TIDMHLMA
RNS Number : 7989F
Halma PLC
19 November 2020
HALMA plc
HALF YEAR RESULTS 2020/21
Resilient performance and continued dividend growth
Halma, the global group of life-saving technology companies focused
on growing a safer, cleaner and healthier future, today announces
its half year results for the 6 months to 30 September 2020.
Highlights
Change 2020 2019
Revenue -5% GBP618.4m GBP653.7m
Adjusted(1) Profit before Taxation -5% GBP122.0m GBP128.8m
Adjusted(2) Earnings per Share -6% 25.54p 27.20p
Statutory Profit before Taxation -9% GBP96.3m GBP105.8m
Statutory Earnings per Share -9% 20.37p 22.40p
Interim Dividend per Share(3) +5% 6.87p 6.54p
Return on Sales(4) 19.7% 19.7%
Return on Total Invested Capital(5) 12.6% 14.8%
Net Debt GBP315.0m GBP310.4m
-- A resilient performance with a continued focus on the
long-term sustainability of our business supported by our positive
purpose, the strength of our culture and our agile business
model.
-- Revenue and Adjusted(1) Profit before Taxation declined by
5%, both including a 6% positive contribution from prior year
acquisitions. Statutory Profit before Taxation reduced by 9%.
-- Organic constant currency(6) (OCCY) revenue was 11% lower,
reflecting the net negative impact of the COVID-19 pandemic;
revenue momentum improved during the period and has continued into
the second half to date.
-- High level of returns maintained: discretionary cost
reductions of over GBP20m in Q1 and ongoing overhead control
contributed to Return on Sales(4) remaining flat at 19.7%. Return
on Total Invested Capital(5) of 12.6% was in excess of our KPI and
significantly above the Group's cost of capital.
-- Revenue growth in the Environmental & Analysis and
Medical sectors. Safety sectors' revenue declined, although trends
improved during the half year.
-- Revenue growth in the USA. Moderate declines in Mainland
Europe and Asia Pacific, despite growth in China, and a weaker
performance in the UK.
-- Strong cash generation with good working capital management.
A robust balance sheet with net debt of GBP315.0m (net debt to
EBITDA of 1.02 times) and significant liquidity. No furlough or
debt funding sought, or received, from the UK Government.
-- Continued investment in future growth. R&D expenditure
increased to 5.6% of revenue and more M&A search activity and
engagement from Q2 onwards.
-- Interim dividend increased by 5%, reflecting the Board's
continued confidence in the Group's resilience and long-term growth
prospects.
-- Notwithstanding the continued uncertainty in the Group's
major markets, including in relation to the current COVID-19
pandemic and the wider macroeconomic environment, the Board now
expects Adjusted profit before tax for FY 2020/21 to be around 5%
below FY 2019/20, compared to prior guidance of 5% to 10% below FY
2019/20.
Andrew Williams, Group Chief Executive of Halma, commented:
"Halma's proven strategic, financial and organisational model
has contributed to a resilient performance in testing
circumstances, with our financial performance improving as the
first half progressed. Throughout the pandemic, we have maintained
our focus on employee safety and wellbeing, while working hard to
ensure the continued delivery of critical safety, health and
environmental solutions for our customers. This was achieved thanks
to the tremendous commitment and capability of our colleagues
across the Group. Our rapid response to the many new challenges of
recent months enabled Halma to not only weather the storm, but to
be well positioned to meet the challenges and opportunities
ahead.
We have had a good start to the second half, with order intake
ahead of revenue and up on the same period last year. Our improving
trading performance, together with our strong cash position, will
enable us to accelerate strategic investments in the second half of
the year. As a result of our progress so far this year, we now
expect Adjusted profit before tax for FY 2020/21 to be around 5%
below FY 2019/20, compared to prior guidance of 5% to 10% below FY
2019/20."
Notes:
1 Adjusted to remove the amortisation of acquired intangible
assets, acquisition items, restructuring costs, and profit or loss
on disposal of operations, totaling GBP25.7m (2019/20: GBP23.0m).
See note 2 to the Condensed Interim Financial Statements for
details.
2 Adjusted to remove the amortisation of acquired intangible
assets, acquisition items, restructuring costs, profit or loss on
disposal of operations and the associated taxation thereon. See
note 2 to the Condensed Interim Financial Statements for
details.
3 Interim dividend paid and 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 Return on Total Invested Capital (ROTIC) is defined as
post-tax Adjusted(1) Profit as a percentage of average Total
Invested Capital.
6 Organic constant currency measures exclude the effect of
movements in foreign exchange rates on the translation of revenue
and profit(1) into Sterling, as well as acquisitions and disposals
for the year following completion.
7 Adjusted(1) Profit before Taxation, Adjusted(2) Earnings per
Share, organic growth rates, Return on Sales and ROTIC are
alternative performance measures used by management. See notes 2, 6
and 9 to the Condensed Interim Financial Statements for
details.
For further information, please contact:
Halma plc
Andrew Williams, Group Chief
Executive +44 (0)1494 721 111
Marc Ronchetti, Chief Financial
Officer
Investor Relations +44 (0)7469 851962
MHP Communications
Andrew Jaques / Giles Robinson +44 (0)20 3128 8788
A copy of this announcement, together with other information
about Halma, may be viewed on its website: www.halma.com . The
webcast of the results presentation will be available on the
Halma website later today: www.halma.com
NOTE TO EDITORS
1. Halma is a global group of life-saving technology companies,
focused on growing a safer, cleaner and healthier future for
everyone, every day. Our innovative products and solutions address
many of the key issues facing the world today. The Group comprises
four business sectors:
-- Process Safety Technologies that protect people and assets
at work.
-- Infrastructure Safety Technologies that save lives, protect infrastructure
and enable safe movement in public spaces.
-- Environmental & Technologies to improve environmental protection
Analysis and the security of life-critical resources.
-- Medical Technologies which enhance the quality
of life for patients and improve the quality
of care delivered by healthcare providers.
The key characteristics of Halma's businesses are specialist
technology and application knowledge for niches within markets
offering strong long-term growth potential. Many Group businesses
are market leaders in their specialist fields.
2. 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
.
3. 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
Resilient results and improving momentum
Halma delivered a resilient performance in the first half of the
year, which included periods of lockdown in most of our major
regions due to the COVID-19 pandemic. This performance reflects our
flexible and agile business model and the benefits of our diverse
portfolio, focused on markets with long-term growth drivers, and
the essential nature of many of our products and services.
The challenges faced by our individual companies varied widely.
This was a reflection of significant changes in demand in
individual end markets and geographies, as well as the additional
production, sales and distribution resources required to adapt to
safe working requirements and the limitations on physical access to
customer sites.
Once these initial operational challenges were understood and
acted upon, the trading pattern across all four Group sectors
steadily improved as the period progressed. This was also reflected
in most companies consistently exceeding their short-term forecasts
and gaining greater confidence in their prospects for the year
ahead and the longer term. Many of the significant variances
reported in each sector against prior year performances were due to
greater volatility in last year's trading pattern rather than
current year performance.
Revenue decreased by 5% in the period to GBP618.4m (2019/20:
GBP653.7m), including an improvement in Q2 with revenue up 11% on
Q1 . Good overhead control and discretionary variable cost savings,
in both operating companies and central functions, resulted in an
Adjusted(1) Profit before Taxation decrease of 5% to GBP122.0m
(2019/20: GBP128.8m). Statutory Profit before Taxation was down 9%
to GBP96.3m (2019/20: GBP105.8m).
The reported revenue decline included an 11% reduction in
organic constant currency revenue (13% reduction in Q1 and 9%
reduction in Q2) , a 6% contribution from acquisitions completed
last year, and a small negative currency translation effect of
0.4%. The 5% decline in Adjusted(1) Profit before Taxation included
an organic constant currency decline of 11%, a 6% contribution from
acquisitions completed last year and a small negative currency
translation effect of 0.3%.
Return on Sales(1) was flat on last year at 19.7%, reflecting
discretionary cost reductions of over GBP20m in Q1 compared to the
previous Q4 run rate, ongoing overhead control and continued
strategic investment for future growth. Our companies' R&D
expenditure was GBP34.4m, representing 5.6% of Group revenue
(2019/20: 5.3%).
We ended the period with net debt of GBP315.0m and available
liquidity of GBP493.7m. This robust balance sheet position supports
continued investment in future organic growth, gives us substantial
capacity for acquisitions and sustains our progressive dividend
policy.
The Board has declared an increase of 5% in the interim dividend
to 6.87p per share (2019/20: 6.54p per share). The interim dividend
will be paid on 5 February 2021 to shareholders on the register on
29 December 2020.
An effective and agile response to COVID-19 and continued
strategic progress
In response to the emergence of COVID-19 in early 2020 and the
related ongoing economic downturn, we acted quickly to reduce
costs. These actions resulted in a cost reduction (net of the cost
of implementation) of more than GBP20m in Q1, compared to the
previous Q4 run rate. We implemented a significant reduction in all
discretionary overheads and ensured that our companies continued to
manage their working capital effectively.
Throughout the pandemic, we have maintained productive
relationships with customers and suppliers. To date, we have
recorded very little bad debt and have continued to pay our
suppliers on a timely basis, with our trade creditor days remaining
in line with the prior period at 36 days. We limited capital
investment to R&D and essential projects only and decided not
to complete any acquisitions during the first half of this
financial year.
A freeze on hiring and promotions was implemented, while
company, sector and Group employees agreed to temporary salary
reductions from 1 April 2020 for a three-month period, including a
20% reduction in salaries or fees for the Board and Executive
Board. During the second quarter, we were able to progressively
remove the most stringent restrictions, while continuing to control
costs and working capital to protect profit and ensure good cash
generation.
At the outset of the pandemic, we decided that the resilience of
our business meant that we should self-fund the small percentage of
our workforce who were furloughed by their companies, without any
support from the UK Government's Coronavirus Job Retention Scheme.
Additionally, we provided enhanced financial support to those
companies and employees that were affected by unavoidable
redundancies due to significant declines in demand in certain
markets. The impact of these employee support programmes was
approximately GBP4m in the first half.
We progressively increased our M&A search activity during
the first half, following our early decision in March 2020 not to
complete any acquisitions until the impact of COVID-19 on our
trading and balance sheet was better understood. We believe that
our strategy of focusing on acquiring businesses with valuable
intellectual property, which operate in market niches aligned with
our purpose of "growing a safer, cleaner, healthier future for
everyone, every day" will only grow in significance as the ongoing
impact of the global pandemic on the world becomes more
apparent.
From 1 April 2021, we will operate and report as three sectors
to reflect the increasing importance of environmental and
healthcare issues and align with our purpose and focus on safety,
health and environmental markets. As set out in more detail below,
we will combine our two Safety sectors under a single Sector CEO
and appoint a separate Sector CEO and M&A team for each of our
Medical and Environmental & Analysis sectors.
The pandemic has also accelerated the trend towards the
increasing use of digital technologies in how we operate, as well
as in the solutions we provide to our end-customers. At the start
of the year, we were already committed to increasing investment in
our operational and customer-facing technology, such as helping our
companies take a standardised approach to building
Internet-of-things based solutions. In the second half of the year,
we will be accelerating this technology investment programme, under
the guidance of our Chief Technology Officer, Catherine Michel, who
joined us last year. The overall scale of this investment is
expected to be around GBP10m over the next three years.
Revenue growth in the USA, declines in other regions
External revenue by destination
Half year 2020 Half year 2019
---------------- ----------------
% organic
growth
(1) at
% of % of Change % constant
GBPm total GBPm total GBPm growth currency
------------------------- ------- ------- ------- ------- ------ ------- ---------
United States of America 255.1 41% 248.8 38% 6.3 2% (7)%
Mainland Europe 127.2 21% 135.5 21% (8.3) (6)% (9)%
United Kingdom 87.6 14% 105.2 16% (17.6) (17)% (18)%
Asia Pacific 100.0 16% 106.8 16% (6.8) (6)% (14)%
Other regions 48.5 8% 57.4 9% (8.9) (16)% (15)%
------------------------- ------- ------- ------- ------- ------ ------- ---------
618.4 100% 653.7 100% (35.3) (5)% (11)%
------------------------- ------- ------- ------- ------- ------ ------- ---------
All our major regions were adversely affected by the impact of
COVID-19 during the period. We delivered revenue growth in the USA
and moderate revenue declines in Mainland Europe and Asia Pacific,
despite growth in China. There was a weaker performance in the UK,
although trends have been improving.
The USA remains our largest sales destination and contributed
41% of total Group revenue. Revenue in the USA increased by 2% in
the period, a decline of 7% on an organic constant currency basis.
This was driven by a strong organic performance in Environmental
& Analysis and a positive contribution from acquisitions in the
Medical and Process Safety sectors. This progress was partially
offset by organic revenue declines in Medical and the two Safety
sectors.
Mainland Europe revenue fell by 6%, a reduction of 9% on an
organic constant currency basis. A good organic revenue performance
in Process Safety was offset by organic declines in Infrastructure
Safety and Environmental & Analysis. Medical saw revenue grow
in Mainland Europe, mainly due to prior year acquisitions.
The UK was our weakest region with revenue 17% lower, or 18%
down on an organic constant currency basis. This was largely driven
by declines in the two largest sectors in the region, Environmental
& Analysis and Infrastructure Safety, while Process Safety
demonstrated a more resilient performance.
Asia Pacific's revenue was 6% below last year, including a 14%
organic constant currency decline and a contribution of 9% from
acquisitions, primarily the Ampac acquisition, which was completed
in July 2019. There was revenue growth in China of 1% compared with
last year, although sequential growth in China was stronger with Q2
revenue 16% higher than Q1. However, this was offset by sharp falls
in India, Malaysia and Singapore, which were all affected to some
extent by the timing of large projects.
In Other regions, which represent 8% of the Group, revenue fell
by 16%, which was 15% lower on an organic constant currency basis.
There was a positive performance in Canada, offset by declines in
Africa, Brazil and the Middle East, partially reflecting the timing
of project-based business.
Significant market variations within each sector
External revenue by sector
Half Half
year year
2020 2019
----- -----
% organic
growth
(1) at
Change % constant
GBPm GBPm GBPm growth currency
------------------------- ----- ----- ------ ------- ---------
Process Safety 91.1 101.3 (10.2) (10)% (17)%
Infrastructure Safety 201.5 232.9 (31.4) (13)% (16)%
Environmental & Analysis 154.0 153.1 0.9 0.6% 0.9%
Medical 172.4 166.5 5.9 3% (11)%
Inter-segmental revenue (0.6) (0.1) (0.5)
------------------------- ----- ----- ------ ------- ---------
618.4 653.7 (35.3) (5)% (11)%
------------------------- ----- ----- ------ ------- ---------
Profit by sector
Half year 2020 Half year 2019
--------------------- ----------------
% organic
growth(1)
% of % of Change % at constant
GBPm total GBPm total GBPm growth currency
------------------- ------- ------- ------- ------ ------- ------- -------------
Process Safety 16.6 12% 24.9 17% (8.3) (33)% (37)%
Infrastructure
Safety 46.0 33% 52.3 35% (6.3) (12)% (15)%
Environmental &
Analysis 38.3 28% 31.4 21% 6.9 22% 23%
Medical 38.2 27% 39.3 27% (1.1) (3)% (22)%
------------------- ------- ------- ------- ------ ------- ------- -------------
Sector profit(2) 139.1 100% 147.9 100% (8.8) (6)% (13)%
------------------- ------- ------- ------- ------ ------- ------- -------------
Central
administration
costs (11.3) (13.4) 2.1
Net finance
expense (5.8) (5.7) (0.1)
------------------- ------- ------- ------- ------ ------- ------- -------------
Adjusted(1) profit
before tax 122.0 128.8 (6.8) (5)% (11)%
------------------- ------- ------- ------- ------ ------- ------- -------------
Infrastructure Safety
Revenue decreased by 13% to GBP201.5m (2019/20: GBP232.9m), with
a 16% organic constant currency decline. There was a marginal negative
effect from currency translation and a 3% positive contribution from
the acquisitions of Ampac and FireMate in the prior financial year.
People and Vehicle Flow delivered a resilient performance with a
substantial shift in product mix away from sliding door sensors,
which are predominantly associated with construction work and retail
refurbishment, towards sensors which can be retrofitted to make swing
doors operate automatically and other touchless entry activation
devices. This mix shift varied by market and was a great example
of how Halma's agile business model allows operating companies, which
are closest to the customer, to respond quickly to new challenges
and capture new opportunities.
Fire, Security and Elevator Safety were the most impacted by the
challenge of customers gaining physical access to installation sites
during lockdowns and the furloughing of UK-based installation customers,
particularly during Q1. Some of our operating companies were able
to focus more on recurring revenue streams to offset reduced project
business by launching leasing models, accelerating online training
and remote installation support or adapting resources to segments
with the strongest regulatory environments, such as Area of Refuge
communication systems in the USA. Q2 saw demand improving as lockdown
restrictions eased, installers returned to work and distribution
channels restocked.
The USA and Mainland Europe performed relatively well, with revenue
declining 12% and 13% respectively on an organic constant currency
basis, compared to the UK and Asia Pacific, which were down 19% and
22% respectively organically. The UK, which historically has accounted
for around a quarter of sector revenue, was particularly impacted
by site access and customer furlough constraints. Aside from the
impact of COVID-19, the organic decline in Asia Pacific was mainly
driven by the timing of large projects, and the implementation of
our decisions to exit lower margin business in Elevator Safety last
year. Prior year acquisitions, both based in Australia, made an excellent
contribution to growth in Asia Pacific, restricting the region's
total revenue decline to just 1%.
Profit(2) was 12% lower at GBP46.0m (2019/20: GBP52.3m) including
a 15% organic constant currency decline, a marginal negative effect
from currency translation and a 4% contribution from acquisitions
in the prior year. Return on Sales improved to 22.8% (2019/20: 22.5%),
supported by strong overhead control and higher margins due to effective
management of product and geographic mix. R&D expenditure of GBP12.2m
was maintained at a good level and represented 6.1% of revenue (2019/20:
6.1%).
The sector is expected to make further progress in the second half
and deliver a resilient full-year performance with continued strategic
investment in longer-term growth opportunities. Due to the timing
of prior year acquisitions, their inorganic impact on the sector's
overall growth rate will be minimal in the second half.
Process Safety
Revenue reduced by 10% to GBP91.1m (2019/20: GBP101.3m), including
an organic constant currency decline of 17%, a very small 0.2% negative
effect from currency translation and a positive contribution of 7%
from the acquisition of USA-based Sensit Technologies in the prior
year.
Revenue growth in Europe of 6% was driven by Safe Storage and Transfer
fulfilling significant projects, some of which had been in the order
book prior to the start of the financial year. The UK delivered a
resilient performance, while it was more challenging in Asia Pacific
where there was a slowing of large project approvals. Revenue declined
16% in the USA, or 34% on an organic constant currency basis. This
resulted from a fall in demand for safety products in onshore oil
and gas related businesses as a result of the lower oil price, which
particularly impacted Pressure Management, and Industrial Access
Control's strong prior year comparative, which included a large logistics
contract.
Profit(2) declined by 33% to GBP16.6m (2019/20: GBP24.9m) including
a 37% organic constant currency decline, a negligible negative effect
from currency translation and a 4% positive contribution from the
Sensit acquisition. Return on Sales decreased from 24.5% to 18.2%,
although this remained within the Group's strategic KPI of 18%-22%.
The significant reduction in profitability was driven by a combination
of the major decline in high-margin USA onshore oil and gas revenue
and one-off restructuring costs of GBP1.7m. Against that backdrop,
R&D investment was maintained at a healthy level of GBP4.5m, which
equated to 4.9% of revenue (2019/20: 3.5%), as the sector continued
to invest in key areas for the future such as connected safety monitoring
solutions.
Despite the continuing challenges, especially in the oil and gas
market, Process Safety is expected to continue the gradual improvement
in trading delivered as the first half progressed. Its continued
investment in connected technologies and diversification away from
the oil market is expected to improve its performance in the longer
term .
Environmental & Analysis
Revenue increased to GBP154.0m (2019/20: GBP153.1m(3) ), comprising
1% organic constant currency growth and a small 0.5% negative effect
from currency translation.
Strong growth in Photonics contributed to growth in the USA of 10%,
which represents over half of the sector's revenue. In particular,
growth was driven by the phasing of a continuing large contract in
the USA, which is an example of how our Photonics companies are increasingly
seeing demand for their technology in applications related to building
digital/data capabilities for the digital age. Progress in the USA
also benefited from one of our gas flowmeter businesses, Alicat,
rapidly adapting its technology to make components to meet urgent
new requirements from ventilator manufacturers in response to COVID-19.
Growth in the USA was offset by declines in all other major regions,
with the Water and Spectroscopy businesses also reporting reduced
revenue. Revenue from the UK was down by 14%, with the Water businesses
experiencing delayed demand from the UK water utilities due to the
start of a new five-year Asset Management Plan investment cycle and
disruption caused by COVID-19. Mainland Europe and Asia Pacific revenues
declined by 8% and 7% respectively, with gradual improvement in both
following the impacts of COVID-19.
Profit (2) increased by an impressive 22% to GBP38.3m (2019/20: GBP31.4m(3)
). Organic constant currency profit growth was 23% and there was
a 0.7% negative effect from currency translation. Return on Sales
improved from 20.5% to 24.9%, primarily due to proactive cost management,
including in response to COVID-19 in the first quarter, with all
companies across the Group contributing to the response to the wider
challenges faced by the Group. R&D expenditure of GBP8.3m was maintained
at a good level, although this was a reduction to 5.4% of sales (2019/20:
6.1%(3) ).
The sector is expected to perform well over the full year, although
a very strong prior year comparator will mean that growth rates will
be reduced compared to the levels achieved in the first half. Return
on Sales in the second half is expected to return to recent historic
levels. While water markets should continue to recover, we expect
lower demand for ventilator components and the timing of Photonics
projects to moderate growth for the full year.
Medical
Revenue increased by 3% to GBP172.4m (2019/20: GBP166.5m(3) ). Organic
constant currency revenue growth was down 11%, with a small 0.5%
negative effect from currency translation and a large 15% positive
contribution from acquisitions in the prior year.
During the period, the sector experienced significant increases in
demand for products and services related to the diagnosis or treatment
of COVID-19, with dramatic decreases in products and services related
to elective healthcare procedures. Consequently, our Health Assessment
businesses saw strong growth in general health diagnostics, including
monitoring of vital signs. There was strong growth in businesses
supporting the oxygenation of patients, including last year's Maxtec
acquisition (now part of Perma Pure), which saw significant demand
for its respiratory therapy products.
Ophthalmology revenue declined due to reduced patient demand for
elective surgery and discretionary ophthalmic diagnosis procedures,
as did Life Sciences, while Sensors & Analytics was adversely impacted
by a lack of access to hospitals in Q1.
The USA and Mainland Europe, the sector's first and second largest
regions, grew revenue by 14% and 6% respectively, mainly due to the
location of prior year acquisitions and our companies with COVID-19
related products. There were declines in the other major regions,
with UK revenue 21% lower and Asia Pacific down 6%, with Asia Pacific
particularly impacted by contraction in the in vitro diagnostics
industry.
Profit (2) declined by 3% to GBP38.2m (2019/20: GBP39.3m(3) ). Return
on Sales of 22.1% was lower than the 23.7% reported last year, primarily
driven by mix as revenue for lower gross margin products grew, while
revenue for higher gross margin therapeutic products declined. Profit
also benefited from a reduction in reorganisation charges, that principally
related to the rationalisation of product development strategies
in the prior year . R&D spend of GBP9.4m increased to 5.5% of revenue
(2019/20: 4.6%(3) ), demonstrating the confidence of our medical
businesses in the long-term growth prospects of their market niches.
As the financial year has progressed, we have seen a gradual improvement
in demand for products and services related to elective healthcare
procedures. Although the demand for COVID-19 products is expected
to moderate, the sector is expected to deliver a resilient performance
in the second half. Due to the timing of acquisitions in the prior
year, acquisitions are expected to have a smaller inorganic impact
on the sector's overall growth rate in the second half.
Continued strengthening of the Executive Board to drive growth strategy
The global pandemic has reaffirmed the value of our growth strategy
and strengthened our commitment to our purpose to grow a safer, cleaner,
healthier future for everyone, every day. Fulfilling this purpose
has become even more relevant during the period, which has motivated
us to go faster and to increase our organisational focus to drive
growth in our key markets.
We announced two changes to Halma's Executive Board in the first
half. In September 2020, we welcomed Funmi Adegoke as Group General
Counsel, succeeding Ruwan De Soyza. We were also pleased to retain
Adam Meyers as interim Safety Sector Chief Executive over the period
of the COVID-19 crisis until his planned retirement in 2021, following
the departure of Paul Simmons.
From 1 April 2021, we will align our organisational structure and
financial reporting with our purpose and core market focus of Safety,
Health and the Environment. The three sectors will be called Safety,
Environmental & Analysis, and Medical. Each sector will be led by
a Sector CEO and small sector support team, following the same model
we have successfully developed since 2014. Process Safety will be
combined with Infrastructure Safety to form a single Safety sector,
with the exception of our two Gas sensor companies (Crowcon and Sensit),
which will move from Process Safety to Environmental & Analysis.
Laura Stoltenberg, currently Sector CEO of the combined Medical and
Environmental sectors, will continue as Sector CEO of our Medical
sector. Two of our Divisional CEOs, Wendy McMillan and Constance
Baroudel will be promoted to Sector Chief Executive for the Safety
and Environmental & Analysis sectors respectively. These organisational,
leadership and reporting changes demonstrate the agility of Halma's
operating model and our commitment to developing our internal talent
to ensure we have a strong leadership pipeline for the future.
Sustainability and living our purpose
Our approach to sustainability is defined by our purpose of growing
a safer, cleaner, healthier future for everyone, every day. We aim
to play a positive role in society over the long term, both through
the beneficial effects of our products and services, and by behaving
responsibly. Many of our technologies enable other companies to achieve
their own sustainability commitments around protection of natural
resources or reduction of carbon emissions. Our four chosen UN Sustainable
Development Goals (SDG 3 Good health and wellbeing, SDG 6 Clean water
and sanitation, SDG 9 Industry, innovation and infrastructure and
SDG 11 Sustainable cities and communities), alongside our purpose,
provide a framework for some of our initiatives.
During this financial year, we are continuing to work towards a number
of our environmental commitments, including setting Science-Based
Targets to reduce our greenhouse gas emissions, disclosing in line
with the recommendations of the Task Force on Climate-Related Financial
Disclosures by 2022, moving our UK sites to renewable electricity
and green gas and reviewing the Group's strategy around electronic
waste.
The COVID-19 pandemic and social movements including #blacklivesmatter
have highlighted the importance of the social aspect of sustainability.
During the period, the success of the Board's focus on diversity
and inclusion has continued with 63% female representation on our
Executive Board and 44% gender balance among our Divisional Chief
Executives at 30 September 2020. This progress was further recognised
in September 2020 when our CEO Andrew Williams was named an advocate
for women in business in the "HERoes 50 Advocates List". We have
also launched additional initiatives during the half year to increase
gender and ethnic diversity, including our global shared parental
leave policy and the rollout of Accelerate Inclusion, our group-based,
online programme offering actionable bite-sized learning on key diversity
and inclusion topics.
We carefully consider all stakeholder groups, including our employees
and the communities and societies in which we operate, in our efforts
to grow a safer, cleaner, healthier future for everyone, every day.
In recent months, we have increased our focus on the mental health
of our employees, as well as their physical health and safety. A
new employee assistance programme, available in the US and the UK,
offers a safe and confidential space for staff to speak to specialists
about workplace mental health issues as well as challenges at home,
including access to financial or legal support. We have also created
a dedicated portal on our internal communications platform, HalmaHub,
offering guidance and tools for managing stress, anxiety and uncertainty;
learning resources for parenting in uncertain times; and help for
leaders to support employee mental health, manage a remote workforce
and other challenges. Alongside this, we have launched new online
training and development tools for employees seeking to enhance their
capabilities during furlough or lockdowns, and in response to the
expected increased level of working from home in the future.
In October 2020, we were excited to launch our Water for Life partnership
with the international non-profit organisation WaterAid, which is
aligned with our purpose and one of our chosen UN Sustainable Development
Goals, SDG 6 Clean water and sanitation. Through this partnership,
we will highlight the global issue of access to safe water by providing
8,000 people in India with clean drinking water. To help WaterAid
make sure the water supplies in these villages are free of dangerous
contaminants, we are contributing a number of specialised testing
kits from Palintest, one of our UK-based operating companies, as
well as donating a minimum of GBP200,000 including monies raised
by employees across the Group. While Halma is not a large consumer
of water relative to most manufacturing businesses, we will also
be aiming to further reduce water consumption and wastewater emissions
within our operations.
Currency effects
We report our results in Sterling with 51% of Group revenue denominated
in US Dollars and 12% in Euros during the period. Average exchange
rates are used to translate results in the Income Statement. Sterling
weakened against the US Dollar and the Euro during the first half
of 2020/21. This resulted in a 0.4% negative currency translation
effect on Group revenue and a 0.3% negative effect on profit in H1
2020/21 relative to H1 2019/20. If exchange rates remain at current
levels, we expect a small positive currency translation effect in
H2 2020/21, resulting in a broadly neutral impact for the year.
Pension deficit
On an IAS 19 basis, the deficit on the Group's defined benefit plans
at the half year end increased to GBP45.0m
(31 March 2020: GBP5.2m) before the related deferred tax asset.
Following the volatility in the markets used to set assumptions at
31 March 2020, which contributed to a particularly low pension deficit,
the plans' liabilities increased due to a decrease in the discount
rate and increase in the inflation assumption used to value those
liabilities. Although this was partially offset by further employer
contributions together with the return from the plans' assets, there
was an overall increase in the plans' deficit. The plans' actuarial
valuation reviews, rather than the accounting basis, determine any
cash payments by the Group to eliminate the deficit. In this regard,
we expect the aggregate cash contributions for the two UK defined
benefit plans in the 2020/21 financial year to be consistent with
our previous guidance of GBP13.3m.
Group tax rate
The Group's effective tax rate on adjusted profit was 20.6%. This
is based on the forecast effective tax rate for the year as a whole,
and is higher than in the Full Year 2019/20 (18.5%) mainly due to
the reversal of one off credits in the prior year and a change in
the expected mix of profits arising from increased profits in higher
tax jurisdictions.
On 2 April 2019, the European Commission published its final decision
that the UK-controlled Finance Company Partial Exemption (FCPE) partially
constituted State Aid. In common with other UK companies, Halma has
benefited from the FCPE, which was a plan approved by the UK Government,
and the total benefit to date is approximately GBP15.4m (in respect
of tax) and approximately GBP1.4m (in respect of interest). Halma
has appealed against the European Commission's decision, as has the
UK Government and several other UK companies. In the meantime, the
UK Government is required to pursue collection proceedings and therefore
it is expected that the Group will have to make a payment in the
second half of up to GBP17m. Based on its current assessment, the
Group believes that no provision is required in respect of this issue.
Cash flow and funding
Cash conversion (adjusted operating cash flow as a percentage of
adjusted operating profit - see note 9) was 111% (2019/20: 82%),
above our cash conversion target of 85%. The exceptionally high cash
conversion for the period reflects a continued focus on working capital
management, in addition to UK and US Government COVID-19 initiatives
permitting the deferral of GBP4.1m of VAT (until H2 2020/21) and
GBP3.6m of Employer payroll taxes (to FY 2021/22 and FY 2022/23).
Working capital reduced by GBP6.4m during the period (2019/20: increase
of GBP25.2m), principally reflecting a combination of good debt collections
across the Group, the deferrals outlined above, and an overall reduction
in debtors and creditors due to the decrease in revenue. We do not
expect H2 cash conversion to remain at the exceptional levels seen
in H1, with cash conversion at the full year expected to be above
our KPI of 85%.
Dividend payments increased this half year with payments of GBP37.7m
(2019/20: GBP36.4m). Tax payments decreased to GBP14.0m (2019/20:
GBP27.3m), mainly due to changes in the timing of tax payments and
one-off tax refunds of GBP2.2m. Expenditure on acquisitions, which
include acquisition costs and contingent consideration for acquisitions
made in prior years, was GBP8.2m (2019/20: GBP88.3m). Capital expenditure
reduced to GBP11.1m (2019/20: GBP13.7m) reflecting our actions to
limit capital investment to essential projects and R&D only. However,
given our strong balance sheet and trading performance, we continue
to expect capital expenditure for the full year to be around GBP30m.
Net debt at the end of the period was GBP315.0m (31 March 2020: GBP375.3m).
Gearing (the ratio of net debt to EBITDA) at half year end was 1.02
times (31 March 2020: 1.13 times), which is within our typical operating
range of up to two times and included the effect of IFRS 16.
Principal risks and uncertainties
A number of potential risks and uncertainties exist, which could
have a material impact on the Group's performance over the second
half of the financial year and cause actual results to differ materially
from expected and historical results. The Group has processes in
place for identifying, evaluating and managing risk. Our principal
risks, together with a description of our approach to mitigating
them, are set out on pages 48 to 53 of the Annual Report and Accounts
2020, which is available on the Group's website at www.halma.com
. See note 15 to the Condensed Interim Financial Statements for further
details.
We have continued to assess the changing level of risk related to
the ongoing COVID-19 global pandemic, and have communicated the changing
situation and guidance through our central and regional COVID-19
support groups. The benefits arising from the agility that our business
model gives us has continued to be demonstrated throughout the pandemic,
and we expect our companies to continue to be able to respond and
adapt to the local market situations they are facing.
We continue to closely monitor and assess any potential effects from
the UK's exit from the European Union. While we have completed a
significant amount of work within operating companies, in areas such
as gaining new product certifications, we have not seen any material
effects to date and consider that our decentralised model, with businesses
in diverse markets and locations, enables our companies to adapt
quickly to changing trading conditions. We expect that our companies'
agility, and the support we are providing from across the Group to
share best practice, will help us to prepare for these changes, to
mitigate any potential effects, and enable us to take advantage of
new opportunities that arise.
Going concern
The condensed interim financial statements have been prepared on
a going concern basis. In adopting the going concern basis, the Directors
have considered the financial position and performance over the half
year and the principal risks set out above.
As at 30 September 2020, our financial position remains robust with
committed facilities totalling approximately GBP750m which includes
a GBP550m Revolving Credit Facility maturing in November 2023. The
amount undrawn on this facility has increased from GBP313.6m at 31
March 2020 to GBP358.3m at 30 September 2020. The earliest maturity
in these facilities is for GBP74m in January 2021, with the remaining
maturities from January 2023 onwards. The financial covenants on
these facilities are for leverage (net debt/adjusted EBITDA) of not
more than three times and for adjusted interest cover of not less
than four times. Net debt and adjusted EBITDA are measured on a pre-IFRS
16 basis for covenant purposes. At 30 September 2020, leverage and
adjusted interest cover (both measured according to covenant definitions)
were 0.79 times and 36 times respectively.
As at 31 March 2020, a base case scenario was prepared including
revised budgets and three-year plans which considered the challenges
and opportunities faced by each of our operating companies. Details
of this scenario are set out on page 120 of the Annual Report and
Accounts 2020.
In assessing the updated base case scenario to support the use of
the going concern basis at 30 September 2020, we updated the assumptions
to 31 March 2022 using the latest management forecasts. These forecasts
took into account the resilient cash and trading performance of the
Group in dealing with the challenges from COVID-19 and reduction
in net debt in the first half of the year. The base case also allowed
for the resumption of M&A activity in the second half of the year.
In addition, a severe but plausible downside scenario has been modelled
showing a significant reduction in trading for the duration of the
period to 31 March 2022, which could be caused by a greater impact
of COVID-19 and the potential for a slower than anticipated recovery
in the Group's major markets.
Neither of these scenarios resulted in a breach of the Group's available
debt facilities or the attached covenants and accordingly the Directors
believe there is no material uncertainty in the use of the going
concern assumption.
Outlook
Halma's proven strategic, financial and organisational model has
contributed to a resilient performance in testing circumstances,
with our financial performance improving as the first half progressed.
Throughout the pandemic, we have maintained our focus on employee
safety and wellbeing, while working hard to ensure the continued
delivery of critical safety, health and environmental solutions for
our customers. This was achieved thanks to the tremendous commitment
and capability of our colleagues across the Group. Our rapid response
to the many new challenges of recent months enabled Halma to not
only weather the storm, but to be well positioned to meet the challenges
and opportunities ahead.
We have had a good start to the second half, with order intake ahead
of revenue and up on the same period last year. Our improving trading
performance, together with our strong cash position, will enable
us to accelerate strategic investments in the second half of the
year. As a result of our progress so far this year, we now expect
Adjusted profit before tax for FY 2020/21 to be around 5% below FY
2019/20, compared to prior guidance of 5% to 10% below FY 2019/20.
Andrew Williams Marc Ronchetti
Group Chief Executive Chief Financial Officer
(1) See Highlights, page 1.
(2) See note 2 to the Condensed Interim Financial Statements.
Profit is Adjusted(1) operating profit before central
administration costs after share of associate.
(3) Perma Pure, one of the Group's gas conditioning businesses,
was transferred from the Environmental & Analysis sector into
the Medical sector in the second half of the prior year, given that
the majority of its revenues now come from medical uses following
the Group's acquisition of Maxtec. Historical comparatives have
been restated to reflect this change.
Independent review report of Halma plc
Report on the Consolidated Interim Financial Statements
Our conclusion
We have reviewed Halma plc's consolidated interim financial
statements (the "interim financial statements") in the Half Year
Report of Halma plc for the six-month period ended 30 September
2020 (the "period").
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 2020;
- 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 of Halma plc 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
London
19 November 2020
Half year results 2020/21
Condensed INTERIM Financial Statements
Consolidated Income Statement
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
------------- ----- ------------ ------------ ------------- ------------- ------------ ------------- ---------
Adjustments* Adjustments*
Before (note Before (note
adjustments* 2) Total adjustments* 2) Total Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ----- ------------ ------------ ------------- ------------- ------------ ------------- ---------
Continuing
operations
Revenue 2 618.4 - 618.4 653.7 - 653.7 1,338.4
------------- ----- ------------ ------------ ------------- ------------- ------------ ------------- ---------
Operating
profit 127.8 (25.7) 102.1 134.6 (23.0) 111.6 233.4
Share of
results
of
associates - - - (0.1) - (0.1) (0.1)
Gain on
disposal
of
operations 2 - - - - - - 2.9
Finance
income 3 1.0 - 1.0 0.4 - 0.4 0.6
Finance
expense 4 (6.8) - (6.8) (6.1) - (6.1) (12.7)
------------- ----- ------------ ------------ ------------- ------------- ------------ ------------- ---------
Profit before
taxation 122.0 (25.7) 96.3 128.8 (23.0) 105.8 224.1
Taxation 5 (25.1) 6.1 (19.0) (25.6) 4.8 (20.8) (39.7)
------------- ----- ------------ ------------ ------------- ------------- ------------ ------------- ---------
Profit for
the
period
attributable
to equity
shareholders 96.9 (19.6) 77.3 103.2 (18.2) 85.0 184.4
------------- ----- ------------ ------------ ------------- ------------- ------------ ------------- ---------
Earnings per
share
from
continuing
operations 6
Basic and
diluted 25.54p 20.37p 27.20p 22.40p 48.66p
Dividends in
respect
of the
period 7
Dividends
paid
and proposed
(GBPm) 26.1 24.8 62.5
Per share 6.87p 6.54p 16.50p
------------- ----- ------------ ------------ ------------- ------------- ------------ ------------- ---------
* Adjustments include the amortisation and impairment of
acquired intangible assets; acquisition items; significant
restructuring costs; profit or loss on disposal of operations; and
the associated taxation thereon. Note 9 provides more information
on alternative performance measures.
Consolidated Statement of Comprehensive Income and
Expenditure
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------------------- ------------- ------------- ---------
Profit for the period 77.3 85.0 184.4
Items that will not be reclassified subsequently
to the Income Statement:
Actuarial (losses)/gains on defined benefit pension
plans (46.3) 6.0 22.5
Tax relating to components of other comprehensive
income that will not be reclassified 8.8 (1.1) (4.0)
Items that may be reclassified subsequently to
the Income Statement:
Effective portion of changes in fair value of cash
flow hedges (0.6) (0.4) (0.5)
Deferred tax in respect of cash flow hedges accounted
for in the hedging reserve 0.1 (0.1) 0.1
Exchange (losses)/gains on translation of foreign
operations and net investment hedge (14.9) 43.2 29.1
Exchange gain on translation of foreign operations
recycled on disposal - - 0.1
Other comprehensive (expense)/income for the period (52.9) 47.6 47.3
------------------------------------------------------- ------------- ------------- ---------
Total comprehensive income for the period attributable
to equity shareholders 24.4 132.6 231.7
------------------------------------------------------- ------------- ------------- ---------
The exchange losses of GBP14.9m (six months to 30 September
2019: GBP43.2m gain; year to 31 March 2020: GBP29.1m gain) include
gains of GBP4.2m (six months to 30 September 2019: GBP8.0m losses;
year to 31 March 2020: GBP11.9m losses), which relate to net
investment hedges.
Consolidated Balance Sheet
Unaudited Unaudited Audited
30 September 30 September 31 March
2020 2019 2020
Notes GBPm GBPm GBPm
---------------------------------------------- ----- ------------- ------------- ---------
Non-current assets
Goodwill 829.8 765.5 838.4
Other intangible assets 303.8 272.4 328.4
Property, plant and equipment 184.7 171.7 184.3
Interests in associates and other investments 4.8 5.5 4.8
Retirement benefit asset 12 - - 5.4
Deferred tax asset 5.6 1.4 1.3
---------------------------------------------- ----- ------------- ------------- ---------
1,328.7 1,216.5 1,362.6
---------------------------------------------- ----- ------------- ------------- ---------
Current assets
Inventories 175.8 162.9 170.6
Trade and other receivables 245.3 275.2 286.6
Tax receivable 6.5 4.8 10.7
Cash and bank balances 125.5 83.2 106.3
Derivative financial instruments 11 0.4 0.9 1.0
---------------------------------------------- ----- ------------- ------------- ---------
553.5 527.0 575.2
---------------------------------------------- ----- ------------- ------------- ---------
Total assets 1,882.2 1,743.5 1,937.8
---------------------------------------------- ----- ------------- ------------- ---------
Current liabilities
Trade and other payables 158.7 157.9 186.7
Borrowings 76.1 1.7 75.1
Lease liabilities 13.0 12.3 13.0
Provisions 30.5 20.5 28.0
Tax liabilities 11.3 13.4 9.4
Derivative financial instruments 11 0.9 0.7 1.0
---------------------------------------------- ----- ------------- ------------- ---------
290.5 206.5 313.2
---------------------------------------------- ----- ------------- ------------- ---------
Net current assets 263.0 320.5 262.0
---------------------------------------------- ----- ------------- ------------- ---------
Non-current liabilities
Borrowings 300.0 334.9 345.0
Lease liabilities 51.4 44.7 48.5
Retirement benefit obligations 12 45.0 27.6 10.6
Trade and other payables 16.3 13.3 13.3
Provisions 14.3 7.9 21.6
Deferred tax liabilities 41.7 41.1 48.7
---------------------------------------------- ----- ------------- ------------- ---------
468.7 469.5 487.7
---------------------------------------------- ----- ------------- ------------- ---------
Total liabilities 759.2 676.0 800.9
---------------------------------------------- ----- ------------- ------------- ---------
Net assets 1,123.0 1,067.5 1,136.9
---------------------------------------------- ----- ------------- ------------- ---------
Equity
Share capital 38.0 38.0 38.0
Share premium account 23.6 23.6 23.6
Own shares (5.2) (6.6) (14.3)
Capital redemption reserve 0.2 0.2 0.2
Hedging reserve (0.6) (0.2) (0.1)
Translation reserve 133.8 162.7 148.7
Other reserves (18.9) (11.8) (7.7)
Retained earnings 952.8 861.6 949.2
---------------------------------------------- ----- ------------- ------------- ---------
Equity attributable to owners of the Company 1,123.7 1,067.5 1,137.6
---------------------------------------------- ----- ------------- ------------- ---------
Non-controlling interests (0.7) - (0.7)
---------------------------------------------- ----- ------------- ------------- ---------
Total equity 1,123.0 1,067.5 1,136.9
---------------------------------------------- ----- ------------- ------------- ---------
Consolidated Statement of Changes in Equity
For the six months to 30 September 2020
-----------------------------------------------------------------------------------------------
Share Capital
Share premium Own redemption Hedging Translation Other Retained Non-controlling
capital account shares reserve reserve reserve reserves earnings interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------- ------- ------ ---------- ------- ----------- -------- -------- --------------- -------
At 1 April
2020
(audited) 38.0 23.6 (14.3) 0.2 (0.1) 148.7 (7.7) 949.2 (0.7) 1,136.9
Profit for
the period - - - - - - - 77.3 - 77.3
Other
comprehensive
income and
expense:
Exchange
differences
on
translation
of foreign
operations - - - - - (14.9) - - - (14.9)
Actuarial
losses
on defined
benefit
pension
plans - - - - - - - (46.3) - (46.3)
Effective
portion
of changes
in fair value
of cash flow
hedges - - - - (0.6) - - - - (0.6)
Tax relating
to components
of other
comprehensive
income and
expense - - - - 0.1 - - 8.8 - 8.9
-------------- ------- ------- ------ ---------- ------- ----------- -------- -------- --------------- -------
Total other
comprehensive
income and
expense - - - - (0.5) (14.9) - (37.5) - (52.9)
Dividends paid - - - - - - - (37.7) - (37.7)
Share-based
payments
charge - - - - - - 5.0 - - 5.0
Deferred tax
on
share-based
payment
transactions - - - - - - 0.4 - - 0.4
Excess tax
deductions
related to
share-based
payments on
exercised
awards - - - - - - - 1.5 - 1.5
Performance
share plan
awards vested - - 9.1 - - - (16.6) - - (7.5)
-------------- ------- ------- ------ ---------- ------- ----------- -------- -------- --------------- -------
At 30
September
2020
(unaudited) 38.0 23.6 (5.2) 0.2 (0.6) 133.8 (18.9) 952.8 (0.7) 1,123.0
-------------- ------- ------- ------ ---------- ------- ----------- -------- -------- --------------- -------
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 2020 the number of shares
held by the Employee Benefit Trust was 262,551 (30 September 2019:
393,672 and 31 March 2020: 760,894).
The Translation reserve is used to record the difference arising
from the retranslation of the financial statements of foreign
operations. The Hedging reserve is used to record the portion of
the cumulative net change in fair value of cash flow hedging
instruments that are deemed to be an effective hedge.
The Capital redemption reserve was created on repurchase and
cancellation of the Company's own shares. The Other reserves
represent the provision for the value of the Group's equity-settled
share plans.
For the six months to 30 September 2019
----------------------------------------------------------------------------------------------
Share Capital
Share premium Own redemption Hedging Translation Other Retained
capital account shares reserve reserve reserve reserves earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- -------
At 1 April 2019
(audited) 38.0 23.6 (4.7) 0.2 0.3 119.5 (5.6) 810.1 981.4
Impact of changes
in accounting
policies:
IFRS 16 - - - - - - - (3.3) (3.3)
---------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- -------
Restated balance
at
1 April 2019 38.0 23.6 (4.7) 0.2 0.3 119.5 (5.6) 806.8 978.1
Profit for the period - - - - - - - 85.0 85.0
Other comprehensive
income and expense:
Exchange differences
on translation of
foreign operations - - - - - 43.2 - - 43.2
Actuarial gains
on defined benefit
pension plans - - - - - - - 6.0 6.0
Effective portion
of changes in fair
value of cash flow
hedges - - - - (0.4) - - - (0.4)
Tax relating to
components of other
comprehensive income
and expense - - - - (0.1) - - (1.1) (1.2)
---------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- -------
Total other
comprehensive
income and expense - - - - (0.5) 43.2 - 4.9 47.6
Dividends paid - - - - - - - (36.4) (36.4)
Share-based payments
charge - - - - - - 5.2 - 5.2
Deferred tax on
share-based
payment transactions - - - - - - 0.8 - 0.8
Excess tax deductions
related to
share-based
payments on exercised
awards - - - - - - - 1.3 1.3
Purchase of own
shares - - (8.5) - - - - - (8.5)
Performance share
plan awards vested - - 6.6 - - - (12.2) - (5.6)
---------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- -------
At 30 September
2019 (unaudited) 38.0 23.6 (6.6) 0.2 (0.2) 162.7 (11.8) 861.6 1,067.5
---------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- -------
For the six months to 31 March 2020
------------------------------------------------------------------------------------------------
Share Capital
Share premium Own redemption Hedging Translation Other Retained Non-controlling
capital account shares reserve reserve reserve reserves earnings interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------- ------- ------ ---------- ------- ----------- -------- -------- ---------------- -------
At 1 April 2019
(audited) 38.0 23.6 (4.7) 0.2 0.3 119.5 (5.6) 810.1 - 981.4
Impact of
changes in
accounting
policies:
IFRS 16 - - - - - - - (4.0) - (4.0)
---------------- ------- ------- ------ ---------- ------- ----------- -------- -------- ---------------- -------
Restated balance
at
1 April 2019 38.0 23.6 (4.7) 0.2 0.3 119.5 (5.6) 806.1 - 977.4
Profit for the
period - - - - - - - 184.4 - 184.4
Other
comprehensive
income and
expense:
Exchange
differences on
translation
of foreign
operations - - - - - 29.1 - - - 29.1
Exchange loss on
translation of
foreign
operations
recycled to
income
statement
on disposal - - - - - 0.1 - - - 0.1
Actuarial gains
on defined
benefit pension
plans - - - - - - - 22.5 - 22.5
Effective
portion of
changes in fair
value of cash
flow hedges - - - - (0.5) - - - - (0.5)
Tax relating to
components of
other
comprehensive
income and
expense - - - - 0.1 - - (4.0) - (3.9)
---------------- ------- ------- ------ ---------- ------- ----------- -------- -------- ---------------- -------
Total other
comprehensive
income and
expense - - - - (0.4) 29.2 - 18.5 - 47.3
Dividends paid - - - - - - - (61.2) - (61.2)
Share-based
payments charge - - - - - - 10.5 - - 10.5
Deferred tax on
share-based
payment
transactions - - - - - - 0.5 - - 0.5
Excess tax
deductions
related to
share-based
payments on
exercised
awards - - - - - - - 1.4 - 1.4
Purchase of own
shares - - (16.7) - - - - - - (16.7)
Performance
share plan
awards vested - - 7.1 - - - (13.1) - - (6.0)
Non-controlling
interest
arising on
acquisition - - - - - - - - (0.7) (0.7)
---------------- ------- ------- ------ ---------- ------- ----------- -------- -------- ---------------- -------
At 31 March 2020
(audited) 38.0 23.6 (14.3) 0.2 (0.1) 148.7 (7.7) 949.2 (0.7) 1,136.9
---------------- ------- ------- ------ ---------- ------- ----------- -------- -------- ---------------- -------
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
Notes GBPm GBPm GBPm
------------------------------------------------ ----- ------------- ------------- ---------
Net cash inflow from operating activities 8 137.1 95.6 255.5
------------------------------------------------ ----- ------------- ------------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (10.2) (12.0) (31.2)
Purchase of computer software (0.5) (1.5) (2.6)
Purchase of other intangibles (0.9) (0.2) (0.3)
Proceeds from sale of property, plant and
equipment and capitalised development costs 0.5 0.3 1.9
Development costs capitalised (7.0) (6.3) (14.7)
Interest received 0.1 0.3 0.5
Acquisition of businesses, net of cash acquired 10 (6.7) (84.5) (232.8)
Disposal of business - 0.8 7.6
Payments for financial assets at fair value
through other comprehensive income - (1.8) (4.8)
------------------------------------------------ ----- ------------- ------------- ---------
Net cash used in investing activities (24.7) (104.9) (276.4)
------------------------------------------------ ----- ------------- ------------- ---------
Cash flows from financing activities
Dividends paid 7 (37.7) (36.4) (61.2)
Purchase of own shares - (8.5) (16.7)
Interest paid (5.7) (5.2) (11.1)
Proceeds from bank borrowings 9.1 91.9 308.1
Repayment of bank borrowings (52.7) (18.4) (151.7)
Repayment of lease liabilities (7.1) (6.7) (13.7)
------------------------------------------------ ----- ------------- ------------- ---------
Net cash (used in)/from financing activities (94.1) 16.7 53.7
------------------------------------------------ ----- ------------- ------------- ---------
Increase in cash and cash equivalents 18.3 7.4 32.8
Cash and cash equivalents brought forward 105.4 72.1 72.1
Exchange adjustments (0.3) 2.0 0.5
------------------------------------------------ ----- ------------- ------------- ---------
Cash and cash equivalents carried forward 123.4 81.5 105.4
------------------------------------------------ ----- ------------- ------------- ---------
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------------------- ------------- ------------- ---------
Reconciliation of net cash flow to movement in
net debt
Increase in cash and cash equivalents 18.3 7.4 32.8
Net cash outflow/(inflow) from repayment/(drawdown)
of bank borrowings 43.6 (73.5) (156.4)
Loan notes repaid in respect of acquisitions - 0.1 0.1
Lease liabilities additions (11.9) (9.0) (18.1)
Lease liabilities acquired - (3.6) (8.2)
Lease liabilities and interest repaid 8.2 7.7 15.8
Exchange adjustments 2.1 (7.5) (9.3)
---------------------------------------------------- ------------- ------------- ---------
Decrease/(increase) in net debt 60.3 (78.4) (143.3)
Net debt brought forward (375.3) (181.7) (181.7)
Impact of changes in accounting policies - IFRS
16 - (50.3) (50.3)
---------------------------------------------------- ------------- ------------- ---------
Restated net debt brought forward (375.3) (232.0) (232.0)
---------------------------------------------------- ------------- ------------- ---------
Net debt carried forward (315.0) (310.4) (375.3)
---------------------------------------------------- ------------- ------------- ---------
Notes to the Condensed Interim Financial Statements
1 Basis of preparation
General information
The Half Year Report, which includes the Interim Management
Report and Condensed Interim Financial Statements for the six
months to 30 September 2020, was approved by the Directors on 19
November 2020.
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 year to 31 March 2020, 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 year to 31 March 2020 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.
Going concern
The financial statements have been prepared on a going concern
basis. In adopting the going concern basis the Directors have
considered the business activities as set out on pages 1 to 9 and
the principal risks set out on page 35 of the Half Year Report.
As at 30 September 2020, our financial position remains robust
with committed facilities totalling approximately GBP750m which
includes a GBP550m Revolving Credit Facility maturing in November
2023. The amount undrawn on this facility has increased from
GBP313.6m at the year end to GBP358.3m at 30 September 2020. The
earliest maturity in these facilities is for GBP74m in January
2021, with the remaining maturities from January 2023 onwards. The
financial covenants on these facilities are for leverage (net
debt/adjusted EBITDA*) of not more than three times and for
adjusted interest cover of not less than four times.
* Net debt and adjusted EBITDA are on a pre-IFRS 16 basis for
covenant purposes.
As at 31 March 2020, a base case scenario was prepared which was
based on a revised budget and three year plan which considered both
the challenges and opportunities faced by each of our Operating
companies. Details of this scenario are set out on page 120 of the
Annual Report and Accounts 2020.
In assessing the updated base case scenario as at 30 September
2020 to support the use of the going concern basis, we have updated
the assumptions to 31 March 2022 using updated management
forecasts. These forecasts take into account the resilient
performance of the Group in dealing with the challenges from
COVID-19 and reduction in net debt in the first half of the year.
The base case also assumes the resumption of M&A activity in
the second half of the year. In addition, a severe but plausible
downside scenario has been modelled showing a significant reduction
in trading for the duration of the period to 31 March 2022, which
could be caused by a greater impact of COVID-19 and the potential
for a slower than anticipated recovery in the Group's major
markets.
Neither of these scenarios result in a breach of the Group's
available debt facilities or the attached covenants and accordingly
the Directors believe there is no material uncertainty in the use
of the going concern assumption.
New accounting standards and policies
The following Standards with an effective date of 1 January 2020
have been adopted without any significant impact on the amounts
reported in these financial statements:
- Amendments to IAS 1 and IAS 8: Definition of Material
- Amendments to IFRS 3: Definition of a Business
- Amendments to References to the Conceptual Framework in IFRS Standards
- Amendments to IFRS 16: COVID-19-Related Rent Concessions
2 Segmental analysis and revenue from contracts with
customers
Sector analysis
The Group has four main reportable segments (Process Safety,
Infrastructure Safety, Environmental & Analysis and Medical),
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.
During the prior year, following an acquisition in the second
half of the year, that materially changed its customer focus, one
of the operating companies was moved from the Environmental &
Analysis sector to the Medical sector. The prior year segmental
disclosures for the six months to 30 September 2019 have been
restated to reflect this change which moved GBP10.6m of revenue and
GBP3.7m of profit from Environmental & Analysis to Medical.
There was no change in the total Group revenue or profit from this
change.
Segment revenue disaggregation (by location of external
customer)
Unaudited Six months to 30 September 2020
Revenue by sector and destination (all continuing
operations)
-----------------------------------------------------------------------------
Africa,
United Near
States Mainland United and Middle Other
of America Europe Kingdom Asia Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- ------------ ----------- ---------- -----
Process Safety 29.9 20.3 12.4 14.3 10.4 3.8 91.1
Infrastructure Safety 48.3 62.2 43.1 33.0 7.5 7.4 201.5
Environmental & Analysis 81.1 15.7 26.7 24.9 2.9 2.7 154.0
Medical 96.2 29.0 5.6 27.8 4.0 9.8 172.4
Inter-segmental sales (0.4) - (0.2) - - - (0.6)
------------------------- ----------- -------- -------- ------------ ----------- ---------- -----
Revenue for the period 255.1 127.2 87.6 100.0 24.8 23.7 618.4
------------------------- ----------- -------- -------- ------------ ----------- ---------- -----
Unaudited Six months to 30 September 2019
Revenue by sector and destination (all continuing
operations)
Restated
-------------------------------------------------------------------------
Africa,
Near
United and
States Mainland United Middle Other
of America Europe Kingdom Asia Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- ------------ ------- ---------- -----
Process Safety 35.4 19.2 13.4 17.3 10.7 5.3 101.3
Infrastructure Safety 55.5 71.8 53.9 33.3 11.8 6.6 232.9
Environmental & Analysis 73.3 17.1 30.8 26.7 2.5 2.7 153.1
Medical 84.7 27.4 7.1 29.5 5.7 12.1 166.5
Inter-segmental sales (0.1) - - - - - (0.1)
------------------------- ----------- -------- -------- ------------ ------- ---------- -----
Revenue for the period 248.8 135.5 105.2 106.8 30.7 26.7 653.7
------------------------- ----------- -------- -------- ------------ ------- ---------- -----
Audited year end 31 March 2020
Revenue by sector and destination (all continuing
operations)
---------------------------------------------------------------------------
Africa,
Near
United and
States Mainland United Middle Other
of America Europe Kingdom Asia Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- ------------ ------- ---------- -------
Process Safety 67.0 39.7 28.7 33.2 21.8 9.6 200.0
Infrastructure Safety 105.5 142.9 109.9 70.9 22.6 14.7 466.5
Environmental & Analysis 157.3 34.3 67.2 51.9 7.1 7.2 325.0
Medical 180.7 59.6 15.4 57.3 11.7 22.5 347.2
Inter-segmental sales (0.2) (0.1) - - - - (0.3)
------------------------- ----------- -------- -------- ------------ ------- ---------- -------
Revenue for the period 510.3 276.4 221.2 213.3 63.2 54.0 1,338.4
------------------------- ----------- -------- -------- ------------ ------- ---------- -------
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 GBP21.3m
(six months to 30 September 2019: GBP26.6m; year to 31 March 2020:
GBP53.1m). All revenue was otherwise derived from the sale of
products.
The majority of the Group's revenue is recognised when control
passes at a point in time.
Segment results
Profit (all continuing
operations)
---------------------------------------
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
Restated
GBPm GBPm GBPm
------------------------------------------------- ------------- ------------- ---------
Segment profit before allocation of adjustments*
Process Safety 16.6 24.9 43.9
Infrastructure Safety 46.0 52.3 107.7
Environmental & Analysis 38.3 31.4 69.4
Medical 38.2 39.3 84.4
------------------------------------------------- ------------- ------------- ---------
139.1 147.9 305.4
------------------------------------------------- ------------- ------------- ---------
Segment profit after allocation of adjustments*
Process Safety 12.9 22.9 38.6
Infrastructure Safety 39.3 43.0 83.4
Environmental & Analysis 33.8 26.6 62.6
Medical 27.4 32.4 77.9
------------------------------------------------- ------------- ------------- ---------
Segment profit 113.4 124.9 262.5
Central administration costs (11.3) (13.4) (26.3)
Net finance expense (5.8) (5.7) (12.1)
------------------------------------------------- ------------- ------------- ---------
Group profit before taxation 96.3 105.8 224.1
Taxation (19.0) (20.8) (39.7)
------------------------------------------------- ------------- ------------- ---------
Profit for the period 77.3 85.0 184.4
------------------------------------------------- ------------- ------------- ---------
* Adjustments include the amortisation and impairment of
acquired intangible assets; acquisition items; significant
restructuring costs; and profit or loss on disposal of operations.
Note 9 provides more information on alternative performance
measures.
The accounting policies of the reportable segments are the same
as the Group's accounting policies. Acquisition transaction costs,
adjustments to contingent consideration and release of fair value
adjustments to inventory (collectively "acquisition items") are
recognised in the Consolidated Income Statement. Segment profit
before these acquisition items and other adjustments, is disclosed
separately above as this is the measure reported to the Group Chief
Executive for the purpose of allocation of resources and assessment
of segment performance.
These adjustments are analysed as follows:
Unaudited for the Six months to 30 September 2020
Acquisition
items
----------- -------------- -------------
Total
Release amortisation
of charge Disposal
Amortisation Adjustments fair value and of
of acquired Transaction to contingent adjustments acquisition operations
intangibles costs consideration to inventory items and restructuring Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------------
Process Safety (2.8) - - (0.9) (3.7) - (3.7)
Infrastructure
Safety (5.8) - (0.9) - (6.7) - (6.7)
Environmental &
Analysis (4.5) - - - (4.5) - (4.5)
Medical (8.5) (0.6) (0.2) (1.5) (10.8) - (10.8)
---------------- ------------ ----------- -------------- ------------- ------------- ------------------ ------
Total Segment &
Group (21.6) (0.6) (1.1) (2.4) (25.7) - (25.7)
---------------- ------------ ----------- -------------- ------------- ------------- ------------------ ------
The transaction costs relate to the acquisition of Visiometrics
in a previous year.
The GBP1.1m adjustment to contingent consideration comprised: a
charge of GBP0.9m in Infrastructure Safety arising from an increase
in estimates of the payable for FireMate (GBP0.9m); and a charge of
GBP0.2m in Medical arising from an increase in estimate of the
payable for Infowave (GBP0.7m), a decrease in the estimate payable
for NeoMedix (GBP1.0m) and a charge of GBP0.5m arising from
exchange differences on balances denominated in Euros.
The GBP2.3m release of fair value adjustments to inventory
relates to Sensit (GBP0.9m) in Process Safety and NovaBone
(GBP1.3m) and Maxtec (GBP0.2m) in Medical. All amounts have now
been released in relation to Sensit and Maxtec.
Unaudited for the Six months to 30 September
2019
--------------------------------------------------------------------------------------------------
Acquisition
items
----------- -------------- -------------
Release Total
of amortisation
fair charge Disposal
Amortisation Adjustments value and of
of acquired Transaction to contingent adjustments acquisition operations
intangibles costs consideration to inventory items and restructuring Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------ ----------- -------------- ------------- ------------- ----------------- ------
Process Safety (2.0) - - - (2.0) - (2.0)
Infrastructure
Safety (5.2) (2.2) - (1.9) (9.3) - (9.3)
Environmental &
Analysis (4.6) (0.2) - - (4.8) - (4.8)
Medical (6.5) (0.5) 0.1 - (6.9) - (6.9)
------------------ ------------ ----------- -------------- ------------- ------------- ----------------- ------
Total Segment &
Group (18.3) (2.9) 0.1 (1.9) (23.0) - (23.0)
------------------ ------------ ----------- -------------- ------------- ------------- ----------------- ------
The transaction costs arose mainly on the acquisitions during
the year. In Infrastructure Safety, they related to Ampac
(GBP2.2m). In Environmental & Analysis, they related to the
acquisitions of Invenio (GBP0.1m) and Enoveo (GBP0.1m). In Medical,
they mainly related to the acquisition of Visiometrics in a
previous year (GBP0.3m).
The GBP1.9m release of fair value adjustments to inventory
relates to Navtech Radar (GBP0.4m) and Ampac (GBP1.5m). All amounts
have now been released in relation to Navtech Radar.
Audited for the year to 31 March 2020
------------ ------------------------------------------------------------------------------------
Acquisition
items
----------- -------------- -------------
Release Total
of amortisation
fair charge Disposal
Amortisation Adjustments value and of
of acquired Transaction to contingent adjustments acquisition operations
intangibles costs consideration to inventory items and restructuring Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------ ------------- ----------------- ------
Process Safety (4.2) (0.7) - (0.4) (5.3) - (5.3)
Infrastructure
Safety (11.0) (2.3) (8.2) (2.8) (24.3) - (24.3)
Environmental &
Analysis (9.2) (0.2) 2.6 - (6.8) - (6.8)
Medical (13.9) (2.7) 8.1 (0.9) (9.4) 2.9 (6.5)
------------------ ------------ ----------- -------------- ------------- ------------- ----------------- ------
Total Segment &
Group (38.3) (5.9) 2.5 (4.1) (45.8) 2.9 (42.9)
------------------ ------------ ----------- -------------- ------------- ------------- ----------------- ------
The transaction costs arose mainly on the acquisitions during
the year. In Process Safety they related to the acquisition of
Sensit (GBP0.7m). In Infrastructure Safety, they related to the
acquisition of Ampac (GBP2.1m) and FireMate (GBP0.2m). In
Environmental & Analysis, they related to the acquisition of
Invenio (GBP0.1m) and Enoveo (GBP0.1m). In Medical, they related to
the acquisition of Infowave (GBP0.1m), NeoMedix (GBP0.1m), NovaBone
(GBP1.7m), Spreo (GBP0.1m) and Maxtec (GBP0.3m) in the current year
and the acquisition of Visiometrics in a previous year
(GBP0.4m).
The GBP2.5m adjustment to contingent consideration comprised: a
debit in Infrastructure Safety of GBP8.2m arising from an increase
in the estimate of the payable for Navtech; a credit of GBP2.6m in
Environmental & Analysis arising from decreases in estimates of
the payables for Mini-Cam (GBP2.6m) and Invenio (GBP0.1m), offset
by an increase in estimates of the payable for Enoveo (GBP0.1m);
and a credit of GBP8.1m in Medical arising from a decrease in
estimates of the payables for NovaBone (GBP8.0m) and Infowave
(GBP1.1m) offset by an increase in the estimate of the payable for
NeoMedix (GBP1.0m).
The GBP4.1m release of fair value adjustments to inventory
related to Sensit (GBP0.4m) in Process Safety, Navtech (GBP0.4m)
and Ampac (GBP2.4m) in Infrastructure Safety; and NeoMedix
(GBP0.3m), NovaBone (GBP0.5m), and Maxtec (GBP0.1m) in Medical. All
amounts have been released in relation to Navtech, Ampac and
NeoMedix.
The GBP2.9m gain on disposal of operations and restructuring
related to the sale of the Group's interest in Optomed Oy to third
parties for proceeds of EUR8.6m (GBP7.2m).
3 Finance income
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------------------- ------------- ------------- ---------
Interest receivable 0.1 0.3 0.6
Fair value movement on derivative financial instruments 0.9 0.1 -
-------------------------------------------------------- ------------- ------------- ---------
1.0 0.4 0.6
-------------------------------------------------------- ------------- ------------- ---------
4 Finance expense
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------------------- ------------- ------------- ---------
Interest payable on loans and overdrafts 4.5 3.7 8.7
Interest payable on lease obligations 1.2 1.0 2.1
Amortisation of finance costs 0.3 0.4 0.7
Net interest charge on pension plan liabilities - 0.4 0.8
Other interest payable - 0.1 0.2
-------------------------------------------------------- ------------- ------------- ---------
6.0 5.6 12.5
Fair value movement on derivative financial instruments 0.8 0.2 0.2
Unwinding of discount on provisions - 0.3 -
-------------------------------------------------------- ------------- ------------- ---------
6.8 6.1 12.7
-------------------------------------------------------- ------------- ------------- ---------
5 Taxation
The total Group tax charge for the six months to 30 September
2020 of GBP19.0m (six months to 30 September 2019: GBP20.8m; year
to 31 March 2020: GBP39.7m) comprises a current tax charge of
GBP22.0m (six months to 30 September 2019: GBP23.3m; year to 31
March 2020: GBP39.9m) and a deferred tax credit of GBP3.0m (six
months to 30 September 2019: GBP2.5m; year to 31 March 2020:
GBP0.2m). The tax charge is based on the estimated effective tax
rate for the year, for profit before tax before adjustments. The
tax rates applied to the adjustments are established on an
individual basis for each adjustment.
The current tax charge includes GBP20.0m (six months to 30
September 2019: GBP19.6m; year to 31 March 2020: GBP30.5m) in
respect of overseas tax.
6 Earnings per ordinary share
Basic and diluted earnings per ordinary share are calculated
using the weighted average of 379,092,489 (30 September 2019:
379,134,587; 31 March 2020: 379,086,833) shares in issue during the
period (net of shares purchased by the Company and held as 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 of acquired intangible
assets; acquisition items; significant 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 as it excludes amounts
not directly linked to trading. A reconciliation of earnings and
the effect on basic earnings per share figures is as follows:
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------------- ------------- ------------- ---------
Earnings from continuing operations 77.3 85.0 184.4
Amortisation of acquired intangible assets (after
tax) 16.4 14.1 30.3
Acquisition transaction costs (after tax) 0.5 2.8 5.3
Adjustments to contingent consideration (after
tax) 1.0 (0.1) (2.5)
Release of fair value adjustments to inventory
(after tax) 1.7 1.4 3.0
Disposal of operations and restructuring (after
tax) - - (2.9)
Adjusted earnings 96.9 103.2 217.6
-------------------------------------------------- ------------- ------------- ---------
Per ordinary share
---------------------------------------
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
pence pence pence
-------------------------------------------------- ------------- ------------- ---------
Earnings from continuing operations 20.37 22.40 48.66
Amortisation of acquired intangible assets (after
tax) 4.30 3.72 7.98
Acquisition transaction costs (after tax) 0.14 0.75 1.41
Adjustments to contingent consideration (after
tax) 0.27 (0.04) (0.66)
Release of fair value adjustments to inventory
(after tax) 0.46 0.37 0.78
Disposal of operations and restructuring (after
tax) - - (0.78)
Adjusted earnings 25.54 27.20 57.39
-------------------------------------------------- ------------- ------------- ---------
7 Dividends
Per ordinary share
---------------------------------------
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
pence pence pence
---------------------------------------------------- ------------- ------------- ---------
Amounts recognised as distributions to shareholders
in the period
Final dividend for the year to 31 March 2020 (31
March 2019) 9.96 9.60 9.60
Interim dividend for the year to 31 March 2020 - - 6.54
---------------------------------------------------- ------------- ------------- ---------
9.96 9.60 16.14
---------------------------------------------------- ------------- ------------- ---------
Dividends in respect of the period
Proposed interim dividend for the year to 31 March
2021 (31 March 2020) 6.87 6.54 6.54
Final dividend for the year to 31 March 2020 - - 9.96
---------------------------------------------------- ------------- ------------- ---------
6.87 6.54 16.50
---------------------------------------------------- ------------- ------------- ---------
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------------------- ------------- ------------- ---------
Amounts recognised as distributions to shareholders
in the period
Final dividend for the year to 31 March 2020 (31
March 2019) 37.7 36.4 36.4
Interim dividend for the year to 31 March 2020 - - 24.8
---------------------------------------------------- ------------- ------------- ---------
37.7 36.4 61.2
---------------------------------------------------- ------------- ------------- ---------
Dividends in respect of the period
Proposed interim dividend for the year to 31 March
2021 (31 March 2020) 26.1 24.8 24.8
Final dividend for the year to 31 March 2020 - - 37.7
---------------------------------------------------- ------------- ------------- ---------
26.1 24.8 62.5
---------------------------------------------------- ------------- ------------- ---------
8 Notes to the Consolidated Cash Flow Statement
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------------------- ------------- ------------- ---------
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 102.1 111.6 233.4
Financial instruments at fair value through profit
or loss - - 0.1
Depreciation of property, plant and equipment 18.5 17.0 35.8
Amortisation of computer software 1.5 1.1 2.2
Amortisation of capitalised development costs
and other intangibles 3.7 4.1 8.4
Impairment of capitalised development costs 2.3 2.0 5.2
Amortisation of acquired intangible assets 21.6 18.3 38.3
Share-based payment expense less amounts paid (2.0) 0.2 4.8
Payments to defined benefit pension plans net
of charge (6.5) (6.2) (12.5)
Loss/(profit) on sale of property, plant and equipment
and computer software 0.1 0.1 (0.1)
------------------------------------------------------- ------------- ------------- ---------
Operating cash flows before movement in working
capital 141.3 148.2 315.6
Increase in inventories (7.2) (6.5) (5.1)
Decrease/(increase) in receivables 36.5 (2.3) (9.0)
(Decrease)/increase in payables and provisions (20.6) (16.4) 8.9
Revision to estimate of contingent consideration
payable 1.1 (0.1) (2.5)
------------------------------------------------------- ------------- ------------- ---------
Cash generated from operations 151.1 122.9 307.9
Taxation paid (14.0) (27.3) (52.4)
------------------------------------------------------- ------------- ------------- ---------
Net cash inflow from operating activities 137.1 95.6 255.5
------------------------------------------------------- ------------- ------------- ---------
Unaudited Unaudited Audited
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
-------------------------------------------- ------------- ------------- ---------
Analysis of cash and cash equivalents
Cash and bank balances 125.5 83.2 106.3
Overdrafts (included in current borrowings) (2.1) (1.7) (0.9)
-------------------------------------------- ------------- ------------- ---------
Cash and cash equivalents 123.4 81.5 105.4
-------------------------------------------- ------------- ------------- ---------
At Lease At
31 March liabilities Exchange 30 September
2020 Cash flow additions adjustments 2020
GBPm GBPm GBPm GBPm GBPm
---------------------------------- --------- --------- ------------ ------------ -------------
Analysis of net debt
Cash and bank balances 106.3 19.5 - (0.3) 125.5
Overdrafts (0.9) (1.2) - - (2.1)
---------------------------------- --------- --------- ------------ ------------ -------------
Cash and cash equivalents 105.4 18.3 - (0.3) 123.4
Loan notes falling due within one
year (74.2) - - 0.2 (74.0)
Loan notes falling due after more
than one year (108.6) - - 0.3 (108.3)
Bank loans falling due after more
than one year (236.4) 43.6 - 1.1 (191.7)
Lease liabilities (61.5) 8.2 (11.9) 0.8 (64.4)
---------------------------------- --------- --------- ------------ ------------ -------------
Total net debt (375.3) 70.1 (11.9) 2.1 (315.0)
---------------------------------- --------- --------- ------------ ------------ -------------
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 alternative performance measures to help
it effectively monitor the performance of the Group. The Directors
consider that these represent a more consistent measure of
underlying performance by removing non-trading items that are not
closely related to the Group's trading or operating cash flows.
These measures include Return on Total Invested Capital (ROTIC),
Return on Capital Employed (ROCE), organic growth at constant
currency, Adjusted operating profit, Adjusted operating cash flow
and Return on Sales.
Note 2 provides further analysis of the adjusting items in
reaching adjusted profit measures.
Return on Total Invested Capital (ROTIC)
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------------- ------------- ------------- ---------
Profit after tax 77.3 85.0 184.4
Adjustments(1) 19.6 18.2 33.2
------------------------------------------------- ------------- ------------- ---------
Adjusted profit after tax(1) 96.9 103.2 217.6
------------------------------------------------- ------------- ------------- ---------
Total equity 1,123.0 1,067.5 1,136.9
Add back retirement benefit obligations 45.0 27.6 5.2
Less associated deferred tax assets (8.1) (4.7) (0.5)
Cumulative amortisation of acquired intangible
assets 300.6 264.8 283.5
Historical adjustments to goodwill(2) 89.5 89.5 89.5
------------------------------------------------- ------------- ------------- ---------
Total Invested Capital 1,550.0 1,444.7 1,514.6
------------------------------------------------- ------------- ------------- ---------
Average Total Invested Capital(3) 1,532.3 1,391.5 1,426.5
------------------------------------------------- ------------- ------------- ---------
Return on Total Invested Capital (annualised)(4) 12.6% 14.8% 15.3%
------------------------------------------------- ------------- ------------- ---------
Return on Capital Employed (ROCE)
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------------------- ------------- ------------- ---------
Profit before tax 96.3 105.8 224.1
Adjustments(1) 25.7 23.0 42.9
Net finance costs 5.8 5.7 12.1
Lease interest (1.2) (1.0) (2.1)
---------------------------------------------------- ------------- ------------- ---------
Adjusted operating profit(1) after share of results
of associates 126.6 133.5 277.0
---------------------------------------------------- ------------- ------------- ---------
Computer software costs within intangible assets 4.8 6.0 5.9
Capitalised development costs within intangible
assets 36.7 34.7 36.1
Other intangibles within intangible assets 3.8 3.3 3.1
Property, plant and equipment 184.7 171.7 184.3
Inventories 175.8 162.9 170.6
Trade and other receivables 245.3 275.2 286.6
Trade and other payables (158.7) (157.9) (186.7)
Lease liabilities (13.0) (12.3) (13.0)
Provisions (30.5) (20.5) (28.0)
Net current tax liabilities (4.8) (8.6) 1.3
Non-current trade and other payables (16.3) (13.3) (13.3)
Non-current provisions (14.3) (7.9) (21.6)
Non-current lease liabilities (51.4) (44.7) (48.5)
Add back contingent purchase consideration 34.5 19.4 40.1
---------------------------------------------------- ------------- ------------- ---------
Capital Employed 396.6 408.0 416.9
---------------------------------------------------- ------------- ------------- ---------
Average Capital Employed(3) 406.8 383.5 387.9
---------------------------------------------------- ------------- ------------- ---------
Return on Capital Employed (annualised)(4) 62.2% 69.6% 71.4%
---------------------------------------------------- ------------- ------------- ---------
1 Adjustments include the amortisation of acquired intangible
assets; acquisition items; significant restructuring costs and
profit or loss on disposal of operations. These also include the
associated taxation on adjusting items where after-tax
measures.
2 Includes goodwill amortised prior to 3 April 2004 and goodwill
taken to reserves.
3 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 2019
Total Invested Capital and Capital Employed balances were
GBP1,338.3m and GBP358.9m respectively.
4 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.
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:
a. removing from the year of acquisition their entire revenue
and profit before taxation,
b. in the following year, removing the revenue and profit for
the number of months equivalent to the pre-acquisition period in
the prior year, and
c. removing from the year prior to acquisition any revenue
generated by sales to the acquired company which would have been
eliminated on consolidation had the acquired company been owned for
that period.
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 exchange
rates.
Organic growth at constant currency has been calculated as
follows:
Organic growth at constant currency
Revenue Adjusted profit* before
taxation
-------------------------------------- --------------------------------------
Unaudited Unaudited Unaudited Unaudited
Six months Six months Six months Six months
to to to to
30 September 30 September 30 September 30 September
2020 2019 2020 2019
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Continuing operations 618.4 653.7 (5.4) 122.0 128.8 (5.3)
Acquired and disposed revenue/profit (40.8) (1.5) (7.8) 0.1
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth 577.6 652.2 (11.4) 114.2 128.9 (11.4)
Constant currency adjustment 2.6 - 0.4 -
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth at constant
currency 580.2 652.2 (11.0) 114.6 128.9 (11.1)
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
*Adjustments include the amortisation of acquired intangible
assets; significant 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.
Process Safety
Revenue Adjusted* segment profit
-------------------------------------- --------------------------------------
Unaudited Unaudited Unaudited Unaudited
Six months Six months Six months Six months
to to to to
30 September 30 September 30 September 30 September
2020 2019 2020 2019
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Continuing operations 91.1 101.3 (10.1) 16.6 24.9 (33.2)
Acquisition and currency adjustments (7.1) - (0.9) -
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth at constant
currency 84.0 101.3 (17.1) 15.7 24.9 (36.7)
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Infrastructure Safety
Revenue Adjusted* segment profit
-------------------------------------- --------------------------------------
Unaudited Unaudited Unaudited Unaudited
Six months Six months Six months Six months
to to to to
30 September 30 September 30 September 30 September
2020 2019 2020 2019
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Continuing operations 201.5 232.9 (13.5) 46.0 52.3 (12.0)
Acquisition and currency adjustments (7.5) (1.5) (1.7) -
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth at constant
currency 194.0 231.4 (16.2) 44.3 52.3 (15.3)
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Environmental & Analysis
Revenue Adjusted* segment profit
-------------------------------------- --------------------------------------
Unaudited Unaudited Unaudited Unaudited
Six months Six months Six months Six months
to to to to
30 September 30 September 30 September 30 September
2020 2019 2020 2019
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Continuing operations 154.0 153.1 0.6 38.3 31.4 22.2
Acquisition and currency adjustments 0.4 - 0.3 -
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth at constant
currency 154.4 153.1 0.9 38.6 31.4 23.0
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Medical
Revenue Adjusted* segment profit
-------------------------------------- --------------------------------------
Unaudited Unaudited Unaudited Unaudited
Six months Six months Six months Six months
to to to to
30 September 30 September 30 September 30 September
2020 2019 2020 2019
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Continuing operations 172.4 166.5 3.5 38.2 39.3 (3.2)
Acquisition and currency adjustments (24.1) - (7.3) 0.1
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth at constant
currency 148.3 166.5 (10.9) 30.9 39.4 (21.8)
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
*Adjustments include the amortisation of acquired intangible
assets; significant acquisition items; restructuring costs; and
profit or loss on disposal of operations.
Adjusted operating profit
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------- ------------- ------------- ---------
Operating profit 102.1 111.6 233.4
Add back:
Acquisition items 4.1 4.7 7.5
Amortisation of acquired intangible assets 21.6 18.3 38.3
------------------------------------------- ------------- ------------- ---------
Adjusted operating profit 127.8 134.6 279.2
------------------------------------------- ------------- ------------- ---------
Adjusted operating cash flow
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
--------------------------------------------------------- ------------- ------------- ---------
Net cash from operating activities (note 8) 137.1 95.6 255.5
Add back:
Net acquisition costs 1.5 2.0 5.2
Taxes paid 14.0 27.3 52.4
Proceeds from sale of property, plant and equipment 0.5 0.3 1.9
Share awards vested not settled by own shares* 7.5 5.6 6.0
Less:
Purchase of property, plant and equipment (10.2) (12.0) (31.2)
Purchase of computer software and other intangibles (1.4) (1.7) (2.9)
Development costs capitalised (7.0) (6.3) (14.7)
--------------------------------------------------------- ------------- ------------- ---------
Adjusted operating cash flow 142.0 110.8 272.2
--------------------------------------------------------- ------------- ------------- ---------
Cash conversion % (adjusted operating cash flow/adjusted
operating profit) 111% 82% 97%
--------------------------------------------------------- ------------- ------------- ---------
*See Consolidated Statement of Changes in Equity.
Return on Sales
Group Return on Sales is defined as Adjusted Profit before
Taxation as a percentage of revenue. For the sectors, Return on
Sales is defined as Adjusted segment profit as a percentage of
segment revenue. Adjusted Profit before Taxation and Adjusted
segment profit is as defined in note 2.
10 Acquisitions
Analysis of cash outflow in the Consolidated Cash Flow
Statement
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------------------------- ------------- ------------- ---------
Initial cash consideration paid - 78.2 226.2
Cash acquired on acquisitions - (6.8) (8.0)
Initial cash consideration adjustment on current
year acquisitions - 3.1 4.1
Contingent consideration paid and loan notes repaid
in cash in relation to prior year acquisitions 5.7 10.0 10.4
Other amounts paid in relation to prior year acquisitions 1.0 - 0.1
---------------------------------------------------------- ------------- ------------- ---------
Net cash outflow relating to acquisitions (per
Consolidated Cash Flow Statement) 6.7 84.5 232.8
---------------------------------------------------------- ------------- ------------- ---------
11 Fair values of financial assets and liabilities
As at 30 September 2020, 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 approximates 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 GBP187.7m, against a carrying value of
GBP182.4m.
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 2020, the total forward foreign currency
contracts outstanding were GBP47.8m. 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
GBP0.4m (30 September 2019: GBP0.9m; 31 March 2020: GBP1.0m) asset
and GBP0.9m (30 September 2019: GBP0.7m; 31 March 2020: GBP1.0m)
liability in the Consolidated Balance Sheet.
Any movements in the fair values of the forward contracts are
recognised in equity until the hedge transaction occurs, when
gains/losses are recycled to finance income or finance expense.
12 Retirement benefits
At 30 September 2020, the Group has IAS 19 Retirement benefit
obligations totalling GBP45.0m (30 September 2019: net obligation
of GBP27.6m; 31 March 2020: net obligation of GBP5.2m). The net
obligation has increased from 31 March 2020 primarily due to
changes in the financial assumptions, with the largest impacts
being the decrease in discount rate and increase in inflation rate
in the UK defined benefit plans from 2.55% and 2.50% at 31 March
2020, to 1.50% and 2.80% at 30 September 2020 respectively,
partially offset by additional employer contributions made to the
UK defined benefit plans of GBP6.6m.
13 Contingent liability
Group financing exemptions applicable to UK controlled foreign
companies
As previously reported, on 24 November 2017 the European
Commission published an opening decision that the United Kingdom
controlled foreign company ("CFC") group financing partial
exemption ("FCPE") constitutes State Aid. On 2 April 2019, the
European Commission's final decision concluded that the FCPE rules,
as they applied up to 31 December 2018, constitute State Aid. On 12
June 2019, the UK Government applied to annul the EC decision. The
Group's application to annul the EC decision on the CFC FCPE was
registered in the General Court on 9 September 2019 and has been
stayed pending the outcome of the UK Government's appeal. The UK
Government is required to commence collection proceedings in this
respect. Consequently, the Group, in common with other affected
taxpayers, is in correspondence with HMRC on this matter. The most
recent correspondence in the period was in July when the Group
provided the analyses requested by HMRC. At present it is not
possible to determine the amount that the UK Government will seek
to collect. The Group has benefited from the FCPE and the total
benefit to date at 30 September 2020 was approximately GBP15.4m (30
September 2019: GBP15.4m; 31 March 2020: GBP15.4m) in respect of
tax and approximately GBP1.4m (30 September 2019: GBP0.9m; 31 March
2020: GBP1.2m) in respect of interest. Based on its current
assessment, the Group believes no provision is required at this
time.
Other contingent liabilities
The Group has widespread global operations and is consequently a
defendant in many legal, tax and customs proceedings incidental to
those operations. In addition, there are contingent liabilities
arising in the normal course of business in respect of indemnities,
warranties and guarantees. These contingent liabilities are not
considered to be unusual in the context of the normal operating
activities of the Group. Provisions have been recognised in
accordance with the Group accounting policies where required. None
of these claims are expected to result in a material gain or loss
to the Group.
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 2020.
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 48 to 53 in the
Annual Report and Accounts 2020, 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:
- Cyber
- Organic growth
- Making and integrating acquisitions
- Talent and diversity
- Innovation
- Competition
- Economic and geopolitical uncertainty
- Natural disasters
- Communications
- Non-compliance with laws and regulations
- Financial controls
- Treasury management
- Product failure
16 Responsibility statement
We confirm that to the best of our knowledge:
a) these Condensed Interim Financial Statements have been
prepared in accordance with International Accounting Standard 34
"Interim Financial Reporting" as adopted by the European Union and
the ASB's 2007 statement on half-yearly reports;
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
Andrew Williams Marc Ronchetti
Group Chief Executive Chief Financial Officer
19 November 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR FFFIILLLTLII
(END) Dow Jones Newswires
November 19, 2020 02:00 ET (07:00 GMT)
Grafico Azioni Halma (LSE:HLMA)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Halma (LSE:HLMA)
Storico
Da Apr 2023 a Apr 2024
