costs arose on the acquisitions of Rohrback Cosasco Systems Inc., £908,000; Advanced Electronics Limited, £386,000; and Plasticspritzerei AG, £4,000.
The £1,664,000 credit to contingent consideration related to the revision of the estimate of the remaining ASL Holdings Limited payable from £2,500,000 to £836,000, after payment of £1,000,000 in May 2014.
Within the Infrastructure Safety segment, the £1,084,000 profit relates to the disposal, on 30 May 2014, of Monitor Elevator Products, Inc. Within the Medical segment, the £346,000 profit comprises the disposal, on 2 May 2014, of the Group's 50% ownership interest in PSRM Immobilien AG (£131,000) and, on 14 July 2014, of 10.72% of its ownership interest in Optomed Oy (£215,000). |
|
|
|
Audited for the 52 weeks ended 28 March 2015 |
||||
|
|
Acquisition items |
|
|
|
||
|
Amortisation of acquired intangibles £000 |
Transaction costs £000 |
Adjustments to contingent consideration £000 |
Release of fair value adjustments to inventory £000 |
Total amortisation charge and acquisition items £000 |
Disposal of operations (note 11) £000 |
Total £000 |
Process Safety |
(3,026) |
(928) |
- |
(538) |
(4,492) |
- |
(4,492) |
Infrastructure Safety |
(765) |
(486) |
(102) |
(130) |
(1,483) |
1,076 |
(407) |
Medical |
(12,156) |
(21) |
(1,581) |
- |
(13,758) |
354 |
(13,404) |
Environmental & Analysis |
(4,007) |
- |
2,303 |
- |
(1,704) |
- |
(1,704) |
Total Segment & Group |
(19,954) |
(1,435) |
620 |
(668) |
(21,437) |
1,430 |
(20,007) |
The £1,581,000 charge to contingent consideration in the Medical sector related mainly to the revision in the estimate of the MST payable from $6,504,000 to $9,061,000. The £2,303,000 credit to contingent consideration in the Environmental & Analysis sector related to the further revision of the estimate of the remaining ASL Holdings Limited payable.
The total assets and liabilities of all four segments have not been disclosed as there have been no material changes to those disclosed in the 2015 Annual Report and Accounts. |
Geographic information
The Group's revenue from external customers (by location of customer) is as follows: |
|
||
|
Revenue by destination |
||
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
United States of America |
124,415 |
104,110 |
223,374 |
Mainland Europe |
85,190 |
79,216 |
167,363 |
United Kingdom |
71,520 |
67,225 |
138,312 |
Asia Pacific |
59,736 |
56,248 |
116,842 |
Africa, Near and Middle East |
25,419 |
19,055 |
44,037 |
Other countries |
13,377 |
15,049 |
36,206 |
Group revenue |
379,657 |
340,903 |
726,134 |
3 Finance income |
|
|
|
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Interest receivable |
128 |
64 |
134 |
Fair value movement on derivative financial instruments |
- |
- |
33 |
|
128 |
64 |
167 |
4 Finance expense |
|
|
|
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Interest payable on bank loans and overdrafts |
1,580 |
1,499 |
3,090 |
Amortisation of finance costs |
265 |
265 |
530 |
Net interest charge on pension plan liabilities |
1,008 |
701 |
1,419 |
Other interest payable |
9 |
- |
28 |
|
2,862 |
2,465 |
5,067 |
Fair value movement on derivative financial instruments |
187 |
49 |
- |
Unwinding of discount on provisions |
- |
22 |
46 |
|
3,049 |
2,536 |
5,113 |
5 Taxation |
The total Group tax charge for the 27 weeks to 3 October 2015 of £14,027,000 (26 weeks to 27 September 2014: £13,631,000; 52 weeks to 28 March 2015: £29,610,000) comprises a current tax charge of £15,280,000 (26 weeks to 27 September 2014: £14,608,000; 52 weeks to 28 March 2015: £33,523,000) and a deferred tax credit of £1,253,000 (26 weeks to 27 September 2014: £977,000; 52 weeks to 28 March 2015: £3,913,000). The tax charge is based on the estimated effective tax rate for the year.
The tax charge includes £12,270,000 (26 weeks to 27 September 2014: £10,620,000; 52 weeks to 28 March 2015: £24,064,000) in respect of overseas tax. |
6 Earnings per ordinary share |
Basic earnings per ordinary share are calculated using the weighted average of 378,390,374 (27 September 2014: 378,115,425; 28 March 2015: 378,328,541) shares in issue during the period (net of shares purchased by the Company and held as treasury and Employee Benefit Trust shares). Diluted earnings per ordinary share are calculated using 378,390,374 (27 September 2014: 378,383,111; 28 March 2015: 378,475,804) shares which includes dilutive potential ordinary shares of nil (27 September 2014: 267,686; 28 March 2015: 147,263). 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, acquisition items, profit or loss on disposal of operations, and associated taxation thereon.
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 is as follows: |
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Earnings from continuing operations |
50,218 |
47,542 |
104,001 |
Costs to close the defined benefit pension plan to future accrual (after tax) |
- |
36 |
- |
Amortisation of acquired intangible assets (after tax) |
7,351 |
6,801 |
14,121 |
Acquisition transaction costs (after tax) |
171 |
1,286 |
1,423 |
Release of fair value adjustments to inventory (after tax) |
- |
- |
474 |
Adjustments to contingent consideration (after tax) |
339 |
(1,664) |
(1,162) |
Profit on disposal of operations (after tax) |
(592) |
(857) |
(945) |
Adjusted earnings |
57,487 |
53,144 |
117,912 |
|
Per ordinary share |
||
|
Unaudited 27 weeks to 3 October 2015 pence |
Unaudited 26 weeks to 27 September 2014 pence |
Audited 52 weeks to 28 March 2015 pence |
Earnings from continuing operations |
13.27 |
12.57 |
27.49 |
Costs to close the defined benefit pension plan to future accrual (after tax) |
- |
0.01 |
- |
Amortisation of acquired intangible assets (after tax) |
1.94 |
1.80 |
3.73 |
Acquisition transaction costs (after tax) |
0.05 |
0.34 |
0.38 |
Release of fair value adjustments to inventory (after tax) |
- |
- |
0.13 |
Adjustments to contingent consideration (after tax) |
0.09 |
(0.44) |
(0.31) |
Profit on disposal of operations (after tax) |
(0.16) |
(0.23) |
(0.25) |
Adjusted earnings |
15.19 |
14.05 |
31.17 |
7 Dividends |
|
||
|
Per ordinary share |
||
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Amounts recognised as distributions to shareholders in the period |
|
|
|
Final dividend for the year to 28 March 2015 (29 March 2014) |
7.31 |
6.82 |
6.82 |
Interim dividend for the year to 28 March 2015 |
- |
- |
4.65 |
|
7.31 |
6.82 |
11.47 |
Dividends in respect of the period |
|
|
|
Interim dividend for the year to 2 April 2016 (28 March 2015) |
4.98 |
4.65 |
4.65 |
Final dividend for the year to 28 March 2015 |
- |
- |
7.31 |
|
4.98 |
4.65 |
11.96 |
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Amounts recognised as distributions to shareholders in the period |
|
|
|
Final dividend for the year to 28 March 2015 (29 March 2014) |
27,630 |
25,800 |
25,800 |
Interim dividend for the year to 28 March 2015 |
- |
- |
17,599 |
|
27,630 |
25,800 |
43,399 |
Dividends in respect of the period |
|
|
|
Interim dividend for the year to 2 April 2016 (28 March 2015) |
18,855 |
17,599 |
17,599 |
Final dividend for the year to 28 March 2015 |
- |
- |
27,630 |
|
18,855 |
17,599 |
45,229 |
8 Notes to the Consolidated Cash Flow Statement |
|
|
|
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Reconciliation of profit from operations to net cash inflow from operating activities |
|
|
|
Profit on continuing operations before finance income and expense, share of results of associates and profit on disposal of operations |
66,653 |
62,150 |
137,063 |
Depreciation of property, plant and equipment |
7,387 |
6,822 |
14,005 |
Amortisation of computer software |
610 |
568 |
1,211 |
Amortisation of capitalised development costs and other intangibles |
2,347 |
2,829 |
5,505 |
Impairment of capitalised development costs |
- |
- |
236 |
Amortisation of acquired intangible assets |
10,403 |
9,595 |
19,954 |
Share-based payment expense (less than)/in excess of amounts paid |
(1,052) |
2,079 |
3,803 |
Additional payments to pension plans |
(3,241) |
(3,250) |
(6,560) |
Loss/(profit) on sale of property, plant and equipment and computer software |
35 |
(114) |
(590) |
Operating cash flows before movement in working capital |
83,142 |
80,679 |
174,627 |
Increase in inventories |
(4,525) |
(3,037) |
(1,097) |
Decrease/(increase) in receivables |
11,661 |
6,073 |
(10,656) |
(Decrease)/increase in payables and provisions |
(12,398) |
(7,318) |
5,801 |
Revision to estimate of contingent consideration payable |
339 |
(1,664) |
(620) |
Cash generated from operations |
78,219 |
74,733 |
168,055 |
Taxation paid |
(16,333) |
(12,809) |
(30,824) |
Net cash inflow from operating activities |
61,886 |
61,924 |
137,231 |
|
Unaudited 3 October 2015 £000 |
Unaudited 27 September 2014 £000 |
Audited 28 March 2015 £000 |
Analysis of cash and cash equivalents |
|
|
|
Cash and bank balances |
133,716 |
49,177 |
41,230 |
Overdrafts (included in current Borrowings) |
- |
(4,617) |
(1,705) |
Cash and cash equivalents |
133,716 |
44,560 |
39,525 |
|
At 28 March 2015 £000 |
Cash flow £000 |
Loan notes issued £000 |
Loan notes repaid £000 |
Exchange adjustments £000 |
At 3 October 2015 £000 |
Analysis of net debt |
|
|
|
|
|
|
Cash and bank balances |
41,230 |
92,255 |
- |
- |
231 |
133,716 |
Overdrafts |
(1,705) |
1,705 |
- |
- |
- |
- |
Cash and cash equivalents |
39,525 |
93,960 |
- |
- |
231 |
133,716 |
Loan notes falling due after more than one year* |
(657) |
- |
(263) |
368 |
- |
(552) |
Bank loans falling due after |
(139,762) |
(87,000) |
- |
- |
211 |
(226,551) |
Total net debt |
(100,894) |
6,960 |
(263) |
368 |
442 |
(93,387) |
* £368,000 of the £657,000 loan notes issued in the prior period was converted at par into cash on 17 July 2015. The remaining loan notes are outstanding. Loan notes totalling £263,000 were issued on 15 April 2015 and 16 July 2015 as part of the consideration payable in relation to the acquisition of Advanced Electronics Limited on 14 May 2014. The loan notes, which attract interest of 1%, are convertible into cash by the holder at par on each anniversary of the acquisition date until 14 May 2019.
Cash flows attributable to bank loans falling due after more than one year comprise drawdowns of £87,000,000 and repayments of £nil.
|
9 Non-GAAP measures Return on Total Invested Capital (ROTIC) |
|
|
|
|
Unaudited 27 weeks to 3 October 2015 £000 |
(Restated)* Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Post-tax profit before adjustments** |
57,487 |
53,144 |
117,912 |
Shareholders' funds |
566,856 |
497,656 |
548,948 |
Add back retirement benefit obligations |
51,405 |
44,209 |
66,790 |
Less associated deferred tax assets |
(10,000) |
(8,718) |
(13,085) |
Cumulative amortisation of acquired intangible assets |
93,137 |
70,080 |
83,958 |
Historical adjustments to goodwill*** |
89,549 |
89,549 |
89,549 |
Total Invested Capital |
790,947 |
692,776 |
776,160 |
Average Total Invested Capital |
783,554 |
679,563 |
721,255 |
Return on Total Invested Capital (annualised) |
14.7% |
15.6% |
16.3% |
Return on Capital Employed (ROCE) |
|
|
|
|
Unaudited 27 weeks to 3 October 2015 £000 |
(Restated)* Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Operating profit before adjustments**, but after share of results of associates |
77,578 |
71,490 |
158,564 |
Computer software costs within intangible assets |
2,981 |
2,862 |
2,835 |
Capitalised development costs within intangible assets |
17,397 |
15,150 |
15,865 |
Other intangibles within intangible assets |
453 |
404 |
450 |
Property, plant and equipment |
86,000 |
78,359 |
86,303 |
Inventories |
83,014 |
77,720 |
79,734 |
Trade and other receivables |
143,144 |
135,225 |
156,464 |
Trade and other payables |
(90,721) |
(85,004) |
(102,717) |
Provisions |
(2,179) |
(11,003) |
(11,746) |
Net tax liabilities |
(9,431) |
(11,679) |
(12,385) |
Non-current trade and other payables |
(4,058) |
(3,335) |
(3,756) |
Non-current provisions |
(2,534) |
(1,631) |
(1,549) |
Add back contingent purchase consideration |
841 |
8,700 |
9,650 |
Capital Employed |
224,907 |
205,768 |
219,148 |
Average Capital Employed |
222,028 |
197,738 |
204,428 |
Return on Capital Employed (annualised) |
69.9% |
72.3% |
77.6% |
* |
The ROTIC and ROCE measures are now expressed as a percentage of the average of the current period's and prior year's Total Invested Capital and Capital Employed respectively. Using an average as the denominator is considered to be more representative. The March 2014 Total Invested Capital and Capital Employed balances were £666,350,000 and £189,707,000 respectively. |
** |
Adjustments include the amortisation of acquired intangible assets, acquisition items, and profit or loss on disposal of operations. |
*** |
Includes goodwill amortised prior to 3 April 2004 and goodwill taken to reserves. |
Organic growthOrganic growth measures the change in revenue and profit from continuing Group operations. The effect of current and prior period acquisitions is equalised by adjusting the current period results for pro-rated contributions based on their revenue and profit before taxation at the dates of acquisition. The results of disposals made are removed from the prior period reported revenue and profit before taxation. The effects of currency changes are removed through restating the current year revenue and profit before taxation at the prior year exchange rates. Organic growth at constant currency has been calculated as follows: |
|
|
|
Revenue |
Adjusted profit* before taxation |
||
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
% growth |
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
% growth |
Continuing operations |
379,657 |
340,903 |
|
74,657 |
69,018 |
|
Acquired and disposed revenue/profit |
(6,139) |
(1,094) |
|
(1,273) |
64 |
|
Organic growth |
373,518 |
339,809 |
9.9% |
73,384 |
69,082 |
6.2% |
Constant currency adjustment |
(9,192) |
- |
|
(1,703) |
- |
|
Organic growth at constant currency |
364,326 |
339,809 |
7.2% |
71,681 |
69,082 |
3.8% |
* Adjustments include the amortisation of acquired intangible assets, acquisition items, and profit or loss on disposal of operations. |
Adjusted operating profit |
|
|
|
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Operating profit |
66,653 |
62,150 |
137,063 |
Add back: |
|
|
|
Acquisition items |
601 |
(366) |
1,483 |
Costs to close the defined benefit pension plan to future accrual |
- |
46 |
- |
Amortisation of acquired intangible assets |
10,403 |
9,595 |
19,954 |
Adjusted operating profit |
77,657 |
71,425 |
158,500 |
Adjusted operating cash flow |
|
|
|
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Net cash from operating activities (note 8) |
61,886 |
61,924 |
137,231 |
Add back: |
|
|
|
Taxation paid |
16,333 |
12,809 |
30,824 |
Proceeds from sale of property, plant and equipment |
468 |
543 |
1,411 |
Share awards vested not settled by own shares* |
2,477 |
- |
- |
Less: |
|
|
|
Purchase of property, plant and equipment |
(8,244) |
(9,419) |
(22,164) |
Purchase of computer software and other intangibles |
(859) |
(741) |
(1,403) |
Development costs capitalised |
(3,990) |
(3,239) |
(7,213) |
Adjusted operating cash flow |
68,071 |
61,877 |
138,686 |
Cash conversion % (adjusted operating cash flow/adjusted operating profit) |
88% |
87% |
87% |
* See Consolidated Statement of Changes in Equity. |
10 Acquisitions
In the provisional accounting, adjustments are made to the book values of the net assets of the companies acquired to reflect their provisional fair values to the Group. Acquired inventories are valued at fair value adopting Group bases and any liabilities for warranties relating to past trading are recognised. Other previously unrecognised assets and liabilities at acquisition are included and accounting policies are aligned with those of the Group where appropriate.
On 19 May 2015 the Group acquired the entire membership interest of Value Added Solutions, LLC (VAS) for an initial consideration of $5,000,000. Below is the summary of the assets and liabilities acquired and the purchase consideration. |
Value Added Solutions, LLC |
|
|
|
|
Book value £000 |
Fair value adjustments £000 |
Total £000 |
Non-current assets |
|
|
|
Intangible assets |
2 |
1,808 |
1,810 |
Property, plant and equipment |
26 |
212 |
238 |
Current assets |
|
|
|
Inventories |
22 |
7 |
29 |
Trade and other receivables |
193 |
(8) |
185 |
Total assets |
243 |
2,019 |
2,262 |
Current liabilities |
|
|
|
Trade and other payables |
(23) |
(6) |
(29) |
Provisions |
(9) |
(2) |
(11) |
Total liabilities |
(32) |
(8) |
(40) |
Net assets of businesses acquired |
211 |
2,011 |
2,222 |
|
|
|
|
Initial consideration paid (all cash) |
|
|
3,228 |
Deferred contingent purchase consideration estimated to be paid |
|
|
645 |
Total consideration |
|
|
3,873 |
|
|
|
|
Goodwill arising on current year acquisition |
|
|
1,651 |
Due to their contractual dates, the fair value of receivables acquired (shown above) approximate to the gross contractual amounts receivable. The amount of gross contractual receivables not expected to be recovered is immaterial.
There are no material contingent liabilities recognised in accordance with paragraph 23 of IFRS 3 (revised).
The goodwill arising on acquisition is expected to be deductible for tax purposes. The maximum deferred contingent consideration payable is $1,500,000 (£968,000). The current provision represents management's best estimate of the likely payable based on performance observed to date. The deferred contingent consideration is payable based on annualised gross margin for an eighteen month performance period to 1 October 2016.
VAS will operate as a 'bolt-on' to Diba Industries Inc., within Halma's Medical sector. Diba Industries creates innovative fluid handling solutions that are invaluable to device OEMs, while VAS specialises in precision plastic machining, production of thermally bonded manifolds, and fluid component integrations. VAS will add complementary expertise, capabilities, and products that will allow Diba to provide broader solutions to its existing customers, as well as expand its customer base. VAS's production facility is located in Berlin, Connecticut, USA, approximately one hour from Diba Industries' headquarters.
VAS contributed £322,000 of revenue and £11,000 of profit after tax for the period ended 3 October 2015. If it had been held since the start of the financial period, it is estimated the Group's reported revenue and profit after tax would have been £158,000 and £22,000 higher respectively.
The fair value adjustments made resulted in net adjustments to goodwill, which exclude acquired intangibles recognised and deferred tax thereon, of £207,000. The excess of the fair value of the consideration paid over the fair value of the assets acquired is represented by customer-related intangibles of £1,107,000; technology-related intangibles of £701,000; with residual goodwill arising of £1,651,000. The goodwill represents:
a) the technical expertise of the acquired workforce; b) the opportunity to leverage this expertise across some of Halma's businesses; and c) the ability to exploit the Group's existing customer base.
As at the date of approval of this Report, the initial acquisition accounting for VAS is provisional. It is common for certain provisions, inventory valuations, intangible asset valuations and deferred tax balances to be revised during the goodwill measurement period, which expires in May 2016. Revisions are made only if new information about conditions existing at the acquisition date becomes available during the measurement period, as defined by IFRS 3 (revised) 'Business Combinations'. The accounting for all prior period acquisitions is completed. |
Analysis of cash outflow in the Consolidated Cash Flow Statement |
|
|
|
|
Unaudited 27 weeks to 3 October 2015 £000 |
Unaudited 26 weeks to 27 September 2014 £000 |
Audited 52 weeks to 28 March 2015 £000 |
Initial cash consideration paid |
3,228 |
90,828 |
90,828 |
Cash acquired on acquisitions |
- |
(9,619) |
(9,619) |
Deferred contingent consideration paid in relation to current year acquisitions |
- |
1,955 |
2,601 |
Deferred contingent consideration paid and loan notes repaid in cash in relation to prior year acquisitions* |
9,674 |
3,981 |
3,933 |
Net cash outflow relating to acquisitions (per Consolidated Cash Flow Statement) |
12,902 |
87,145 |
87,743 |
* The £9,674,000 comprises £368,000 loan notes and £9,306,000 contingent purchase consideration paid in respect of prior period acquisitions, all but £339,000 of which had been provided in the prior year's financial statements. |
11 Disposal of subsidiary and interests in associates
On 26 August 2015 the Group disposed of 9,176 shares in Optomed Oy (Optomed), representing 8.8% of its ownership interest in the associate. Consideration received was €1,236,000 (£908,000). This transaction resulted in a profit on disposal of £592,000. The Group's residual interest in Optomed is 28.6%. As one of the largest shareholders, the Group continues to exercise significant influence, but not control, over the company and so continues to apply the equity method of accounting for its interest in Optomed.
In the prior periods the profit on disposal related to the disposal by the Group, of its subsidiary Monitor Elevator Products, Inc., its 50% ownership interest in PSRM Immobilien AG and another partial disposal of Optomed Oy. Further details are provided on page 149 of the 2015 Annual Report and Accounts. |
12 Fair values of financial assets and liabilities
As at 3 October 2015 there were no significant differences between the book value and fair value (as determined by market value) of the Group's financial assets and liabilities.
The fair value of floating and fixed rate borrowings approximate to the carrying value because interest rates are reset to market rates at intervals of less than one year.
The fair value of derivative financial instruments is estimated by discounting the future contracted cash flow using readily available market data and represents a level 2 measurement in the fair value hierarchy under IFRS 7.
As at 3 October 2015, the total forward foreign currency contracts outstanding were £98,389,000. The contracts mostly mature within one year and therefore the cash flows and resulting effect on profit and loss are expected to occur within the next 12 months.
The fair values of the forward contracts are disclosed as a £173,000 (27 September 2014: £622,000; 28 March 2015: £1,069,000) asset and £270,000 (27 September 2014: £338,000; 28 March 2015: £636,000) liability in the Consolidated Balance Sheet.
Any movements in the fair values of the contracts are recognised in equity until the hedge transaction occurs, when gains/losses are recycled to finance income or finance expense. |
13 Subsequent events
Acquisition of Firetrace USA, LLCOn 5 October 2015, the Group acquired the entire interest in Firetrace USA, LLC and its subsidiary companies for cash consideration of $110,000,000, adjustable based on the closing date net assets. No deferred contingent consideration is payable.
Firetrace, based in Scottsdale, Arizona, USA, designs and manufactures automatic fire detection and suppression systems for installation in small enclosed environments to protect people and critical assets. It will continue to operate out of its current facilities and existing management will remain in place. Firetrace will become part of the Infrastructure Safety sector and further extends the Group's product offering within the fire protection industry. Due to the proximity of the acquisition to the date of the approval of this Half Year Report it is impractical to provide further information, including full IFRS 3 'Business Combinations' disclosures.
United States Private PlacementOn 2 November 2015, the Group completed a United States Private Placement of $250,000,000. The Placement will take effect on 6 January 2016. The Placement includes Sterling, Euro and US Dollar borrowings at a weighted average fixed interest rate of 2.5%. The bonds mature at five, seven and ten year intervals. |
14 Other matters
SeasonalityThe Group's financial results have not historically been subject to significant seasonal trends.
Equity and borrowingsIssues and repurchases of Halma plc's ordinary shares and drawdowns and repayments of borrowings are shown in the Consolidated Cash Flow Statement.
Related party transactionsThere were no significant changes in the nature and size of related party transactions for the period to those reported in the 2015 Annual Report and Accounts. |
15 Principal risks and uncertainties
A number of potential risks and uncertainties exist that 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 on pages 28 to 31 in the 2015 Annual Report and Accounts, which is available on the Group's website at www.halma.com.
The principal risks and uncertainties relate to:
· Globalisation · Competition · Economic conditions · Funding, treasury and pension deficit · Cyber security/Information Technology/Business interruption · Acquisitions · Laws and regulations · Succession planning and staff quality · Research & Development and Intellectual Property strategy
The Directors consider that the principal risks and uncertainties noted above continue to be relevant to the Group. As part of their ongoing assessment of risk throughout the period the Directors have considered the above risks in the context of the new Executive Board structure and the Group's delivery of its financial objectives. Movements in foreign exchange rates also remain a risk to financial performance. We mitigate the risk to demand by operating in markets underpinned by regulatory drivers (where customer spending is often non-discretionary), maintaining a diverse product portfolio and targeting continued growth in developing markets. In addition, Halma's model of autonomy allows local management to change strategy quickly when reacting to variable market conditions.
Although the Group uses forward foreign exchange contracts to mitigate its transactional currency exposure risk, it does not hedge the translation of its currency profits. In the first half of the year, Sterling weakened on average by 8% relative to the US Dollar, and strengthened 12% against the Euro, resulting in a 3% positive currency impact on reported revenue and 2% on reported profit. |
16 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
17 November 2015 |
Kevin Thompson Finance Director |