TIDMHLMA
RNS Number : 6930G
Halma PLC
17 November 2022
Halma plc
HALF YEAR RESULTS 2022/23
Record first half results and continued dividend growth
Halma, the global group of life-saving technology companies focused
on growing a safer, cleaner, healthier future for everyone, every
day, today announces results for the 6 months to 30 September 2022.
Highlights
Change 2022 2021
Revenue +19% GBP875.5m GBP737.2m
Adjusted(1) Profit before +11% GBP171.7m GBP154.9m
Taxation
Adjusted Earnings per Share(2) +12% 35.65p 31.96p
Statutory Profit before taxation (13)% GBP145.5m GBP167.5m
Statutory Earnings per Share (15)% 30.39p 35.83p
Interim Dividend per Share(3) +7% 7.86p 7.35p
Return on Sales(4) 19.6% 21.0%
Return on Total Invested
Capital(5) 13.8% 14.9%
Net Debt GBP499.6m GBP274.8m(9)
Strong growth and returns; increased investment; on track for
full year
* Record revenue and Adjusted(1) Profit: revenue up
19%; Adjusted(1) Profit before Taxation up 11%
compared to H1 2021/22; further sequential growth
from second half of 2021/22.
* Statutory Profit before Taxation down 13% principally
due to the gain on disposal of GBP34.0m in the first
half of last year; up 9% excluding this gain.
* Revenue and Adjusted(1) Profit growth on an organic
constant currency(6) basis: up by 9% and 2%
respectively.
* Growth in all sectors and regions: revenue growth in
all sectors and regions; Adjusted(1) Profit growth in
all sectors (including on an organic constant
currency(6) basis).
* Strong Return on Sales(4) of 19.6% (2021/22: 21.0%),
above pre-COVID levels(8) and reflecting the planned
normalisation of overhead costs .
* Increased strategic investment: R&D investment GBP50m,
up 20% (5.7% of revenue). Three acquisitions this
financial year (two in H1); consideration(10) of
GBP238m.
* Cash conversion(11) 63%, below 90% target: includes
strategic inventory investment to maintain supply
chain resilience and support a very strong order
book; continued good working capital control.
* Continued balance sheet strength: net debt/EBITDA of
1.2 times, supporting future increased organic
investment and acquisitions; a promising acquisition
pipeline.
* 7% interim dividend increase, continuing our
progressive dividend policy and reflecting the
Board's continued confidence in the Group's long-term
growth prospects.
* Announced last week appointment of Steve Gunning as
Chief Financial Officer, effective 16 January 2023.
Andrew Williams, Group Chief Executive of Halma, commented:
"Halma made further good progress in the first half. We delivered
record revenue, Adjusted(1) Profit and interim dividend, with
growth in all sectors and regions. We maintained a strong balance
sheet, while further enhancing our growth opportunities through
increased strategic investment to support future growth, both
organically and through acquisitions.
We saw strong demand for our companies' products and services
in the period. Our order book is exceptionally strong, having
grown from the record level seen at the start of the year. Order
intake remained ahead of both revenue and the very strong order
intake in the comparable period last year.
Our Sustainable Growth Model continues to enable our success
in varied market conditions, demonstrating the value of the diversity
and global reach of our portfolio, our strong purpose and culture
and our agile business model. The operational environment presents
both challenges and opportunities; we remain 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 GBP26.2m
(2021/22: GBP(12.6)m). 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 declared per share.
4 Return on Sales is defined as Adjusted(1) Profit before
Taxation from continuing operations expressed as a percentage
of revenue from continuing operations.
5 Return on Total Invested Capital (ROTIC) is defined as post-tax
Adjusted(1) Profit as a percentage of average Total Invested
Capital.
6 Organic constant currency measures exclude the effect of
movements in foreign exchange rates on the translation of
revenue and Adjusted Profit(1) into Sterling, as well as
acquisitions in the year following completion and disposals.
See note 9 to the Condensed Interim Financial Statements
for details.
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.
8 Defined as the average of the Return on Sales reported in
the five first half years prior to the COVID pandemic (19.3%).
9 As at 31 March 2022.
10 Maximum total consideration is on a cash- and debt-free
basis.
11
Cash conversion is defined as adjusted operating cash flow
as a percentage of adjusted operating profit. See note 9
to the Condensed Interim Financial Statements for details.
For further information, please contact:
Halma plc +44 (0)1494 721 111
Andrew Williams, Group Chief Executive
Marc Ronchetti, Group Chief Executive
Designate and Chief Financial Officer
Charles King, Head of Investor Relations
Clayton Hirst, Director of Corporate +44 (0)7776 685948
Affairs +44 (0)7384 796013
MHP Communications
Andrew Jaques/Rachel Farrington +44 (0)20 3128 8572
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, healthier future for everyone,
every day. Its purpose defines the three broad market areas
where it operates:
-- Safety Protecting people's safety and the environment
as populations grow, and enhancing worker
safety.
-- Environment Addressing the impacts of climate change,
pollution and waste, protecting life-critical
resources and supporting scientific research.
-- Health Meeting the increasing demand for better
healthcare as chronic illness rises, driven
by growing and ageing populations and lifestyle
changes.
It employs over 7,000 people in more than 20 countries, with
major operations in the UK, Mainland Europe, the USA and Asia
Pacific. Halma is listed on the London Stock Exchange (LON:
HLMA) and is a constituent of the FTSE 100 index.
For the past three years Halma has been named one of Britain's
Most Admired Companies by Management Today.
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
Halma made good progress in the first half of the year,
achieving record results in a challenging operational
environment.
Our continued success is driven by our Sustainable Growth Model.
At its core is our purpose, which is our motivating ambition to
deliver a positive impact by helping to solve some of the world's
most pressing issues, such as climate change, waste and pollution,
and increasing demands on healthcare systems and life-critical
resources.
Our DNA describes how we deliver on that purpose, embodying the
core elements of our organisation and culture, such as agility,
collaboration, entrepreneurialism, and our continuous investment in
talent and innovation.
Our Sustainable Growth Model ensures that we maintain a diverse
portfolio of companies with leading positions in global niche
markets which are exposed to strong and fundamental long-term
growth drivers. Each company is positioned to deliver resilient
growth, high returns and strong cash flows. This is further
supported by strategic investments, both within each company and in
our carefully selected Growth Enabler support functions at the
centre, which include digital innovation, international expansion
and M&A.
For each Halma company, our Sustainable Growth Model gives the
agility and autonomy to respond rapidly to changes in their end
markets and supply chains, such as we again saw in the first half.
Building connectivity between our companies is an important element
of our success; it supports a collaborative culture which is driven
by our companies' common aim to innovate in solving critical
challenges facing people and our planet. Since the year end, we
have increased investment to re-establish and deepen these
connections at multiple levels, following the disruption caused by
the pandemic. This included a number of formal events such as
Accelerate Halma, which brought together our senior leaders from
across the Group.
The qualities embodied in our Sustainable Growth Model are
becoming ever more important and relevant in a world which is
increasingly subject to rapid change and greater economic and
geopolitical uncertainty in the face of challenges such as growing
and ageing populations, climate change, resource scarcity and the
need for better healthcare, which are more urgent than ever before.
Our ability to address these challenges for our customers will
support our continued success over the long term.
Record first half results
Our results in the first half were driven by strong and
broad-based demand for our products and services, with organic
constant currency(1) revenue and Adjusted(1) Profit growth across
all our sectors, and organic constant currency(1) revenue growth in
all regions. This growth was delivered not only in a challenging
operational environment, but also against a very strong comparative
period in the first half of last year, which had seen substantial
growth and unusually high margins as the impacts of the COVID-19
pandemic receded.
Revenue increased by 19%, to GBP875.5m (2021/22: GBP737.2m), and
included strong organic constant currency(1) growth, as well as a
substantial benefit from currency translation as a result of the
depreciation of Sterling. This increase in revenue represented not
only strong growth compared to the first half of last year, but
also further sequential growth of GBP87.4m, or 11%, from the second
half of last year.
Return on Sales(1) was 19.6%, a strong performance, and
especially pleasing given increased inflationary pressures and the
substantial strategic investments made in the period to support
future growth. It compared to the exceptionally high Return on
Sales(1) of 21.0% in the first half of last year, which had
benefited from a slower return in variable overhead costs than in
revenue as the effects of the pandemic abated. It also compared to
the average first half Return on Sales(1) of 19.3% for the five
years prior to the pandemic. These variable overhead costs have
returned to more normal levels relative to revenue in the first
half of this year and, as a result, Adjusted(1) Profit before
Taxation grew by 11% to GBP171.7m (2021/22: GBP154.9m), compared to
the 19% increase in revenue.
Statutory Profit before Taxation decreased by 13% to GBP145.5m
(2021/22: GBP167.5m). The prior half year included a GBP34.0m gain
on the disposal of a Safety sector business in the period, and,
excluding this gain, Statutory Profit before Taxation would have
increased by 9%.
Revenue growth comprised organic constant currency(1) revenue
growth of 9.5%, a 1.0% positive contribution from acquisitions net
of the effects of disposals, and a benefit from currency
translation of 8.3%. Investment in our products and services to
ensure they continue to address our customers' needs enabled us to
deliver a resilient price performance, which offset the majority of
cost increases, resulting in only a small decrease in gross margin.
We estimate that price increases accounted for approximately four
percentage points of our revenue growth, broadly evenly spread
across the sectors.
The 11% increase in Adjusted(1) Profit before Taxation included
organic constant currency(1) growth of 1.9%, with the more modest
level of growth relative to revenue reflecting the variable
overhead cost dynamics noted above and comparing to the very strong
32% growth in Adjusted(1) Profit before Taxation on an organic
constant currency(1) basis in the first half of last year. There
was a small adverse effect of 0.2% from acquisitions net of the
effects of disposals; the contribution from acquisitions is
expected to improve in the second half of the year as they benefit
from integration into Halma and the support available to deliver
their growth strategies. As with revenue, there was a substantial
benefit from currency translation of 9.2%.
It is a strength of Halma's business model that we are able to
simultaneously deliver a strong operating performance and maintain
a strong balance sheet, while making substantial strategic
investments to support our future growth. We further increased
organic investment in the first half, for example through a 20%
increase in R&D expenditure to GBP49.6m, representing 5.7% of
Group revenue (2021/22: GBP41.3m; 5.6% of Group revenue), and
through continued investment in our technology infrastructure
totalling GBP9m, which is on track to reach our projected spend for
the year of c.GBP20m. Our Digital and Technology teams continued to
be active in supporting the development of digital solutions in our
companies' portfolios, and we saw good growth in revenue from
digital products and solutions, which increased in line with Group
revenue growth, and continues to represent over 40% of Group
revenues.
We also further expanded our opportunities for growth in markets
highly aligned to our purpose through investment in acquisitions,
with two companies (Deep Trekker Inc. and IZI Medical Products,
LLC) purchased in the first half, for an aggregate maximum total
consideration of GBP187.5m on a cash- and debt-free basis. We made
one further acquisition, WEETECH Holding GmbH for EUR57.5m
(approximately GBP50m) on a cash- and debt-free basis following the
period end. Further details of these acquisitions are given later
in this review.
We maintained a strong balance sheet and ended the period with
net debt of GBP499.6m, equivalent to 1.2 times annualised EBITDA
(31 March 2022: net debt of GBP274.8m; 0.7 times EBITDA). Our
control of working capital remained strong, with trade debtor and
trade creditor days within historic ranges. Cash conversion
(adjusted operating cash flow as a percentage of adjusted operating
profit - see note 9) of 63% (2021/22: 85%) was below our annualised
cash conversion Key Performance Indicator (KPI) of 90%, and
included incremental targeted investment in inventory by a number
of our companies to maintain supply chain resilience, manage price
increases and support their growth. We estimate that, without this
incremental investment, our cash conversion would have been over
80%, in line with typical levels in the first half of the year. We
expect full year cash conversion to improve closer to our KPI of
90%. Our strong balance sheet and continued cash generation
underpin our ongoing investment in future organic growth, give us
substantial capacity for acquisitions, and support our progressive
dividend policy.
Return on Total Invested Capital(1) was 13.8%, well above our
KPI of 12%. The change from 14.9% in the comparative period
principally reflects the rate of organic and acquired profit growth
relative to the increase in retained earnings.
The Board has declared an increase of 7% in the interim dividend
to 7.86p per share (2021/22: 7.35p per share). The interim dividend
will be paid on 3 February 2023 to shareholders on the register on
23 December 2022.
Organic constant currency(1) revenue growth in all regions
External revenue by destination
Half year
2022 Half year 2021
------------- ----------------
% organic
growth
% of % of Change % at constant
GBPm total GBPm total GBPm growth currency(1)
------------------------- ----- ------ ------- ------- ------ ------- ------------
United States of America 364.2 42% 280.9 38% 83.3 30% 11%
Mainland Europe 170.5 19% 146.6 20% 23.9 16% 12%
United Kingdom 137.2 16% 136.2 18% 1.0 1% 6%
Asia Pacific 142.1 16% 124.8 17% 17.3 14% 4%
Other regions 61.5 7% 48.7 7% 12.8 26% 15%
------------------------- ----- ------ ------- ------- ------ ------- ------------
875.5 100% 737.2 100% 138.3 19% 9%
------------------------- ----- ------ ------- ------- ------ ------- ------------
Our growth in the period was broad-based, and revenue grew in
all regions, both on a reported and organic constant currency(1)
basis. Reported growth rates in each region were impacted to
differing extents by acquisitions (net of disposals), and positive
effects from foreign currency translation, given the relative
weakness of Sterling. Organic constant currency(1) growth rates
reflected good growth in all regions, as well as the strength of
growth in the comparative period, with the UK and Asia Pacific
regions, for example, having grown by 46% and 30% respectively on
an organic constant currency(1) basis in the first half of last
year.
The USA remains our largest sales destination and contributed
42% of total revenue. Revenue increased by 30%, or by 11% on an
organic constant currency(1) basis, with all sectors delivering a
strong organic constant currency(1) performance. Reported revenue
growth in the USA included a contribution of 4% from recent
acquisitions, as well as a substantial positive effect from
currency translation of 15%. On an organic constant currency(1)
basis, the strongest growth was in the Safety sector, led by
emergency communications within the Elevator Safety subsector, and
by strong performances in Industrial Access Control and Pressure
Management. The Environmental & Analysis and Healthcare(3)
sectors also delivered growth in all subsectors on an organic
constant currency(1) basis.
Mainland Europe revenue increased by 16%, or 12% on an organic
constant currency(1) basis, with strong reported revenue growth in
all sectors. Reported revenue benefited from a number of
acquisitions, including Sensitron in the Environmental &
Analysis sector and Ramtech in the Safety sector, but was partly
offset by the disposal in the Safety sector. There was a net
acquisition contribution of 2% and also a positive effect from
currency translation of 2%. On an organic constant currency(1)
basis there were strong performances in Healthcare, led by good
customer demand in the Therapeutic Solutions subsector, and in the
Safety sector, which saw strong growth in People & Vehicle Flow
and Industrial Access Control. However, the performance of the
Environmental & Analysis sector was more mixed, with a broadly
flat performance as a result of softening demand in some areas of
the Water Analysis & Treatment subsector.
Revenue in the UK grew 1%, or 6% on an organic constant
currency(1) basis, against exceptionally strong growth of 55% and
46% respectively in the first half of last year. There was a
negative effect on reported revenue from the prior year disposal,
which was only partly offset by a much smaller benefit from
acquisitions in the period. The Healthcare sector grew strongly on
an organic constant currency(1) basis, benefiting from good
momentum at SSG (Static Systems Group), while the Safety sector
also grew well, supported by a major People & Vehicle Flow
contract. Revenue in the Environmental & Analysis sector
declined, principally as a result of weaker momentum in the Water
Analysis & Treatment subsector.
Asia Pacific's revenue grew 14%, which included a 9% benefit
from currency translation and 1% from acquisitions net of
disposals, and by 4% on an organic constant currency(1) basis. The
region's organic constant currency(1) growth reflected a strong
performance in the Environmental & Analysis sector, which
included strong demand in the Environmental Monitoring and Optical
Analysis subsectors, while the Safety sector grew only modestly and
Healthcare revenue declined, both against very strong performances
in the first half of last year. Of the larger countries, on an
organic constant currency(1) basis, there was strong growth in
India, notably in the flow and pressure control market, and good
growth in Australasia. These more than offset lower revenue in
China, which saw declines in the Healthcare and Safety sectors as a
result of ongoing COVID-19 lockdowns and the consequent effects on
economic growth, and budget reductions; however, there was
continued growth in the Environmental & Analysis sector,
benefiting in part from products supporting the energy
transition.
In other regions, which represent only 7% of Group revenue,
revenue grew strongly, both on a reported and on an organic
constant currency(1) basis. This was supported by strong organic
constant currency(1) growth in the Near and Middle East and Canada,
which together represent over 60% of the regions' revenue. Reported
revenue also benefited from the acquisition of Deep Trekker in the
period, as well as from currency translation effects.
Organic constant currency(1) revenue and Adjusted(1) Profit
growth in all sectors
External revenue by sector
Half year Half year
2022 2021
--------- ---------
% organic
growth at
Change % constant
GBPm GBPm GBPm growth currency(1)
------------------------- --------- --------- ------ ------- ------------
Safety 355.4 320.2 35.2 11% 10%
Environmental & Analysis 263.8 209.5 54.3 26% 9%
Healthcare 256.7 208.0 48.7 23% 9%
Inter-segmental revenue (0.4) (0.5) 0.1
------------------------- --------- --------- ------ ------- ------------
875.5 737.2 138.3 19% 9%
------------------------- --------- --------- ------ ------- ------------
Adjusted(1) Profit by sector
Half year Half year
2022 2021
--------- ---------
% organic
growth at
Change % constant
GBPm GBPm GBPm growth currency(1)
------------------------- --------- --------- ------ ------- ------------
Safety 75.4 73.5 1.9 3% 1%
Environmental & Analysis 65.4 53.1 12.3 23% 8%
Healthcare 56.4 46.3 10.1 22% 9%
------------------------- --------- --------- ------ ------- ------------
Sector profit(2) 197.2 172.9 24.3 14% 5%
------------------------- --------- --------- ------ ------- ------------
Central administration
costs (19.3) (14.0)
Net finance expense (6.2) (4.0)
------------------------- --------- --------- ------ ------- ------------
Adjusted(1) Profit
before Taxation 171.7 154.9 16.8 11% 2%
------------------------- --------- --------- ------ ------- ------------
Safety sector
Revenue increased by 11% to GBP355.4m (2021/22: GBP320.2m) and
organic constant currency(1) revenue increased by 10%. There was a
positive contribution from acquisitions of 1% and from currency
translation of 5%, and a negative effect from the disposal in the
prior year of Texecom of 5%. Given the substantial currency
translation effects in the period, the revenue commentary below is
given on an organic constant currency(1) basis.
Revenue growth was broadly spread across the larger subsectors
and the three largest regions, the USA, Mainland Europe and the UK,
and supported by continued and well distributed growth in the
sector's order book. While operational and supply chain disruptions
continue to impact sector companies, their ability to be agile in
addressing these challenges and to continue to innovate thanks to
our Sustainable Growth Model has given them a competitive advantage
in manufacturing and delivering the products that their customers
need.
Following very strong growth in the first half of last year,
there were healthy levels of revenue growth in the two largest
subsectors, Fire Detection and People & Vehicle Flow. Demand
for interlock products in the logistics and electrical sectors
resulted in strong revenue growth in our Industrial Access Control
subsector, while Pressure Management grew strongly, driven by
growth in its chemical processing and general industrial segments.
Elevator Safety also saw good revenue growth, benefiting from
strong regulatorily driven demand for emergency communications
products in the USA.
Performance in the two smallest subsectors, Fire Suppression and
Safe Storage and Transfer, was mixed, and revenues compared to the
first half of last year were broadly flat, reflecting operating
challenges, including component shortages and lower Asia Pacific
revenues in Safe Storage and Transfer.
By region, the largest contributions to sector revenue growth
came from the USA and Mainland Europe, which grew 14% and 13%
respectively, followed by the UK which grew 8%, against revenue
growth of 69% in the first half of last year. The USA saw strong
growth in Elevator Safety, Industrial Access Control and Pressure
Management, while People & Vehicle Flow was the largest driver
of growth in both Mainland Europe and the UK. Asia Pacific grew 1%,
reflecting the continued impact of lockdowns and slower economic
growth; this compared to 25% growth in the first half of last year,
which had benefited from a non-recurring road safety contract in
China. Revenue in the Africa, Near and Middle East and Other
regions, which together represent 8% of sector revenues, grew by
14%, compared to a decline of 9% in the first half of last
year.
Profit(2) was 3% higher at GBP75.4m (2021/22: GBP73.5m), and
included 1% organic constant currency(1) growth, a benefit of 5%
from currency translation, and a negative effect of 3% from the
disposal in the prior year. Return on Sales(1) decreased to 21.2%
(2021/22: 23.0%), partly due to a reversion of overhead costs to
more normal levels. This follows an increase of 1.4 percentage
points in the first half of the prior year, reflecting the slower
return of variable overhead costs (relative to the increase in
revenue) and a stable gross margin. The movement in the period also
reflected the increased cost of procuring critical components,
including for some of our largest companies, which were compensated
for in absolute terms by price increases, but resulted in a decline
in gross margin. R&D expenditure of GBP19.6m remained at a good
level, which, with an increase in absolute investment of GBP1.6m,
represented 5.5% of revenue (2021/22: 5.6%).
Environmental & Analysis sector
Revenue increased by 26% to GBP263.8m (2021/22: GBP209.5m),
comprising 9% organic constant currency(1) growth, a 7% net
contribution from acquisitions, and a positive effect of 10% from
currency translation.
The sector's growth reflected its customers' continued focus on
protecting the environment and improving the availability and
quality of life-critical resources. It was also supported by the
growing demand for products supporting the transition to cleaner
forms of energy and other high-technology solutions based on
digital, optical and opto-electronic expertise. These trends
supported strong growth in Gas Detection and in Environmental
Monitoring and continued growth in the Optical Analysis
subsector.
In the USA, revenue grew 12% on an organic constant currency(1)
basis, driven by further growth in a continuing large Photonics
contract, and in products addressing the minimisation of emissions
in Gas Detection and supporting the transition to new sources of
energy in Environmental Monitoring. There was a good contribution
to reported revenue growth from acquisitions, notably International
Light Technologies and Deep Trekker.
Asia Pacific revenue growth continued to be very strong, at 19%
on an organic constant currency(1) basis. This was driven by
substantial growth in the flow and pressure control market within
Environmental Monitoring in India, while growth in China was
supported by the fulfilment of outstanding orders in Optical
Analysis and demand for products supporting the energy transition
in Environmental Monitoring.
Organic constant currency(1) revenue declined by 4% in the UK.
This reflected the phasing of customer project spending, including
as a result of the UK water regulatory cycle, supply chain
constraints within Water Analysis & Treatment, and inspection
volumes in the consumer market within Gas Detection.
Mainland Europe revenue was flat on an organic constant
currency(1) basis, but grew by 20% on a reported basis, which
included a benefit from acquisitions, principally Sensitron.
In the other regions, the sector's Gas Detection companies
continued to benefit from a recovery in the oil and gas sector,
which drove strong organic growth in Africa, Near & Middle
East.
Profit(2) increased by 23% to GBP65.4m (2021/22: GBP53.1m).
Organic constant currency(1) profit growth was 8% and there was a
6% contribution from acquisitions and a positive effect of 10% from
currency translation. Return on Sales(1) was 24.8%, compared to
25.4% in the prior period which had benefited from overheads
lagging sales growth as companies scaled up post-COVID. Gross
margin improved slightly driven by business mix. R&D
expenditure of GBP13.6m was maintained at a good level at 5.2% of
sales (2021/22: 4.9%).
Healthcare (3) sector
Revenue increased by 23% to GBP256.7m (2021/22: GBP208.0m).
Organic constant currency(1) revenue growth was 9%, with a 2%
contribution from acquisitions, and a positive contribution of 12%
from currency translation.
There was revenue growth in all subsectors and all geographies,
although revenue growth was slower in Asia Pacific than in other
regions as a result of lockdown restrictions in China. Growth
across the sector was supported by a very strong order book,
reflecting generally improved customer buying patterns, high
patient caseload levels and order backlogs and customer advance
ordering due to supply chain disruptions.
All subsectors grew revenue on an organic constant currency(1)
basis. Healthcare Assessment & Analytics saw the strongest
growth, supported by demand in vital signs monitoring, clinical
ophthalmology and communication and software systems for healthcare
facilities. High patient caseload levels in eye surgery also drove
good growth in Therapeutic Solutions, while the smaller Life
Sciences subsector also grew well, despite a decline in China as a
result of lockdown restrictions.
The USA, the sector's largest region, grew revenue by 28%, or
10% on an organic constant currency(1) basis driven by growth in
Healthcare Assessment & Analytics, and, to a lesser extent,
Life Sciences. On a reported basis, USA revenue also benefited from
recent acquisitions, including Infinite Leap Inc., and the positive
effect of currency translation.
In the other regions, Mainland Europe revenue grew by 17% on an
organic constant currency(1) basis, following growth of 17% in the
comparable period last year, given strong growth in products for
eye surgery within Therapeutic Solutions. The UK also grew
strongly, by 17% on an organic constant currency(1) basis, driven
by demand for SSG's integrated communication systems and software
solutions for care facilities. While Asia Pacific grew revenue on a
reported basis, on an organic constant currency(1) basis revenue
declined by 7% as a result of lockdown restrictions in China,
although there was an improving performance trend during the course
of the half year.
Profit(2) increased by 22% to GBP56.4m (2021/22: GBP46.3m), and
by 9% on an organic constant currency(1) basis. Return on Sales(1)
decreased to 22.0% (2021/22: 22.3%), principally reflecting a
modestly lower gross margin as a result of increased material costs
and product mix. R&D spend was GBP16.3m, representing 6.3% of
revenue (2021/22: 6.2%) and included substantial new product
development and investment by recently acquired companies.
Three acquisitions completed this financial year across all
three sectors
We have completed three acquisitions in the year to date, for a
maximum total consideration of approximately GBP238m on a cash- and
debt-free basis. These have further expanded our capabilities and
opportunities to supplement our organic growth. Two of these
acquisitions were made in the first half, and a further acquisition
has been made since the period end. The acquisitions were spread
across all three sectors and will be standalone companies within
their sectors. Two of the companies acquired were based in North
America and one in Mainland Europe.
We have a promising pipeline of potential acquisitions across
all three sectors, and continue to see good opportunities to
acquire small- to medium-sized businesses which are strongly
aligned to our purpose of growing a safer, cleaner, healthier
future for everyone, every day.
In April 2022, our Environmental & Analysis sector acquired
the Canadian company Deep Trekker, a market-leading manufacturer of
remotely operated underwater robots used for inspection, surveying,
analysis and maintenance. It serves markets including aquaculture,
renewable energy and ocean science and research, and was acquired
for a consideration of C$60m (GBP36.6m) on a cash- and debt-free
basis.
At the end of September 2022, our Healthcare sector acquired IZI
Medical Products, LLC (IZI), a USA-based designer, manufacturer and
distributor of medical consumable devices which are mainly used by
interventional radiologists and surgeons in a range of acute,
hospital-based diagnostic and therapeutic procedures. It was
acquired for an initial consideration of US$153.5m (GBP137.9m) on a
cash- and debt-free basis. When adjusted for tax benefits with a
net present value of approximately US$11m (GBP9.9m), the net
initial consideration was approximately US$142.5m (GBP128.0m). An
additional consideration of up to US$14.5m (GBP13.0m) is payable in
cash, based on IZI's growth in the year to 31 March 2023.
In October 2022, our Safety sector acquired WEETECH Holding
GmbH, a German designer and manufacturer of safety-critical
electrical testing technology used to test the integrity of both
high and low voltage electrical systems . The consideration was
EUR57.5m (approximately GBP50m) on a cash- and debt-free basis
.
We have also continued to develop our external partnerships
through our Halma Ventures programme, that offers Halma access to
new technology and capabilities via minority equity ownership. In
June 2022, we made an investment in VAPAR, whose AI technology
enables faster and more accurate condition assessment of wastewater
infrastructure.
Further progress on sustainability
We create sustainable value for our stakeholders through our
Sustainable Growth Model, and we support our companies in
developing growth opportunities from innovative solutions that
address their customers' global sustainability challenges.
Our companies already have a substantial positive impact through
their existing solutions. These are diverse and span a number of
areas linked to our long-term growth drivers. They include products
and services which preserve life-critical resources and improve
water and air quality, enhance efficiency by minimising the use of
resources in industrial and commercial environments, and improve
patient outcomes as demand for healthcare grows. Recent innovations
include BEA's online "Thermotool" which enables their customers to
simulate how BEA's door sensing solutions can improve the energy
efficiency of industrial doors, and Volk's telemedicine offering
with the "VistaView" portable retinal camera and their partnering
with NGOs to address the shortage of eye doctors in countries such
as Honduras.
We also amplify the positive impact of our purpose-aligned
growth by reducing the impact of our companies' operations and
value chains. The majority of our companies have now created their
own bottom-up plans to contribute to the Group's sustainability
goals and ambitions on climate change, circular economy and
diversity, equity and inclusion. We are also driving our
sustainability progress with a refreshed focus on
sustainability-related growth, driven by innovation as a key lever
(and with digital providing a connected opportunity) for delivering
this growth.
We continued to see good progress during the first half towards
delivering these plans, which included achieving a more balanced
gender representation in our companies' leadership teams. 28% of
all Halma company boards are women (as at 30 September 2022), which
is up from 22% in 2021, a steady improvement towards our target of
40%-60% by end of March 2024. At the Group level, we're also making
strides, having appointed four female sector leaders this year: two
Sector Chief Financial Officers and two Divisional Chief
Executives.
At the Group level, in addition to our existing commitment to
greenhouse gas emissions reduction targets for Scope 1 & 2
emissions, we have also continued to work towards better estimating
and understanding our Scope 3 baselines.
Cash flow and funding
Cash conversion (adjusted operating cash flow as a percentage of
adjusted operating profit - see note 9) in the first half of the
year was 63% (2021/22: 85%) , which was below our annualised cash
conversion KPI of 90%. This was principally because of an increase
in working capital of GBP70.2m (2021/22: increase of GBP25.5m),
driven by further strategic investment in inventory to maintain
supply chain resilience and support growth . Underlying working
capital controls were strong, with trade debtor days stable
compared to prior periods and trade creditor days within normal
operating ranges.
Dividend payments increased to GBP43.6m (2021/22: GBP40.8m), and
tax payments were also higher at GBP31.2m, compared to GBP27.6m in
the first half of 2021/22, in line with expectations.
Expenditure on acquisitions, which includes acquisition costs
and contingent consideration for acquisitions made in prior years,
totalled GBP179.7m (2021/22: GBP58.0m).
Capital expenditure (net of disposal proceeds) increased to
GBP15.6m, compared to GBP14.2m in the first half of 2021/22. We
continue to expect capital expenditure for the full year to be
around GBP34m.
Net debt at the end of the period was GBP499.6m (31 March 2022:
GBP274.8m). Gearing (the ratio of net debt to annualised EBITDA) at
half year end was 1.2 times (31 March 2022: 0.7 times), which is
well within our typical operating range of up to two times.
As reported in our Annual Report and Accounts 2022, shortly
after the year end, we refinanced our syndicated revolving credit
facility. The new facility remains at GBP550m and matures in May
2027, and there are two one-year extension options. In addition, we
completed a new Private Placement issuance of c.GBP330m in May
2022. The issuance consists of Sterling, Euro, US Dollar and Swiss
Franc tranches and matures in July 2032, with an amortisation
profile giving it a seven-year average life. Together, these will
give us additional funding capacity of GBP260m once the January
2023 tranche of our existing Private Placement has matured.
Currency effects on reported revenue and profit
We report our results in Sterling with 50% of Group revenue
denominated in US Dollars and 11% 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 2022/23. This resulted in a 8% positive
currency translation effect on Group revenue and 9% on profit in
the first half of 2022/23 relative to 2021/22. If exchange rates
remain at current levels, we expect a further positive currency
translation effect in the second half of 2022/23.
Pensions update
On an IAS 19 basis, the Group's defined benefit plans at the
half year end had a surplus of GBP43.2m (31 March 2022: surplus of
GBP30.5m) before the related deferred tax asset. The plans'
liabilities decreased due to a substantial increase in the discount
rate used to value those liabilities, while there was a smaller
decrease in the plans' assets due to market volatility. Together,
these movements resulted in an overall increase in the plans'
surplus. 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 2022/23
financial year to be consistent with our previous guidance of
GBP14.6m (excludes a GBP1.3m contribution related to the disposal
of Texecom).
Group tax rate in line with prior year
The Group has major operating subsidiaries in a number of
countries and the Group's effective tax rate is a blend of these
national tax rates applied to locally generated profits.
The Group's effective tax rate on Adjusted(1) Profit was 21.5%
(six months to 30 September 2021: 21.8%; year to 31 March 2022:
21.6%).
On 2 April 2019, the European Commission (EC) published its
final decision that the UK controlled Finance Company Partial
Exemption (FCPE) constituted State Aid. In common with many other
UK companies, Halma has benefited from the FCPE and had appealed
against the European Commission's decision, as had the UK
Government. The EU General Court delivered its decision on 8 June
2022. The ruling was in favour of the European Commission but in
August 2022 the UK Government and the taxpayer have appealed this
decision. Following receipt of charging notices from HM Revenue
& Customs (HMRC) we made a payment in February 2021 of GBP13.9m
to HMRC in respect of tax, and in May 2021 made a further payment
of approximately GBP0.8m in respect of interest.
Whilst the EU General Court was in favour of the EC, our
assessment is that there are strong grounds for appeal and we would
expect such appeals to be successful. As a result, and given the
appeal process is expected to take more than a year, we continue to
recognise a receivable of GBP14.7m within non-current assets in the
balance sheet.
Chief Financial Officer appointment and Group Chief Executive
transition update
We were pleased to announce last week the appointment of Steve
Gunning as Chief Financial Officer (CFO). Steve will join Halma on
16 January 2023 and will be appointed to Halma's Board at that
time. He will succeed Marc Ronchetti who, as previously announced,
will become Group Chief Executive (CEO) in April 2023, as Andrew
Williams retires from that role.
Steve is a highly experienced FTSE 100 CFO. He was most recently
CFO of International Airlines Group, the Anglo-Spanish airlines
group that was formed through the merger of British Airways (BA)
and Iberia and prior to that held several senior commercial and
finances roles in that group.
His appointment will enable a seamless transition of the CFO and
CEO roles and ensure that Halma is well positioned to deliver
continued success.
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. As part of these processes, we are closely
monitoring and assessing the effects on revenue, costs and working
capital from higher inflation and the currently elevated levels of
disruption in supply chains and labour markets. We expect that our
companies' agility, and the support they receive from across the
Group to share best practice in addressing these challenges, will
continue to mitigate any potential material effects.
Our principal risks, together with a description of our approach
to mitigating them, are set out on pages 98 to 101 of the Annual
Report and Accounts 2022, which is available on the Group's website
at www.halma.com. See note 17 to the Condensed Interim Financial
Statements for further details.
Going concern
After conducting a review of the Group's business activities,
financial position and main trends and factors likely to affect its
future development, performance and position, and considering
potential scenarios and principal risks, the Directors believe, at
the time of approving the financial statements, that the Company is
well placed to manage its business risks successfully and remains a
going concern. For this reason they deem it appropriate to continue
to adopt the going concern basis of accounting for at least the
next 12-month period. Further information is available in the
statement headed "Going concern" in the Condensed Interim Financial
Statements.
Summary and Outlook
Halma made further good progress in the first half. We delivered
record revenue, Adjusted(1) Profit and interim dividend, with
growth in all sectors and regions. We maintained a strong balance
sheet, while further enhancing our growth opportunities through
increased strategic investment to support future growth, both
organically and through acquisitions.
We saw strong demand for our companies' products and services in
the period. Our order book is exceptionally strong, having grown
from the record level seen at the start of the year. Order intake
remained ahead of both revenue and the very strong order intake in
the comparable period last year.
Our Sustainable Growth Model continues to enable our success in
varied market conditions, demonstrating the value of the diversity
and global reach of our portfolio, our strong purpose and culture
and our agile business model. The operational environment presents
both challenges and opportunities; we remain 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 Group Chief Executive Designate and Chief
Financial Officer
(1) See Highlights, above.
(2) See note 2 to the Condensed Interim Financial Statements.
Profit is Adjusted(1) operating profit before central
administration costs after share of associate.
(3) From 16 June 2022, the Medical sector was renamed
Healthcare.
Independent review report to Halma plc
Report on the Condensed Consolidated Interim Financial
Statements
Our conclusion
We have reviewed Halma plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
Half Year Report of Halma plc for the 6 month period ended 30
September 2022 (the "period").
Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
- the Consolidated Balance Sheet as at 30 September 2022;
- the Consolidated Income Statement and the Consolidated
Statement of Comprehensive Income and Expenditure for the period
then ended;
- the Consolidated Cash Flow Statement for the period then ended;
- the Consolidated Statement of Changes in Equity for the period then ended; and
- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year
Report of Halma plc have been prepared in accordance with UK
adopted International Accounting Standard 34, 'Interim Financial
Reporting' and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Financial Reporting Council 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.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE.
However, future events or conditions may cause the group to cease
to continue as a going concern.
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. In preparing the Half Year Report, including the
interim financial statements, the directors are responsible for
assessing the group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the directors
either intend to liquidate the group or to cease operations, or
have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the Half Year Report based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
17 November 2022
Condensed Interim Financial Statements
Consolidated Income Statement
Audited
year
Unaudited Unaudited to
six months to six months to 31 March
30 September 2022 30 September 2021 2022
----------------------------------- ----------------------------------- ---------
Adjustments* Adjustments*
Before (note Before (note
adjustments* 2) Total adjustments* 2) Total Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ----- ------------- ------------ ------ ------------- ------------ ------ ---------
Continuing operations
Revenue 2 875.5 - 875.5 737.2 - 737.2 1,525.3
---------------------- ----- ------------- ------------ ------ ------------- ------------ ------ ---------
Operating profit 177.9 (26.2) 151.7 159.0 (21.4) 137.6 278.9
Share of results
of associates - - - (0.1) - (0.1) (0.1)
Gain on disposal
of operations 11 - - - - 34.0 34.0 34.0
Finance income 3 0.8 - 0.8 0.6 - 0.6 0.6
Finance expense 4 (7.0) - (7.0) (4.6) - (4.6) (9.0)
---------------------- ----- ------------- ------------ ------ ------------- ------------ ------ ---------
Profit before taxation 171.7 (26.2) 145.5 154.9 12.6 167.5 304.4
Taxation 5 (36.9) 6.2 (30.7) (33.8) 2.0 (31.8) (60.2)
---------------------- ----- ------------- ------------ ------ ------------- ------------ ------ ---------
Profit for the
period 134.8 (20.0) 114.8 121.1 14.6 135.7 244.2
---------------------- ----- ------------- ------------ ------ ------------- ------------ ------ ---------
Attributable to:
Owners of the parent 115.0 135.8 244.4
Non-controlling
interests (0.2) (0.1) (0.2)
Earnings per share
from continuing
operations 6
Basic 35.65p 30.39p 31.96p 35.83p 64.54p
Diluted 30.35p 35.77p 64.42p
Dividends in respect
of the period 7
Dividends paid
and proposed (GBPm) 29.7 27.9 71.5
Per share 7.86p 7.35p 18.88p
---------------------- ----- ------------- ------------ ------ ------------- ------------ ------ ---------
* Adjustments include the amortisation and impairment of
acquired intangible assets; acquisition items; significant
restructuring costs; profit or loss on disposal of operations; and
the associated taxation thereon. Note 9 provides more information
on alternative performance measures.
Consolidated Statement of Comprehensive Income
and Expenditure
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
------------------------------------------------------ ------------- ------------- ---------
Profit for the period 114.8 135.7 244.2
Items that will not be reclassified subsequently
to the Income Statement:
Actuarial gains on defined benefit pension plans 3.6 10.4 41.6
Tax relating to components of other comprehensive
income that will not be reclassified (1.4) (1.0) (9.6)
Changes in the fair value of equity instruments
at fair value through other comprehensive income 9.3 - (1.7)
Items that may be reclassified subsequently to
the Income Statement:
Effective portion of changes in fair value of cash
flow hedges (1.7) (0.8) (1.5)
Deferred tax in respect of cash flow hedges accounted
for in the hedging reserve 0.3 0.2 0.4
Exchange gains on translation of foreign operations
and net investment hedge 162.1 18.5 43.9
Other comprehensive income for the period 172.2 27.3 73.1
------------------------------------------------------ ------------- ------------- ---------
Total comprehensive income for the period 287.0 163.0 317.3
------------------------------------------------------ ------------- ------------- ---------
Attributable to:
Owners of the parent 287.2 163.1 317.5
Non-controlling interests (0.2) (0.1) (0.2)
------------------------------------------------------ ------------- ------------- ---------
The exchange gains of GBP162.1m (six months to 30 September
2021: GBP18.5m gain; year to 31 March 2022: GBP43.9m gain) include
losses of GBP28.8m (six months to 30 September 2021: GBP3.6m
losses; year to 31 March 2022: GBP8.6m losses), which relate to net
investment hedges.
Consolidated Balance Sheet
Unaudited Unaudited Audited
30 September 30 September 31 March
2022 2021 2022
Notes GBPm GBPm GBPm
---------------------------------------------- ----- ------------- ------------- ---------
Non-current assets
Goodwill 1,101.8 867.4 908.7
Other intangible assets 418.6 319.3 325.2
Property, plant and equipment 224.5 186.7 194.0
Interests in associates and other investments 19.8 9.9 8.2
Retirement benefit asset 13 43.9 4.8 31.1
Tax receivable 14 14.7 14.7 14.7
Deferred tax asset 2.8 1.9 2.4
---------------------------------------------- ----- ------------- ------------- ---------
1,826.1 1,404.7 1,484.3
---------------------------------------------- ----- ------------- ------------- ---------
Current assets
Inventories 308.8 193.2 228.8
Trade and other receivables 389.9 279.2 325.1
Tax receivable 1.9 4.4 0.7
Cash and bank balances 213.4 131.1 157.4
Derivative financial instruments 12 1.2 0.6 0.7
---------------------------------------------- ----- ------------- ------------- ---------
915.2 608.5 712.7
---------------------------------------------- ----- ------------- ------------- ---------
Total assets 2,741.3 2,013.2 2,197.0
---------------------------------------------- ----- ------------- ------------- ---------
Current liabilities
Trade and other payables 256.4 206.1 242.7
Borrowings 78.8 3.0 72.5
Lease liabilities 19.4 14.2 15.5
Provisions 26.5 22.0 20.7
Tax liabilities 15.8 13.8 11.6
Derivative financial instruments 12 3.4 0.2 0.9
---------------------------------------------- ----- ------------- ------------- ---------
400.3 259.3 363.9
---------------------------------------------- ----- ------------- ------------- ---------
Net current assets 514.9 349.2 348.8
---------------------------------------------- ----- ------------- ------------- ---------
Non-current liabilities
Borrowings 545.6 340.7 287.6
Lease liabilities 69.2 53.4 56.6
Retirement benefit obligations 13 0.7 10.1 0.6
Trade and other payables 21.4 15.2 19.0
Provisions 7.9 6.3 7.7
Deferred tax liabilities 69.2 51.1 58.5
---------------------------------------------- ----- ------------- ------------- ---------
714.0 476.8 430.0
---------------------------------------------- ----- ------------- ------------- ---------
Total liabilities 1,114.3 736.1 793.9
---------------------------------------------- ----- ------------- ------------- ---------
Net assets 1,627.0 1,277.1 1,403.1
---------------------------------------------- ----- ------------- ------------- ---------
Equity
Share capital 38.0 38.0 38.0
Share premium account 23.6 23.6 23.6
Own shares (46.3) (22.0) (30.7)
Capital redemption reserve 0.2 0.2 0.2
Hedging reserve (1.8) 0.1 (0.4)
Translation reserve 279.2 91.7 117.1
Other reserves (14.5) (26.4) (19.9)
Retained earnings 1,348.4 1,171.4 1,274.8
---------------------------------------------- ----- ------------- ------------- ---------
Equity attributable to owners of the Company 1,626.8 1,276.6 1,402.7
---------------------------------------------- ----- ------------- ------------- ---------
Non-controlling interests 0.2 0.5 0.4
---------------------------------------------- ----- ------------- ------------- ---------
Total equity 1,627.0 1,277.1 1,403.1
---------------------------------------------- ----- ------------- ------------- ---------
Consolidated Statement of Changes in Equity
For the six months to 30 September 2022
-----------------------------------------------------------------------------------------------
Share Capital
Share premium Own redemption Hedging Translation Other Retained Non-controlling
capital account shares reserve reserve reserve reserves earnings interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------- ------- ------ ---------- ------- ----------- -------- -------- --------------- -------
At 1 April 2022
(audited) 38.0 23.6 (30.7) 0.2 (0.4) 117.1 (19.9) 1,274.8 0.4 1,403.1
Profit for the
period - - - - - - - 115.0 (0.2) 114.8
Other
comprehensive
income and
expense - - - - (1.4) 162.1 9.3 2.2 - 172.2
----------------- ------- ------- ------ ---------- ------- ----------- -------- -------- --------------- -------
Total
comprehensive
income/(expense) - - - - (1.4) 162.1 9.3 117.2 (0.2) 287.0
Dividends paid - - - - - - - (43.6) - (43.6)
Share-based
payments charge - - - - - - 7.8 - - 7.8
Deferred tax
on share-based
payment
transactions - - - - - - (0.8) - - (0.8)
Purchase of
own shares - - (22.3) - - - - - - (22.3)
Performance
share plan
awards
vested - - 6.7 - - - (10.9) - - (4.2)
----------------- ------- ------- ------ ---------- ------- ----------- -------- -------- --------------- -------
At 30 September
2022 (unaudited) 38.0 23.6 (46.3) 0.2 (1.8) 279.2 (14.5) 1,348.4 0.2 1,627.0
----------------- ------- ------- ------ ---------- ------- ----------- -------- -------- --------------- -------
Own shares are ordinary shares in Halma plc purchased by the
Company and held to fulfil the Company's obligations under the
Company's share plans. As at 30 September 2022, the number of
shares held by the Employee Benefit Trust was 1,913,290 (30
September 2021: 870,370 and 31 March 2022: 1,175,080).
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 and fair value adjustments on equity instruments held
at fair value through other comprehensive income.
For the six months to 30 September 2021
------------------------------------------------------------------------------------------------
Share Capital Non-
Share premium Own redemption Hedging Translation Other Retained controlling
capital account shares reserve reserve reserve reserves earnings interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- -------
At 1 April 2021
(audited) 38.0 23.6 (20.9) 0.2 0.7 73.2 (13.6) 1,065.8 0.6 1,167.6
Profit for the
period - - - - - - - 135.8 (0.1) 135.7
Other
comprehensive
income and
expense - - - - (0.6) 18.5 - 9.4 - 27.3
----------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- -------
Total
comprehensive
income/(expense) - - - - (0.6) 18.5 - 145.2 (0.1) 163.0
Dividends paid - - - - - - - (40.8) - (40.8)
Share-based
payments
charge - - - - - - 4.0 - - 4.0
Deferred tax
on share-based
payment
transactions - - - - - - (0.5) - - (0.5)
Excess tax
deductions
related to
share-based
payments on
exercised
awards - - - - - - - 1.2 - 1.2
Purchase of own
shares - - (10.4) - - - - - - (10.4)
Performance share
plan awards
vested - - 9.3 - - - (16.3) - - (7.0)
----------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- -------
At 30 September
2021 (unaudited) 38.0 23.6 (22.0) 0.2 0.1 91.7 (26.4) 1,171.4 0.5 1,277.1
----------------- -------- ------- ------- ---------- -------- ------------ --------- --------- ----------- -------
For the year to 31 March 2022
--------------------------------------------------------------------------------------------------
Share Capital Non-
Share premium Own redemption Hedging Translation Other Retained controlling
capital account shares reserve reserve reserve reserves earnings interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- ------- -------- ---------- -------- ------------ --------- --------- ----------- --------
At 1 April 2021
(audited) 38.0 23.6 (20.9) 0.2 0.7 73.2 (13.6) 1,065.8 0.6 1,167.6
Profit for the
year - - - - - - - 244.4 (0.2) 244.2
Other
comprehensive
income and
expense - - - - (1.1) 43.9 (1.7) 32.0 - 73.1
----------------- -------- ------- -------- ---------- -------- ------------ --------- --------- ----------- --------
Total
comprehensive
income/(expense) - - - - (1.1) 43.9 (1.7) 276.4 (0.2) 317.3
Dividends paid - - - - - - - (68.7) - (68.7)
Share-based
payments charge - - - - - - 12.2 - - 12.2
Deferred tax
on share-based
payment
transactions - - - - - - (0.2) - - (0.2)
Excess tax
deductions
related to
share-based
payments on
exercised awards - - - - - - - 1.3 - 1.3
Purchase of
own shares - - (19.3) - - - - - - (19.3)
Performance
share plan
awards
vested - - 9.5 - - - (16.6) - - (7.1)
At 31 March
2022 (audited) 38.0 23.6 (30.7) 0.2 (0.4) 117.1 (19.9) 1,274.8 0.4 1,403.1
----------------- -------- ------- -------- ---------- -------- ------------ --------- --------- ----------- --------
Consolidated Cash Flow Statement
Notes Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
------------------------------------------------- ----- ------------- ------------- ---------
Net cash inflow from operating activities 8 95.1 112.0 237.4
------------------------------------------------- ----- ------------- ------------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (16.2) (13.7) (25.2)
Purchase of computer software (0.4) (0.5) (0.9)
Purchase of other intangibles (0.1) (0.4) (0.5)
Proceeds from sale of property, plant and
equipment and capitalised
development costs 1.1 0.4 1.1
Development costs capitalised (7.1) (6.8) (13.4)
Interest received 0.2 0.2 0.2
Acquisition of businesses, net of cash acquired 10 (174.9) (105.0) (152.8)
Disposal of business, net of cash disposed - 57.5 57.5
Investment in associates and other equity
investments (2.2) (0.7) (0.7)
------------------------------------------------- ----- ------------- ------------- ---------
Net cash used in investing activities (199.6) (69.0) (134.7)
------------------------------------------------- ----- ------------- ------------- ---------
Cash flows from financing activities
Dividends paid 7 (43.6) (40.8) (68.7)
Purchase of own shares (22.3) (10.4) (19.3)
Interest paid (6.4) (3.9) (8.2)
Loan arrangement fees (4.1) - -
Proceeds from bank borrowings 258.8 100.0 161.4
Repayments of bank borrowings (361.9) (85.2) (132.5)
Drawdown of loan notes 338.1 - -
Repayment of lease liabilities, net of interest (8.9) (7.0) (14.6)
------------------------------------------------- ----- ------------- ------------- ---------
Net cash from/(used in) financing activities 149.7 (47.3) (81.9)
------------------------------------------------- ----- ------------- ------------- ---------
Increase/(decrease) in cash and cash equivalents 45.2 (4.3) 20.8
Cash and cash equivalents brought forward 156.7 131.1 131.1
Exchange adjustments 9.7 1.3 4.8
------------------------------------------------- ----- ------------- ------------- ---------
Cash and cash equivalents carried forward 211.6 128.1 156.7
------------------------------------------------- ----- ------------- ------------- ---------
Unaudited Unaudited Audited
six months six months year to
to to 31 March
30 September 30 September 2022
2022 2021 GBPm
GBPm GBPm
------------------------------------------------- ------------- ------------- ---------
Reconciliation of net cash flow to movement in
net debt
Increase/(decrease) in cash and cash equivalents 45.2 (4.3) 20.8
Net cash inflow from drawdown of bank borrowings (235.0) (14.8) (28.9)
Lease liabilities additions (15.2) (7.9) (19.0)
Lease liabilities acquired (3.0) (3.8) (4.6)
Lease liabilities disposed of - 2.1 2.1
Lease liabilities and interest repaid 10.2 8.1 16.8
Exchange adjustments (27.0) (3.4) (5.8)
------------------------------------------------- ------------- ------------- ---------
Increase in net debt (224.8) (24.0) (18.6)
Net debt brought forward (274.8) (256.2) (256.2)
Net debt carried forward (499.6) (280.2) (274.8)
------------------------------------------------- ------------- ------------- ---------
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 2022, was approved by the Directors on 17
November 2022.
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 UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the UK's Financial Conduct Authority. The Report should be read in
conjunction with the annual consolidated financial statements for
the year ended 31 March 2022 which were prepared in accordance with
UK-adopted international accounting standards and with the
requirements of the Companies Act 2006. The same accounting
policies and presentation that were applied in the preparation of
the Group's statutory accounts for the year to 31 March 2022 have
also been applied to the interim consolidated financial statements
with the exception of the policy for taxes on income, which in the
interim period is accrued using the estimated effective tax rates
for the year on profits before taxation before adjustments, with
the tax rates applied to the adjustments being established on an
individual basis for each adjustment.
The figures shown for the year to 31 March 2022 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 in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006, have been filed with the Registrar of Companies. The audit
report on those accounts was not qualified, did not include a
reference to any matters to which the Auditor drew attention by way
of emphasis without qualifying the report, and did not contain
statements under Sections 498 (2) or (3) of the Companies Act
2006.
Going concern
The Group's business activities, together with the main trends
and factors likely to affect its future development, performance
and position, and the financial position of the Group as at 30
September 2022, its cash flows, liquidity position and borrowing
facilities are set out below and on pages 2 to 7 of the Half Year
Report.
The financial statements have been prepared on a going concern
basis. In adopting the going concern basis the Directors have
considered all of the above factors, including potential scenarios
and its principal risks set out in note 17. Under the potential
scenarios considered, which includes a severe but plausible
downside scenario, the Group remains within its debt facilities and
the attached financial covenants for the foreseeable future and the
Directors therefore believe, at the time of approving the financial
statements, that the Company is well placed to manage its business
risks successfully and remains a going concern. The key facts and
assumptions in reaching this determination are summarised
below.
Our financial position remains robust with committed facilities
totalling approximately GBP1,013.4m which includes a GBP550m
Revolving Credit Facility of which GBP390.5m remained undrawn at 30
September 2022. The earliest maturity in these facilities is for
GBP76.0m in January 2023. The financial covenants across the
facilities are for leverage (net debt/adjusted EBITDA) of not more
than three and a half times and for adjusted interest cover of not
less than four times.
Our base case scenario has been prepared using forecasts from
each of our Operating Companies as well as cash outflows on
acquisitions in line with pre COVID-19 levels and reflects the
current inflationary environment and supply chain constraints being
experienced. In addition, a severe but plausible downside scenario
has been modelled showing a decline in trading for the next 12
months to below levels seen for the preceding 12-month period, a
reduction in gross margin percentage and increasing overheads. The
reduction in trading could be caused by unexpected market
conditions, such as further significant COVID-19 impacts or another
significant downside event . In mitigating the impacts of the
downside scenario there are actions that can be taken which are
entirely discretionary to the business such as reducing acquisition
spend and dividend growth rates. In addition, the Group has
demonstrated strong resilience and flexibility during the COVID-19
pandemic in managing overheads which could be used to further
mitigate the impacts of the downside scenario. The scenarios
modelled cover a period of greater than 12 months from the date of
the financial statements.
Neither the base case nor severe but plausible downside
scenarios result in a breach of the Group's available debt
facilities or the attached covenants and, accordingly, the
Directors believe there is no material uncertainty in the use of
the going concern assumption and, therefore, deem it appropriate to
continue to adopt the going concern basis of accounting for at
least the next 12-month period.
New accounting standards and policies
The following standards, with an effective date of 1 January
2022, have been adopted without any significant impact on the
amounts reported in these financial statements:
- Reference to the Conceptual Framework - Amendments to IFRS 3.
- Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16.
- Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37.
The Group has not early adopted any standard, interpretation or
amendment that was issued but is not yet effective. The Group is
assessing any potential implication, but currently do not expect a
material impact on the Group.
2 Segmental analysis and revenue from contracts with
customers
Sector analysis
The Group has three main reportable segments (Safety,
Environmental & Analysis and Healthcare), 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. From 16 June 2022, the Group renamed the Medical segment
Healthcare.
Segment revenue disaggregation (by location of external
customer)
Unaudited six months to 30 September 2022
Revenue by sector and destination (all continuing
operations)
-----------------------------------------------------------------------------
Africa,
United Near
States Mainland United and Middle Other
of America Europe Kingdom Asia Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- ------------ ----------- ---------- -----
Safety 99.1 98.9 75.6 54.8 14.9 12.1 355.4
Environmental & Analysis 131.3 29.7 37.9 50.8 7.0 7.1 263.8
Healthcare 134.1 41.9 23.8 36.5 7.3 13.1 256.7
Inter-segmental sales ( 0.3) - (0.1) - - - (0.4)
------------------------- ----------- -------- -------- ------------ ----------- ---------- -----
Revenue for the period 364.2 170.5 137.2 142.1 29.2 32.3 875.5
------------------------- ----------- -------- -------- ------------ ----------- ---------- -----
Unaudited six months to 30 September 2021
Revenue by sector and destination (all continuing
operations)
Africa,
Near
United and
States Mainland United Middle Other
of America Europe Kingdom Asia Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- ------------ ------- ---------- -----
Safety 77.7 89.7 77.5 51.9 15.1 8.3 320.2
Environmental & Analysis 99.0 24.7 38.9 37.3 5.2 4.4 209.5
Healthcare 104.7 32.2 19.8 35.6 5.7 10.0 208.0
Inter-segmental sales (0.5) - - - - - (0.5)
------------------------- ----------- -------- -------- ------------ ------- ---------- -----
Revenue for the period 280.9 146.6 136.2 124.8 26.0 22.7 737.2
------------------------- ----------- -------- -------- ------------ ------- ---------- -----
Audited year end 31 March 2022
Revenue by sector and destination (all continuing
operations)
---------------------------------------------------------------------------
Africa,
Near
United and
States Mainland United Middle Other
of America Europe Kingdom Asia Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- ------------ ------- ---------- -------
Safety 164.6 180.0 147.0 101.8 29.4 18.6 641.4
Environmental & Analysis 209.6 56.7 77.6 78.4 12.3 8.3 442.9
Healthcare 224.3 71.4 42.4 70.6 11.9 21.7 442.3
Inter-segmental sales (1.3) - - - - - (1.3)
------------------------- ----------- -------- -------- ------------ ------- ---------- -------
Revenue for the period 597.2 308.1 267.0 250.8 53.6 48.6 1,525.3
------------------------- ----------- -------- -------- ------------ ------- ---------- -------
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 GBP41.4m
(six months to 30 September 2021: GBP28.8m; year to 31 March 2022:
GBP69.9m). 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
2022 2021 2022
GBPm GBPm GBPm
------------------------------------------------- ------------- ------------- ---------
Segment profit before allocation of adjustments*
Safety 75.4 73.5 146.2
Environmental & Analysis 65.4 53.1 109.8
Healthcare 56.4 46.3 99.5
------------------------------------------------- ------------- ------------- ---------
197.2 172.9 355.5
------------------------------------------------- ------------- ------------- ---------
Segment profit after allocation of adjustments*
Safety 67.1 99.1 163.5
Environmental & Analysis 58.4 46.6 96.9
Healthcare 45.5 39.8 83.3
------------------------------------------------- ------------- ------------- ---------
Segment profit 171.0 185.5 343.7
Central administration costs (19.3) (14.0) (30.9)
Net finance expense (6.2) (4.0) (8.4)
------------------------------------------------- ------------- ------------- ---------
Group profit before taxation 145.5 167.5 304.4
Taxation (30.7) (31.8) (60.2)
------------------------------------------------- ------------- ------------- ---------
Profit for the period 114.8 135.7 244.2
------------------------------------------------- ------------- ------------- ---------
* Adjustments include the am ortisation and imp airment 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 six months to 30 September
2022
------------------ -------------------------------------------------------------------
Acquisition items
------------------ ------------ ---------------------------------------- ------
Total
Release amortisation Disposal
of charge of
Amortisation Adjustments fair value and operations
of acquired Transaction to contingent adjustments acquisition and
intangibles costs consideration to inventory items restructuring Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------ ----------- ------------- ------------ ------------- ------------- ------
Safety (8.1) (0.2) - - (8.3) - (8.3)
Environmental &
Analysis (6.2) (0.6) 0.2 (0.4) (7.0) - (7.0)
Healthcare (9.8) (1.9) 0.8 - (10.9) - (10.9)
------------------ ------------ ----------- ------------- ------------ ------------- ------------- ------
Total Segment &
Group (24.1) (2.7) 1.0 (0.4) (26.2) - (26.2)
------------------ ------------ ----------- ------------- ------------ ------------- ------------- ------
The transaction costs arose mainly on the acquisitions during
the period. In Environmental & Analysis, they related to the
acquisition of Deep Trekker (GBP0.6m). In Healthcare, they mostly
related to the acquisition of IZI Medical Products (GBP1.8m), in
the current year.
Adjustment to contingent consideration comprised of a credit of
GBP0.2m in Environmental & Analysis arising from a decrease in
the estimate of the payable for Orca. In Healthcare there was a
credit of GBP0.8m arising from a decrease in estimates of the
payable for Infinite Leap (GBP0.6m) and a credit arising from
exchange differences on balances denominated in Euros (GBP0.6m),
partially offset by an increase in the estimate of the payable for
Meditech (GBP0.4m).
The GBP0.4m release of fair value adjustments to inventory
related to Deep Trekker (GBP0.3m) and ILT (GBP0.1m) in
Environmental & Analysis. All amounts have been released in
relation to Deep Trekker and ILT.
Unaudited six months to 30 September
2021
----------------- ------------------------------------------------------------------------
Acquisition items
----------------- ------------ ------------------------------------------ ------
Disposal
Release Total of
of amortisation operations
fair charge and
Amortisation Adjustments value and restructuring
of acquired Transaction to contingent adjustments acquisition (note
intangibles costs consideration to inventory items 11) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ------------ ----------- -------------- ------------- ------------- ---------------- ------
Safety (7.3) (0.5) - (0.6) (8.4) 34.0 25.6
Environmental &
Analysis (5.1) (0.7) 0.1 (0.8) (6.5) - (6.5)
Healthcare (8.4) (1.7) 3.8 (0.2) (6.5) - (6.5)
----------------- ------------ ----------- -------------- ------------- ------------- ---------------- ------
Total Segment &
Group (20.8) (2.9) 3.9 (1.6) (21.4) 34.0 12.6
----------------- ------------ ----------- -------------- ------------- ------------- ---------------- ------
The transaction costs arose mainly on the acquisitions during
the prior year. In Safety, they related to the acquisition of
Ramtech (GBP0.4m) and IBIT (GBP0.1m). In Environmental &
Analysis, they related to the acquisition of Dancutter (GBP0.3m),
Sensitron (GBP0.2m), Orca (GBP0.1m) and Anton (GBP0.1m). In
Healthcare, they related to the acquisition of PeriGen (GBP1.3m),
Meditech (GBP0.1m) and RNK (GBP0.1m), in the prior year and the
acquisition of Visiometrics in a previous year (GBP0.2m).
The GBP3.9m adjustment to contingent consideration comprised of
a credit of GBP0.1m in Environmental & Analysis arising from a
decrease in the estimate of the payables for Invenio and a credit
of GBP3.8m in Healthcare arising from a decrease in estimates of
the payables for NovaBone (GBP1.2m), NeoMedix (GBP2.5m) and Spreo
(GBP0.1m) partially offset by an increase in the estimate of the
payable for Infowave (GBP0.1m) and a credit of GBP0.1m arising from
exchange differences on balances denominated in Euros.
The GBP1.6m release of fair value adjustments to inventory
related to Ramtech (GBP0.6m) in Safety; Dancutter (GBP0.1m), Orca
(GBP0.6m) and Sensitron (GBP0.1m) in Environmental & Analysis;
and Meditech (GBP0.2m) in Healthcare. All amounts were released in
relation to Dancutter and Orca.
Audited year ended 31
March 2022
-------------- ------------------------------------------
Acquisition items
------------------------------------------
Disposal
Total of
Release amortisation operations
Amortisation of charge and
of acquired Adjustments fair value and restructuring
intangible Transaction to contingent adjustments acquisition (note
assets costs consideration to inventory items 11) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------------- ----------- -------------- ------------- ------------- ---------------- ------
Safety (14.9) (0.5) - (1.3) (16.7) 34.0 17.3
Environmental &
Analysis (10.3) (1.6) 0.1 (1.1) (12.9) - (12.9)
Healthcare (17.5) (2.1) 4.4 (1.0) (16.2) - (16.2)
----------------- -------------- ----------- -------------- ------------- ------------- ---------------- ------
Total Segment &
Group (42.7) (4.2) 4.5 (3.4) (45.8) 34.0 (11.8)
----------------- -------------- ----------- -------------- ------------- ------------- ---------------- ------
The transaction costs arose mainly on the acquisitions during
the year to March 2022. In Safety, they related to the acquisition
of Ramtech (GBP0.4m) and IBIT (GBP0.1m). In Environmental &
Analysis, they related to the acquisition of Dancutter (GBP0.3m),
Sensitron (GBP0.4m), Orca (GBP0.1m), Anton (GBP0.1m) and ILT
(GBP0.2m) in the year and Deep Trekker (GBP0.5m) that was acquired
in April 2022. In Healthcare, they related to the acquisition of
PeriGen (GBP1.4m), Infinite Leap (GBP0.3m), Clayborn Lab (GBP0.1m),
Meditech (GBP0.1m) and RNK (GBP0.1m), in the year and the
acquisition of Visiometrics in a previous year (GBP0.1m).
The GBP4.5m adjustment to contingent consideration comprised of
a credit of GBP0.1m in Environmental & Analysis arising from a
decrease in the estimate of the payables for Invenio (GBP0.3m)
offset by an increase in the estimate of the payable for Orca
(GBP0.2m) and a credit of GBP4.4m in Healthcare arising from a
decrease in estimates of the payables for NovaBone (GBP1.3m),
NeoMedix (GBP3.0m) and Spreo (GBP0.1m) partially offset by an
increase in the estimate of the payable for Infowave (GBP0.3m) and
a credit of GBP0.3m arising from exchange differences on balances
denominated in Euros.
The GBP3.4m release of fair value adjustments to inventory
related to Ramtech (GBP1.3m) in Safety; Dancutter (GBP0.1m), Orca
(GBP0.6m), Sensitron (GBP0.2m) and ILT (GBP0.2m) in Environmental
& Analysis; and Meditech (GBP1.0m) in Healthcare. All amounts
were released in relation to Dancutter, Ramtech, Orca and
Sensitron.
3 Finance income
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
---------------------------------------------- ------------- ------------- ---------
Interest receivable 0.3 0.2 0.2
Net interest on the net defined benefit asset 0.5 - -
Fair value movement on derivative financial
instruments - 0.4 0.4
---------------------------------------------- ------------- ------------- ---------
0.8 0.6 0.6
---------------------------------------------- ------------- ------------- ---------
4 Finance expense
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
-------------------------------------------------------- ------------- ------------- ---------
Interest payable on loans and overdrafts 5.1 2.7 5.6
Interest payable on lease obligations 1.3 1.1 2.3
Amortisation of finance costs 0.3 0.3 0.7
Net interest on the net defined benefit liability - 0.2 0.3
Other interest payable - 0.1 0.1
-------------------------------------------------------- ------------- ------------- ---------
6.7 4.4 9.0
Fair value movement on derivative financial instruments 0.3 0.2 -
7.0 4.6 9.0
-------------------------------------------------------- ------------- ------------- ---------
5 Taxation
The total Group tax charge for the six months to 30 September
2022 of GBP30.7m (six months to 30 September 2021: GBP31.8m; year
to 31 March 2022: GBP60.2m) comprises a current tax charge of
GBP34.4m (six months to 30 September 2021: GBP33.1m; year to 31
March 2022: GBP63.2m) and a deferred tax credit of GBP3.7m (six
months to 30 September 2021: deferred tax credit GBP1.3m; year to
31 March 2022: deferred tax credit GBP3.0m). The tax charge is
based on the estimated effective tax rates for the year, for profit
before taxation before adjustments. The tax rates applied to the
adjustments are established on an individual basis for each
adjustment.
The tax charge includes GBP24.6m (six months to 30 September
2021: GBP21.4m; year to 31 March 2022: GBP46.0m) in respect of
overseas tax.
On 20 July 2022, the UK Government issued draft legislation
applicable to large multinational groups in relation to a new tax
framework, which introduces a global minimum effective tax rate of
15% effective for accounting periods beginning on or after 31
December 2023. The Group is reviewing these draft rules to
understand the potential impacts on the Group.
6 Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing the
net profit for the year attributable to the equity shareholders of
the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to the ordinary equity shareholders of
the parent by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
Adjusted earnings are calculated as earnings from continuing
operations excluding the amortisation of acquired intangible
assets; acquisition items; profit or loss on disposal of operations
and the associated taxation thereon and in the prior year the
increase in the UK's corporation tax rate from 19% to 25%. The
Directors consider that adjusted earnings, which constitute an
alternative performance measure, represent a more consistent
measure of underlying performance as it excludes amounts not
directly linked with trading. A reconciliation of earnings and the
effect on basic and diluted earnings per share figures is as
follows:
Basic earnings per share
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
-------------------------------------------------- ------------- ------------- ---------
Earnings from continuing operations attributable
to owners of the parent 115.0 135.8 244.4
Amortisation of acquired intangible assets (after
tax) 18.3 16.9 33.1
Acquisition transaction costs (after tax) 2.4 2.7 3.8
Adjustments to contingent consideration (after
tax) (1.1) (3.9) (4.5)
Release of fair value adjustments to inventory
(after tax) 0.3 1.1 2.6
Disposal of operations and restructuring (after
tax) - (34.0) (34.0)
Impact of UK rate change - 2.6 2.6
Adjusted earnings attributable to owners of the
parent 134.9 121.2 248.0
-------------------------------------------------- ------------- ------------- ---------
Weighted average number of ordinary shares in
issue for basic earnings
per share, million 378.2 379.1 378.7
-------------------------------------------------- ------------- ------------- ---------
Per ordinary share
---------------------------------------
Unaudited Unaudited Audited
Six months Six months year
to to to
30 September 30 September 31 March
2022 2021 2022
pence pence pence
--------------------------------------------------- ------------- ------------- ---------
Earnings per share from continuing operations
attributable to owners of the parent 30.39 35.83 64.54
Amortisation of acquired intangible assets (after
tax) 4.84 4.46 8.73
Acquisition transaction costs (after tax) 0.62 0.70 0.99
Adjustments to contingent consideration (after
tax) (0.29) (1.03) (1.19)
Release of fair value adjustments to inventory
(after tax) 0.09 0.30 0.70
Disposal of operations and restructuring (after
tax) - (8.99) (8.98)
Impact of UK rate change - 0.69 0.69
Adjusted earnings per share attributable to owners
of the parent 35.65 31.96 65.48
--------------------------------------------------- ------------- ------------- ---------
Diluted earnings per share
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
--------------------------------------------------- ------------- ------------- ---------
Earnings from continuing operations attributable
to owners of the parent 115.0 135.8 244.4
Weighted average number of ordinary shares in
issue for basic earnings
per share, million 378.2 379.1 378.7
--------------------------------------------------- ------------- ------------- ---------
Dilutive potential ordinary shares - share awards,
million 0.5 0.6 0.7
--------------------------------------------------- ------------- ------------- ---------
Weighted average number of ordinary shares in
issue for diluted earnings
per share, million 378.7 379.7 379.4
--------------------------------------------------- ------------- ------------- ---------
Per ordinary share
---------------------------------------
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
pence pence pence
---------------------------------------------- ------------- ------------- ---------
Earnings per share from continuing operations
attributable to owners of the parent 30.35 35.77 64.42
---------------------------------------------- ------------- ------------- ---------
7 Dividends
Per ordinary share
---------------------------------------
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
pence pence pence
--------------------------------------------------- ------------- ------------- ---------
Amounts recognised as distributions and paid to
shareholders in the period
Final dividend for the year to 31 March 2022 (31
March 2021) 11.53 10.78 10.78
Interim dividend for the year to 31 March 2022 - - 7.35
--------------------------------------------------- ------------- ------------- ---------
11.53 10.78 18.13
--------------------------------------------------- ------------- ------------- ---------
Dividends in respect of the period
Proposed interim dividend for the year to 31 March
2022 (31 March 2021) 7.86 7.35 7.35
Final dividend for the year to 31 March 2023 - - 11.53
--------------------------------------------------- ------------- ------------- ---------
7.86 7.35 18.88
--------------------------------------------------- ------------- ------------- ---------
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
--------------------------------------------------- ------------- ---------------- ---------
Amounts recognised as distributions and paid to
shareholders in the period
Final dividend for the year to 31 March 2022 (31
March 2021) 43.6 40.8 40.8
Interim dividend for the year to 31 March 2023 - - 27.9
--------------------------------------------------- ------------- ---------------- ---------
43.6 40.8 68.7
--------------------------------------------------- ------------- ---------------- ---------
Dividends in respect of the period
Proposed interim dividend for the year to 31 March
2022 (31 March 2021) 29.7 27.8 27.9
Final dividend for the year to 31 March 2023 - - 43.6
--------------------------------------------------- ------------- ---------------- ---------
29.7 27.8 71.5
--------------------------------------------------- ------------- ---------------- ---------
8 Notes to the Consolidated Cash Flow Statement
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
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 151.7 137.6 278.9
Depreciation of property, plant and equipment 21.5 18.1 36.1
Amortisation of computer software 1.2 1.2 2.5
Amortisation of capitalised development costs
and other intangibles 4.8 4.7 7.6
Impairment of capitalised development costs - 1.7 2.9
Amortisation of acquired intangible assets 24.1 20.8 42.7
Share-based payment expense less amounts paid 4.2 (2.5) 5.0
Payments to defined benefit pension plans net
of service costs (8.7) (7.0) (11.7)
(Profit)/loss on sale of property, plant and equipment
and computer software (0.2) 0.1 0.8
------------------------------------------------------- ------------- ------------- ---------
Operating cash flows before movement in working
capital 198.6 174.7 364.8
Increase in inventories (42.5) (22.1) (51.9)
Increase in receivables (19.9) (9.1) (43.6)
(Decrease)/increase in payables and provisions (7.4) 7.2 36.1
Revision to estimate and exchange difference on
contingent consideration payable less amounts
paid in excess of payable estimated on acquisition (2.5) (11.1) (12.0)
------------------------------------------------------- ------------- ------------- ---------
Cash generated from operations 126.3 139.6 293.4
Taxation paid (31.2) (27.6) (56.0)
------------------------------------------------------- ------------- ------------- ---------
Net cash inflow from operating activities 95.1 112.0 237.4
------------------------------------------------------- ------------- ------------- ---------
Unaudited Unaudited Audited
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
-------------------------------------------- ------------- ------------- ---------
Analysis of cash and cash equivalents
Cash and bank balances 213.4 131.1 157.4
Overdrafts (included in current borrowings) (1.8) (3.0) (0.7)
-------------------------------------------- ------------- ------------- ---------
Cash and cash equivalents 211.6 128.1 156.7
-------------------------------------------- ------------- ------------- ---------
At Lease At 30
31 March Cash Net cash/(debt) liabilities Exchange September
2022 flow acquired additions adjustments 2022
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ --------- -------- ---------------- ---------------- ---------------- ----------
Analysis of net debt
Cash and bank balances 157.4 42.3 4.0 - 9.7 213.4
Overdrafts (0.7) (1.1) - - - (1.8)
------------------------------ --------- -------- ---------------- ---------------- ---------------- ----------
Cash and cash equivalents 156.7 41.2 4.0 - 9.7 211.6
Loan notes falling due within
one year (71.2) (5.3) - - - (76.5)
Loan notes falling due after
more than one year (35.0) (332.8) - - (19.1) (386.9)
Bank loans falling due within
one year (0.6) 0.1 - - - (0.5)
Bank loans falling due after
more than one year (252.6) 103.0 - - (9.1) (158.7)
Lease liabilities (72.1) 10.2 (3.0) (15.2) (8.5) (88.6)
------------------------------ --------- -------- ---------------- ---------------- ---------------- ----------
Total net debt (274.8) (183.6) 1.0 (15.2) (27.0) (499.6)
------------------------------ --------- -------- ---------------- ---------------- ---------------- ----------
Overdrafts 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 31 March
30 September 30 September 2022
2022 2021 GBPm
GBPm GBPm
------------------------------------------------------------ ------------- ------------- ---------
Profit after tax 114.8 135.7 244.2
Adjustments(1) 20.0 (14.6) 3.7
------------------------------------------------------------ ------------- ------------- ---------
Adjusted profit after tax(1) 134.8 121.1 247.9
------------------------------------------------------------ ------------- ------------- ---------
Total equity 1,627.0 1,277.1 1,403.1
(Less)/add back net retirement benefit (assets)/obligations (43.2) 5.3 (30.5)
Deferred tax liabilities/(assets) on retirement
benefits 11.0 (0.8) 7.7
Cumulative fair value adjustments for investments
at fair value through other comprehensive
income (7.7) - 1.7
Cumulative amortisation of acquired intangible
assets 415.5 316.8 345.7
Historical adjustments to goodwill(2) 89.5 89.5 89.5
------------------------------------------------------------ ------------- ------------- ---------
Total Invested Capital 2,092.1 1,687.9 1,817.2
------------------------------------------------------------ ------------- ------------- ---------
Average Total Invested Capital(3) 1,954.7 1,630.4 1,695.0
------------------------------------------------------------ ------------- ------------- ---------
Return on Total Invested Capital (annualised)(4) 13.8% 14.9% 14.6%
------------------------------------------------------------ ------------- ------------- ---------
Return on Capital Employed (ROCE)
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
------------------------------------------------ ------------- ------------- ---------
Profit before tax 145.5 167.5 304.4
Adjustments(1) 26.2 (12.6) 11.8
Net finance costs 6.2 4.0 8.4
Lease interest (1.3) (1.1) (2.3)
------------------------------------------------ ------------- ------------- ---------
Adjusted operating profit(1) after share
of results of associates 176.6 157.8 322.3
------------------------------------------------ ------------- ------------- ---------
Computer software costs within intangible
assets 3.4 5.3 4.2
Capitalised development costs within intangible
assets 48.3 39.1 41.7
Other intangibles within intangible assets 3.8 3.6 3.6
Property, plant and equipment 224.5 186.7 194.0
Inventories 308.8 193.2 228.8
Trade and other receivables 389.9 279.2 325.1
Current trade and other payables (256.4) (206.1) (242.7)
Current lease liabilities (19.4) (14.2) (15.5)
Current provisions (26.5) (22.0) (20.7)
Net tax receivable 0.8 5.3 3.8
Non-current trade and other payables (21.4) (15.2) (19.0)
Non-current provisions (7.9) (6.3) (7.7)
Non-current lease liabilities (69.2) (53.4) (56.6)
Add back contingent purchase consideration
provision 19.5 14.8 15.2
------------------------------------------------ ------------- ------------- ---------
Capital Employed 598.2 410.0 454.2
------------------------------------------------ ------------- ------------- ---------
Average Capital Employed(3) 526.1 399.8 421.9
------------------------------------------------ ------------- ------------- ---------
Return on Capital Employed (annualised)(4) 67.1% 78.9% 76.4%
------------------------------------------------ ------------- ------------- ---------
1 Adjustments include the amortisation of acquired intangible
assets; acquisition items; significant restructuring costs and
profit or loss on disposal of operations. Where after-tax measures,
these also include the associated taxation on adjusting items.
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 1 April
2021 Total Invested Capital and Capital Employed balances were
GBP1,572.8m and GBP389.5m respectively.
4 The ROTIC and ROCE measures are calculated as annualised
Adjusted profit after tax divided by Average Total Invested Capital
and annualised Adjusted operating profit after share of results of
associates divided by Average Capital Employed respectively.
Organic growth and constant currency
Organic growth measures the change in revenue and profit from
continuing Group operations. The measure equalises the effect of
acquisitions by:
a. removing from the year of acquisition their entire revenue
and profit before taxation,
b. in the following year, removing the revenue and profit for
the number of months equivalent to the pre-acquisition period in
the prior year, and
c. removing from the year prior to acquisition any revenue
generated by sales to the acquired company which would have been
eliminated on consolidation had the acquired company been owned for
that period.
The resultant effect is that the acquisitions are removed from
organic results for one full year of ownership.
The results of disposals are removed from the prior period
reported revenue and profit before taxation.
Constant currency measures the change in revenue and profit
excluding the effects of currency movements. The measure restates
the current year's revenue and profit at last year's exchanges
rates.
Organic growth at constant currency has been calculated as
follows:
Revenue Adjusted profit* before
taxation
-------------------------------------- --------------------------------------
Unaudited Unaudited Unaudited Unaudited
six months six months six months six months
to to to to
30 September 30 September 30 September 30 September
2022 2021 2022 2021
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Continuing operations 875.5 737.2 18.8% 171.7 154.9 10.9%
Acquired and disposed revenue/profit (24.8) (14.9) (1.9) (2.0)
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth 850.7 722.3 17.8% 169.8 152.9 11.1%
Constant currency adjustment (60.1) - (14.0) -
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth at constant
currency 790.6 722.3 9.5% 155.8 152.9 1.9%
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
* Adjustments include the amortisation of acquired intangible
assets; significant acquisition items; significant 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.
Safety
Revenue Adjusted* segment profit
-------------------------------------- --------------------------------------
Unaudited Unaudited Unaudited Unaudited
six months six months six months six months
to to to to
30 September 30 September 30 September 30 September
2022 2021 2022 2021
GBPm GBPm % growth GBPm GBPm % growth
--------------------------- ------------- ------------- -------- ------------- ------------- --------
Continuing operations 355.4 320.2 11.0% 75.4 73.5 2.6%
Acquisition, disposal and
currency adjustments (19.2) (14.6) (3.4) (2.0)
--------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth at constant
currency 336.2 305.6 10.1% 72.0 71.5 0.8%
--------------------------- ------------- ------------- -------- ------------- ------------- --------
Environmental & Analysis
Revenue Adjusted* segment
profit
-------------------------------------- --------------------------------------
Unaudited Unaudited Unaudited Unaudited
six months six months six months six months
to to to to
30 September 30 September 30 September 30 September
2022 2021 2022 2021
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Continuing operations 263.9 209.5 25.9% 65.4 53.1 23.1%
Acquisition and currency adjustments (36.3) (0.3) (2.9) -
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth at constant
currency 227.6 209.2 8.7% 62.5 53.1 7.6%
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Healthcare
Revenue Adjusted* segment
profit
-------------------------------------- --------------------------------------
Unaudited Unaudited Unaudited Unaudited
six months six months six months six months
to to to to
30 September 30 September 30 September 30 September
2022 2021 2022 2021
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Continuing operations 256.7 208.0 23.4% 56.4 46.3 21.9%
Acquisition and currency adjustments (29.4) - (5.8) -
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
Organic growth at constant
currency 227.3 208.0 9.3% 50.6 46.3 9.3%
------------------------------------- ------------- ------------- -------- ------------- ------------- --------
* Adjustments include the amortisation of acquired intangible
assets; acquisition items; significant 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
2022 2021 2022
GBPm GBPm GBPm
------------------------------------------- ------------- ------------- ---------
Operating profit 151.7 137.6 278.9
Add back:
Acquisition items 2.1 0.6 3.1
Amortisation of acquired intangible assets 24.1 20.8 42.7
------------------------------------------- ------------- ------------- ---------
Adjusted operating profit 177.9 159.0 324.7
------------------------------------------- ------------- ------------- ---------
Adjusted operating cash flow
Unaudited Unaudited Audited
six months six months year
to to to
30 September 30 September 31 March
2022 2021 2022
GBPm GBPm GBPm
--------------------------------------------------------- ------------- ------------- ---------
Net cash from operating activities (note 8) 95.1 112.0 237.4
Add back:
Net acquisition costs paid 3.4 2.9 4.1
Taxes paid 31.2 27.6 56.0
Proceeds from sale of property, plant and equipment
and capitalised development costs 1.1 0.4 1.1
Share awards vested not settled by own shares* 4.2 7.0 7.1
Deferred consideration paid in excess of payable
estimated on acquisition 1.4 7.2 7.5
Less:
Purchase of property, plant and equipment (16.2) (13.7) (25.2)
Purchase of computer software and other intangibles (0.5) (0.9) (1.4)
Development costs capitalised (7.1) (6.8) (13.4)
Adjusted operating cash flow 112.6 135.7 273.2
--------------------------------------------------------- ------------- ------------- ---------
Cash conversion % (adjusted operating cash flow/adjusted
operating profit) 63% 85% 84%
--------------------------------------------------------- ------------- ------------- ---------
* 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. Other previously unrecognised assets and
liabilities at acquisition are included and accounting policies are
aligned with those of the Group where appropriate.
During the six months ended 30 September 2022, the Group made
two acquisitions namely:
- Deep Trekker Inc.; and
- IZI Medical Products, LLC.
Set out on the following pages are summaries of the assets
acquired and liabilities assumed and the purchase consideration
of:
a. the total of acquisitions;
b. Deep Trekker Inc.; and
c. IZI Medical Products, LLC.
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 acquisitions contributed GBP5.9m of revenue and GBP0.6m of
profit after tax for the six months ended 30 September 2022.
If these acquisitions had been held since the start of the
financial year, it is estimated that the Group's reported revenue
and profit after tax would have been GBP14.3m and GBP3.1m higher
respectively.
As at the date of approval of the financial statements, the
accounting for all current and prior year acquisitions from 1
October 2021 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.
a) Total of acquisitions
Unaudited
30 September
2022
GBPm
------------------------------------------------------- -------------
Non-current assets
Intangible assets 80.3
Property, plant and equipment 4.7
Deferred tax 0.4
Current assets
Inventories 13.1
Trade and other receivables 6.3
Tax 0.1
Cash and cash equivalents 4.0
------------------------------------------------------- -------------
Total assets 108.9
------------------------------------------------------- -------------
Current liabilities
Payables (5.1)
Borrowings and lease liabilities (1.0)
Provisions (0.1)
Tax (0.2)
Non-current liabilities
Borrowings and lease liabilities (2.0)
Deferred tax (5.1)
------------------------------------------------------- -------------
Total liabilities (13.5)
------------------------------------------------------- -------------
Net assets of business acquired 95.4
------------------------------------------------------- -------------
Initial cash consideration paid 174.5
Other adjustments 3.0
Other amounts to be paid 0.3
Contingent purchase consideration estimated to be paid 6.2
------------------------------------------------------- -------------
Total consideration 184.0
------------------------------------------------------- -------------
Total goodwill 88.6
------------------------------------------------------- -------------
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
2022 2021 2022
GBPm GBPm GBPm
---------------------------------------------------- ------------- ------------- ---------
Initial cash consideration paid 174.5 106.5 151.2
Cash acquired on acquisitions (4.0) (18.2) (18.2)
Initial cash consideration adjustment on current
year acquisitions 3.0 11.9 13.1
Contingent consideration paid and loan notes repaid
in cash in relation to prior year acquisitions 2.8 12.0 14.2
Net cash outflow relating to acquisitions 176.3 112.2 160.3
---------------------------------------------------- ------------- ------------- ---------
Included in cash flows from operating activities 1.4 7.2 7.5
Included in cash flows from investing activities 174.9 105.0 152.8
---------------------------------------------------- ------------- ------------- ---------
Contingent consideration included in cash flows from operating
activities reflect amounts paid in excess of that estimated in the
acquisition balance sheets.
b) Deep Trekker Inc.
Unaudited
30 September
2022
GBPm
---------------------------------- -------------
Non-current assets
Intangible assets 14.9
Property, plant and equipment 2.2
Deferred tax 0.4
Current assets
Inventories 3.5
Trade and other receivables 1.2
Cash and cash equivalents 2.7
---------------------------------- -------------
Total assets 24.9
---------------------------------- -------------
Current liabilities
Payables (2.1)
Borrowings and lease liabilities (0.4)
Provisions (0.1)
Tax (0.2)
Non-current liabilities
Borrowings and lease liabilities (1.2)
Deferred tax (4.0)
---------------------------------- -------------
Total liabilities (8.0)
---------------------------------- -------------
Net assets of businesses acquired 16.9
---------------------------------- -------------
Initial cash consideration paid 36.6
Other adjustments 1.6
Other amounts to be paid 0.3
---------------------------------- -------------
Total consideration 38.5
---------------------------------- -------------
Total goodwill 21.6
---------------------------------- -------------
On 13 April 2022, the Group acquired the entire share capital of
Deep Trekker Inc. (Deep Trekker) for C$63.1m (GBP38.5m), which
comprised the purchase price of C$60.0m (GBP36.6m), net cash/(debt)
adjustments of C$2.6m (GBP1.6m) and additional amounts payable in
respect of working capital adjustments of C$0.5m (GBP0.3m). There
is no contingent consideration payable.
Deep Trekker, based in Ontario, Canada, is a market-leading
manufacturer of remotely operated underwater robots used for
inspection, surveying, analysis and maintenance. Deep Trekker will
be part of Halma's Environmental & Analysis sector.
On acquisition acquired intangibles were recognised relating to
customer related intangibles (GBP2.8m); trade name (GBP3.5m) and
technology related intangibles (GBP8.6m).
The residual goodwill of GBP21.6m 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.
Deep Trekker contributed GBP5.9m of revenue and GBP0.6m of
profit after tax for the six months ended 30 September 2022. If
this acquisition had been held since the start of the financial
year, it is estimated that the Group's reported revenue and profit
after tax would have been GBP0.3m higher and GBP0.1m higher
respectively.
Acquisition costs totalling GBP0.6m were recorded in the
Consolidated Income Statement.
The goodwill arising on this acquisition is not expected to be
deductible for tax purposes.
c) IZI Medical Products, LLC
Unaudited
30 September
2022
GBPm
------------------------------------------------------- -------------
Non-current assets
Intangible assets 65.4
Property, plant and equipment 2.5
Current assets
Inventories 9.6
Trade and other receivables 5.1
Tax 0.1
Cash and cash equivalents 1.3
------------------------------------------------------- -------------
Total assets 84.0
------------------------------------------------------- -------------
Current liabilities
Payables (3.0)
Borrowings and lease liabilities (0.6)
Non-current liabilities
Borrowings and lease liabilities (0.8)
Deferred tax (1.1)
------------------------------------------------------- -------------
Total liabilities (5.5)
------------------------------------------------------- -------------
Net assets of business acquired 78.5
------------------------------------------------------- -------------
Initial cash consideration paid 137.9
Other adjustments 1.4
Contingent purchase consideration estimated to be paid 6.2
------------------------------------------------------- -------------
Total consideration 145.5
------------------------------------------------------- -------------
Total goodwill 67.0
------------------------------------------------------- -------------
On 30 September 2022, the Group acquired the entire share
capital of IZI Medical Products, LLC (IZI), for US$155.0m
(GBP139.3m), which comprised the purchase price of US$153.5m
(GBP137.9m) plus net cash/(debt) adjustments of US$1.5m (GBP1.4m).
The maximum contingent consideration payable is US$14.5m (GBP13.0m)
based on profit-based targets for the year ending 31 March
2023.
IZI, based in Baltimore, Maryland, USA, is a leading designer,
manufacturer and distributor of medical devices used across a range
of diagnostic and therapeutic procedures. IZI will continue to be
run under its own management team and will be part of Halma's
Healthcare sector.
On acquisition acquired intangibles were recognised relating to
customer related intangibles (GBP20.4m); trade names (GBP2.7m) and
technology related intangibles (GBP42.3m).
The residual goodwill of GBP67.0m 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.
As IZI was acquired on the last day of the period it did not
contribute to the Group's reported revenue or profit after tax. If
this acquisition had been held since the start of the financial
year, it is estimated that the Group's reported revenue and profit
after tax would have been GBP14.0m and GBP3.0m higher
respectively.
Acquisition costs totalling GBP1.8m were recorded in the
Consolidated Income Statement.
The goodwill arising on the IZI acquisition is expected to be
deductible for tax purposes.
11 Disposal of operations
In the prior year, in August 2021, the Group disposed of its
entire interest in Texecom Limited to a third party. Cash received
on disposal of operations in the prior year of GBP57.5m comprised
proceeds from the sale of GBP64.8m, less GBP4.5m of cash disposed
and GBP2.8m of disposal costs. The Group recognised a profit on
disposal of operations of GBP34.0m.
12 Fair values of financial assets and liabilities
As at 30 September 2022, 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.
In May 2022, a new Private Placement of GBP330m was completed.
The issuance consists of Sterling, Euro, US Dollar and Swiss Francs
tranches and matures in July 2032, with an amortisation profile
giving it a seven year average life. Further information on the
refinancing can be found in the Annual Report and Accounts 2022
note 27.
The fair value of the Group's fixed rate loan notes arising from
the United States Private Placement completed in January 2016 and
the Private Placement completed in May 2022 is estimated to be
GBP426.2m, against a carrying value of GBP463.4m.
The fair value of financial instruments is estimated by
discounting the future contracted cash flow using readily available
market data and represents a level 2 measurement in the fair value
hierarchy under IFRS 7.
As at 30 September 2022, the total forward foreign currency
contracts outstanding were GBP65.8m. The contracts mostly mature
within one year and therefore the cash flows and resulting effect
on profit and loss are expected to occur within the next 12
months.
The fair values of the forward contracts are disclosed as a
GBP1.2m (30 September 2021: GBP0.6m; 31 March 2022: GBP0.7m) asset
and GBP3.4m (30 September 2021: GBP0.2m; 31 March 2022: GBP0.9m)
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.
The fair value of equity investments held at fair value through
other comprehensive income is based on the latest observable price
where available. Where there are no recent observable prices,
adjustments are made based on qualitative indicators, such as the
financial performance of the entity, performance against
operational milestones and future outlook. This represents a level
3 measurement in the fair value hierarchy under IFRS 7.
The fair values of the equity instruments held at fair value
through other comprehensive income at 30 September 2022 were
GBP17.6m (30 September 2021: GBP8.6m; 31 March 2022: GBP6.9m). The
fair value adjustment recognised in other comprehensive income for
the six months to 30 September 2022 was a gain of GBP9.3m (six
months to 30 September 2021: GBPNil; year to 31 March 2022: loss of
GBP1.7m).
13 Retirement benefits
At 30 September 2022, the Group has IAS 19 Retirement benefit
net surplus totalling GBP43.2m (30 September 2021: net obligation
of GBP5.3m, 31 March 2022: net surplus of GBP30.5m). The net asset
has increased from 31 March 2022 primarily due to changes in the
financial assumptions reducing the obligations by GBP100.4m and
additional employer contributions made to the UK defined benefit
plans of GBP8.7m, partly offset by losses on plan assets (excluding
interest income) of GBP85.3m and experience assumptions increasing
obligations by GBP11.5m. The financial assumption with the largest
impact was the increase in discount rate in the UK defined benefit
plans from 2.80% at 31 March 2022 to 5.35% at 30 September
2022.
14 Contingent liability
Group financing exemptions applicable to UK controlled foreign
companies
On 2 April 2019, the European Commission (EC) published its
final decision that the United Kingdom controlled Foreign Company
Partial Exemption (FCPE) constitutes State Aid. As previously
reported, the Group has benefited from the FCPE, which amounts to
GBP15.4m of tax for the period from 1 April 2013 to 31 December
2018.
Appeals had been made by the UK Government, the Group and other
UK-based groups to annul the EC decision. On 8 June 2022, the EU
General Court delivered its decision in favour of the EC. In August
2022, the UK Government appealed this decision.
Notwithstanding this appeal, under EU law, the UK Government is
required to commence collection proceedings. In January 2021, the
Group received a Charging Notice from HM Revenue & Customs
(HMRC) for GBP13.9m assessed for the period from 1 April 2016 to 31
December 2018. The Group has appealed against the notice but, as
there is no right of postponement, the amount charged was paid in
full in February 2021 with a further GBP0.8m of interest paid in
May 2021. In February 2021, the Group received confirmation from
HMRC that it was not a beneficiary of State Aid for the period from
1 April 2013 to 31 March 2016.
Whilst the EU General Court was in favour of the EC, our
assessment is that there are strong grounds for appeal and we would
expect such appeals to be successful. As the amounts paid are
expected to be fully recovered, and given the appeal process is
expected to take more than a year, the Group continues to recognise
a receivable of GBP14.7m (30 September 2021: GBP14.7m, 31 March
2022: GBP14.7m) on the Consolidated Balance Sheet within
non-current assets.
Other contingent liabilities
The Group has widespread global operations and is consequently a
defendant in many legal, tax and customs proceedings incidental to
those operations. In addition, there are contingent liabilities
arising in the normal course of business in respect of indemnities,
warranties and guarantees. These contingent liabilities are not
considered to be unusual in the context of the normal operating
activities of the Group. Provisions have been recognised in
accordance with the Group accounting policies where required. None
of these claims are expected to result in a material gain or loss
to the Group.
15 Events subsequent to the end of the reporting period
On 4 October 2022, the Group acquired the entire share capital
of WEETECH Holding GmbH (WEETECH), based in Wertheim, Germany for a
cash consideration of EUR57.5m (approximately GBP50m) on a cash-
and debt free-basis. WEETECH designs and manufactures
safety-critical electrical testing technology, to test the
integrity of both high and low voltage electrical systems. WEETECH
will be part of Halma's Safety sector. A detailed purchase price
allocation exercise is currently being performed to calculate the
goodwill arising on acquisition.
There were no other known material non-adjusting events which
occurred between the end of the reporting period and prior to the
authorisation of these financial statements on 17 November
2022.
16 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 2022.
17 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 98 to 101 in the
Annual Report and Accounts 2022, 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
- Acquisitions and investments
- Talent and diversity
- Innovation
- Economic and geopolitical uncertainty
- Climate change and natural hazards
- Business model and its communications
- Non-compliance with laws and regulations
- Financial controls
- Liquidity
- Product failure
18 Responsibility statement
The Directors confirm that these condensed interim financial
statements have been prepared in accordance with UK adopted
International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and that the
interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
By order of the Board
Andrew Williams Marc Ronchetti
Group Chief Executive Group Chief Executive Designate
and Chief Financial Officer
17 November 2022
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END
IR DBBDBGXBDGDL
(END) Dow Jones Newswires
November 17, 2022 02:00 ET (07:00 GMT)
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