TIDMHLMA
RNS Number : 0273X
Halma PLC
21 November 2017
HALMA plc
HalF YEAR RESULTS 2017/18
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 6 months to 30 September 2017.
Highlights
Change 2017 2016
Continuing Operations
Revenue 15% GBP506.3m GBP442.1m
Adjusted Profit before Taxation(1,5) 13% GBP94.5m GBP83.6m
Adjusted Earnings per Share(2,5) 12% 19.37p 17.23p
Statutory Profit before Taxation 18% GBP76.8m GBP65.2m
Statutory Earnings per Share 18% 16.27p 13.79p
Interim Dividend per Share(3) 7% 5.71p 5.33p
Return on Sales(4) 18.7% 18.9%
Return on Total Invested
Capital(5) 13.4% 13.8%
Net Debt GBP181.0m GBP237.3m
-- Revenue up 15% with Adjusted(1) pre-tax profit
up 13%. Organic constant currency growth(5)
: revenue up 9%, profit up 8%.
-- All four sectors achieved good organic constant
currency revenue growth.
-- Revenue growth in all major regions. Significant
growth in Asia Pacific where revenue exceeded
the UK for the first time; good progress in
the USA, Mainland Europe and Other regions.
-- Strong profit growth in the Process Safety,
Infrastructure Safety and Environmental & Analysis
sectors; Medical sector profit marginally lower
although on track to improve profitability in
the second half.
-- Strong returns with Return on Sales(4) of 18.7%
and ROTIC(5) of 13.4%. R&D expenditure up 19%,
representing 5.4% of revenue.
-- Interim dividend up 7%.
-- Good cash generation and strong balance sheet
support sustained strategic investment; healthy
acquisition pipeline with two acquisitions completed
in the first half and two further acquisitions
completed since the period end.
Andrew Williams, Chief Executive of Halma, commented:
"Halma has continued to make strong progress,
delivering record revenue, profit and dividends
for shareholders. The diversity of our business
and the evolution of our organisational model
through our four sectors is enabling us to sustain
growth in varied market conditions. Since the
period end, order intake has continued to be ahead
of revenue and order intake last year. Halma remains
on track to make progress in the second half of
the year in line with the Board's expectations."
Notes:
1 Adjusted to remove the amortisation and impairment
of acquired intangible assets, acquisition
items, restructuring costs and profit or loss
on disposal of operations, totalling GBP17.7m
(2016/17: GBP18.4m). See note 2 to the Condensed
Financial Statements for details.
2 Adjusted to remove the amortisation and impairment
of acquired intangible assets, acquisition
items, restructuring costs, profit or loss
on disposal of operations, and the associated
taxation thereon. See note 6 to the Condensed
Financial Statements for details.
3 Interim dividend declared per share.
4 Return on Sales is defined as adjusted(1) profit
before taxation from continuing operations
expressed as a percentage of revenue from continuing
operations.
5 Adjusted(1) Profit before Taxation, Adjusted(1)
Earnings per Share, organic growth rates and
Return on Total Invested Capital (ROTIC) are
alternative performance measures used by management.
See notes 2, 6 and 9 to the Condensed Financial
Statements for details.
For further information, please contact:
Halma plc
Andrew Williams,
Chief Executive
Kevin Thompson,
Finance Director +44 (0)1494 721 111
MHP Communications
Rachel Hirst/Andrew
Jaques +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 Products and services that improve
Safety the safety and mobility of people
and protect commercially and publicly
owned infrastructure.
-- Medical Products which enhance the quality
of life for patients and improve
the quality of care delivered
by providers.
-- Environmental Products and technologies for
& Analysis analysis in environmental safety
and life sciences markets.
The key characteristics of Halma's businesses
are specialist technology and application knowledge
for markets offering strong long term 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 'Media
Gallery'.
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 made strong progress during the first half
of the year. Revenue increased by 15% to GBP506m
(2016/17: GBP442m) including a positive currency
translation impact of 5%. Organic revenue growth
at constant currency was 9%.
Adjusted(1) profit before taxation increased by
13% to GBP94.5m (2016/17: GBP83.6m) including
a positive currency translation impact of 5%.
Organic profit growth at constant currency was
8%.
Return on Sales(1) remained strong at 18.7% (2016/17:
18.9%). The Gross Margin % was very slightly below
the prior year, with two sectors up and two down.
Our companies increased R&D expenditure by 19%
to GBP27.3m (2016/17: GBP23.0m) representing 5.4%
of Group revenue (2016/17: 5.2%) with higher rates
of investment in the Medical and Environmental
& Analysis sectors.
The Board has declared an increase of 7% in the
interim dividend to 5.71p per share (2016/17:
5.33p per share). The interim dividend will be
paid on 7 February 2018 to shareholders on the
register on 29 December 2017. For the past 38
years we have increased our full year dividend
by 5% or more each year.
Widespread revenue growth
We achieved revenue growth across all major regions
including organic growth at constant currency
in each region.
Asia Pacific revenue increased by 20%, including
14% organic constant currency growth. All sectors
grew with Infrastructure Safety and Environmental
& Analysis sectors delivering the strongest growth.
Sales to Asia Pacific exceeded those to the UK
for the first time.
The USA remains our largest sales destination
contributing 36% of total revenue, growing 13%
in the half year, 6% at organic constant currency.
Revenue in Mainland Europe increased by 14% and
in the UK by 9% with both regions achieving 9%
organic constant currency growth. Growth in the
Near and Middle East, Canada and Brazil contributed
to the strong growth in Other regions.
The tables below summarise revenue growth by destination
and by sector, including the underlying rates
of organic growth at constant currency. Organic
constant currency rates exclude the effect of
currency translation and acquisitions.
External revenue by destination
Half year 2017/18 Half year 2016/17
------------------- -------------------
% organic
growth
% of % of Change % at constant
GBPm total GBPm total GBPm growth currency
--------------- -------- --------- -------- --------- ------ ------- ------------
United States
of America 181.8 36% 160.8 36% 21.0 13% 6%
Mainland Europe 109.0 21% 96.0 22% 13.0 14% 9%
United Kingdom 79.8 16% 72.9 16% 6.9 9% 9%
Asia Pacific 83.9 17% 69.7 16% 14.2 20% 14%
Other regions 51.8 10% 42.7 10% 9.1 21% 14%
--------------- -------- --------- -------- --------- ------ ------- ------------
506.3 100% 442.1 100% 64.2 15% 9%
--------------- -------- --------- -------- --------- ------ ------- ------------
External revenue
by sector
Half Half
year year
2017/18 2016/17
-------- --------
% organic
growth
Change % at constant
GBPm GBPm GBPm growth currency
---------------- -------- -------- ------ ------- ------------
Process Safety 88.8 76.7 12.1 16% 12%
Infrastructure
Safety 167.9 148.0 19.9 13% 10%
Medical 133.3 118.7 14.6 12% 5%
Environmental
& Analysis 116.5 98.8 17.7 18% 11%
Inter-segmental
revenue (0.2) (0.1) (0.1) - -
---------------- -------- -------- ------ ------- ------------
506.3 442.1 64.2 15% 9%
---------------- -------- -------- ------ ------- ------------
Strong revenue growth in all sectors
Infrastructure Safety revenue increased by 13%
to GBP167.9m (2016/17: GBP148.0m) including 10%
organic constant currency growth and a 3% positive
impact from currency translation. There was growth
in all major market segments with strong growth
in People & Vehicle flow. These trends contributed
to double-digit organic constant currency increases
in Asia Pacific, Mainland Europe and Other regions
with steady growth in the UK. Weaker demand in
our Fire businesses resulted in a mid single-digit
organic constant currency revenue decline in the
USA.
Profit(2) grew by 12% to GBP35.7m (2016/17: GBP32.0m)
including 9% organic constant currency growth
and a 3% positive impact from currency translation.
Return on Sales was a healthy 21.4% (2016/17:
21.6%). R&D expenditure increased by 7% to GBP9.4m
(2016/17: GBP8.8m). The sector is expected to
make continued progress in the second half.
In November 2017, following the period end, we
acquired Setco as a bolt-on for our global Elevator
Safety business, Avire. Setco is based in Barcelona,
Spain and adds new wireless communications technology
which is highly complementary to Avire's existing
product range and new product development roadmap.
Medical revenue was up by 12% to GBP133.3m (2016/17:
GBP118.7m) including 5% organic constant currency
growth, a 1% benefit from acquisitions in the
last year and a 6% positive impact from currency
translation. Our Ophthalmology and Sensors businesses
progressed well. We saw weaker performance in
our Patient Assessment businesses but our acquisitions
of CasMed and Cardios during the first half add
new blood pressure monitoring technology and geographic
presence to this market segment. The integration
of both businesses is proceeding well.
There was healthy single-digit organic constant
currency revenue growth in the UK, the USA and
Other regions. Organic constant currency revenue
was slightly up in Asia Pacific and slightly down
in Mainland Europe.
Profit(2) was GBP28.7m, which was marginally below
the prior year's GBP28.9m. This included 6% organic
constant currency decline and a 6% positive impact
from currency translation. Return on Sales reduced
from 24.3% in 2016/17 to 21.6%, due to both a
drop in Gross Margin % mainly due to mix effects
and an increase in overhead spend. The majority
of this overhead spend was targeted investment
in sales, marketing and new product development,
where R&D spend grew by 25% to GBP5.9m (2016/17:
GBP4.7m).
The sector has taken action to control discretionary
costs, which is expected to improve profitability
during the second half of the year.
Environmental & Analysis revenue rose by 18% to
GBP116.5m (2016/17: GBP98.8m) including 11% organic
constant currency growth, a 2% benefit from acquisitions
and a 5% positive impact from currency translation.
There was growth in all main business segments
with a strong performance in Spectroscopy & Photonics.
Organic constant currency revenue from the UK
and Asia Pacific increased significantly. There
was steadier organic growth from the USA and small
organic declines from Mainland Europe and Other
regions.
Profit(2) improved by an impressive 36% to GBP21.8m
(2016/17: GBP16.0m). Organic constant currency
profit growth was 27% and there was a 2% benefit
from acquisitions in the last year. Currency translation
had a 7% positive impact. Return on Sales improved
significantly from 16.2% up to 18.7%, as a result
of revenue growth this year and the trading impact
(and benefit) of restructuring completed in the
first half of last year. There was an improvement
in the Gross Margin % and increased investment
in new product development. R&D spend increased
by 33% to GBP8.9m (2016/17: GBP6.7m) to represent
7.6% of revenue.
The integration of FluxData, acquired in January
2017, is proceeding well. Companies both inside
and outside the sector are exploring collaborative
projects using their multi-spectral imaging technologies.
Following the half year end, the acquisition of
Mini-Cam in October 2017 added new waste water
pipeline monitoring solutions to our group of
Water businesses.
The sector is well positioned to make progress
in the second half, albeit with a stronger prior
year comparator.
Process Safety revenue increased by 16% to GBP88.8m
(2016/17: GBP76.7m). There was organic constant
currency growth of 12% and a 4% benefit from currency
translation. The Safety Interlocks and Pressure
Relief segments had good growth. Gas Detection
was in line with the prior year. There was organic
constant currency growth in all major regions,
with particularly high growth in the USA and Other
regions. There was good progress in Mainland Europe
and Asia Pacific with steadier growth from the
UK.
Profit(2) increased by 16% to GBP20.2m (2016/17:
GBP17.4m) including 13% organic constant currency
growth and a 3% positive impact from currency
translation. Return on Sales improved marginally
to 22.8% (2016/17: 22.7%). R&D spend was up 11%
to GBP3.1m (2016/17: GBP2.8m). The sector continues
to benefit from increased market diversification
and improved demand from the USA onshore energy
market while other segments of the Oil and Gas
market remain depressed. Despite the tougher comparators,
the sector is well placed to make progress in
the second half.
Four acquisitions completed
In July 2017, we acquired Cas Medical Systems,
Inc's (CasMed) non-invasive blood pressure monitoring
product line for an initial cash consideration
of $4.5m (GBP3.4m) with up to a further $2m (GBP1.5m)
payable based on achievement of certain sales
targets.
In August 2017, we completed the acquisition of
Cardios Sistemas Comercial e Industrial Ltda (Cardios)
located in Brazil. The initial cash consideration
was R$50m (GBP12.4m) with further payment of up
to R$5m (GBP1.2m) payable based on future growth.
In October 2017, following the period end, we
acquired Mini-Cam Enterprises Limited and its
subsidiaries (Mini-Cam). The initial consideration
was GBP62m, on a cash and debt-free basis, with
up to a further GBP23.1m payable based on annualised
profit growth to the end of March 2020.
In November 2017, we acquired Setco S.A. for a
cash consideration of EUR17m (GBP15.1m). Consolidated
31 December 2016 profit, adjusted to IFRS, was
EUR1.7m (GBP1.5m).
These transactions demonstrate our ability to
find attractive, high quality businesses both
in, and adjacent to, our existing sectors. The
pipeline of potential acquisitions has continued
to build across all sectors during the year.
Growing a safer, cleaner and healthier future
for everyone, every day
Halma has always had a strong sense of purpose
to make a positive impact on people's lives.
This core belief has helped us to build strong
competitive positions in market niches with long-term
growth drivers and has contributed to our sustained
success.
Over many years, these fundamentals have been
strengthened further by a relentless determination
to increase strategic investment in innovation,
international expansion and talent development,
both centrally and within each sector.
The desire to make a positive difference to people's
lives is encompassed in our newly articulated
purpose of 'Growing a safer, cleaner and healthier
future for everyone, every day'. This refined
purpose statement will help to provide greater
alignment across the Group as we confront the
challenges and opportunities of the 4(th) Industrial
Revolution, where technologies and industries
are converging to create new value.
Our portfolio of companies means that we are uniquely
positioned to take advantage of these opportunities.
As we continue to evolve our strategy we will
ensure that we use our ecosystem to leverage the
diverse skills and assets we have at our disposal
to create even more value for the Group.
This means that in addition to our commitment
to continuing to grow our Core, we are exploring
new ways to help our companies to add growth opportunities
which require a Convergence of technologies and
capabilities between two or more businesses and
new business models.
In addition, we are building a stronger network
of internal and external partnerships to provide
us with a greater insight into new digital growth
strategies or technologies at the Edge of our
current strategic horizons.
Currency impacts
Currency translation had a positive impact on
the half year results. We report our results in
Sterling with approximately 45% of Group revenue
denominated in US Dollars and approximately 15%
in Euros. Average exchange rates are used to translate
results in the Income Statement. Sterling weakened
during the first half of 2017/18 and has remained
relatively weak in the period since. This resulted
in a 5% positive currency translation impact on
Group revenue and profit in the first half of
2017/18 relative to 2016/17. In the second half
of 2017/18, if exchange rates remain at current
levels, we expect the positive currency impact
seen in the first half to reverse, resulting in
a small positive impact for the year as a whole.
Pension deficit
On an IAS19 basis the deficit on the Group's defined
benefit plans at the half year has reduced to
GBP66.8m (1 April 2017: GBP74.9m) before the related
deferred tax asset. The value of plan liabilities
reduced due to an increase in the discount rate
used to value those liabilities and further employer
contributions also reduced the plan deficit. There
will be a triennial valuation of the two UK defined
benefit pension plans as at December 2017 and
April 2018, leading to a review of the amount
and timing of future employer contributions to
reduce the pension deficit.
Cash flow and funding
Cash conversion (adjusted operating cash flow
as a percentage of adjusted operating profit)
was 84% (2016/17: 84%) just below our cash conversion
target of 85%. Working capital increased more
than in the first half of the prior year with
higher rates of underlying revenue growth and
inventory for new products. As well as continued
organic investment, dividend and tax payments
increased this half year. Capital expenditure
of GBP10.1m (2016/17: GBP11.4m) was 12% lower
than the prior year due primarily to less property
related expenditure.
Net debt at the end of the period was GBP181m
(1 April 2017: GBP196m). Gearing (the ratio of
net debt to EBITDA) at half year end was 0.8 times
(1 April 2017: 0.86 times), comfortably within
our typical operating range of up to 2 times gearing.
In November 2017 we extended the GBP550m Revolving
Credit Facility, put in place in November 2016,
by a further year to 2022. The combination of
good cash generation, a healthy balance sheet
and committed external financial resources provides
us with the capacity we need to invest in organic
growth and acquisitions to meet our growth objectives
as well as to sustain our progressive dividend
policy.
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 processes in place for
identifying, evaluating and managing key risks.
These risks, together with a description of our
approach to mitigating them, are set out on pages
22 to 27 of the Annual Report and Accounts 2017,
which is available on the Group's website at www.halma.com.
The principal risks and uncertainties relate to
operational, strategic, legal, financial, cyber,
people and economic issues. See note 15 to the
Condensed Financial Statements for further details.
The UK referendum decision in June 2016 and the
subsequent triggering of Article 50 in March 2017
mean that the UK is now scheduled to leave the
European Union by the end of March 2019. This
decision has created a new dimension to the uncertainties
surrounding global economic growth.
In 2016/17, approximately 10% of Group revenue
came from direct sales between the UK and Mainland
Europe.
To date, the following Brexit risks have been
identified as having an actual and/or potential
impact on our business:
* Economic conditions: increased overall uncertainty
including the specific impacts on growth, inflation,
interest and currency rates
* Defined benefit pension liability: movements in bond
yields affecting discount rates which may increase
the liability
* Laws and regulations: potential changes to UK and
EU-based law and regulation including product
approvals, patents and import/export tariffs
* Talent: mobility of the workforce
Halma has an executive working group to assess
and monitor the potential impact on us of Brexit,
to communicate updates and support our businesses
in preparing for the range of possible outcomes.
Our decentralised model, with businesses in diverse
markets and locations, will enable each Halma
company to adapt quickly to changing trading conditions.
This agility, together with the regulation driven
demand for many of our products and services,
will help us to mitigate any adverse impact and
also take advantage of the opportunities presented
by the decision to leave the European Union.
In 2017/18, the Board commissioned an external
review of Halma's cyber related control framework.
This review highlighted the strengths of our existing
structure and identified further improvements
in cyber controls and assurance.
The Directors do not consider that the principal
risks and uncertainties have changed since the
publication of the Annual Report and Accounts
2017 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 Group's delivery
of its financial objectives. 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.
Board changes
In July 2017, the Board announced that Marc Ronchetti,
currently Group Financial Controller, will succeed
Kevin Thompson as Group Finance Director. The
transition process is underway and it is anticipated
that it will be completed no later than 31 July
2018.
Outlook
Halma has continued to make strong progress, delivering
record revenue, profit and dividends for shareholders.
The diversity of our business and the evolution
of our organisational model through our four sectors
is enabling us to sustain growth in varied market
conditions. Since the period end, order intake
has continued to be ahead of revenue and order
intake last year. Halma remains on track to make
progress in the second half of the year in line
with the Board's expectations.
Andrew Williams Kevin Thompson
Chief Executive Finance Director
(1) See Highlights.
(2) See note 2 to the Condensed Financial Statements.
Independent review report to Halma plc
Report on the Half Year Report
Our conclusion
We have reviewed Halma plc's half year financial
information (the "interim financial statements")
in the Half Year Report of Halma plc for the 6
months ended 30 September 2017. Based on our review,
nothing has come to our attention that causes
us to believe that the interim financial statements
are not prepared, in all material respects, in
accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance
and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
* the Consolidated Balance Sheet as at 30 September
2017;
* the Consolidated Income Statement and Consolidated
Statement of Comprehensive Income and Expenditure for
the period then ended;
* the Consolidated Cash Flow Statement for the period
then ended;
* the Consolidated Statement of Changes in Equity for
the period then ended; and
* the explanatory notes to the interim financial
statements.
The interim financial statements included in the
half year report have been prepared in accordance
with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European
Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1 to the interim financial
statements, the financial reporting framework
that has been applied in the preparation of the
full annual financial statements of the Group
is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the
European Union.
Responsibilities for the interim financial statements
and the review
Our responsibilities and those of the directors
The Half Year Report, including the interim financial
statements, is the responsibility of, and has
been approved by, the directors. The directors
are responsible for preparing the half year report
in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion
on the interim financial statements in the half
year report based on our review. This report,
including the conclusion, has been prepared for
and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial
Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any
other person to whom this report is shown or into
whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements
involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland)
2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity'
issued by the Auditing Practices Board for use
in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily
of persons responsible for financial and accounting
matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an
audit conducted in accordance with International
Standards on Auditing (UK) and, consequently,
does not enable us to obtain assurance that we
would become aware of all significant matters
that might be identified in an audit. Accordingly,
we do not express an audit opinion.
We have read the other information contained in
the half year report and considered whether it
contains any apparent misstatements or material
inconsistencies with the information in the interim
financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Uxbridge
21 November 2017
Half year results 2017/18
Condensed Financial Statements
Consolidated Income Statement
Audited
52 weeks
Unaudited Unaudited to
6 months to 30 26 weeks to 1 October 1 April
September 2017 2016 2017
-------------------------------------- -------------------------------------- ---------
Adjustments* Adjustments*
Before (note Before (note
adjustments* 2) Total adjustments* 2) Total Total
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ----- ------------- ------------ --------- ------------- ------------ --------- ---------
Continuing
operations
Revenue 2 506,329 - 506,329 442,121 - 442,121 961,662
------------------ ----- ------------- ------------ --------- ------------- ------------ --------- ---------
Operating
profit 99,489 (17,722) 81,767 88,564 (18,405) 70,159 167,070
Share of results
of associates (112) - (112) (43) - (43) (81)
Finance income 3 106 - 106 96 - 96 494
Finance expense 4 (4,942) - (4,942) (4,987) - (4,987) (9,780)
------------------ ----- ------------- ------------ --------- ------------- ------------ --------- ---------
Profit before
taxation 94,541 (17,722) 76,819 83,630 (18,405) 65,225 157,703
Taxation 5 (21,083) 5,979 (15,104) (18,398) 5,385 (13,013) (28,014)
------------------ ----- ------------- ------------ --------- ------------- ------------ --------- ---------
Profit for
the period
attributable
to equity
shareholders 73,458 (11,743) 61,715 65,232 (13,020) 52,212 129,689
------------------ ----- ------------- ------------ --------- ------------- ------------ --------- ---------
Earnings per
share
from continuing
operations 6
Basic and
diluted 19.37p 16.27p 17.23p 13.79p 34.25p
Dividends
in respect
of the period 7
Dividends
paid and proposed
(GBP000) 21,678 20,183 51,916
Per share 5.71p 5.33p 13.71p
------------------ ----- ------------- ------------ --------- ------------- ------------ --------- ---------
*
Adjustments
include
the
amortisation
and
impairment
of
acquired
intangible
assets;
acquisition
items;
restructuring
costs;
profit
on
disposal
of
operations;
and
the
associated
taxation
thereon.
Consolidated Statement of Comprehensive Income and
Expenditure
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
----------------------------------------------- ------------- ---------- ---------
Profit for the period 61,715 52,212 129,689
----------------------------------------------- ------------- ---------- ---------
Items that will not be reclassified
subsequently to the Income Statement:
Actuarial gains/(losses) on defined
benefit pension plans 3,506 (45,838) (31,059)
Tax relating to components of other
comprehensive income that will not
be reclassified (667) 9,168 6,082
Items that may be reclassified subsequently
to the Income Statement:
Effective portion of changes in fair
value of cash flow hedges (265) (453) 1,197
Exchange (losses)/gains on translation
of foreign operations and net investment
hedge (36,687) 57,825 74,810
Tax relating to components of other
comprehensive income that may be reclassified 51 91 (233)
----------------------------------------------- ------------- ---------- ---------
Other comprehensive (expense)/income
for the period (34,062) 20,793 50,797
----------------------------------------------- ------------- ---------- ---------
Total comprehensive income for the
period attributable to equity shareholders 27,653 73,005 180,486
----------------------------------------------- ------------- ---------- ---------
The exchange losses of GBP36,687,000 (26 weeks to 1
October 2016 gains: GBP57,825,000; 52 weeks to 1 April
2017 gains: GBP74,810,000) include gains of GBP6,915,000
(26 weeks to 1 October 2016 losses: GBP16,267,000;
52 weeks to 1 April 2017 losses: GBP21,305,000) which
relate to net investment hedges.
Consolidated Balance Sheet
Unaudited Unaudited Audited
30 September 1 October 1 April
2017 2016 2017
Notes GBP000 GBP000 GBP000
--------------------------------- ----- ------------- ---------- ---------
Non-current assets
Goodwill 586,757 586,940 603,553
Other intangible assets 216,420 235,473 234,430
Property, plant and equipment 102,620 103,417 106,016
Interests in associates 3,431 3,660 3,553
Deferred tax asset 55,340 52,725 56,866
--------------------------------- ----- ------------- ---------- ---------
964,568 982,215 1,004,418
--------------------------------- ----- ------------- ---------- ---------
Current assets
Inventories 124,231 113,757 118,780
Trade and other receivables 203,408 179,659 212,236
Tax receivable 386 474 124
Cash and cash equivalents 71,671 76,093 66,827
Derivative financial instruments 12 592 135 598
--------------------------------- ----- ------------- ---------- ---------
400,288 370,118 398,565
--------------------------------- ----- ------------- ---------- ---------
Total assets 1,364,856 1,352,333 1,402,983
--------------------------------- ----- ------------- ---------- ---------
Current liabilities
Trade and other payables 125,730 109,841 134,816
Borrowings 180 2,161 1,351
Provisions 4,752 5,571 6,776
Tax liabilities 14,897 12,446 16,055
Derivative financial instruments 12 410 1,920 315
--------------------------------- ----- ------------- ---------- ---------
145,969 131,939 159,313
--------------------------------- ----- ------------- ---------- ---------
Net current assets 254,319 238,179 239,252
--------------------------------- ----- ------------- ---------- ---------
Non-current liabilities
Borrowings 252,481 311,252 261,918
Retirement benefit obligations 11 66,825 94,024 74,856
Trade and other payables 11,383 11,387 11,221
Provisions 16,888 18,859 16,917
Deferred tax liabilities 95,995 94,304 100,121
--------------------------------- ----- ------------- ---------- ---------
443,572 529,826 465,033
--------------------------------- ----- ------------- ---------- ---------
Total liabilities 589,541 661,765 624,346
--------------------------------- ----- ------------- ---------- ---------
Net assets 775,315 690,568 778,637
--------------------------------- ----- ------------- ---------- ---------
Equity
Share capital 37,965 37,965 37,965
Share premium account 23,608 23,608 23,608
Own shares (3,669) (4,896) (7,263)
Capital redemption reserve 185 185 185
Hedging reserve 140 (972) 354
Translation reserve 113,510 133,212 150,197
Other reserves (10,294) (9,481) (6,323)
Retained earnings 613,870 510,947 579,914
--------------------------------- ----- ------------- ---------- ---------
Shareholders' funds 775,315 690,568 778,637
--------------------------------- ----- ------------- ---------- ---------
Consolidated Statement of Changes in Equity
For the 6 months to 30 September 2017
-----------------------------------------------------------------------------------------------
Share Capital
Share premium Own redemption Hedging Translation Other Retained
capital account shares reserve reserve reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
At 1 April 2017
(audited) 37,965 23,608 (7,263) 185 354 150,197 (6,323) 579,914 778,637
Profit for the
period - - - - - - - 61,715 61,715
Other comprehensive
income and expense:
Exchange differences
on translation
of foreign
operations - - - - - (36,687) - - (36,687)
Actuarial gains
on defined benefit
pension plans - - - - - - - 3,506 3,506
Effective portion
of changes in fair
value of cash flow
hedges - - - - (265) - - - (265)
Tax relating to
components of other
comprehensive income
and expense - - - - 51 - - (667) (616)
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
Total other
comprehensive
income and expense - - - - (214) (36,687) - 2,839 (34,062)
Dividends paid - - - - - - - (31,733) (31,733)
Share-based payments
charge - - - - - - 3,532 - 3,532
Deferred tax on
share-based
payment transactions - - - - - - (563) - (563)
Excess tax deductions
related to
share-based
payments on
exercised
awards - - - - - - - 1,135 1,135
Performance share
plan awards vested - - 3,594 - - - (6,940) - (3,346)
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
At 30 September
2017 (unaudited) 37,965 23,608 (3,669) 185 140 113,510 (10,294) 613,870 775,315
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
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 30 September
2017 the number of treasury shares held was 3,990 (1
October 2016: 462,188; 1 April 2017: 462,188) and the
number of shares held by the Employee Benefit Trust
was 421,991 (1 October 2016: 262,417 and 1 April 2017:
512,417).
For the 26 weeks to 1 October 2016
-------- -------------------------------------------------------------------------------------
Share Capital
Share premium Own redemption Hedging Translation Other Retained
capital account shares reserve reserve reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
At 2 April 2016
(audited) 37,965 23,608 (8,219) 185 (610) 75,387 (5,831) 523,855 646,340
Profit for the
period - - - - - - - 52,212 52,212
Other comprehensive
income and expense:
Exchange differences
on translation
of foreign
operations - - - - - 57,825 - - 57,825
Actuarial losses
on defined benefit
pension plans - - - - - - - (45,838) (45,838)
Effective portion
of changes in fair
value of cash flow
hedges - - - - (453) - - - (453)
Tax relating to
components of other
comprehensive income
and expense - - - - 91 - - 9,168 9,259
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
Total other
comprehensive
income and expense - - - - (362) 57,825 - (36,670) 20,793
Dividends paid - - - - - - - (29,609) (29,609)
Share-based payments
charge - - - - - - 3,110 - 3,110
Deferred tax on
share-based payment
transactions - - - - - - (127) - (127)
Excess tax deductions
related to
share-based
payments on
exercised
awards - - - - - - - 1,159 1,159
Performance share
plan awards vested - - 3,323 - - - (6,633) - (3,310)
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
At 1 October 2016
(unaudited) 37,965 23,608 (4,896) 185 (972) 133,212 (9,481) 510,947 690,568
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
For the 52 weeks to 1 April 2017
-------- -------------------------------------------------------------------------------------
Share Capital
Share premium Own redemption Hedging Translation Other Retained
capital account shares reserve reserve reserve reserves earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
At 2 April 2016
(audited) 37,965 23,608 (8,219) 185 (610) 75,387 (5,831) 523,855 646,340
Profit for the period - - - - - - - 129,689 129,689
Other comprehensive
income and expense:
Exchange differences
on translation of
foreign operations - - - - - 74,810 - - 74,810
Actuarial losses
on defined benefit
pension plans - - - - - - - (31,059) (31,059)
Effective portion
of changes in fair
value of cash flow
hedges - - - - 1,197 - - - 1,197
Tax relating to
components of other
comprehensive income
and expense - - - - (233) - - 6,082 5,849
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
Total other
comprehensive
income and expense - - - - 964 74,810 - (24,977) 50,797
Dividends paid - - - - - - - (49,788) (49,788)
Share-based payments
charge - - - - - - 6,076 - 6,076
Deferred tax on
share-based payment
transactions - - - - - - 65 - 65
Excess tax deductions
related to
share-based
payments on
exercised
awards - - - - - - - 1,135 1,135
Purchase of Own
shares - - (2,368) - - - - - (2,368)
Performance share
plan awards vested - - 3,324 - - - (6,633) - (3,309)
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
At 1 April 2017
(audited) 37,965 23,608 (7,263) 185 354 150,197 (6,323) 579,914 778,637
--------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- --------
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
Notes GBP000 GBP000 GBP000
--------------------------------- ----- ------------- ---------- ---------
Net cash inflow from operating
activities 8 76,025 70,345 172,493
--------------------------------- ----- ------------- ---------- ---------
Cash flows from investing
activities
Purchase of property, plant
and equipment (9,134) (10,728) (21,875)
Purchase of computer software (972) (702) (2,479)
Purchase of other intangibles (117) (209) (281)
Proceeds from sale of property,
plant and equipment 1,177 287 1,495
Development costs capitalised (5,034) (4,814) (10,731)
Interest received 106 96 211
Acquisition of businesses,
net of cash acquired 10 (17,086) (148) (9,972)
Net cash used in investing
activities (31,060) (16,218) (43,632)
--------------------------------- ----- ------------- ---------- ---------
Cash flows from financing
activities
Dividends paid (31,733) (29,609) (49,788)
Purchase of Own shares - - (2,368)
Interest paid (3,545) (3,489) (7,023)
Loan arrangement fee paid - - (2,656)
Proceeds from bank borrowings 30,748 - -
Repayment of bank borrowings (33,300) - (54,761)
Net cash used in financing
activities (37,830) (33,098) (116,596)
--------------------------------- ----- ------------- ---------- ---------
Increase in cash and cash
equivalents 7,135 21,029 12,265
Cash and cash equivalents
brought forward 65,637 49,526 49,526
Exchange adjustments (1,106) 3,713 3,846
--------------------------------- ----- ------------- ---------- ---------
Cash and cash equivalents
carried forward 71,666 74,268 65,637
--------------------------------- ----- ------------- ---------- ---------
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
---------------------------------------- ------------- ---------- ---------
Reconciliation of net cash
flow to movement in net debt
Increase in cash and cash equivalents 7,135 21,029 12,265
Net cash outflow from repayment
of bank borrowings 2,552 - 54,761
Loan notes repaid in respect
of acquisitions 161 241 241
Exchange adjustments 5,604 (11,873) (16,991)
---------------------------------------- ------------- ---------- ---------
15,452 9,397 50,276
Net debt brought forward (196,442) (246,718) (246,718)
---------------------------------------- ------------- ---------- ---------
Net debt carried forward (180,990) (237,321) (196,442)
---------------------------------------- ------------- ---------- ---------
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 6 months to 30 September 2017, was approved
by the Directors on 21 November 2017.
Effective from this financial year, the Group changed
its reporting basis from weeks to calendar months.
The Half Year Report is prepared for the 6 month
period to 30 September 2017 and the Annual Report
will be prepared for the year to 31 March 2018.
For the current financial year, 26 weeks is equivalent
to 6 months so there is no difference between presentation
on a weekly or calendar months basis.
Basis of preparation
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 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 1 April 2017, with the exception
of the policy for taxes on income, which in the
interim period is accrued using the effective tax
rate that would be applicable to expected total
income for the financial year.
The figures shown for the 52 weeks to 1 April 2017
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.
Standards and interpretations not yet applied
At the date of authorisation of this Half Year Report,
the following Standards and Interpretations that
are potentially relevant to the Group, and which
have not been applied in these financial statements,
were in issue but not yet effective (and in some
cases had not yet been adopted by the EU):
* IFRS 9 'Financial Instruments: Classification and
measurement' - effective for accounting periods
beginning on or after 1 January 2018.
* IFRS 15 'Revenue from Contracts with Customers' -
effective for accounting periods beginning on or
after 1 January 2018.
* IFRS 16 'Leases' - effective for accounting periods
beginning on or after 1 January 2019.
* Amendments to IFRS 2: Classification and Measurement
of Share-based Payment Transactions - effective for
accounting periods beginning on or after 1 January
2018.
* Annual Improvements 2014-2016 Cycle - effective for
accounting periods beginning on or after 1 January
2018.
* IFRIC Interpretation 22: Foreign Currency
Transactions and Advance Consideration - effective
for accounting periods beginning on or after 1
January 2018.
* IFRIC Interpretation 23: Uncertainty over Income Tax
Treatments - effective for accounting periods
beginning on or after 1 January 2019.
* Amendments to IAS 28: Long-term Interests in
Associates and Joint Ventures - effective for
accounting periods beginning on or after 1 January
2019.
The Directors anticipate that the adoption of these
Standards and Interpretations in future periods
will have no material impact on the financial statements
of the Group with the exception of IFRS 9 'Financial
Instruments', IFRS 15 'Revenue from Contracts with
Customers', and IFRS 16 'Leases' where our review
of the impact is ongoing as described below.
(a) IFRS 15 'Revenue from Contracts with Customers'
For the Group, transition to IFRS 15 will take effect
from 1 April 2018. The half year results for FY18/19
will be IFRS 15 compliant with the first Annual
Report published in accordance with IFRS 15 being
the 31 March 2019 report. The Group plans to adopt
a fully retrospective transition approach and so
comparatives for the year ended 31 March 2018 will
be restated.
IFRS 15 sets out the requirements for recognising
revenue from contracts with customers. The standard
requires entities to apportion revenue earned from
contracts to individual promises, or performance
obligations, on a stand-alone selling price basis,
based on a five-step model.
The Group is making good progress in quantifying
the full impact of this standard. Having performed
an impact assessment in FY16/17, during the first
half of FY17/18 the Group has been working through
a comprehensive transition exercise at each of its
subsidiaries. The autonomous nature of the Group
means that each subsidiary sets its own terms and
conditions and operating procedures and as such
this was the appropriate level for the transition
exercise. The transition exercise has involved scoping
the Group's revenues to identify revenue streams
with like commercial terms and performing sample
contract reviews to determine the appropriate revenue
recognition under IFRS 15. To ensure a consistent
approach to the exercise and consistent judgements,
the exercise has been supported from the centre
through setting the approach to transition, and
providing appropriate tools and guidance, including
a revised Group Accounting Manual.
The review and conclusion of this exercise is ongoing,
including reviewing the consistency of judgements
between companies and review by the Group's auditor.
Based on the initial views of the companies we do
not expect there to be a material change in the
timing or quantum of revenue recognition.
The following areas of potential differences were
identified from our initial impact assessment which
are being investigated as part of our transition
exercise:
* Certain companies across the Group provide a product
which involves an element of customisation. Currently
under IAS 18 the revenue recognition for such product
is at a point in time on transfer of the risk and
reward of the transaction to the customer. IFRS 15
requires that for such transactions, where certain
criteria are met, revenue is recognised over time.
Based on the review of specific contract terms
against the requirements of IFRS 15 we do not
currently expect the criteria of IFRS 15 to be met
and as such do not expect there to be material change
in the timing or quantum of revenue recognition in
relation to these arrangements.
* Certain companies across the Group arrange shipping
and handling on behalf of their customers but, based
on assessment of all terms and conditions, determine
control of goods to pass on despatch. Accordingly
shipping and handling is a separate performance
obligation under IFRS 15 and revenue is only
recognised when the performance obligation is
fulfilled. Having reviewed the terms of the
arrangements we do not currently expect there to be a
material change in the timing or quantum of revenue
recognition.
* Many of our companies have warranty arrangements with
their customers. Having reviewed the details of the
warranty arrangements, these have been determined to
be of an assurance nature and as such there is no
material change in accounting required by IFRS 15.
* Many of the companies have variable consideration
arrangements with their customers. Having reviewed
the details of these arrangements against IFRS 15 and
current accounting practices, we do not currently
expect there to be a material change in the timing or
quantum of revenue recognition.
* Sales commissions and other third-party sales
acquisition costs resulting directly from securing
contracts with customers are required to be
recognised as an asset under IFRS 15 and recognised
over the associated contract period where such
contract is more than one year in length. Having
reviewed the nature of the arrangements we do not
currently expect there to be a change in the current
accounting.
(b) IFRS 9 'Financial Instruments'
For the Group, transition to IFRS 9 will take effect
from 1 April 2018. The half year results for FY18/19
will be IFRS 9 compliant with the first Annual Report
published in accordance with IFRS 9 being the 31
March 2019 report. There is no requirement to restate
comparatives.
IFRS 9 provides a new expected losses impairment
model for financial assets, including trade receivables,
and includes amendments to classification and measurement
of financial instruments.
During this half year the Group has undertaken a
high-level review of the impact of this new standard
on its financial statements. The Group's use of
financial instruments is limited to short-term trading
balances such as receivables and payables, borrowings
and derivatives used for hedging foreign exchange
risks. We therefore expect that the impact of this
standard will be limited to classification of financial
instruments and the measurement of impairment of
short-term financial assets using the expected losses
impairment model.
Through the second half of the year we will be working
to establish an appropriate impairment model and
accompanying processes to be applied to receivables
by our companies. However, the nature of the financial
assets is such that we do not expect there will
be a material change in level of impairment recognised
compared to that based on current procedures.
(c) IFRS 16 'Leases'
For the Group, transition to IFRS 16 will take effect
from 1 April 2019. The half year results for FY19/20
will be IFRS 16 compliant with the first Annual
Report published in accordance with IFRS 16 being
for the year ending 31 March 2020.
IFRS 16 provides a single model for lessees which
recognises a right of use asset and lease liability
for all leases which are longer than one year or
which are not classified as low value. The distinction
between finance and operating leases for lessees
is removed.
The Group is currently assessing the impact of the
new standard. The most significant impact currently
identified will be that the Group's land and buildings
leases will be brought on to the balance sheet.
Further assessment of other leases is currently
ongoing. The Group's future lease commitments for
land and buildings as at 1 April 2017, which provides
an indicator of the value to be brought on to the
balance sheet, was GBP45m.
Going concern
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 GBP550m five-year Revolving Credit Facility (RCF)
completed in November 2016 of which GBP477m remains
undrawn at the date of this report. The RCF was
extended to November 2022 following the period end.
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 analysis
The 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 Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
------------------------- ------------- ---------- ---------
Process Safety 88,794 76,743 167,007
Infrastructure Safety 167,923 147,988 315,219
Medical 133,270 118,664 260,576
Environmental & Analysis 116,513 98,797 219,118
Inter-segmental sales (171) (71) (258)
------------------------- ------------- ---------- ---------
Revenue for the period 506,329 442,121 961,662
------------------------- ------------- ---------- ---------
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. Revenue derived from the rendering of services was GBP23,399,000
(26 weeks to 1 October 2016: GBP14,034,000; 52 weeks to 1 April 2017: GBP39,011,000).
All revenue was otherwise derived from the sale of products.
Profit (all continuing
operations)
------------------------------------
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
----------------------------------- ------------- ---------- ---------
Segment profit before allocation
of adjustments*
Process Safety 20,247 17,395 40,243
Infrastructure Safety 35,736 31,991 65,129
Medical 28,730 28,876 66,704
Environmental & Analysis 21,776 16,022 41,698
----------------------------------- ------------- ---------- ---------
106,489 94,284 213,774
----------------------------------- ------------- ---------- ---------
Segment profit after allocation of
adjustments*
Process Safety 18,227 15,491 36,243
Infrastructure Safety 33,177 29,735 60,342
Medical 17,469 18,933 45,804
Environmental & Analysis 19,894 11,720 35,084
----------------------------------- ------------- ---------- ---------
Segment profit 88,767 75,879 177,473
Central administration costs (7,112) (5,763) (10,484)
Net finance expense (4,836) (4,891) (9,286)
----------------------------------- ------------- ---------- ---------
Group profit before taxation 76,819 65,225 157,703
Taxation (15,104) (13,013) (28,014)
----------------------------------- ------------- ---------- ---------
Profit for the period 61,715 52,212 129,689
----------------------------------- ------------- ---------- ---------
* Adjustments include the amortisation and impairment
of acquired intangible assets; acquisition items;
restructuring costs; 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 and impairment of acquired intangible
assets, restructuring costs 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 6 months
to 30 September 2017
----------- -------------- ------------------------------------------------------
Acquisition items
------------------------------------------
Total
Amortisation amortisation Disposal
and Release of charge of
impairment Adjustments fair value and operations
of acquired Transaction to contingent adjustments acquisition and
intangibles costs consideration to inventory items restructuring Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- ------------ ----------- -------------- ------------- ------------- -------------- --------
Process Safety (2,020) - - - (2,020) - (2,020)
Infrastructure
Safety (2,456) (103) - - (2,559) - (2,559)
Medical (9,941) (826) (494) - (11,261) - (11,261)
Environmental
& Analysis (2,899) (3) 1,121 (101) (1,882) - (1,882)
--------------- ------------ ----------- -------------- ------------- ------------- -------------- --------
Total Segment
& Group (17,316) (932) 627 (101) (17,722) - (17,722)
--------------- ------------ ----------- -------------- ------------- ------------- -------------- --------
The transaction costs arose mainly on the acquisitions
of CasMed NIBP and Cardios during the period. Further
detail on the acquisitions is contained in note 10.
The GBP627,000 adjustment to contingent consideration
comprises a credit of GBP1,121,000 in Environmental
& Analysis arising from a change in estimate of the
payable for FluxData, Inc. (FluxData), a prior year
acquisition, offset by GBP494,000 in Medical arising
from exchange differences on the payables for Visiometrics
S.L. (Visiometrics) which is denominated in Euros and
for Cardios which is denominated in Brazilian Reals.
The GBP101,000 charge relates to the release of the
remaining fair value adjustment on revaluing the inventory
of FluxData on acquisition in the prior year.
Unaudited for the 26 weeks
to 1 October 2016
--------------- ----------- -------------- -------------------------------------------------------
Acquisition items
Release Total
of amortisation Disposal
Amortisation fair charge of
and impairment Adjustments value and operations
of acquired Transaction to contingent adjustments acquisition and
intangibles costs consideration to inventory items restructuring Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- --------------- ----------- -------------- ------------- ------------- --------------- --------
Process Safety (1,904) - - - (1,904) - (1,904)
Infrastructure
Safety (2,256) - - - (2,256) - (2,256)
Medical (8,815) - (338) (790) (9,943) - (9,943)
Environmental
& Analysis (2,217) - 15 - (2,202) (2,100) (4,302)
--------------- --------------- ----------- -------------- ------------- ------------- --------------- --------
Total Segment
& Group (15,192) - (323) (790) (16,305) (2,100) (18,405)
--------------- --------------- ----------- -------------- ------------- ------------- --------------- --------
The GBP338,000 charge to contingent consideration comprises a credit arising from
a revision to the estimate of the payable for Value Added Solutions LLC (VAS) by
GBP339,000 offset by a GBP677,000 charge arising from changes in the discount rate
along with exchange differences on the payable for Visiometrics which is denominated
in Euros.
The GBP790,000 charge relates to the release of the remaining fair value adjustment
on revaluing the inventory of CenTrak Inc (CenTrak) on acquisition.
The GBP2,100,000 charge relates to inventory and fixed asset write downs and severance
costs arising on the restructuring of non-core operations in one of the Group's subsidiaries,
Pixelteq Inc (Pixelteq).
Audited for the 52 weeks ended
1 April 2017
--------------- ----------- -----------------------------------------------------------------------
Acquisition items
------------------------------------------
Release Total
of amortisation Disposal
Amortisation fair charge of
and impairment Adjustments value and operations
of acquired Transaction to contingent adjustments acquisition and
intangibles costs consideration to inventory items restructuring Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- --------------- ----------- -------------- ------------- ------------- --------------- --------
Process Safety (4,000) - - - (4,000) - (4,000)
Infrastructure
Safety (4,784) (3) - - (4,787) - (4,787)
Medical (30,702) (95) 10,687 (790) (20,900) - (20,900)
Environmental
& Analysis (4,412) (265) 14 (41) (4,704) (1,910) (6,614)
--------------- --------------- ----------- -------------- ------------- ------------- --------------- --------
Total Segment
& Group (43,898) (363) 10,701 (831) (34,391) (1,910) (36,301)
--------------- --------------- ----------- -------------- ------------- ------------- --------------- --------
Included within amortisation and impairment of acquired intangibles in the Medical
sector is GBP12,429,000 impairment to a customer relationship asset of Visiometrics.
Related to this impairment, included within the Medical sector, there is a credit
arising from a revision to the estimate of the deferred contingent consideration
payable for Visiometrics of GBP10,087,000 (EUR12,002,000). The majority of this revision
relates to deferred contingent consideration payable on sales to the same customer.
The transaction costs arose mainly on the acquisition of FluxData on 6 January 2017.
The GBP10,701,000 credit to contingent consideration comprises mainly the revision
to estimate of the payable for Visiometrics discussed above. The remaining credit
relates to the change in estimate to the payable for VAS by GBP356,000, and for ASL
Holdings Limited (ASL) by GBP14,000 on final settlement of the payable, and a credit
of GBP244,000 arising from exchange differences on the Visiometrics payable which
is denominated in Euros.
The GBP831,000 charge relates to the release of the fair value adjustment on revaluing
the inventories of CenTrak (GBP790,000) and FluxData (GBP41,000) on acquisition.
All amounts have now been released in relation to CenTrak.
The GBP1,910,000 charge relates to inventory and fixed asset write downs and severance
costs arising on the restructuring
of non-core operations in one of the Group's subsidiaries, Pixelteq.
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 Annual Report and Accounts
2017.
Geographic information
The Group's revenue from external
customers (by location of customer)
is as follows:
Revenue by destination
------------------------------------
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------- ------------- ---------- ---------
United States of America 181,808 160,807 345,295
Mainland Europe 109,011 95,965 210,342
United Kingdom 79,746 72,901 154,920
Asia Pacific 83,928 69,686 151,626
Africa, Near and Middle East 30,750 26,742 60,765
Other countries 21,086 16,020 38,714
------------------------------------- ------------- ---------- ---------
Group revenue 506,329 442,121 961,662
------------------------------------- ------------- ---------- ---------
3 Finance income
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
---------------------------------- ------------- ---------- ---------
Interest receivable 106 96 211
Fair value movement on derivative
financial instruments - - 283
---------------------------------- ------------- ---------- ---------
106 96 494
---------------------------------- ------------- ---------- ---------
4 Finance expense
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
----------------------------------------- ------------- ---------- ---------
Interest payable on loans and overdrafts 3,470 3,463 6,977
Amortisation of finance costs 454 325 1,040
Net interest charge on pension plan
liabilities 888 832 1,553
Other interest payable 75 25 126
----------------------------------------- ------------- ---------- ---------
4,887 4,645 9,696
Fair value movement on derivative
financial instruments 29 267 53
Unwinding of discount on provisions 26 75 31
----------------------------------------- ------------- ---------- ---------
4,942 4,987 9,780
----------------------------------------- ------------- ---------- ---------
5 Taxation
The total Group tax charge for the 6 months to 30 September 2017 of GBP15,104,000
(26 weeks to 1 October 2016: GBP13,013,000; 52 weeks to 1 April 2017: GBP28,014,000)
comprises a current tax charge of GBP17,991,000 (26 weeks to 1 October 2016: GBP15,032,000;
52 weeks to 1 April 2017: GBP34,766,000) and a deferred tax credit of GBP2,887,000
(26 weeks to 1 October 2016: GBP2,019,000; 52 weeks to 1 April 2017: GBP6,752,000).
The tax charge is based on the estimated effective tax rate for the year.
The tax charge includes GBP14,885,000 (26 weeks to 1 October 2016: GBP12,253,000;
52 weeks to 1 April 2017: GBP27,525,000) in respect of overseas tax.
6 Earnings per ordinary share
Basic and diluted earnings per ordinary share are calculated using the weighted average
of 379,219,351 (1 October 2016: 378,549,906; 1 April 2017: 378,685,730) shares in
issue during the period (net of shares purchased by the Company and held as treasury
and Employee Benefit Trust shares). There are no dilutive or potentially dilutive
ordinary shares.
Adjusted earnings are calculated as earnings from continuing operations excluding
the amortisation and impairment of acquired intangible assets; acquisition items;
restructuring costs; profit or loss on disposal of operations; and the 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 Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
----------------------------------------- ------------- ---------- ---------
Earnings from continuing operations 61,715 52,212 129,689
Amortisation of acquired intangible
assets (after tax) 11,832 10,383 21,452
Impairment of acquired intangible
assets (after tax) - - 9,322
Acquisition transaction costs (after
tax) 574 - 240
Release of fair value adjustments
to inventory (after tax) 62 490 569
Adjustments to contingent consideration
(after tax) (725) 300 (10,650)
Disposal of operations and restructuring
(after tax) - 1,847 1,648
----------------------------------------- ------------- ---------- ---------
Adjusted earnings 73,458 65,232 152,270
----------------------------------------- ------------- ---------- ---------
Per ordinary share
------------------------------------
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
pence pence pence
----------------------------------------- ------------- ---------- ---------
Earnings from continuing operations 16.27 13.79 34.25
Amortisation of acquired intangible
assets (after tax) 3.12 2.74 5.66
Impairment of acquired intangible
assets (after tax) - - 2.46
Acquisition transaction costs (after
tax) 0.15 - 0.06
Release of fair value adjustments
to inventory (after tax) 0.02 0.13 0.15
Adjustments to contingent consideration
(after tax) (0.19) 0.08 (2.81)
Disposal of operations and restructuring
(after tax) - 0.49 0.44
----------------------------------------- ------------- ---------- ---------
Adjusted earnings 19.37 17.23 40.21
----------------------------------------- ------------- ---------- ---------
7 Dividends
Per ordinary share
------------------------------------
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
pence pence pence
--------------------------------------- ------------- ---------- ---------
Amounts recognised as distributions
to shareholders in the period
Final dividend for the year to 1 April
2017 (2 April 2016) 8.38 7.83 7.83
Interim dividend for the year to 1
April 2017 - - 5.33
--------------------------------------- ------------- ---------- ---------
8.38 7.83 13.16
--------------------------------------- ------------- ---------- ---------
Dividends in respect of the period
Interim dividend for the year to 31
March 2018 (1 April 2017) 5.71 5.33 5.33
Final dividend for the year to 1 April
2017 - - 8.38
--------------------------------------- ------------- ---------- ---------
5.71 5.33 13.71
--------------------------------------- ------------- ---------- ---------
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
--------------------------------------- ------------- ---------- ---------
Amounts recognised as distributions
to shareholders in the period
Final dividend for the year to 1 April
2017 (2 April 2016) 31,733 29,605 29,605
Interim dividend for the year to 1
April 2017 - - 20,183
--------------------------------------- ------------- ---------- ---------
31,733 29,605 49,788
--------------------------------------- ------------- ---------- ---------
Dividends in respect of the period
Interim dividend for the year to 31
March 2018 (1 April 2017) 21,678 20,183 20,183
Final dividend for the year to 1 April
2017 - - 31,733
--------------------------------------- ------------- ---------- ---------
21,678 20,183 51,916
--------------------------------------- ------------- ---------- ---------
8 Notes to the Consolidated Cash Flow
Statement
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------------- ------------- ---------- ---------
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
or loss on disposal of operations 81,767 70,159 167,070
Financial instruments at Fair value
through profit or loss (193) - -
Depreciation of property, plant and
equipment 9,139 8,743 17,798
Amortisation of computer software 845 696 1,432
Amortisation of capitalised development
costs and other intangibles 3,375 3,508 6,947
Impairment of intangibles - - 98
Amortisation of acquired intangible
assets 17,316 15,192 31,469
Impairment of acquired intangible
assets - - 12,429
Share-based payment expense in excess
of/(less than) amounts paid 552 (695) 1,880
Additional payments to pension plans (5,358) (5,104) (10,213)
Loss on restructuring of operation - 2,057 1,252
(Profit)/loss on sale of property,
plant and equipment and computer software (522) 14 138
------------------------------------------- ------------- ---------- ---------
Operating cash flows before movement
in working capital 106,921 94,570 230,300
Increase in inventories (8,688) (2,350) (5,406)
Decrease/(increase) in receivables 4,007 12,680 (14,262)
(Decrease)/increase in payables and
provisions (8,106) (18,104) 5,750
Revision to estimate of contingent
consideration payable (627) 323 (10,701)
------------------------------------------- ------------- ---------- ---------
Cash generated from operations 93,507 87,119 205,681
Taxation paid (17,482) (16,774) (33,188)
------------------------------------------- ------------- ---------- ---------
Net cash inflow from operating activities 76,025 70,345 172,493
------------------------------------------- ------------- ---------- ---------
Unaudited Unaudited Audited
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
-------------------------------------------- ------------- ---------- --------
Analysis of cash and cash equivalents
Cash and bank balances 71,671 76,093 66,827
Overdrafts (included in current Borrowings) (5) (1,825) (1,190)
-------------------------------------------- ------------- ---------- --------
Cash and cash equivalents 71,666 74,268 65,637
-------------------------------------------- ------------- ---------- --------
At Net Loan At
1 April Cash cash/(debt) notes Exchange 30 September
2017 Reclass flow acquired repaid adjustments 2017
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- --------- ------------------ ------- ------------ ------- ------------ -------------
Analysis of net
debt
Cash and bank balances 66,827 - 5,795 155 - (1,106) 71,671
Overdrafts (1,190) - 1,185 - - - (5)
-------------------------- --------- ------------------ ------- ------------ ------- ------------ -------------
Cash and cash equivalents 65,637 - 6,980 155 - (1,106) 71,666
-------------------------- --------- ------------------ ------- ------------ ------- ------------ -------------
Loan notes falling
due within one
year (161) (175) - - 161 - (175)
Loan notes falling
due after more
than one year (181,157) 175 - - - 1,916 (179,066)
Bank loans falling
due after more
than one year (80,761) - 2,552 - - 4,794 (73,415)
-------------------------- --------- ------------------ ------- ------------ ------- ------------ -------------
Total net debt (196,442) - 9,532 155 161 5,604 (180,990)
-------------------------- --------- ------------------ ------- ------------ ------- ------------ -------------
Overdrafts and Loan notes falling due within one year are included as current borrowings
in the Consolidated Balance Sheet. Loan notes and Bank loans falling due after more
than one year are included as non-current borrowings.
9 Alternative performance measures
The Board uses certain non-GAAP measures to help it effectively monitor the performance
of the Group. The Directors consider that these represent a more consistent measure
of underlying performance. These measures include Return on Total Invested Capital,
Return on Capital Employed, Organic growth at constant currency, Adjusted operating
profit and Adjusted operating cash flow.
Return on Total Invested Capital (ROTIC)
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------------------- ------------- ---------- ---------
Profit after tax 61,715 52,212 129,689
Adjustments(3) 11,743 13,020 22,581
------------------------------------------------- ------------- ---------- ---------
Adjusted(3) profit after tax 73,458 65,232 152,270
------------------------------------------------- ------------- ---------- ---------
Shareholders' funds 775,315 690,568 778,637
Add back retirement benefit obligations 66,825 94,024 74,856
Less associated deferred tax assets (12,424) (17,506) (13,947)
Cumulative amortisation of acquired
intangible assets 179,650 136,963 168,031
Historical adjustments to goodwill(4) 89,549 89,549 89,549
------------------------------------------------- ------------- ---------- ---------
Total Invested Capital 1,098,915 993,598 1,097,126
------------------------------------------------- ------------- ---------- ---------
Average Total Invested Capital(2) 1,098,021 942,335 994,099
------------------------------------------------- ------------- ---------- ---------
Return on Total Invested Capital (annualised)(1) 13.4% 13.8% 15.3%
------------------------------------------------- ------------- ---------- ---------
Return on Capital Employed (ROCE)
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------------- ------------- ---------- ---------
Profit before tax 76,819 65,225 157,703
Adjustments(3) 17,722 18,405 36,301
Net finance costs 4,836 4,891 9,286
------------------------------------------- ------------- ---------- ---------
Adjusted operating profit(3) after
share of results of associates 99,377 88,521 203,290
------------------------------------------- ------------- ---------- ---------
Computer software costs within intangible
assets 4,633 3,353 4,466
Capitalised development costs within
intangible assets 30,027 25,985 28,782
Other intangibles within intangible
assets 1,079 1,099 1,111
Property, plant and equipment 102,620 103,417 106,016
Inventories 124,231 113,757 118,780
Trade and other receivables 203,408 179,659 212,236
Trade and other payables (125,730) (109,841) (135,257)
Provisions (4,752) (5,571) (6,776)
Net tax liabilities (14,511) (11,972) (15,931)
Non-current trade and other payables (11,383) (11,387) (10,780)
Non-current provisions (16,888) (18,859) (16,917)
Add back contingent purchase consideration 15,228 18,500 16,444
------------------------------------------- ------------- ---------- ---------
Capital Employed 307,962 288,140 302,174
------------------------------------------- ------------- ---------- ---------
Average Capital Employed(2) 305,068 273,394 280,411
------------------------------------------- ------------- ---------- ---------
Return on Capital Employed (annualised)(1) 65.2% 64.8% 72.5%
------------------------------------------- ------------- ---------- ---------
1 The ROTIC and ROCE measures are calculated as annualised
Adjusted profit after tax divided by Average Total
Invested Capital and annualised Adjusted operating
profit after share of results of associates divided
by Average Capital Employed respectively.
2 The ROTIC and ROCE measures are 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
2016 Total Invested Capital and Capital Employed
balances were GBP891,071,000 and GBP258,648,000
respectively.
3 Adjustments set out in note 2 include the amortisation
and impairment of acquired intangible assets; acquisition
items; restructuring costs and profit or loss on
disposal of operations, and where applicable, the
associated taxation thereon.
4 Includes goodwill amortised prior to 3 April 2004
and goodwill taken to reserves.
Organic growth and constant currency
Organic growth measures the change in revenue and profit
from continuing Group operations. The measure equalises
the effect of acquisitions by:
i. removing from the year of acquisition their entire
revenue and profit before taxation, and
ii. in the following year, removing the revenue and
profit for the number of months equivalent to the pre-acquisition
period in the prior year.
The resultant effect is that the acquisitions are removed
from organic results for one full year of ownership.
The results of disposals are removed from the prior
period reported revenue and profit before taxation.
Constant currency measures the change in revenue and
profit excluding the effects of currency movements.
The measure restates the current year's revenue and
profit at last year's exchanges rates.
Organic growth at constant currency has been calculated
below:
Adjusted profit*
Revenue before taxation
------------- ---------- -------- -----------------------------------
Unaudited Unaudited Unaudited Unaudited
6 months 26 weeks 6 months 26 weeks
to to to to
30 September 1 October 30 September 1 October
2017 2016 2017 2016
GBP000 GBP000 % growth GBP000 GBP000 % growth
---------------------- ------------- ---------- -------- ------------- ---------- --------
Continuing operations 506,329 442,121 14.5% 94,541 83,630 13.0%
Acquired and disposed
revenue/profit (3,587) (172)
---------------------- ------------- ---------- -------- ------------- ---------- --------
Organic growth 502,742 442,121 13.7% 94,369 83,630 12.8%
Constant currency
adjustment (20,277) (4,154)
---------------------- ------------- ---------- -------- ------------- ---------- --------
Organic growth at
constant currency 482,465 442,121 9.1% 90,215 83,630 7.9%
---------------------- ------------- ---------- -------- ------------- ---------- --------
* Adjustments include the amortisation and impairment
of acquired intangible assets; acquisition items; restructuring
costs; and profit or loss on disposal of operations.
Sector organic growth at constant currency
Organic growth at constant currency is calculated for each segment using the same
method as described above.
Adjusted* segment
Process Safety Revenue profit
----------------------------------- -----------------------------------
Unaudited Unaudited Unaudited Unaudited
6 months 26 weeks 6 months 26 weeks
to to to to
30 September 1 October 30 September 1 October
2017 2016 2017 2016
GBP000 GBP000 % growth GBP000 GBP000 % growth
------------------------- ------------- ---------- -------- ------------- ---------- --------
Continuing operations 88,794 76,743 15.7% 20,247 17,395 16.4%
Acquisition and currency
adjustments (2,710) (596)
------------------------- ------------- ---------- -------- ------------- ---------- --------
Organic growth at
constant currency 86,084 76,743 12.2% 19,651 17,395 13.0%
------------------------- ------------- ---------- -------- ------------- ---------- --------
Adjusted* segment
Infrastructure Safety Revenue profit
----------------------------------- -----------------------------------
Unaudited Unaudited Unaudited Unaudited
6 months 26 weeks 6 months 26 weeks
to to to to
30 September 1 October 30 September 1 October
2017 2016 2017 2016
GBP000 GBP000 % growth GBP000 GBP000 % growth
------------------------- ------------- ---------- -------- ------------- ---------- --------
Continuing operations 167,923 147,988 13.5% 35,736 31,991 11.7%
Acquisition and currency
adjustments (5,491) (1,008)
------------------------- ------------- ---------- -------- ------------- ---------- --------
Organic growth at
constant currency 162,432 147,988 9.8% 34,728 31,991 8.6%
------------------------- ------------- ---------- -------- ------------- ---------- --------
Adjusted* segment
Medical Revenue profit
----------------------------------- -----------------------------------
Unaudited Unaudited Unaudited Unaudited
6 months 26 weeks 6 months 26 weeks
to to to to
30 September 1 October 30 September 1 October
2017 2016 2017 2016
GBP000 GBP000 % growth GBP000 GBP000 % growth
------------------------- ------------- ---------- -------- ------------- ---------- --------
Continuing operations 133,270 118,664 12.3% 28,730 28,876 (0.5)%
Acquisition and currency
adjustments (8,360) (1,663)
------------------------- ------------- ---------- -------- ------------- ---------- --------
Organic growth at
constant currency 124,910 118,664 5.3% 27,067 28,876 (6.3)%
------------------------- ------------- ---------- -------- ------------- ---------- --------
Adjusted* segment
Environmental & Analysis Revenue profit
----------------------------------- -----------------------------------
Unaudited Unaudited Unaudited Unaudited
6 months 26 weeks 6 months 26 weeks
to to to to
30 September 1 October 30 September 1 October
2017 2016 2017 2016
GBP000 GBP000 % growth GBP000 GBP000 % growth
------------------------- ------------- ---------- -------- ------------- ---------- --------
Continuing operations 116,513 98,797 17.9% 21,776 16,022 35.9%
Acquisition and currency
adjustments (7,303) (1,379)
------------------------- ------------- ---------- -------- ------------- ---------- --------
Organic growth at
constant currency 109,210 98,797 10.5% 20,397 16,022 27.3%
------------------------- ------------- ---------- -------- ------------- ---------- --------
* Adjustments include the amortisation and impairment
of acquired intangible assets; acquisition items; restructuring
costs; and profit or loss on disposal of operations.
Adjusted operating profit
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------ ------------- ---------- ---------
Operating profit 81,767 70,159 167,070
------------------------------------ ------------- ---------- ---------
Add back:
Acquisition items 406 1,113 (9,507)
Loss on restructuring - 2,100 1,910
Amortisation of acquired intangible
assets 17,316 15,192 31,469
Impairment of acquired intangible
assets - - 12,429
------------------------------------ ------------- ---------- ---------
Adjusted operating profit 99,489 88,564 203,371
------------------------------------ ------------- ---------- ---------
Adjusted operating cash flow
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
------------------------------------------ ------------- ---------- ---------
Net cash from operating activities
(note 8) 76,025 70,345 172,493
------------------------------------------ ------------- ---------- ---------
Add back:
Net acquisition costs 932 - 363
Taxes paid 17,482 16,774 33,188
Proceeds from sale of property, plant
and equipment 1,177 287 1,495
Share awards vested not settled by
Own shares* 3,346 3,310 3,309
Less:
Purchase of property, plant and equipment (9,134) (10,728) (21,875)
Purchase of computer software and
other intangibles (1,089) (911) (2,760)
Development costs capitalised (5,034) (4,814) (10,731)
------------------------------------------ ------------- ---------- ---------
Adjusted operating cash flow 83,705 74,263 175,482
------------------------------------------ ------------- ---------- ---------
Cash conversion % (adjusted operating
cash flow/adjusted operating profit) 84% 84% 86%
------------------------------------------ ------------- ---------- ---------
* 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.
During the period ended 30 September 2017, the Group
made two acquisitions: Cas Medical Systems Inc's
Non-Invasive Blood Pressure Monitoring product line
("CasMed NIBP") and Cardios Sistemas Comercial e
Industrial Ltda and Cardio Dinamica Ltda (together
"Cardios").
The combined fair value adjustments made for the
acquisitions, excluding acquired intangible assets
recognised and deferred taxation thereon, resulted
in reducing the goodwill recognised by GBP558,000.
Below are summaries of the assets acquired and liabilities
assumed and the purchase consideration of:
a) the total of CasMed NIBP and Cardios;
b) CasMed NIBP, on a stand-alone basis; and
c) Cardios, on a stand-alone basis.
(A) Total of CasMed NIBP and Cardios
Total
GBP000
----------------------------------------------- -------
Non-current assets
Intangible assets 9,817
Property, plant and equipment 232
Current assets
Inventories 768
Trade and other receivables 1,834
Cash and cash equivalents 155
----------------------------------------------- -------
Total assets 12,806
----------------------------------------------- -------
Current liabilities
Trade and other payables (925)
Provisions (27)
Corporation tax liability (8)
Non-current liabilities
Deferred tax (2,317)
----------------------------------------------- -------
Total liabilities (3,277)
----------------------------------------------- -------
Net assets of businesses acquired 9,529
----------------------------------------------- -------
Initial cash consideration paid 15,872
Initial cash consideration payable 23
Contingent purchase consideration estimated to
be paid 1,314
----------------------------------------------- -------
Total consideration 17,209
----------------------------------------------- -------
Goodwill arising on acquisitions 7,680
----------------------------------------------- -------
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).
As at the date of approval of these Condensed Financial Statements the accounting
for the acquisitions remains provisional. The measurement window expires in July
2018 for CasMed NIBP and in August 2018 for Cardios.
Analysis of cash outflow in the Consolidated
Cash Flow Statement
Unaudited Unaudited Audited
6 months 26 weeks 52 weeks
to to to
30 September 1 October 1 April
2017 2016 2017
GBP000 GBP000 GBP000
--------------------------------------------- ------------- ---------- ---------
Initial cash consideration paid 15,872 - 9,878
Initial cash consideration adjustment
on prior year acquisitions - (166) -
Cash acquired on acquisition (155) - (496)
Deferred contingent consideration
paid and loan notes repaid in cash
in relation to prior year acquisitions* 1,369 314 590
--------------------------------------------- ------------- ---------- ---------
Net cash outflow relating to acquisitions
(per Consolidated Cash Flow Statement) 17,086 148 9,972
--------------------------------------------- ------------- ---------- ---------
* The GBP1,369,000 comprises GBP161,000 loan notes and GBP1,208,000 contingent consideration
paid in respect of prior period acquisitions all of which had been provided in the prior period's
financial statements.
(B) CasMed NIBP, on a stand-alone basis
Total
GBP000
----------------------------------------------- -------
Non-current assets
Intangible assets 2,909
Net assets of business acquired 2,909
----------------------------------------------- -------
Initial cash consideration paid 3,449
Contingent purchase consideration estimated to
be paid 693
----------------------------------------------- -------
Total consideration 4,142
----------------------------------------------- -------
Goodwill arising on acquisition 1,233
----------------------------------------------- -------
The Group acquired the trade and assets of the non-invasive blood pressure (NIBP)
monitoring product line on 25 July 2017 for an initial cash consideration of US$4,500,000
(GBP3,449,000). The maximum contingent consideration payable is US$2,000,000 (GBP1,533,000).
The current provision of US$905,000 (GBP693,000) represents the fair value of the
estimated payable based on performance to date and the expectation of future cash
flows. The earn-out is payable on the achievement of product net sales above a target
threshold for the 24-month period to June 2019.
CasMed NIBP was purchased by SunTech Medical Inc within the Medical sector. NIBP
monitoring products provide SunTech with more clinical grade options for OEM customers
seeking NIBP technology for multi-parameter monitors, EMS defibrillators, haemodialysis
machines and various other clinical monitoring devices.
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 GBP1,250,000; and
technology related intangibles of GBP1,659,000; with residual goodwill arising of
GBP1,233,000. The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of Halma's businesses through
future technologies; and
c) the ability to exploit the Group's existing customer base.
Acquisition costs totalling GBP354,000 were recorded in the Consolidated Income Statement.
The goodwill arising on the acquisition is expected to be deductible for tax purposes.
(C) Cardios, on a stand-alone basis
Total
GBP000
----------------------------------------------- -------
Non-current assets
Intangible assets 6,908
Property, plant and equipment 232
Current assets
Inventories 768
Trade and other receivables 1,834
Cash and cash equivalents 155
----------------------------------------------- -------
Total assets 9,897
----------------------------------------------- -------
Current liabilities
Trade and other payables (925)
Provisions (27)
Corporation tax liability (8)
Non-current liabilities
Deferred tax (2,317)
----------------------------------------------- -------
Total liabilities (3,277)
----------------------------------------------- -------
Net assets of businesses acquired 6,620
----------------------------------------------- -------
Initial cash consideration paid 12,423
Initial cash consideration payable 23
Contingent purchase consideration estimated to
be paid 621
----------------------------------------------- -------
Total consideration 13,067
----------------------------------------------- -------
Goodwill arising on acquisition 6,447
----------------------------------------------- -------
The Group acquired the entire share capital of Cardios Sistemas Comercial e Industrial
Ltda and Cardio Dinamica Ltda (together "Cardios") on 4 August 2017 for an initial
cash consideration of R$50,000,000 (GBP12,423,000), adjustable based on closing date
net assets and cash. The adjustment was determined to be R$93,000 (GBP23,000). The
maximum contingent consideration payable is R$5,000,000 (GBP1,242,000).
The current provision of R$2,500,000 (GBP621,000) represents the fair value of the
estimated payable based on performance to date and the expectation of future cash
flows. The earn-out is payable on gross margin growth in excess of a target threshold
for the 12-month period post-acquisition.
Cardios, located in São Paulo, Brazil, designs and manufactures ambulatory ECG
recorders and ambulatory blood pressure monitors for Brazilian healthcare providers.
These devices are used by cardiologists and general practitioners to diagnose and
prevent heart and blood vessel related diseases such as hypertension, diabetes, heart
attacks, and heart arrhythmias. These products are similar or complementary to patient
assessment devices currently manufactured and marketed by Halma's Medical sector.
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 GBP934,000; trade
name of GBP2,303,000 and technology related intangibles of GBP3,578,000; with residual
goodwill arising of GBP6,447,000. The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of Halma's businesses through
new technologies; and
c) the ability to exploit the Group's existing customer base.
Acquisition costs totalling GBP367,000 were recorded in the Consolidated Income Statement.
11 Retirement benefits
The Group's significant defined benefit plans are
for the qualifying employees of its UK subsidiaries.
The defined benefit obligation at 30 September 2017
of GBP66,825,000 (1 October 2016: GBP94,024,000;
1 April 2017: GBP74,856,000) has been estimated based
on the latest triennial actuarial valuations updated
to reflect current assumptions regarding discount
rates, inflation rates and asset values. The last
triennial valuations were carried out at 1 December
2014 for the Halma Group Pension Plan and 1 April
2015 for the Apollo Pension and Life Assurance Plan.
The discount rate assumption was set at 2.6% (1 October
2016: 2.3%; 1 April 2017: 2.5%). All other assumptions
are materially unchanged.
In addition, the defined benefit plan assets have
been updated to reflect deficit reduction payments
in the period totalling GBP5,400,000 (1 October 2016:
GBP5,160,000; 1 April 2017: GBP10,700,000). The UK
plans are closed to future accrual.
12 Fair values of financial assets and liabilities
As at 30 September 2017, with the exception of the
Group's fixed rate loan notes, 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 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 the Group's fixed rate loan notes
arising from the United States Private Placement
completed in January 2016 is estimated to be GBP180,087,000.
The fair value of 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 30 September 2017, the total forward foreign
currency contracts outstanding were GBP26,396,000.
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 GBP592,000 (1 October 2016: GBP135,000; 1 April
2017: GBP598,000) asset and GBP410,000 (1 October
2016: GBP1,920,000; 1 April 2017: GBP315,000) 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
Revolving Credit Facility extension
Effective from November 2017, the Group extended
its unsecured five-year GBP550,000,000 Revolving
Credit Facility agreed in November 2016 for a further
year to November 2022.
Acquisition of Mini-Cam Enterprises Limited and subsidiaries
On 31 October 2017, the Group acquired the entire
share capital of Mini-Cam Enterprises Limited and
its subsidiary companies for cash consideration of
GBP62,000,000, adjustable based on the closing date
net assets and cash. Maximum deferred contingent
consideration is payable of GBP23,100,000 based on
annualised profit growth to the period ended 31 March
2020.
Mini-Cam, headquartered in Lancashire, UK, specialises
in pipeline inspection solutions for waste water
systems in the UK and internationally. Mini-Cam's
remotely-operated products and software enable utilities
to identify leakages, blockages and potential ingress
in waste water networks, thereby helping them to
improve customer service levels and compliance with
environmental regulations. The management team of
Mini-Cam will continue to operate the business out
of its current locations. Mini-Cam will join the
Group's Environmental & Analysis sector where it
provides new opportunities for commercial and technical
collaboration with the sector's existing water technologies.
Acquisition of Setco
On 9 November 2017, the Group acquired the entire
share capital of Setco S.A. for EUR17,000,000 (GBP15,088,000),
adjustable based on closing date net assets and cash.
Setco, based in Barcelona, Spain, will be a bolt-on
for our global Elevator Safety business, Avire, and
adds new wireless communications technology which
is highly complementary to its existing product range
and new product development roadmap. Setco will join
the Infrastructure Safety sector.
14 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 plc'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 Annual Report and Accounts
2017.
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 22 to 27 in the Annual
Report and Accounts 2017, which is available on the
Group's website at www.halma.com. The Directors do
not consider that the principal risks and uncertainties
have changed since the publication of the Annual
Report and Accounts.
The principal risks and uncertainties relate to:
-- Globalisation
-- Competition
-- Economic conditions
-- Funding, treasury and pension deficit
-- Cyber security/Information Technology/Business
interruption/Natural disasters
-- Acquisitions
-- Laws and regulations
-- Talent and diversity
-- Research & Development and Intellectual Property
strategy
-- Product quality
The UK referendum decision in June 2016 and the subsequent
triggering of Article 50 in March 2017 mean that
the UK is now scheduled to leave the European Union
by the end of March 2019. This decision has created
a new dimension to the uncertainties surrounding
global economic growth.
In 2016/17, approximately 10% of Group revenue came
from direct sales between the UK and Mainland Europe.
To date, the following Brexit risks have been identified
as having an actual and/or potential impact on our
business:
* Economic conditions: increased overall uncertainty
including the specific impacts on growth, inflation,
interest and currency rates
* Defined benefit pension liability: movements in bond
yields affecting discount rates which may increase
the liability
* Laws and regulations: potential changes to UK and
EU-based law and regulation including product
approvals, patents and import/export tariffs
* Talent: mobility of the workforce
Halma has an executive working group to assess and
monitor the potential impact on us of Brexit, to
communicate updates and support our businesses in
preparing for the range of possible outcomes.
Our decentralised model, with businesses in diverse
markets and locations, will enable each Halma company
to adapt quickly to changing trading conditions.
This agility, together with the regulation driven
demand for many of our products and services, will
help us to mitigate any adverse impact and also take
advantage of the opportunities presented by the decision
to leave the European Union.
Movements in foreign exchange rates remain a risk
to financial performance. 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 6% relative to the US Dollar, and by 7%
against the Euro, resulting in a 5% positive currency
impact on reported revenue and 5% 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 Guidance
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
Kevin Thompson
Andrew Williams Finance Director
Chief Executive
21 November 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DBLFLDFFLFBF
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