TIDMHLMA
RNS Number : 8162T
Halma PLC
19 November 2019
HALMA plc
HALF YEAR RESULTS 2019/20
Record first half results 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
2019.
Highlights
Change 2019 2018
Revenue +12% GBP653.7m GBP585.5m
Adjusted Profit before Taxation(1) +14% GBP128.8m GBP112.9m
Adjusted Earnings per Share(2) +15% 27.20p 23.67p
Statutory Profit before Taxation +12% GBP105.8m GBP94.5m
Statutory Earnings per Share +14% 22.40p 19.67p
Interim Dividend per Share(3) +7% 6.54p 6.11p
Return on Sales(4) 19.7% 19.3%
Return on Total Invested Capital(5) 14.8% 14.9%
Net Debt(6) GBP310.4m GBP194.6m
-- Strong growth with Revenue up 12%, Adjusted(1) Profit before
Taxation up 14%, and Statutory Profit before Taxation up 12%,
reflecting good organic and acquired growth.
-- Organic constant currency(7) revenue growth up 5%, and
organic constant currency(3) Adjusted(1) Profit before Taxation
growth of 6%.
-- Organic constant currency(7) revenue growth in all major
regions, with good performances in the USA, UK and Asia Pacific,
and solid growth in Mainland Europe.
-- Revenue growth in all four sectors on an organic constant
currency basis(7) , with three out of four sectors delivering
growth in Adjusted(1) Profit before Taxation on an organic constant
currency basis(7) .
-- Strong returns, with Return on Sales(4) of 19.7% and ROTIC5
of 14.8%, as well as continued investment, with R&D expenditure
up 12% and representing 5.3% of revenue.
-- Solid cash generation, with cash conversion of 82%.
-- Healthy acquisition pipeline with three acquisitions
completed in the first half and two further acquisitions completed
since the period end.
-- Robust balance sheet supporting sustained investment in
organic growth and acquisitions, with net debt of GBP310.4m
(including an increase from IFRS 16 of GBP57.0m) and net debt to
EBITDA of 0.98 times.
-- Interim dividend increased 7%.
Andrew Williams, Group Chief Executive of Halma, commented:
"Halma made good progress in the first half, delivering record
revenue, profit and dividends, while increasing strategic
investment to remain well positioned in global niche markets which
have resilient, long-term growth drivers. Our strong purpose and
culture, our portfolio and geographic diversity together with our
agile business model are enabling us to deliver a good performance
in varied market conditions and to sustain growth and returns over
the longer term.
Since the period end, order intake has continued to be ahead of
revenue and order intake last year. Halma remains on track to make
further progress in the second half of the year and deliver another
good full year performance."
Notes
1 Adjusted to remove the amortisation of acquired intangible assets,
acquisition items, significant restructuring costs and profit
or loss on disposal of operations, totalling GBP23.0m (2018/19:
GBP18.4m). See note 2 to the Condensed Interim Financial Statements
for details.
2 Adjusted to remove the amortisation of acquired intangible assets,
acquisition items, significant 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 Includes an increase in 2019 of GBP57.0m as a result of the
implementation of IFRS 16.
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
Charles King, Head of Investor
Relations +44 (0)7776 685948
MHP Communications
Rachel Hirst/Andrew Jaques +44 (0)20 3128 8100
A copy of this announcement, together with other information
about Halma, may be viewed on its website: www.halma.com. 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
Record half year results
Halma made good progress in the first half of the year. Revenue
increased by 12% to GBP653.7m (2018/19: GBP585.5m), Adjusted(1)
Profit before Taxation increased by 14% to GBP128.8m (2018/19:
GBP112.9m), and Statutory Profit before Taxation increased by 12%
to GBP105.8m (2018/19: GBP94.5m).
Revenue growth included good organic constant currency revenue
growth of 5%, against a strong comparative of 14% growth in the
first half of the last financial year, a 4% contribution from
acquisitions completed in this and the previous half year, and a
positive currency translation effect of 3%.
The 14% increase in Adjusted(1) Profit before Taxation included
organic constant currency growth of 6% against a comparative of 16%
growth in the first half of last year, a 4% contribution from
acquisitions completed in this half year and the second half of
last year and a positive currency translation effect of 4%.
Return on Sales(1) improved to 19.7% (2018/19: 19.3%), including
a further increase in strategic investment for future growth. Our
companies increased R&D expenditure by 12% to GBP34.9m,
representing 5.3% of Group revenue (2018/19: 5.3%).
The Board has declared an increase of 7% in the interim dividend
to 6.54p per share (2018/19: 6.11p per share). The interim dividend
will be paid on 5 February 2020 to shareholders on the register on
24 December 2019.
Revenue growth in all four major regions
We grew revenue in all four major regions, with organic constant
currency revenue growth in our four major regions and in all of our
business sectors. This was further supported by a positive
contribution from acquisitions and by favourable currency
translation.
The USA remains our largest sales destination and contributed
38% of total revenue. Revenue increased 15%, or 7% on an organic
constant currency basis, driven by strong performances in the
Environmental & Analysis and Infrastructure Safety sectors.
Reported revenue growth in Infrastructure Safety included a
contribution, in line with our expectations, from Rath
Communications, which was acquired in January 2019. Process Safety
delivered a good performance, despite challenges in some areas
including certain oil and gas-related markets, as it continued to
benefit from a large logistics contract. The Medical sector grew at
a slower rate, partly as a result of the disposal of Accudynamics
in the last financial year.
Revenue in the UK grew 9%, or 8% on an organic constant currency
basis, with strong contributions from the two largest sectors in
the region, Environmental & Analysis and Infrastructure Safety,
and good progress in the smaller Medical sector. This was partly
offset by a slowdown in the Process Safety sector.
Mainland Europe revenue increased by 9%, or 4% on an organic
constant currency basis. Infrastructure Safety and Environmental
& Analysis performed well, while there were small declines in
the other two sectors.
Asia Pacific's revenue grew 21%, or 9% on an organic constant
currency basis. Organic growth reflected strong performances in the
Process Safety and Medical sectors and modest growth in the
Environmental & Analysis and Infrastructure Safety sectors.
Total revenue growth in this region included a contribution of 9%
from acquisitions, primarily the Ampac Group acquisition which was
completed in July 2019, details of which are given below.
In the rest of the world, which represents just 9% of the Group,
revenue fell 6%, or 9% on an organic constant currency basis.
Revenue declined in the Africa, Near and Middle East territories,
partially reflecting the timing of project-based business. Other
countries performed well overall.
The tables below summarise revenue growth by destination and by
sector, including the rates of organic growth at constant currency.
Organic constant currency measures exclude the effect of movements
in foreign exchange rates on the translation of revenue and profit
into Sterling, as well as acquisitions and disposals for the year
following completion.
External revenue by destination
Half year 2019 Half year 2018
---------------- ----------------
% organic
growth
% of % of Change % at constant
GBPm total GBPm total GBPm growth currency
------------------------- ------- ------- ------- ------- ------ ------- ------------
United States of America 248.8 38% 216.0 37% 32.8 15% 7%
Mainland Europe 135.5 21% 124.3 21% 11.2 9% 4%
United Kingdom 105.2 16% 96.2 16% 9.0 9% 8%
Asia Pacific 106.8 16% 88.1 15% 18.7 21% 9%
Other regions 57.4 9% 60.9 11% (3.5) (6)% (9)%
------------------------- ------- ------- ------- ------- ------ ------- ------------
653.7 100% 585.5 100% 68.2 12% 5%
------------------------- ------- ------- ------- ------- ------ ------- ------------
External revenue by sector
Half Half
year year
2019 2018
----- -----
% organic
growth
Change % at constant
GBPm GBPm GBPm growth currency
------------------------- ----- ----- ------ ------- ------------
Process Safety 101.3 97.9 3.4 3% 1%
Infrastructure Safety 232.9 197.6 35.3 18% 4%
Environmental & Analysis 163.7 143.0 20.7 14% 10%
Medical 155.9 147.2 8.7 6% 4%
Inter-segmental revenue (0.1) (0.2) 0.1 - -
------------------------- ----- ----- ------ ------- ------------
653.7 585.5 68.2 12% 5%
------------------------- ----- ----- ------ ------- ------------
Revenue growth in all sectors
Infrastructure Safety revenue increased by 18% to GBP232.9m (2018/19:
GBP197.6m), with 4% organic constant currency growth and a 2% positive
effect from currency translation. It also included 12% growth from
last financial year's acquisitions (Limotec, Navtech Radar and Rath
Communications), as well as from the Ampac Group which was acquired
in the first half of this financial year.
There was strong growth in Fire Detection, People and Vehicle Flow
and Elevator Safety and growth across our four major regions. The
USA performed strongly on an organic constant currency basis, with
revenue increasing 13% against 24% organic constant currency growth
in the first half of last year, driven by strong growth in the Elevator
Safety, Fire Detection and the People and Vehicle Flow segments with
the latter benefiting from new product innovation. Europe and the
UK performed well with broadly spread growth across the business
segments, while revenue declined in the Other regions due to less
project-based business in the Middle East. Acquisitions made an excellent
contribution to growth, particularly in Asia Pacific, the USA and
Mainland Europe.
Profit(2) grew by 25% to GBP52.3m (2018/19: GBP41.7m) including 9%
organic constant currency growth, a 2% positive effect from currency
translation and 14% growth from acquisitions. Return on Sales increased
to 22.5% (2018/19: 21.1%), helped by recent investments in manufacturing
process automation. Strategic investment in innovation increased,
with R&D expenditure up 15% to GBP14.2m (2018/19: GBP12.4m).
The sector is expected to make further progress in the second half,
with continued organic revenue growth and benefits from recent acquisitions.
Return on Sales in the second half is expected to be similar to the
second half of last year, resulting in the sector delivering a good
full year performance.
Process Safety revenue increased by 3% to GBP101.3m (2018/19: GBP97.9m).
There was organic constant currency growth of 1%, which compared
to last year's very strong performance of 12% organic constant currency
growth, and a 2% positive effect from currency translation. The Industrial
Access Control segment grew strongly and continued to benefit from
a large logistics safety contract in the USA. Pressure Management
and Safe Storage & Transfer revenue declined, principally due to
a challenging market in the USA for Pressure Management, although
there was stronger growth in Asia Pacific. Gas Detection saw modest
growth, with a weaker performance in developed markets, more than
offset by good increases in Asia Pacific and the Middle East, driven
by the benefits of recent investment in sales, marketing and new
product development.
Overall, the sector saw strong growth in Asia Pacific and the USA,
despite variable market conditions, the latter against a very strong
comparative. Revenue in Other regions declined.
Profit(2) increased by 12% to GBP24.9m (2018/19: GBP22.2m) including
9% organic constant currency growth and a 3% positive effect from
currency translation. Return on Sales increased to 24.5%, from 22.6%
in the first half of last year which included some one-off reorganisation
costs. R&D investment rose 4% to GBP3.5m (2018/19: GBP3.4m).
The sector is expected to make progress in the second half, and to
deliver a solid full year result, with revenue momentum steadily
improving as the benefits from the actions taken over the past year
to improve performance start to come through.
Environmental & Analysis revenue rose by 14% to GBP163.7m (2018/19:
GBP143.0m), comprising 10% organic constant currency growth and a
4% positive effect from currency translation. There was growth in
all business segments with particularly good performances in Spectroscopy
& Photonics and in Environmental Monitoring. The USA and the UK delivered
strong organic constant currency revenue growth: the USA driven by
the Photonics businesses and the UK from an excellent performance
in Environmental Monitoring, supported by new product development
and by regulatory requirements in the UK water market. Mainland Europe
grew well, also due to good contributions from the Spectroscopy &
Photonics and Environmental Monitoring segments. Revenue in Asia
Pacific grew modestly, while Other regions, which represent only
3% of sector revenue, declined.
Profit(2) increased by 21% to GBP35.1m (2018/19: GBP29.0m). Organic
constant currency profit growth was 16% and there was a 5% positive
effect from currency translation. Return on Sales saw a further improvement
from 20.3% to 21.5%. We expect Return on Sales for the Full Year
to be broadly stable year on year due to the revenue mix expected
in the second half. R&D investment rose by 2% to GBP9.8m (2018/19:
GBP9.6m), representing 6.0% of revenue.
The sector is expected to continue to perform well in the second
half of the year and achieve a strong full year performance.
Medical revenue was up by 6% to GBP155.9m (2018/19: GBP147.2m). There
was 4% organic constant currency growth against a strong prior year
comparator of 14%, a (3)% negative effect from last year's Accudynamics
disposal and a positive effect of 5% from currency translation. The
Diagnostics and Sensor Technology segments made good progress while
there were weaker performances in Ophthalmology and Patient Assessment.
Medical's largest region, the USA, represented over 50% of the sector's
revenue and delivered modest organic growth, influenced by the timing
of orders and product launches as well as the strong prior year performance.
Certain customers also moved their operations from the USA to Asia
Pacific, with that region's revenue growing 22% (or 19% on an organic
constant currency basis) as a result. Europe and UK revenue was stable
in aggregate, with good progress in Diagnostics and Sensor Technology
offset by lower revenue in Ophthalmology. Other regions grew strongly,
led by the Sensor Technology segment.
Profit(2) was GBP35.6m (2018/19: GBP35.0m), a 2% increase over the
strong performance in the first half of last year which included
a 22% organic constant currency increase. There was a GBP1.7m increase
in R&D investment in this half year, notably in our Sensor Technology
and Ophthalmology segments. Profit also included a net charge of
GBP2.5m, principally related to the rationalisation of product development
strategies, following the reorganisation and merger of two ophthalmic
companies. This portfolio change is expected to improve their combined
growth and profitability over the medium term. There was a (2)% negative
effect following last year's Accudynamics disposal, and a 5% positive
impact from currency translation. Return on Sales decreased to 22.9%
from 23.8% in 2018/19 with R&D investment (excluding the effect of
the Accudynamics disposal) up 30% to GBP7.2m (2018/19: GBP5.5m) and
now 4.6% of revenue.
We expect a stronger sector performance in the second half in order
to deliver a solid full year performance.
Five acquisitions completed this financial year
We made three acquisitions in the period, and a further two early
in the second half of the year. These involved three sectors and
four geographies, continuing our strategy of making value-enhancing
acquisitions in core and adjacent markets to expand our future growth
opportunities and geographical reach.
In July 2019, we completed the acquisition of the Ampac Group for
a cash consideration of A$135.0m (GBP75.2m), on a cash- and debt-free
basis, as part of our strategy to acquire regional partners to accelerate
growth in our core Fire Detection markets within our Infrastructure
Safety sector. The Ampac Group, as a leading fire and evacuation
systems supplier in the Australian and New Zealand markets, extended
our geographical reach and has brought highly complementary technologies
to our existing Fire businesses.
In the first half we also completed two smaller bolt-on acquisitions
to expand our technology capabilities in the Environmental & Analysis
sector, for a maximum total consideration of GBP7m. These were: Invenio,
a UK market leader in customer-side water leak detection, which is
now part of our HWM Water business based in Cwmbran, Wales; and Enoveo,
a French company with expertise in environmental microbiology, chemistry
and biotechnologies and real-time pollution monitoring, which has
been incorporated into our Hydreka business based in Lyon, France.
In October 2019, we further expanded our surgical product offering
in Ophthalmology with the acquisition of the Trabectome and Goniotome
product platforms from NeoMedix Inc., a USA-based company which designs,
manufactures and markets surgical devices for the fast-growing minimally-invasive
glaucoma surgery market. The initial cash consideration was US$8.1m
(GBP6.6 m) on a cash- and debt-free basis. Further earn-out considerations,
capped at a total of US$17m (GBP14.0m) are payable in cash, dependent
on performance in the three years to October 2022. This acquisition
is being integrated into Medical's MicroSurgical Technology (MST)
business based near Seattle, USA.
In October 2019, we acquired Infowave Solutions Inc., a location
sensing and software solutions provider, for CenTrak, one of our
Medical sector companies, to further expand its addressable market
and enhance its technological and data capabilities. The initial
consideration for Infowave was US$8.3m (GBP6.8m) with further earn-out
considerations, payable in cash, of up to US$4m (GBP3.3m) in total,
payable dependent on performance in each of the financial years ended
March 2021 and March 2022.
We continue to add to our pipeline of potential acquisitions both
in, and adjacent to, our existing markets, with all aligned to our
purpose of growing a safer, cleaner, healthier future. We have further
strengthened our sector M&A teams globally to support the acquisition
of both stand-alone businesses and bolt-ons to existing Halma companies.
New capabilities added to the Executive Board
We announced three changes to Halma's Executive Board in the first
half, as part of planned succession processes, which have added important
new capabilities and increased diversity, aligned with the needs
of our growth strategy.
Laura Stoltenberg succeeded Adam Meyers as Sector Chief Executive,
Medical & Environmental from 1 October 2019, becoming a member of
the Halma Executive Board. This followed the announcement in July
2019 of Adam's intention to retire from Halma. Adam is supporting
Laura in her transition to ensure an orderly handover occurs and
he will remain on the Executive Board and the plc Board until July
2020. He has also agreed to support Halma beyond this date until
mid-2021 should we need it.
In August 2019, Ruwan De Soyza joined Halma as our General Counsel
and Company Secretary following the retirement of Carol Chesney as
Company Secretary in late 2018. This is a newly created role on Halma's
Executive Board, with global responsibility for the Group's legal,
compliance, governance and company secretarial affairs.
In September 2019, Catherine Michel joined Halma as our first Chief
Technology Officer, with global responsibility for IT and digital
architecture. Catherine's remit covers both internal and externally
facing IT systems and she will work closely with Inken Braunschmidt
in her role of driving the execution of Halma's Digital and Innovation
growth strategy
Evolution of the Halma 4.0 growth strategy
We made further good progress on our Halma 4.0 strategy, through
which our companies are addressing the diverse challenges and opportunities
presented by the digital age. We have continued to increase investment
to support our companies to improve the speed and cost of innovation.
Our innovation and digital accelerator programmes are increasingly
focusing on the commercialisation of projects. We are piloting a
new Execution Accelerator programme that delivers targeted support
to shorten the time from investment to revenue by addressing specific
areas of challenge, such as the development of new routes to market
and new technology. Increasingly we are also leveraging our existing
digital project development experience and will be creating improved
IT and digital architecture.
Sustainability and living our purpose
Halma's 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. We have carefully selected four UN Sustainable Development
Goals to provide a framework for our initiatives, and began in the
first half to develop measures to track our impacts in relation to
these goals.
In terms of the environment and specifically addressing the challenge
of climate change, we are developing new long-term carbon emission
targets. We expect them to be aligned with climate science and initially
to cover our Scope 1 and 2 emissions. We are also beginning the evaluation
of the steps we would need to take to report on our climate change
strategy, risks and governance in line with the TCFD (Task Force
on Climate-Related Financial Disclosures) framework. We expect to
update on this in our Full Year results announcement.
We are committed to ensuring that Halma is an inclusive organisation,
thereby maximising the pool of talent available to us and ensuring
we recruit the best people for each role. One measure of our inclusivity
is gender diversity, and the changes to our Executive Board outlined
above will ultimately result in gender balance, setting a strong
example to the rest of the Group. We were also pleased that our progress
was recognised by three of our senior leaders being included in the
Financial Times' ranking of the 100 Most Influential Women in Engineering
in the UK.
We were immensely pleased and energised with the result of our first
ever group-wide charitable campaign, Gift of Sight. As part of the
campaign, we screened the eyesight of 2,525 employees, approximately
one-third of our global employee population, with the involvement
of 33 Halma companies in the USA, the UK, India, Brazil and China.
We raised over US$200,000 for our campaign partner, the Himalayan
Cataract Project, which will help transform more than 8,000 people's
lives by giving them sight. We have now formed a team to identify
and lead our next campaign in 2020, which will also be aligned with
one of our chosen UN Sustainable Development Goals.
Currency effects
We report our results in Sterling with 48% 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 2019/20. This resulted in a 3% positive currency translation effect
on Group revenue and 4% on profit in the first half of 2019/20 relative
to 2018/19. If exchange rates remain at current levels, we expect
a broadly neutral currency translation effect in the second half
of 2019/20.
Pension deficit reduced
On an IAS 19 basis the deficit on the Group's defined benefit plans
at the half year end reduced to GBP27.6m
(31 March 2019: GBP39.2m) before the related deferred tax asset.
The plans' liabilities increased due to a decrease in the discount
rate used to value those liabilities, but this was more than offset
by further employer contributions together with the return from the
plans' assets which resulted in the overall reduction 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. We expect the aggregate cash contributions in this regard
for the two UK defined benefit plans in the 2019/20 financial year
to be consistent with our previous guidance of GBP12.7m.
Group tax rate as expected
The Group's effective tax rate on adjusted profit was 19.9%. This
is based on the forecast effective tax rate for the year as a whole,
and is higher than in the Full Year 2018/19 (18.6%) mainly due to
a change in 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 GBP0.9m (in respect of interest). Halma
has appealed against the European Commission's decision, as has the
UK Government and a number of other UK companies. In the meantime,
the UK Government is required to commence collection proceedings
and therefore it is expected that the Group will have to make a payment
in the second half of the year ending 31 March 2020 of up to GBP16.3m.
Based on its current assessment, the Group believes that no provision
is required in respect of this issue.
New accounting standard IFRS 16 adopted
The Group adopted new accounting standards and interpretations with
effect from 1 April 2019. There has been no material impact on the
Group's financial statements, with the exception of IFRS 16 'Leases',
which brings leases, principally for land and buildings, on to the
balance sheet. IFRS 16 has resulted in a small reduction in net assets
of GBP3.3m, comprising an increase in assets of GBP45.4m recognising
a right-of-use asset, and an increase in liabilities (principally
from the lease liability) of GBP48.7m. The net effect on the Group's
profit and loss account has been immaterial, with operating lease
costs of approximately GBP7.7m being replaced by a depreciation charge
of GBP6.3m and a financing expense of GBP1.0m, resulting in a benefit
to Operating Profit of GBP1.4m and to Profit before Tax of GBP0.4m.
There has been no impact on the Group's cash flow. Further details
of all new accounting standards adopted, and their application to
the Group's accounts, can be found in the notes to the Condensed
Interim Financial Statements.
Cash flow and funding
Cash conversion (adjusted operating cash flow as a percentage of
adjusted operating profit - see note 9) was 82% (2018/19: 86%), just
below our cash conversion target of 85%. This included an increase
in working capital of GBP25.2m (2018/19: GBP10.6m), principally reflecting
the timing and relative quantum of payments and the Group's continued
strong growth.
Dividend and tax payments also increased this half year, with tax
payments of GBP27.3m (2018/19: GBP19.0m). This included a one-off
increase in cash taxation payable of GBP5.4m as a result of the acceleration
of the payment timetable for UK Corporation Tax payments for larger
companies, which will not be repeated in the second half. Acquisition
expenditure (including acquisition costs and contingent consideration
for acquisitions made in prior years) was GBP88.3m (2018/19: GBP4.7m).
Capital expenditure reduced to GBP13.7m (2018/19: GBP14.9m) reflecting
the timing of company projects rather than a specific action to limit
investment. We continue to expect capital expenditure for the full
year to be around GBP35m.
Net debt at the end of the period was GBP310.4m, which includes an
increase of GBP57.0m for lease liabilities now included as a result
of the adoption of IFRS 16 (31 March 2019 net debt: GBP181.7m, GBP232.0m
restated for the effect of IFRS 16). Gearing (the ratio of net debt
to EBITDA) at half year end was 0.98 times, which is within our typical
operating range of up to 2 times gearing and included the effect
of IFRS 16 on net debt and EBITDA.
Continued cash generation, a healthy balance sheet and committed
external financial resources will allow us to continue to invest
in organic growth and acquisitions to meet our growth objectives
as well as to sustain our progressive dividend policy.
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 thereby 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 54 to 59 of the Annual Report and Accounts
2019, 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 continue to closely monitor and assess any potential effects from
the UK's exit from the European Union, and to monitor and respond
to changes in tariffs on certain goods by the USA and China. In the
first half of this financial year, approximately 9% of Group revenue
came from direct sales between the UK and Mainland Europe, and approximately
3% between the USA and China. 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, as well as enabling us to take advantage
of any new opportunities that arise.
Going concern
After conducting a review of the Group's financial resources, the
Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason they continue to adopt the going concern
basis in preparing the Condensed Interim Financial Statements.
Outlook
Halma made good progress in the first half, delivering record revenue,
profit and dividends, while increasing strategic investment to remain
well positioned in global niche markets which have resilient, long-term
growth drivers. Our strong purpose and culture, our portfolio and
geographic diversity together with our agile business model are enabling
us to deliver a good performance in varied market conditions and
to sustain growth and returns over the longer term.
Since the period end, order intake has continued to be ahead of revenue
and order intake last year. Halma remains on track to make further
progress in the second half of the year and deliver another good
full year performance.
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. Profit includes the
effect of the adoption of IFRS 16 from 1 April 2019, which
benefited Adjusted(1) Operating Profit by GBP1.4m. The effect on
each individual sector was immaterial.
Independent review report to Halma plc
Report on the Condensed Interim Financial Statements
Our conclusion
We have reviewed Halma plc's half year financial information (the
"interim financial statements") in the Half Year Report of Halma
plc for the six-month period ended 30 September 2019. 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
2019;
* the Consolidated Income Statement and Consolidated
Statement of Comprehensive Income and Expenditure for
the period then ended;
* the Consolidated Cash Flow Statement for the period
then ended;
* the Consolidated Statement of Changes in Equity for
the period then ended; and
* the explanatory notes to the interim financial
statements.
The interim financial statements included in the Half Year Report
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the European
Union and the Disclosure Guidance and Transparency Rules sourcebook
of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 in the notes 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
Watford
19 November 2019
Half year results 2019/20
Condensed INTERIM Financial Statements
Consolidated Income Statement Audited
Year
to
Unaudited Unaudited 31
Six months to Six months to March
30 September 2019 30 September 2018 2019
---------------------------------- ---------------------------------- -------
Adjustments* Adjustments*
Before (note Before (note
adjustments* 2) Total adjustments* 2) Total Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------- ----- ------------ ------------ ------ ------------ ------------ ------ -------
Continuing
operations
Revenue 2 653.7 - 653.7 585.5 - 585.5 1,210.9
------------- ----- ------------ ------------ ------ ------------ ------------ ------ -------
Operating
profit 134.6 (23.0) 111.6 117.9 (17.5) 100.4 217.8
Share of
results
of
associates (0.1) - (0.1) (0.1) - (0.1) (0.1)
Loss on
disposal
of
operations 2 - - - - (0.9) (0.9) (1.0)
Finance
income 3 0.4 - 0.4 0.1 - 0.1 0.5
Finance
expense 4 (6.1) - (6.1) (5.0) - (5.0) (10.5)
------------- ----- ------------ ------------ ------ ------------ ------------ ------ -------
Profit before
taxation 128.8 (23.0) 105.8 112.9 (18.4) 94.5 206.7
Taxation 5 (25.6) 4.8 (20.8) (23.1) 3.2 (19.9) (36.9)
------------- ----- ------------ ------------ ------ ------------ ------------ ------ -------
Profit for
the
period
attributable
to equity
shareholders 103.2 (18.2) 85.0 89.8 (15.2) 74.6 169.8
------------- ----- ------------ ------------ ------ ------------ ------------ ------ -------
Earnings per
share
from
continuing
operations 6
Basic and
diluted 27.20p 22.40p 23.67p 19.67p 44.78p
Dividends in
respect
of the
period 7
Dividends
paid
and proposed
(GBPm) 24.8 23.2 59.6
Per share 6.54p 6.11p 15.71p
------------- ----- ------------ ------------ ------ ------------ ------------ ------ -------
* 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 Year
to months to
30 September to 31 March
2019 30 September 2019
GBPm 2018 GBPm
GBPm
----------------------------------------------- ------------- ------------- ---------
Profit for the period 85.0 74.6 169.8
Items that will not be reclassified
subsequently
to the Income Statement:
Actuarial gains on defined benefit pension
plans 6.0 28.2 6.5
Tax relating to components of other
comprehensive
income that will not be reclassified (1.1) (5.2) (1.6)
Items that may be reclassified subsequently
to the Income Statement:
Effective portion of changes in fair value
of cash flow hedges (0.4) (0.6) -
Exchange gains on translation of foreign
operations
and net investment hedge 43.2 37.3 32.5
Exchange gain on translation of foreign
operations
recycled on disposal - (0.4) (0.3)
Tax relating to components of other
comprehensive
income that may be reclassified (0.1) - -
----------------------------------------------- ------------- ------------- ---------
Other comprehensive income for the period 47.6 59.3 37.1
----------------------------------------------- ------------- ------------- ---------
Total comprehensive income for the period
attributable
to equity shareholders 132.6 133.9 206.9
----------------------------------------------- ------------- ------------- ---------
The exchange gains of GBP43.2m (six months to 30 September 2018:
GBP36.9m gain; year to 31 March 2019: GBP32.5m gain) include losses
of GBP8.0m (six months to 30 September 2018: GBP10.7m losses;
year to 31 March 2019: GBP7.9m losses), which relate to net investment
hedges.
Consolidated Balance Sheet
Unaudited Unaudited Audited
30 September 30 September 31 March
2019 2018 2019
Restated Restated
Notes GBPm GBPm GBPm
---------------------------------------------- ----- ------------- ------------- ---------
Non-current assets
Goodwill 10 765.5 655.6 694.0
Other intangible assets 272.4 229.9 245.2
Property, plant and equipment 171.7 109.6 112.4
Interests in associates and other investments 5.5 3.9 3.9
Deferred tax asset 1.4 1.7 1.4
---------------------------------------------- ----- ------------- ------------- ---------
1,216.5 1,000.7 1,056.9
---------------------------------------------- ----- ------------- ------------- ---------
Current assets
Inventories 162.9 141.2 144.3
Trade and other receivables 275.2 241.8 259.6
Tax receivable 4.8 0.7 0.2
Cash and bank balances 83.2 66.4 81.2
Derivative financial instruments 11 0.9 0.3 0.9
---------------------------------------------- ----- ------------- ------------- ---------
527.0 450.4 486.2
---------------------------------------------- ----- ------------- ------------- ---------
Total assets 1,743.5 1,451.1 1,543.1
---------------------------------------------- ----- ------------- ------------- ---------
Current liabilities
Trade and other payables 157.9 154.5 164.8
Borrowings 1.7 3.0 9.2
Lease liabilities 12.3 - -
Provisions 20.5 18.2 25.4
Tax liabilities 13.4 13.3 13.4
Derivative financial instruments 11 0.7 0.5 0.3
---------------------------------------------- ----- ------------- ------------- ---------
206.5 189.5 213.1
---------------------------------------------- ----- ------------- ------------- ---------
Net current assets 320.5 260.9 273.1
---------------------------------------------- ----- ------------- ------------- ---------
Non-current liabilities
Borrowings 334.9 258.0 253.7
Lease liabilities 44.7 - -
Retirement benefit obligations 27.6 20.7 39.2
Trade and other payables 13.3 9.7 11.6
Provisions 7.9 4.7 10.9
Deferred tax liabilities 41.1 41.2 33.2
---------------------------------------------- ----- ------------- ------------- ---------
469.5 334.3 348.6
---------------------------------------------- ----- ------------- ------------- ---------
Total liabilities 676.0 523.8 561.7
---------------------------------------------- ----- ------------- ------------- ---------
Net assets 1,067.5 927.3 981.4
---------------------------------------------- ----- ------------- ------------- ---------
Equity
Share capital 38.0 38.0 38.0
Share premium account 23.6 23.6 23.6
Own shares (6.6) (3.5) (4.7)
Capital redemption reserve 0.2 0.2 0.2
Hedging reserve (0.2) (0.3) 0.3
Translation reserve 162.7 124.2 119.5
Other reserves (11.8) (10.9) (5.6)
Retained earnings 861.6 756.0 810.1
---------------------------------------------- ----- ------------- ------------- ---------
Total equity 1,067.5 927.3 981.4
---------------------------------------------- ----- ------------- ------------- ---------
Consolidated Statement of Changes in Equity
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
-------------- ------- ------- ------ ---------- ------- ----------- -------- -------- -------
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 2019 the number of shares held by the Employee
Benefit Trust was 393,672
(30 September 2018: 289,966 and 31 March 2019: 370,354).
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 2018
---------------------------------------------------------------------------------------------
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 2018
(audited) 38.0 23.6 (6.3) 0.2 0.3 87.3 (5.9) 691.2 828.4
Impact of changes
in accounting policies:
IFRS 9 - - - - - - - 0.1 0.1
IFRS 15 - - - - - - - (0.2) (0.2)
----------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- ------
Restated balance
at
1 April 2018 38.0 23.6 (6.3) 0.2 0.3 87.3 (5.9) 691.1 828.3
Profit for the period - - - - - - - 74.6 74.6
Other comprehensive
income and expense:
Exchange differences
on translation of
foreign operations - - - - - 37.3 - - 37.3
Exchange gains on
translation of foreign
operations recycled
on disposal - - - - - (0.4) - - (0.4)
Actuarial gains
on defined benefit
pension plans - - - - - - - 28.2 28.2
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 - - - - - - - (5.2) (5.2)
----------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- ------
Total other
comprehensive
income and expense - - - - (0.6) 36.9 - 23.0 59.3
Dividends paid - - - - - - - (34.0) (34.0)
Share-based payments
charge - - - - - - 4.9 - 4.9
Deferred tax on
share-based
payment transactions - - - - - - 0.5 - 0.5
Excess tax deductions
related to share-based
payments on exercised
awards - - - - - - - 1.3 1.3
Purchase of own
shares - - (2.7) - - - - - (2.7)
Performance share
plan awards vested - 5.5 - - - (10.4) - (4.9)
----------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- ------
At 30 September
2018 (unaudited) 38.0 23.6 (3.5) 0.2 (0.3) 124.2 (10.9) 756.0 927.3
----------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- ------
For the year to 31 March 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 2018
(audited) 38.0 23.6 (6.3) 0.2 0.3 87.3 (5.9) 691.2 828.4
Impact of changes
in accounting policies:
IFRS 9 - - - - - - - 0.1 0.1
IFRS 15 - - - - - - - (0.2) (0.2)
----------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- ------
Restated balance
at
1 April 2018 38.0 23.6 (6.3) 0.2 0.3 87.3 (5.9) 691.1 828.3
Profit for the
period - - - - - - - 169.8 169.8
Other comprehensive
income and expense:
Exchange differences
on translation
of foreign operations - - - - - 32.5 - - 32.5
Exchange gains
on translation
of foreign operations
recycled on disposal - - - - - (0.3) - - (0.3)
Actuarial gains
on defined benefit
pension plans - - - - - - - 6.5 6.5
Effective portion
of changes in fair
value of cash flow
hedges - - - - - - - - -
Tax relating to
components of other
comprehensive income - - - - - - - (1.6) (1.6)
----------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- ------
Total other
comprehensive
income and expense - - - - - 32.2 - 4.9 37.1
Dividends paid - - - - - - - (57.2) (57.2)
Share-based payments
charge - - - - - - 9.7 - 9.7
Deferred tax on
share-based
payment transactions - - - - - - 0.9 - 0.9
Excess tax deductions
related to share-based
payments on exercised
awards - - - - - - - 1.5 1.5
Purchase of own
shares - - (3.8) - - - - - (3.8)
Performance share
plan awards vested - 5.4 - - - (10.3) - (4.9)
----------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- ------
At 31 March 2019
(audited) 38.0 23.6 (4.7) 0.2 0.3 119.5 (5.6) 810.1 981.4
----------------------- -------- -------- ------- ----------- -------- ----------- --------- --------- ------
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2019 2018 2019
Notes GBPm GBPm GBPm
------------------------------------------------- ----- ------------- ------------- ---------
Net cash inflow from operating activities 8 95.6 96.8 219.0
------------------------------------------------- ----- ------------- ------------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (12.0) (13.7) (26.4)
Purchase of computer software (1.5) (1.2) (2.4)
Purchase of other intangibles (0.2) (0.8) (2.5)
Proceeds from sale of property, plant and
equipment and capitalised development costs 0.3 0.4 1.6
Development costs capitalised (6.3) (4.3) (10.8)
Interest received 0.3 0.1 0.4
Acquisition of businesses, net of cash acquired (84.5) (4.7) (67.0)
Disposal of business 0.8 3.0 3.1
Payments for financial assets at fair value
through other comprehensive income (1.8) - -
------------------------------------------------- ----- ------------- ------------- ---------
Net cash used in investing activities (104.9) (21.2) (104.0)
------------------------------------------------- ----- ------------- ------------- ---------
Cash flows from financing activities
Dividends paid 7 (36.4) (34.0) (57.2)
Purchase of own shares (8.5) (2.6) (3.8)
Interest paid (5.2) (4.0) (8.2)
Loan arrangement fee paid - - (0.5)
Proceeds from bank borrowings 91.9 28.0 66.4
Repayment of bank borrowings (18.4) (70.4) (110.3)
Repayment of lease liabilities (6.7) - -
------------------------------------------------- ----- ------------- ------------- ---------
Net cash from/(used in) financing activities 16.7 (83.0) (113.6)
------------------------------------------------- ----- ------------- ------------- ---------
Increase/(decrease) in cash and cash equivalents 7.4 (7.4) 1.4
Cash and cash equivalents brought forward 72.1 69.7 69.7
Exchange adjustments 2.0 1.2 1.0
------------------------------------------------- ----- ------------- ------------- ---------
Cash and cash equivalents carried forward 81.5 63.5 72.1
------------------------------------------------- ----- ------------- ------------- ---------
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
---------------------------------------------------- ------------- ------------- ---------
Reconciliation of net cash flow to movement
in net debt
Increase/(decrease) in cash and cash equivalents 7.4 (7.4) 1.4
Net cash (inflow)/outflow from (drawdown)/repayment
of bank borrowings (73.5) 42.4 43.9
Loan notes repaid in respect of acquisitions 0.1 0.1 0.1
Lease liabilities additions (9.0) - -
Lease liabilities acquired (3.6) - -
Lease liabilities and interest repaid 7.7 - -
Exchange adjustments (7.5) (9.4) (6.8)
---------------------------------------------------- ------------- ------------- ---------
(78.4) 25.7 38.6
Net debt brought forward (181.7) (220.3) (220.3)
Impact of changes in accounting policies - IFRS
16 (50.3) - -
---------------------------------------------------- ------------- ------------- ---------
Restated net debt brought forward (232.0) (220.3) (220.3)
---------------------------------------------------- ------------- ------------- ---------
Net debt carried forward (310.4) (194.6) (181.7)
---------------------------------------------------- ------------- ------------- ---------
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 2019, was approved by the Directors on 19 November
2019.
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 2019, 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, and except for the adoption of new accounting standards
described below.
The figures shown for the year to 31 March 2019 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.
As part of a review of deferred tax balances as at 30 September
2019, some balances were identified (mainly relating to intangible
assets on US acquisitions) that were previously presented gross
but should have been netted off as they are in the same jurisdiction
and there is a legally enforceable right to set off current tax
assets against current tax liabilities. These balances have now
been netted off. Restatements have been made to the prior periods
as at 30 September 2018 and 31 March 2019, resulting in a netting
down of assets and liabilities of GBP29.2m and GBP40.7m respectively.
There is no impact on net assets, cash or other KPIs. There was
no impact on opening net assets as at 1 April 2018.
Going concern
The Directors believe the Group is well placed to manage its business
risks successfully. The Group's forecasts and projections, taking
account of reasonably possible changes in trading performance,
show that the Group should be able to operate within the level
of its current committed facilities, which includes a GBP550m five-year
Revolving Credit Facility (RCF) running until November 2023 of
which GBP398.8m remains undrawn at the date of this report. With
this in mind, the Directors have a reasonable expectation that
the Company and Group have adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue to adopt
the going concern basis in preparing the half year Condensed Financial
Statements.
New accounting standards and policies
With effect from 1 April 2019 the Group has adopted the following
new accounting standard:
IFRS 16 'Leases'
The Group has adopted IFRS 16 from 1 April 2019 and applied the
modified retrospective approach. IFRS 16 provides a single on-balance
sheet accounting model for lessees which recognises a right-of-use
asset, representing its right to use the underlying asset, and
lease liability, representing its obligations to make payment in
respect of the use of the underlying asset. The distinction between
finance and operating leases for lessees is removed. Comparatives
for the prior period have not been restated and the adjustments
arising from the new leasing standard are therefore recognised
in the opening balance sheet on 1 April 2019 as follows:
1 April
2019
GBPm
------------------------------------------------------- -------
Non-current assets
Property, plant and equipment (right of use assets) 45.4
Total assets 45.4
------------------------------------------------------- -------
Current liabilities
Trade and other payables 0.4
Lease liabilities (10.7)
Non-current liabilities
Lease liabilities (39.6)
Deferred tax liability 1.2
Total liabilities (48.7)
------------------------------------------------------- -------
Total movement in retained earnings as at 1 April 2019 (3.3)
------------------------------------------------------- -------
On adoption of IFRS 16, the Group recognised liabilities for leases
which had been classified as operating leases under previous accounting
standards. The lease liability has been measured at the present
value of the remaining lease payments, discounted using the incremental
borrowing rate as at 1 April 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on
1 April 2019 was 3.7%.
1 April
2019
GBPm
------------------------------------------------------------- -------
Operating lease commitments as disclosed at 31 March 2019 52.5
Reconciling items
* Effect of discounting (at incremental borrowing rate
as a 1 April 2019) (4.8)
* Short-term leases recognised on a straight-line basis
as expense (0.4)
* Low-value leases recognised on a straight-line basis
as expense (0.3)
* Recognition differences on new leases and extension
assumptions 3.3
------------------------------------------------------------- -------
Lease liability recognised as at 1 April 2019 50.3
------------------------------------------------------------- -------
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
* Relied on previous assessments of whether leases are
onerous
* Excluded initial direct costs for the measurement of
right-of-use assets at the date of the initial
application
* Used hindsight in determining the lease term where
the contract contains options to extend or terminate
the
lease
Additionally, on transition the Group elected not to reassess whether
a contract is, or contains, a lease, instead relying on the assessment
already made applying IAS 17 'Leases' and IFRIC 4 'Determining
whether an Arrangement contains a Lease'.
Impact on the income statement
The impact on the income statement for the six months ended 30
September 2019 is to increase operating profit by approximately
GBP1.4m and increase finance costs by GBP1.0m resulting in an increase
in profit before tax of GBP0.4m. The impact on the income statement
for the year ended 31 March 2020 is expected to increase operating
profit by approximately GBP2.8m and increase finance costs by GBP2.0m
resulting in an increase in profit before tax of GBP0.8m.
Impact on the cash flow statement
There has been a change to the classification of cash flows in
the cash flow statement with operating lease payments previously
categorised as net cash used in operations now being split between
the principal element, included as repayment of lease liabilities
within financing activities and the interest element, included
as interest paid within financing activities. In the six months
to 30 September 2019 there are GBP7.7m of lease payments within
financing activities comprising GBP6.7m of repayment of lease liabilities
and GBP1.0m of interest paid.
Accounting policy
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date.
The right-of-use asset is initially measured at cost, comprising
the initial amount of the lease liability plus any initial direct
costs incurred and an estimate of costs to restore the underlying
asset, less any lease incentives received. The right-of-use asset
is subsequently depreciated using the straight-line method from
the commencement date to the earlier of the end of the useful life
of the asset or the end of the lease term.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the incremental borrowing rate. The lease liability
is measured at amortised cost using the effective interest method.
It is remeasured when there is a change in future lease payments
arising from a change in an index or a rate or a change in the
Group's assessment of whether it will exercise an extension or
termination option. When the lease liability is remeasured, a corresponding
adjustment is made to the right-of-use asset.
Payments associated with short-term leases or low-value assets
are recognised on a straight-line basis as an expense in the income
statement. Short-term leases are leases with a lease term of 12
months or less. Low-value assets mostly comprise of IT equipment
and small items of office furniture.
Other new accounting standards and interpretations applied for
the first time
The following Standards with an effective date of 1 January 2019
have been adopted without any significant impact on the amounts
reported in these financial statements:
* Amendments to IAS 19: Plan amendment, Curtailment of
Settlement
* Annual improvements 2015-2017 cycle
* IFRIC Interpretation 23: Uncertainty over Income Tax
Treatments
* Amendments to IAS 28: Long-term Interests in
Associates and Joint Ventures
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.
Segment revenue disaggregation (by location of external customer)
Unaudited Six months to 30 September 2019
----------------------------------------------------------------------
Revenue by sector and destination (all continuing
operations)
----------------------------------------------------------------------
Africa,
United Near
States and
of Mainland United Asia Middle Other
America Europe Kingdom 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 78.1 19.5 31.3 29.6 2.5 2.7 163.7
Medical 79.9 25.0 6.6 26.6 5.7 12.1 155.9
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
---------------- --------- -------- -------- --------- --------- ---------- -----
Unaudited Six months to 30 September 2018
--------------------------------------------------------------------
Revenue by sector and destination (all continuing
operations)
--------------------------------------------------------------------
Africa,
United Near
States and
of Mainland United Asia Middle Other
America Europe Kingdom Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- -------- -------- -------- ------- --------- -------
Process Safety 32.5 19.8 15.4 13.9 12.0 4.3 97.9
Infrastructure
Safety 39.8 61.2 50.2 24.4 16.2 5.8 197.6
Environmental &
Analysis 65.6 17.7 24.7 28.1 3.7 3.2 143.0
Medical 78.2 25.6 6.0 21.7 6.6 9.1 147.2
Inter-segmental
sales (0.1) - (0.1) - - - (0.2)
---------------- --------- -------- -------- -------- ------- --------- -------
Revenue for the
period 216.0 124.3 96.2 88.1 38.5 22.4 585.5
---------------- --------- -------- -------- -------- ------- --------- -------
Audited year end 31 March 2019
--------------------------------------------------------------------
Revenue by sector and destination (all continuing
operations)
--------------------------------------------------------------------
Africa,
United Near
States and
of Mainland United Asia Middle Other
America Europe Kingdom Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- --------- -------- -------- -------- ------- --------- -------
Process Safety 61.3 42.1 32.6 29.6 23.2 8.7 197.5
Infrastructure
Safety 87.8 131.2 101.4 48.6 28.4 11.2 408.6
Environmental &
Analysis 135.2 38.0 53.6 59.7 6.0 6.6 299.1
Medical 159.2 55.0 13.4 46.1 13.2 19.2 306.1
Inter-segmental
sales (0.3) - (0.1) - - - (0.4)
---------------- --------- -------- -------- -------- ------- --------- -------
Revenue for the
period 443.2 266.3 200.9 184.0 70.8 45.7 1,210.9
---------------- --------- -------- -------- -------- ------- --------- -------
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 GBP26.6m (six
months to 30 September 2018: GBP18.0m; year to 31 March 2019: GBP39.2m).
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
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- ---------
Segment profit before allocation of
adjustments*
Process Safety 24.9 22.2 45.5
Infrastructure Safety 52.3 41.7 88.9
Environmental & Analysis 35.1 29.0 66.4
Medical 35.6 35.0 76.9
----------------------------------------------- ------------- ------------- ---------
147.9 127.9 277.7
----------------------------------------------- ------------- ------------- ---------
Segment profit after allocation of adjustments*
Process Safety 22.9 20.2 41.5
Infrastructure Safety 43.0 37.3 79.1
Environmental & Analysis 30.3 25.5 60.1
Medical 28.7 26.5 60.1
----------------------------------------------- ------------- ------------- ---------
Segment profit 124.9 109.5 240.8
Central administration costs (13.4) (10.1) (24.1)
Net finance expense (5.7) (4.9) (10.0)
----------------------------------------------- ------------- ------------- ---------
Group profit before taxation 105.8 94.5 206.7
Taxation (20.8) (19.9) (36.9)
----------------------------------------------- ------------- ------------- ---------
Profit for the period 85.0 74.6 169.8
----------------------------------------------- ------------- ------------- ---------
* 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 2019
--------------- ------------------------------------------------------------------------------------------
Acquisition items
--------------- ------------ --------------------------------------- ------------ ------------- ------
Release
of Total Disposal
fair amortisation of
value charge operations
Amortisation Adjustments adjustments and and
of acquired Transaction to contingent to acquisition significant
intangibles costs consideration inventory items 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 and 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.
Unaudited for the Six months to 30 September 2018
--------------- ------------------------------------------------------------------------------------------
Acquisition items
--------------- ------------ --------------------------------------- ------------ ------------- ------
Release
of Total Disposal
fair amortisation of
value charge operations
Amortisation Adjustments adjustments and and
of acquired Transaction to contingent to acquisition significant
intangibles costs consideration inventory items restructuring Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------ ----------- ------------- ----------- ------------ ------------- ------
Process Safety (2.0) - - - (2.0) - (2.0)
Infrastructure
Safety (3.0) - - (1.4) (4.4) - (4.4)
Environmental &
Analysis (4.5) - 1.1 (0.1) (3.5) - (3.5)
Medical (8.0) - 0.4 - (7.6) (0.9) (8.5)
--------------- ------------ ----------- ------------- ----------- ------------ ------------- ------
Total Segment &
Group (17.5) - 1.5 (1.5) (17.5) (0.9) (18.4)
--------------- ------------ ----------- ------------- ----------- ------------ ------------- ------
The GBP1.5m adjustment to contingent consideration comprised a
credit of GBP1.1m in Environmental & Analysis arising from a change
in estimate of the payable for FluxData, Inc. and a credit of GBP0.4m
in Medical arising from exchange differences on the payables for
Visiometrics S.L. ("Visiometrics") which is denominated in Euros.
The GBP1.5m charge related to the release of the remaining fair
value adjustment on revaluing the inventory of Firetrace (GBP1.4m)
and Mini-Cam Enterprises Limited and subsidiaries (GBP0.1m).
The loss on disposal of operations of GBP0.9m arose on the sale
of the trade and assets of Accudynamics Inc, for sale proceeds
of GBP4.1m. The net assets on disposal were GBP4.3m, which together
with the disposal of related goodwill of GBP0.8m and disposal costs
of GBP0.3m, offset by the recycling of foreign exchange gains of
GBP0.4m, resulted in a net loss on disposal (before taxation) of
GBP0.9m.
Audited for the year to 31 March 2019
--------------- -------------------------------------------------------------------------------------
Acquisition items
--------------- ------------ --------------------------------------- ------------ ------------- ------
Release
of Total Disposal
fair amortisation of
value charge Defined operations
Amortisation Adjustments adjustments and benefit and
of acquired Transaction to contingent to acquisition pension significant
intangibles costs consideration inventory items charge restructuring Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------ ----------- ------------- ----------- ------------ ------- ------------- ------
Process
Safety (4.0) - - - (4.0) - - (4.0)
Infrastructure
Safety (6.8) (0.4) - (2.6) (9.8) - - (9.8)
Environmental
& Analysis (9.1) (0.1) 3.0 (0.1) (6.3) - - (6.3)
Medical (15.7) (0.6) 0.5 - (15.8) - (1.0) (16.8)
--------------- ------------ ----------- ------------- ----------- ------------ ------- ------------- ------
Total Segment (35.6) (1.1) 3.5 (2.7) (35.9) - (1.0) (36.9)
Unallocated - - - - - (2.1) - (2.1)
--------------- ------------ ----------- ------------- ----------- ------------ ------- ------------- ------
(35.6) (1.1) 3.5 (2.7) (35.9) (2.1) (1.0) (39.0)
--------------- ------------ ----------- ------------- ----------- ------------ ------- ------------- ------
The transaction costs arose mainly on the acquisitions during the
year. In Infrastructure Safety, they mainly related to LAN Controls
Limited (GBP0.1m), Limotec (GBP0.1m), Navtech Radar (GBP0.4m) and
Business Marketers Group (trading as Rath Communications) (GBP0.1m)
and a credit from a previous acquisition. In Environmental & Analysis,
they related to the acquisition of FluxData in a previous year
(GBP0.1m). In Medical, they mainly related to the acquisition of
Visiometrics in a previous year (GBP0.5m).
The GBP3.5m adjustment to contingent consideration comprised: a
credit of GBP3.0m in Environmental & Analysis arising from decreases
in estimates of the payable for FluxData (GBP2.7m) and Mini-Cam
(GBP0.3m); and a credit of GBP0.5m in Medical arising from an increase
in estimate of the payable for CasMed NIBP (GBP0.1m) offset by
a credit of GBP0.6m arising from exchange differences on the payable
for Visiometrics which is denominated in Euros.
The GBP2.7m release of fair value adjustments to inventory related
to Firetrace (GBP1.4m), Limotec (GBP0.3m), Navtech Radar (GBP0.6m)
and Rath (GBP0.3m) in Infrastructure and Safety; and Mini-Cam (GBP0.1m)
within Environmental & Analysis. All amounts have now been released
in relation to Firetrace, Limotec, Rath and Mini-Cam.
The GBP2.1m defined benefit pension charge related to the estimate
of Guaranteed Minimum Pension equalisation for men and women.
3 Finance income
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- ---------
Interest receivable 0.3 0.1 0.4
Fair value movement on derivative financial
instruments 0.1 - 0.1
----------------------------------------------- ------------- ------------- ---------
0.4 0.1 0.5
----------------------------------------------- ------------- ------------- ---------
4 Finance expense Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- ---------
Interest payable on loans and overdrafts 3.7 3.9 7.6
Interest payable on lease obligations 1.0 - -
Amortisation of finance costs 0.4 0.4 0.9
Net interest charge on pension plan liabilities 0.4 0.6 1.2
Other interest payable 0.1 0.1 0.5
----------------------------------------------- ------------- ------------- ---------
5.6 5.0 10.2
Fair value movement on derivative financial
instruments 0.2 - 0.2
Unwinding of discount on provisions 0.3 - 0.1
----------------------------------------------- ------------- ------------- ---------
6.1 5.0 10.5
----------------------------------------------- ------------- ------------- ---------
5 Taxation
The total Group tax charge for the six months to 30 September 2019
of GBP20.8m (six months to 30 September 2018: GBP19.9m; year to
31 March 2019: GBP36.9m) comprises a current tax charge of GBP23.3m
(six months to 30 September 2018: GBP21.2m; year to 31 March 2019:
GBP44.7m) and a deferred tax credit of GBP2.5m (six months to 30
September 2018: GBP1.3m; year to 31 March 2019: GBP7.8m). 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 tax charge includes GBP19.6m (six months to 30 September 2018:
GBP17.3m; year to 31 March 2019: GBP33.6m) in respect of overseas
tax.
6 Earnings per ordinary share
Basic and diluted earnings per ordinary share are calculated using
the weighted average of 379,134,587
(30 September 2018: 379,043,693; 31 March 2019: 379,159,755) 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. 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
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- ---------
Earnings from continuing operations 85.0 74.6 169.8
Amortisation of acquired intangible assets
(after
tax) 14.1 14.9 27.5
Acquisition transaction costs (after tax) 2.8 - 1.0
Adjustments to contingent consideration (after
tax) (0.1) (1.5) (2.9)
Release of fair value adjustments to inventory
(after tax) 1.4 1.1 2.1
Defined benefit pension charge (after tax) - - 1.7
Disposal of operations and restructuring (after
tax) - 0.7 0.8
Adjusted earnings 103.2 89.8 200.0
----------------------------------------------- ------------- ------------- ---------
Per ordinary share
---------------------------------------
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2019 2018 2019
pence pence pence
----------------------------------------------- ------------- ------------- ---------
Earnings from continuing operations 22.40 19.67 44.78
Amortisation of acquired intangible assets
(after
tax) 3.72 3.93 7.25
Acquisition transaction costs (after tax) 0.75 - 0.27
Adjustments to contingent consideration (after
tax) (0.04) (0.40) (0.75)
Release of fair value adjustments to inventory
(after tax) 0.37 0.29 0.55
Defined benefit pension charge (after tax) - - 0.44
Disposal of operations and restructuring (after
tax) - 0.18 0.20
Adjusted earnings 27.20 23.67 52.74
----------------------------------------------- ------------- ------------- ---------
7 Dividends Per ordinary share
---------------------------------------
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2019 2018 2019
pence pence pence
----------------------------------------------- ------------- ------------- ---------
Amounts recognised as distributions to
shareholders
in the period
Final dividend for the year to 31 March 2019
(31 March 2018) 9.60 8.97 8.97
Interim dividend for the year to 31 March 2019 - - 6.11
----------------------------------------------- ------------- ------------- ---------
9.60 8.97 15.08
----------------------------------------------- ------------- ------------- ---------
Dividends in respect of the period
Proposed interim dividend for the year to 31
March 2020 (31 March 2019) 6.54 6.11 6.11
Final dividend for the year to 31 March 2019 - - 9.60
----------------------------------------------- ------------- ------------- ---------
6.54 6.11 15.71
----------------------------------------------- ------------- ------------- ---------
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- ---------
Amounts recognised as distributions to
shareholders
in the period
Final dividend for the year to 31 March 2019
(31 March 2018) 36.4 34.0 34.0
Interim dividend for the year to 31 March 2019 - - 23.2
----------------------------------------------- ------------- ------------- ---------
36.4 34.0 57.2
----------------------------------------------- ------------- ------------- ---------
Dividends in respect of the period
Proposed interim dividend for the year to 31
March 2020 (31 March 2019) 24.8 23.2 23.2
Final dividend for the year to 31 March 2019 - - 36.4
----------------------------------------------- ------------- ------------- ---------
24.8 23.2 59.6
----------------------------------------------- ------------- ------------- ---------
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
2019 2018 2019
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 111.6 100.4 217.8
Financial instruments at fair value through
profit or loss - (0.1) (0.1)
Depreciation of property, plant and equipment 17.0 9.8 20.0
Loss on disposal of capitalised development
costs - 0.7 -
Amortisation of computer software 1.1 0.8 1.8
Amortisation of capitalised development costs
and other intangibles 4.1 4.3 8.8
Impairment of capitalised development costs 2.0 - 0.7
Amortisation of acquired intangible assets 18.3 17.5 35.6
Share-based payment expense in excess of
amounts
paid 0.2 - 4.7
Additional payments to pension plans (6.2) (5.5) (11.4)
Defined benefit pension charge - - 2.1
Loss/(profit) on sale of property, plant and
equipment and computer software 0.1 - (0.6)
----------------------------------------------- ------------- ------------- ---------
Operating cash flows before movement in working
capital 148.2 127.9 279.4
Increase in inventories (6.5) (9.9) (9.2)
Increase in receivables (2.3) (1.2) (15.3)
(Decrease)/increase in payables and provisions (16.4) 0.5 8.2
Revision to estimate of contingent
consideration
payable (0.1) (1.5) (3.5)
----------------------------------------------- ------------- ------------- ---------
Cash generated from operations 122.9 115.8 259.6
Taxation paid (27.3) (19.0) (40.6)
----------------------------------------------- ------------- ------------- ---------
Net cash inflow from operating activities 95.6 96.8 219.0
----------------------------------------------- ------------- ------------- ---------
Unaudited Unaudited Audited
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
-------------------------------------------- ------------- ------------- ---------
Analysis of cash and cash equivalents
Cash and bank balances 83.2 66.4 81.2
Overdrafts (included in current Borrowings) (1.7) (2.9) (9.1)
-------------------------------------------- ------------- ------------- ---------
Cash and cash equivalents 81.5 63.5 72.1
-------------------------------------------- ------------- ------------- ---------
Restatement
for changes
in Restated At
At accounting as at Net Loan Lease 30
31 March standards 1 April Cash cash/(debt) notes liabilities Exchange September
2019 IFRS 16 2019 flow acquired repaid additions adjustments 2019
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ -------- ----------- -------- ------- ----------- ------ ----------- ----------- ---------
Analysis
of net debt
Cash and
bank
balances 81.2 - 81.2 (6.8) 6.8 - - 2.0 83.2
Overdrafts (9.1) - (9.1) 7.4 - - - - (1.7)
------------ -------- ----------- -------- ------- ----------- ------ ----------- ----------- ---------
Cash and
cash
equivalents 72.1 - 72.1 0.6 6.8 - - 2.0 81.5
Loan notes
falling
due within
one year (0.1) - (0.1) - - 0.1 - - -
Loan notes
falling
due after
more than
one year (179.3) - (179.3) - - - - (4.4) (183.7)
Bank loans
falling
due after
more than
one year (74.4) - (74.4) (73.5) - - - (3.3) (151.2)
Lease
liabilities - (50.3) (50.3) 7.7 (3.6) - (9.0) (1.8) (57.0)
------------ -------- ----------- -------- ------- ----------- ------ ----------- ----------- ---------
Total net
debt (181.7) (50.3) (232.0) (65.2) 3.2 0.1 (9.0) (7.5) (310.4)
------------ -------- ----------- -------- ------- ----------- ------ ----------- ----------- ---------
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
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- ---------
Profit after tax 85.0 74.6 169.8
Adjustments(1) 18.2 15.2 30.2
----------------------------------------------- ------------- ------------- ---------
Adjusted profit after tax(1) 103.2 89.8 200.0
----------------------------------------------- ------------- ------------- ---------
Total equity 1,067.5 927.3 981.4
Add back retirement benefit obligations 27.6 20.7 39.2
Less associated deferred tax assets (4.7) (3.6) (7.0)
Cumulative amortisation of acquired intangible
assets 264.8 219.0 235.2
Historical adjustments to goodwill(2) 89.5 89.5 89.5
----------------------------------------------- ------------- ------------- ---------
Total Invested Capital 1,444.7 1,252.9 1,338.3
----------------------------------------------- ------------- ------------- ---------
Average Total Invested Capital(3) 1,391.5 1,203.0 1,245.7
----------------------------------------------- ------------- ------------- ---------
Return on Total Invested Capital
(annualised)(4) 14.8% 14.9% 16.1%
----------------------------------------------- ------------- ------------- ---------
Return on Capital Employed (ROCE)
Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- ---------
Profit before tax 105.8 94.5 206.7
Adjustments(1) 23.0 18.4 39.0
Net finance costs 5.7 4.9 10.0
Lease interest (1.0) - -
----------------------------------------------- ------------- ------------- ---------
Adjusted operating profit(1) after share of
results
of associates 133.5 117.8 255.7
----------------------------------------------- ------------- ------------- ---------
Computer software costs within intangible
assets 6.0 5.1 5.5
Capitalised development costs within intangible
assets 34.7 30.2 33.1
Other intangibles within intangible assets 3.3 3.0 3.1
Property, plant and equipment 171.7 109.6 112.4
Inventories 162.9 141.2 144.3
Trade and other receivables 275.2 241.8 259.6
Trade and other payables (157.9) (154.5) (164.8)
Provisions (20.5) (18.2) (25.4)
Net current tax liabilities (8.6) (12.6) (13.2)
Non-current trade and other payables (13.3) (9.7) (11.6)
Non-current provisions (7.9) (4.7) (10.9)
Lease liabilities (57.0) - -
Add back contingent purchase consideration 19.4 14.8 26.8
----------------------------------------------- ------------- ------------- ---------
Capital Employed 408.0 346.0 358.9
----------------------------------------------- ------------- ------------- ---------
Average Capital Employed(3) 383.5 334.0 340.4
----------------------------------------------- ------------- ------------- ---------
Return on Capital Employed (annualised)(4) 69.6% 70.5% 75.1%
----------------------------------------------- ------------- ------------- ---------
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
2018 Total Invested Capital and Capital Employed balances were
GBP1,125.1m and GBP312.1m 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, and
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.
The resultant effect is that the acquisitions are removed from
organic results for one full year of ownership.
The results of disposals are removed from the prior period reported
revenue and profit before taxation.
Constant currency measures the change in revenue and profit excluding
the effects of currency movements. The measure restates the current
year's revenue and profit at last year's exchanges rates.
Organic growth at constant currency has been calculated as follows:
Organic growth at constant currency
Revenue Adjusted profit* before
taxation
---------------------------------- -----------------------------------
Unaudited Unaudited % growth Unaudited % growth
Six months Six months Six months Unaudited
to to to Six months
30 30 30 to
September September September 30 September
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
--------------- ----------- ----------- -------- ----------- ------------ --------
Continuing
operations 653.7 585.5 11.7% 128.8 112.9 14.1%
Acquired and
disposed
revenue/profit (23.4) (3.6) (5.1) (0.6)
--------------- ----------- ----------- -------- ----------- ------------ --------
Organic growth 630.3 581.9 8.3% 123.7 112.3 10.2%
Constant
currency
adjustment (18.7) - (4.1) -
--------------- ----------- ----------- -------- ----------- ------------ --------
Organic growth
at constant
currency 611.6 581.9 5.1% 119.6 112.3 6.5%
--------------- ----------- ----------- -------- ----------- ------------ --------
* 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 % growth Unaudited Unaudited % growth
Six months Six months Six months Six months
to to to to
30 September 30 September 30 September 30 September
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
------------ ------------ ------------ -------- ------------ ------------ --------
Continuing
operations 101.3 97.9 3.5% 24.9 22.2 12.2%
Acquisition
and
currency
adjustments (2.4) - (0.7) -
------------ ------------ ------------ -------- ------------ ------------ --------
Organic
growth at
constant
currency 98.9 97.9 1.0% 24.2 22.2 9.3%
------------ ------------ ------------ -------- ------------ ------------ --------
Infrastructure Safety Revenue Adjusted* segment profit
------------------------------------ ------------------------------------
Unaudited Unaudited % growth Unaudited Unaudited % growth
Six months Six months Six months Six months
to to to to
30 September 30 September 30 September 30 September
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
------------ ------------ ------------ -------- ------------ ------------ --------
Continuing
operations 232.9 197.6 17.9% 52.3 41.7 25.3%
Acquisition
and
currency
adjustments (26.9) - (6.7) -
------------ ------------ ------------ -------- ------------ ------------ --------
Organic
growth at
constant
currency 206.0 197.6 4.3% 45.6 41.7 9.3%
------------ ------------ ------------ -------- ------------ ------------ --------
Environmental & Analysis Revenue Adjusted* segment profit
------------------------------------ ------------------------------------
Unaudited Unaudited % growth Unaudited Unaudited % growth
Six months Six months Six months Six months
to to to to
30 September 30 September 30 September 30 September
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
------------ ------------ ------------ -------- ------------ ------------ --------
Continuing
operations 163.7 143.0 14.5% 35.1 29.0 21.3%
Acquisition
and
currency
adjustments (6.1) - (1.3) -
------------ ------------ ------------ -------- ------------ ------------ --------
Organic
growth at
constant
currency 157.6 143.0 10.2% 33.8 29.0 16.5%
------------ ------------ ------------ -------- ------------ ------------ --------
Medical Revenue Adjusted* segment profit
------------------------------------ ------------------------------------
Unaudited Unaudited % growth Unaudited Unaudited % growth
Six months Six months Six months Six months
to to to to
30 September 30 September 30 September 30 September
2019 2018 2019 2018
GBPm GBPm GBPm GBPm
------------ ------------ ------------ -------- ------------ ------------ --------
Continuing
operations 155.9 147.2 6.0% 35.6 35.0 1.8%
Acquisition
and
currency
adjustments (6.7) (3.6) (1.6) (0.6)
------------ ------------ ------------ -------- ------------ ------------ --------
Organic
growth at
constant
currency 149.2 143.6 3.9% 34.0 34.4 (1.1%)
------------ ------------ ------------ -------- ------------ ------------ --------
* 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
2019 2018 2019
GBPm GBPm GBPm
------------------------------------------- ------------- ------------- ---------
Operating profit 111.6 100.4 217.8
Add back:
Acquisition items 4.7 - 0.3
Defined benefit pension charge - - 2.1
Amortisation of acquired intangible assets 18.3 17.5 35.6
------------------------------------------- ------------- ------------- ---------
Adjusted operating profit 134.6 117.9 255.8
------------------------------------------- ------------- ------------- ---------
Adjusted operating cash flow Unaudited Unaudited Audited
Six months Six months Year
to to to
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- ---------
Net cash from operating activities (note 8) 95.6 96.8 219.0
Add back:
Net acquisition costs 2.0 - 1.2
Taxes paid 27.3 19.0 40.6
Proceeds from sale of property, plant and
equipment 0.3 0.4 1.6
Share awards vested not settled by own shares* 5.6 4.9 4.9
Less:
Purchase of property, plant and equipment (12.0) (13.7) (26.4)
Purchase of computer software and other
intangibles (1.7) (2.0) (4.9)
Development costs capitalised (6.3) (4.3) (10.8)
----------------------------------------------- ------------- ------------- ---------
Adjusted operating cash flow 110.8 101.1 255.2
----------------------------------------------- ------------- ------------- ---------
Cash conversion % (adjusted operating cash
flow/adjusted operating profit) 82% 86% 88%
----------------------------------------------- ------------- ------------- ---------
* 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
In accounting for acquisitions, adjustments are made to the book
values of the net assets of the companies acquired to reflect their
fair values to the Group. Acquired inventories are valued at fair
value adopting Group bases and any liabilities for warranties relating
to past trading are recognised. Other previously unrecognised assets
and liabilities at acquisition are included and accounting policies
are aligned with those of the Group where appropriate.
During the period ended 30 September 2019, the Group made three
acquisitions namely:
* Invenio Systems Limited;
* Enoveo SARL; and
* Ampac Group.
Below are summaries of the assets acquired and liabilities assumed
and the purchase consideration of:
a) the total of acquisitions;
b) Invenio Systems Limited and Enoveo SARL; and
c) Ampac Group, on a stand-alone basis.
Due to their contractual dates, the fair value of receivables acquired
(shown below) approximate to the gross contractual amounts receivable.
The amount of gross contractual receivables not expected to be
recovered is immaterial.
There are no material contingent liabilities recognised in accordance
with paragraph 23 of IFRS 3 (revised).
The combined fair value adjustments made for the acquisitions above
under IFRS 3, excluding acquired intangible assets recognised and
deferred taxation thereon, increased the goodwill recognised by
GBP1.7m (30 September 2018: GBPNil).
The accounting for all current year and prior year acquisitions
with the exception of LAN Control Systems is provisional; relating
to finalisation of the valuation of acquired intangible assets,
the initial consideration, which is subject to agreement of certain
contractual adjustments, and certain other provisional balances.
During the period ended 30 September 2019 goodwill increased by
GBP43.1m as a result of acquisitions and GBP28.4m from movements
in foreign exchange.
a) Total of acquisitions Total
GBPm
---------------------------------------------------------- ------
Non-current assets
Intangible assets 35.7
Property, plant and equipment 6.3
Current assets
Inventories 7.4
Trade and other receivables 6.6
Cash and cash equivalents 6.8
---------------------------------------------------------- ------
Total assets 62.8
---------------------------------------------------------- ------
Current liabilities
Trade and other payables (10.0)
Provisions (2.0)
Corporation tax (0.1)
Non-current liabilities
Deferred tax (10.4)
---------------------------------------------------------- ------
Total liabilities (22.5)
---------------------------------------------------------- ------
Net assets of businesses acquired 40.3
---------------------------------------------------------- ------
Initial cash consideration paid 78.2
Additional amounts paid in respect of cash acquired 3.1
Contingent purchase consideration estimated to be paid in
respect of current year acquisitions 2.1
Total consideration 83.4
---------------------------------------------------------- ------
Goodwill arising on acquisitions (current year) 43.1
Total goodwill 43.1
---------------------------------------------------------- ------
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
2019 2018 2019
GBPm GBPm GBPm
----------------------------------------------- ------------- ------------- ---------
Initial cash consideration paid 78.2 1.2 63.0
Cash acquired on acquisitions (6.8) - (5.3)
Initial cash consideration adjustment on
current
year acquisitions 3.1 - 5.7
Initial cash consideration adjustment on prior
year acquisitions - - (0.1)
Contingent consideration paid and loan notes
repaid in cash in relation to prior year
acquisitions 10.0 3.5 3.7
----------------------------------------------- ------------- ------------- ---------
Net cash outflow relating to acquisitions
(per Consolidated Cash Flow Statement) 84.5 4.7 67.0
----------------------------------------------- ------------- ------------- ---------
b) Invenio Systems Limited ('Invenio') and Enoveo SARL ('Enoveo') Total
GBPm
------------------------------------------------------- -----
Non-current assets
Intangible assets 2.1
Property, plant and equipment 0.2
Current assets
Trade and other receivables 0.8
Cash and cash equivalents 0.2
------------------------------------------------------- -----
Total assets 3.3
------------------------------------------------------- -----
Current liabilities
Trade and other payables (0.6)
Non-current liabilities
Deferred tax (0.4)
------------------------------------------------------- -----
Total liabilities (1.0)
------------------------------------------------------- -----
Net assets of business acquired 2.3
------------------------------------------------------- -----
Initial cash consideration paid 3.0
Additional amounts paid in respect of cash acquired 0.1
Contingent purchase consideration estimated to be paid 2.1
======================================================= =====
Total consideration 5.2
------------------------------------------------------- -----
Goodwill arising on acquisition 2.9
------------------------------------------------------- -----
Invenio
The Group acquired the entire share capital of Invenio Systems
Limited ('Invenio') on 2 July 2019 for an initial cash consideration
of GBP2.8m adjustable for cash acquired. The adjustment was determined
to be GBP0.2m. The maximum contingent consideration payable is
GBP3.0m.
The contingent purchase consideration recognised represents the
estimated amount payable, based on profit-based targets, for each
of the three annual earnout periods, commencing 1 April 2019.
Invenio, located in Durham, UK, is a market leader in customer-side
leak detection, offering innovative, non-intrusive detection solutions
for household leaks. Invenio will join the Group as part of HWM,
creating a global leader in leakage reduction within the Group's
Environmental & Analysis sector.
The excess of the fair value of the consideration paid over the
fair value of the assets acquired is represented by technology
related intangibles of GBP1.3m and customer relationship intangibles
of GBP0.4m; with residual goodwill arising of GBP2.5m. The goodwill
represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of Halma's
businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
There is no material impact on the Group's income statement for
the six months ended 30 September 2019 arising from the acquisition.
Acquisition costs totalling GBP0.1m were recorded in the Consolidated
Income Statement.
The goodwill arising on the acquisition is not expected to be deductible
for tax purposes.
Enoveo
The Group also acquired the entire share capital of Enoveo on 1
July 2019 for an initial cash consideration of EUR0.2m (GBP0.2m).
The maximum contingent consideration payable is EUR1.0m (GBP0.9m).
Enoveo, based in Lyon, France, provides services and monitoring
tools for natural, urban or industrial aquatic environments. Enoveo
will be a bolt-on to Hydreka within the Environmental & Analysis
sector.
The excess of the fair value of the consideration paid over the
fair value of the assets acquired of GBP0.4m has provisionally
been allocated to goodwill.
There is no material impact on the Group's income statement for
the six months ended 30 September 2019 arising from the acquisition.
The goodwill arising on the acquisition is not expected to be deductible
for tax purposes.
c) Ampac Group, on a stand-alone basis Total
GBPm
---------------------------------------------------- ------
Non-current assets
Intangible assets 33.6
Property, plant and equipment 6.1
Current assets
Inventories 7.4
Trade and other receivables 5.8
Cash and cash equivalents 6.6
---------------------------------------------------- ------
Total assets 59.5
---------------------------------------------------- ------
Current liabilities
Trade and other payables (9.4)
Provisions (2.0)
Corporation tax payable (0.1)
Non-current liabilities
Deferred tax (10.0)
---------------------------------------------------- ------
Total liabilities (21.5)
---------------------------------------------------- ------
Net assets of business acquired 38.0
---------------------------------------------------- ------
Initial cash consideration paid 75.2
Additional amounts paid in respect of cash acquired 3.0
Total consideration 78.2
---------------------------------------------------- ------
Goodwill arising on acquisition 40.2
---------------------------------------------------- ------
On 15 July 2019, the Group acquired the Ampac group ('Ampac') for
an initial cash consideration of A$135.0m (GBP75.2m), adjustable
for cash acquired. The adjustment was determined to be A$5.4m (GBP3.0m).
The acquisition comprised of the trade and assets of Ampac Technologies
Pty Ltd, Ampac Distributors Pty Ltd and Ampac Pacific Ltd and the
entire share capital of Ampac Europe Ltd and Cranford Controls
Ltd.
Ampac, headquartered in Perth, Australia with offices in Australia,
New Zealand and the UK is a leading fire and evacuation systems
supplier in the Australian and New Zealand markets. The company
will continue to run under its own management team and will become
part of the Group's Infrastructure Safety sector.
The excess of the fair value of the consideration paid over the
fair value of the assets acquired is represented by customer related
intangibles of GBP19.0m; trade name of GBP6.9m and technology related
intangibles of GBP7.3m; with residual goodwill arising of GBP40.2m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of Halma's
businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Ampac contributed GBP8.3m of revenue and GBP2.1m of profit after
tax for the six months ended 30 September 2019.
Acquisition costs totalling GBP2.2m were recorded in the Consolidated
Income Statement.
The goodwill arising on the Ampac acquisition is not expected to
be deductible for tax purposes.
11 Fair values of financial assets and liabilities
As at 30 September 2019, 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 GBP189.9m, against a carrying value of GBP183.7m.
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 2019, the total forward foreign currency contracts
outstanding were GBP49m. 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 GBP0.9m
(30 September 2018: GBP0.3m; 31 March 2019: GBP0.9m) asset and
GBP0.7m (30 September 2018: GBP0.5m; 31 March 2019: GBP0.3m) 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 Subsequent events
On 2 October 2019, the Group acquired the entire share capital
of Infowave Solutions Inc., located in the USA, for an initial
cash consideration of US$8.3m (GBP6.8m). Infowave will join the
Group as part of CenTrak, complementing CenTrak's hardware capabilities
with software and data capabilities, within the Medical sector.
The maximum contingent consideration payable is US$4.0m (GBP3.3m)
based on profit-based targets for the years ended March 2021 and
March 2022.
On 4 October 2019, the Group acquired certain trade and assets
of NeoMedix, located in the USA, for an initial cash consideration
of US$8.1m (GBP6.6m). The glaucoma-related assets of NeoMedix was
acquired by MicroSurgical Technology within the Group's Medical
sector. The maximum contingent consideration payable is US$17.0m
(GBP14.0m) based on revenue-based targets for three years from
the completion of the acquisition.
13 Contingent liability
Group financing exemptions applicable to UK controlled foreign
companies
As previously reported, on 2 April 2019 the European Commission
issued its final decision in a State Aid investigation into the
Group Financing Exemption in the UK controlled foreign company
rules. The European Commission found that part of the Group Financing
Exemption constitutes State Aid. The Group Financing Exemption
was introduced in legislation by the UK government in 2013. In
common with other UK -based international companies whose arrangements
are in line with current UK CFC legislation the Group may be affected
by the ultimate outcome of this investigation. In June and July
2019, the UK government and other UK -based international companies,
including the Group, appealed to the General Court of the European
Union against the decision. In the meantime, the UK Government
is required to commence collection proceedings and therefore it
is expected that the Group will have to make a payment in the second
half of the year ending 31 March 2020 in respect of this case.
At present it is not possible to determine the amount that the
UK government will seek to collect.
If the decision of the European Commission is upheld, the Group
calculates its maximum potential liability at 30 September 2019
to be approximately GBP15.4m (31 March 2019: GBP15.4m) in respect
of tax and approximately GBP0.9m in respect of interest (31 March
2019: GBP0.6m). Based on its current assessment, the Group believes
that no provision is required in respect of this issue.
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,
warrantees 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 2019.
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 54 to 59
in the Annual Report and Accounts 2019, 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 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 2019
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.
END
IR BVLLFKFFZFBD
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November 19, 2019 02:00 ET (07:00 GMT)
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