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%

£875.5m

£737.2m

 

Adjusted1 Profit before Taxation

+11%

£171.7m

£154.9m

 

Adjusted Earnings per Share2

+12%

35.65p

31.96p

 

 

 

 

 

 

Statutory Profit before taxation

(13)%

£145.5m

£167.5m

 

Statutory Earnings per Share

(15)%

30.39p

35.83p

 

Interim Dividend per Share3

+7%

7.86p

7.35p

 

 

 

 

 

 

Return on Sales4

 

19.6%

21.0%

 

Return on Total Invested Capital5

 

13.8%

14.9%

 

Net Debt

 

£499.6m

£274.8m9

 



Strong growth and returns; increased investment; on track for full year

·      Record revenue and Adjusted1 Profit: revenue up 19%; Adjusted1 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 £34.0m in the first half of last year; up 9% excluding this gain.

 

·      Revenue and Adjusted1 Profit growth on an organic constant currency6 basis: up by 9% and 2% respectively.

 

·      Growth in all sectors and regions: revenue growth in all sectors and regions; Adjusted1 Profit growth in all sectors (including on an organic constant currency6 basis).

 

·      Strong Return on Sales4 of 19.6% (2021/22: 21.0%), above pre-COVID levels8 and reflecting the planned normalisation of overhead costs.

 

·      Increased strategic investment: R&D investment £50m, up 20% (5.7% of revenue). Three acquisitions this financial year (two in H1); consideration10 of £238m.

 

·      Cash conversion11 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, Adjusted1 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 £26.2m (2021/22: £(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 Adjusted1 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 Adjusted1 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 Profit1 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

Adjusted1 Profit before Taxation, Adjusted2 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

 

10

 

11

As at 31 March 2022.

 

Maximum total consideration is on a cash- and debt-free basis.

 

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
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 Affairs

 

+44 (0)1494 721 111

 

 

 

+44 (0)7776 685948

+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 currency1 revenue and Adjusted1 Profit growth across all our sectors, and organic constant currency1 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 £875.5m (2021/22: £737.2m), and included strong organic constant currency1 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 £87.4m, or 11%, from the second half of last year.

 

Return on Sales1 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 Sales1 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 Sales1 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, Adjusted1 Profit before Taxation grew by 11% to £171.7m (2021/22: £154.9m), compared to the 19% increase in revenue.

 

Statutory Profit before Taxation decreased by 13% to £145.5m (2021/22: £167.5m). The prior half year included a £34.0m 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 currency1 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 Adjusted1 Profit before Taxation included organic constant currency1 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 Adjusted1 Profit before Taxation on an organic constant currency1 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 £49.6m, representing 5.7% of Group revenue (2021/22: £41.3m; 5.6% of Group revenue), and through continued investment in our technology infrastructure totalling £9m, which is on track to reach our projected spend for the year of c.£20m. 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 £187.5m on a cash- and debt-free basis. We made one further acquisition, WEETECH Holding GmbH for €57.5m (approximately £50m) 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 £499.6m, equivalent to 1.2 times annualised EBITDA (31 March 2022: net debt of £274.8m; 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 Capital1 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 currency1 revenue growth in all regions

 

External revenue by destination


 

 

 


Half year 2022

Half year 2021

 

 

 


£m

% of total

£m

% of total

Change
 £m

%
growth

% organic growth at constant currency1

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 currency1 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 currency1 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 currency1 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 currency1 basis, with all sectors delivering a strong organic constant currency1 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 currency1 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 Healthcare3 sectors also delivered growth in all subsectors on an organic constant currency1 basis.

 

Mainland Europe revenue increased by 16%, or 12% on an organic constant currency1 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 currency1 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 currency1 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 currency1 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 currency1 basis. The region's organic constant currency1 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 currency1 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 currency1 basis. This was supported by strong organic constant currency1 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 currency1 revenue and Adjusted1 Profit growth in all sectors

 

External revenue by sector


 

 

 


Half year 2022

Half year 2021

 

 

 


£m

£m

Change 
 £m
 

%
growth

% organic growth at constant currency1

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% 

 

Adjusted1 Profit by sector


 

 

 


Half year 2022

Half year 2021

 

 

 


£m

£m

Change 
 £m
 

%
growth

% organic growth at constant currency1

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 profit2

197.2

172.9

24.3

14% 

5% 

Central administration costs

(19.3)

(14.0)

 

 

 

Net finance expense

(6.2)

(4.0)

 

 

 

Adjusted1 Profit before Taxation

171.7

154.9

16.8

11% 

2% 

 

Safety sector

Revenue increased by 11% to £355.4m (2021/22: £320.2m) and organic constant currency1 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 currency1 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.

 

Profit2 was 3% higher at £75.4m (2021/22: £73.5m), and included 1% organic constant currency1 growth, a benefit of 5% from currency translation, and a negative effect of 3% from the disposal in the prior year. Return on Sales1 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 £19.6m remained at a good level, which, with an increase in absolute investment of £1.6m, represented 5.5% of revenue (2021/22: 5.6%).

 

Environmental & Analysis sector

Revenue increased by 26% to £263.8m (2021/22: £209.5m), comprising 9% organic constant currency1 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 currency1 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 currency1 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 currency1 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 currency1 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.

 

Profit2 increased by 23% to £65.4m (2021/22: £53.1m). Organic constant currency1 profit growth was 8% and there was a 6% contribution from acquisitions and a positive effect of 10% from currency translation. Return on Sales1 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 £13.6m was maintained at a good level at 5.2% of sales (2021/22: 4.9%).

 

Healthcare3 sector

Revenue increased by 23% to £256.7m (2021/22: £208.0m). Organic constant currency1 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 currency1 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 currency1 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 currency1 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 currency1 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 currency1 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.

 

Profit2 increased by 22% to £56.4m (2021/22: £46.3m), and by 9% on an organic constant currency1 basis. Return on Sales1 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 £16.3m, 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 £238m 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 (£36.6m) 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 (£137.9m) on a cash- and debt-free basis. When adjusted for tax benefits with a net present value of approximately US$11m (£9.9m), the net initial consideration was approximately US$142.5m (£128.0m). An additional consideration of up to US$14.5m (£13.0m) 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 €57.5m (approximately £50m) 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 £70.2m (2021/22: increase of £25.5m), 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 £43.6m (2021/22: £40.8m), and tax payments were also higher at £31.2m, compared to £27.6m 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 £179.7m (2021/22: £58.0m).

 

Capital expenditure (net of disposal proceeds) increased to £15.6m, compared to £14.2m in the first half of 2021/22. We continue to expect capital expenditure for the full year to be around £34m.

 

Net debt at the end of the period was £499.6m (31 March 2022: £274.8m). 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 £550m and matures in May 2027, and there are two one-year extension options. In addition, we completed a new Private Placement issuance of c.£330m 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 £260m 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 £43.2m (31 March 2022: surplus of £30.5m) 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 £14.6m (excludes a £1.3m 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 Adjusted1 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 £13.9m to HMRC in respect of tax, and in May 2021 made a further payment of approximately £0.8m 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 £14.7m 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, Adjusted1 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 Adjusted1 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



Unaudited

six months to
30 September 2022

Unaudited

 six months to
30 September 2021

Audited
year to
31 March 2022


Notes

Before

adjustments*

£m

Adjustments*

(note 2)
£m

Total
£m

Before

adjustments*

£m

Adjustments*

(note 2)
£m

Total
£m

Total
£m

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 (£m)




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
six months to
30 September
2022
£m

Unaudited
six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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 £162.1m (six months to 30 September 2021: £18.5m gain; year to 31 March 2022: £43.9m gain) include losses of £28.8m (six months to 30 September 2021: £3.6m losses; year to 31 March 2022: £8.6m losses), which relate to net investment hedges.

 

Consolidated Balance Sheet


Notes

Unaudited
30 September
2022
£m

Unaudited
30 September
2021

£m

Audited
31 March
2022
£m

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
£m

Share
premium
account
£m

Own
shares
£m

Capital
redemption
reserve
£m

Hedging
reserve
£m

Translation
reserve
£m

Other
reserves
£m

Retained
earnings
£m

Non-controlling interest
£m

Total
£m

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
£m

Share
premium
account
£m

 

Own
shares
£m

Capital
redemption
reserve
£m

 

Hedging
reserve
£m

 

Translation
reserve
£m

 

Other
reserves
£m

 

Retained
earnings
£m

Non-

controlling interest
£m

 

 

Total
£m

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

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
£m

Share
premium
account
£m

 

Own
shares
£m

Capital
redemption
reserve
£m

 

Hedging
reserve
£m

 

Translation
reserve
£m

 

Other
reserves
£m

 

Retained
earnings
£m

Non-

controlling

 interest

 £m

 

 

Total
£m

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
six months to
30 September
2022
£m

Unaudited
six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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)

Net cash from/(used in) financing activities


149.7

(47.3)






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
six months to
30 September
2022
£m

Unaudited
six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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 £1,013.4m which includes a £550m Revolving Credit Facility of which £390.5m remained undrawn at 30 September 2022. The earliest maturity in these facilities is for £76.0m 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)


United States of America
£m

Mainland Europe
£m

United Kingdom
£m

Asia Pacific
£m

Africa,
Near and Middle East
£m

Other
countries
£m

Total
£m

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)


United States
of America
£m

Mainland
Europe
£m

United
 Kingdom
£m

Asia Pacific
£m

Africa,
 Near and
Middle East
£m

Other
countries
£m

Total
£m

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)


United States
of America
£m

Mainland
Europe
£m

United
 Kingdom
£m

Asia Pacific
£m

Africa,
 Near and
Middle East
£m

Other
countries
£m

Total
£m

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 £41.4m (six months to 30 September 2021: £28.8m; year to 31 March 2022: £69.9m). 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
six months to
 30 September
2022

£m

Unaudited
six months to
 30 September

2021

£m

Audited
year to
31 March
2022

£m

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 amortisation and impairment of acquired intangible assets; acquisition items; significant restructuring costs; and profit or loss on disposal of operations. Note 9 provides more information on alternative performance measures.

The accounting policies of the reportable segments are the same as the Group's accounting policies. Acquisition transaction costs, adjustments to contingent consideration and release of fair value adjustments to inventory (collectively 'acquisition items') are recognised in the Consolidated Income Statement. Segment profit before these acquisition items and other adjustments, is disclosed separately above as this is the measure reported to the Group Chief Executive for the purpose of allocation of resources and assessment of segment performance.

 

These adjustments are analysed as follows:




Unaudited six months to 30 September 2022

Amortisation
of acquired
intangibles
£m

Acquisition items



 

 

 


Total
£m

 

Transaction
costs
£m

Adjustments
to contingent
consideration
£m

Release of
 fair value
adjustments
to inventory
£m

Total
amortisation
charge and
acquisition
items
£m

Disposal of
operations and restructuring
£m

 

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 (£0.6m). In Healthcare, they mostly related to the acquisition of IZI Medical Products (£1.8m), in the current year.

 

Adjustment to contingent consideration comprised of a credit of £0.2m in Environmental & Analysis arising from a decrease in the estimate of the payable for Orca. In Healthcare there was a credit of £0.8m arising from a decrease in estimates of the payable for Infinite Leap (£0.6m) and a credit arising from exchange differences on balances denominated in Euros (£0.6m), partially offset by an increase in the estimate of the payable for Meditech (£0.4m).

 

The £0.4m release of fair value adjustments to inventory related to Deep Trekker (£0.3m) and ILT (£0.1m) in Environmental & Analysis. All amounts have been released in relation to Deep Trekker and ILT.

 

 




Unaudited six months to 30 September 2021

Amortisation
of acquired
intangibles
£m

Acquisition items



 


Total
£m

 

Transaction
costs
£m

Adjustments
to contingent
consideration
£m

Release of
 fair value
adjustments
to inventory
£m

Total
amortisation
charge and
acquisition
items
£m

Disposal of
operations and restructuring (note 11)
£m

 

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 (£0.4m) and IBIT (£0.1m). In Environmental & Analysis, they related to the acquisition of Dancutter (£0.3m), Sensitron (£0.2m), Orca (£0.1m) and Anton (£0.1m). In Healthcare, they related to the acquisition of PeriGen (£1.3m), Meditech (£0.1m) and RNK (£0.1m), in the prior year and the acquisition of Visiometrics in a previous year (£0.2m).

 

The £3.9m adjustment to contingent consideration comprised of a credit of £0.1m in Environmental & Analysis arising from a decrease in the estimate of the payables for Invenio and a credit of £3.8m in Healthcare arising from a decrease in estimates of the payables for NovaBone (£1.2m), NeoMedix (£2.5m) and Spreo (£0.1m) partially offset by an increase in the estimate of the payable for Infowave (£0.1m) and a credit of £0.1m arising from exchange differences on balances denominated in Euros.

 

The £1.6m release of fair value adjustments to inventory related to Ramtech (£0.6m) in Safety; Dancutter (£0.1m), Orca (£0.6m) and Sensitron (£0.1m) in Environmental & Analysis; and Meditech (£0.2m) in Healthcare. All amounts were released in relation to Dancutter and Orca.

 



 

Audited year ended 31 March 2022



Acquisition items





 

Amortisation

of acquired

intangible

assets

£m

Adjustments

to contingent

consideration

£m

Release of

fair value

adjustments

to inventory

£m

Total

£m

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 (£0.4m) and IBIT (£0.1m). In Environmental & Analysis, they related to the acquisition of Dancutter (£0.3m), Sensitron (£0.4m), Orca (£0.1m), Anton (£0.1m) and ILT (£0.2m) in the year and Deep Trekker (£0.5m) that was acquired in April 2022. In Healthcare, they related to the acquisition of PeriGen (£1.4m), Infinite Leap (£0.3m), Clayborn Lab (£0.1m), Meditech (£0.1m) and RNK (£0.1m), in the year and the acquisition of Visiometrics in a previous year (£0.1m).

 

The £4.5m adjustment to contingent consideration comprised of a credit of £0.1m in Environmental & Analysis arising from a decrease in the estimate of the payables for Invenio (£0.3m) offset by an increase in the estimate of the payable for Orca (£0.2m) and a credit of £4.4m in Healthcare arising from a decrease in estimates of the payables for NovaBone (£1.3m), NeoMedix (£3.0m) and Spreo (£0.1m) partially offset by an increase in the estimate of the payable for Infowave (£0.3m) and a credit of £0.3m arising from exchange differences on balances denominated in Euros.

 

The £3.4m release of fair value adjustments to inventory related to Ramtech (£1.3m) in Safety; Dancutter (£0.1m), Orca (£0.6m), Sensitron (£0.2m) and ILT (£0.2m) in Environmental & Analysis; and Meditech (£1.0m) in Healthcare. All amounts were released in relation to Dancutter, Ramtech, Orca and Sensitron.

3 Finance income


Unaudited
six months to
30 September
2022
£m

Unaudited
 six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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
six months to
30 September
2022
£m

Unaudited
 six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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 £30.7m (six months to 30 September 2021: £31.8m; year to 31 March 2022: £60.2m) comprises a current tax charge of £34.4m (six months to 30 September 2021: £33.1m; year to 31 March 2022: £63.2m) and a deferred tax credit of £3.7m (six months to 30 September 2021: deferred tax credit £1.3m; year to 31 March 2022: deferred tax credit £3.0m). 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 £24.6m (six months to 30 September 2021: £21.4m; year to 31 March 2022: £46.0m) 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
 six months to
30 September
2022
£m

Unaudited
 six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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
 Six months to
30 September
2022
pence

Unaudited
 Six months to
30 September
2021
pence

Audited
year to
31 March
2022
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
six months to
30 September
2022
£m

Unaudited
 six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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
 six months to
30 September
2022
pence

Unaudited
 six months to
30 September
2021
pence

Audited
year to
31 March
2022
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
six months to
30 September
2022
pence

Unaudited
 six months to
30 September
2021
pence

Audited
year to
31 March
2022
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
 six months to
30 September
2022
£m

Unaudited
 six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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
six months to
30 September
2022
£m

Unaudited
six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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
30 September
2022
£m

Unaudited
30 September
2021
£m

Audited
31 March
2022
£m

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
31 March
2022
£m

 

 

Cash flow
£m

Net cash/(debt) acquired

£m

Lease liabilities additions

£m

 

Exchange
adjustments
£m

At 30 September
 2022
£m

Analysis of net debt


 

 

 

 


Cash and bank balances

157.4

42.3

4.0

                -

9.7

213.4

Overdrafts

(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

(5.3)

                                -

                                -

                                -

(76.5)

Loan notes falling due after more than one year

  (332.8)

                                -

                                -

(19.1)

(386.9)

Bank loans falling due within one year

0.1

                                -

 

-

                                -

(0.5)

Bank loans falling due after more than one year

103.0

                                -

                                -

(9.1)

(158.7)

Lease liabilities

10.2

(3.0)

(15.2)

(8.5)

(88.6)

Total net debt

(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
six months to
 30 September
2022
£m

Unaudited
six months to
 30 September
2021
£m

Audited
year to
31 March
2022
£m

Profit after tax

114.8

135.7

244.2

Adjustments1

20.0

(14.6)

3.7

Adjusted profit after tax1

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 goodwill2

89.5

89.5

89.5

Total Invested Capital

2,092.1

1,687.9

1,817.2

Average Total Invested Capital3

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
six months to
 30 September
2022
£m

Unaudited
six months to
 30 September
2021
£m

Audited
year to
31 March
2022
£m

Profit before tax

145.5

167.5

304.4

Adjustments1

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 profit1 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 Employed3

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 £1,572.8m and £389.5m 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
six months to
30 September
2022
 £m

Unaudited
six months to
30 September
2021
 £m

% growth

Unaudited
six months to
 30 September
2022
£m

Unaudited
six months to
 30 September
2021
£m

% 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
six months to
30 September
2022

 £m

Unaudited
six months to
30 September
2021

 £m

% growth

Unaudited
six months to
 30 September
2022

£m

Unaudited
six months to
 30 September
2021

£m

% 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
six months to
30 September
2022

 £m

Unaudited
six months to
30 September
2021

 £m

% growth

Unaudited
six months to
 30 September
2022

£m

Unaudited
six months to
 30 September
2021

£m

% 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
six months to
30 September
2022

 £m

Unaudited
six months to
30 September
2021

 £m

% growth

Unaudited
six months to
 30 September
2022

£m

Unaudited
six months to
 30 September
2021

£m

% 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
six months to
30 September
2022
£m

Unaudited
six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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
six months to
30 September
2022
£m

Unaudited
six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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 £5.9m of revenue and £0.6m 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 £14.3m and £3.1m 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
£m

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
six months to
30 September
2022
£m

Unaudited
six months to
30 September
2021
£m

Audited
year to
31 March
2022
£m

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
£m

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 (£38.5m), which comprised the purchase price of C$60.0m (£36.6m), net cash/(debt) adjustments of C$2.6m (£1.6m) and additional amounts payable in respect of working capital adjustments of C$0.5m (£0.3m). 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 (£2.8m); trade name (£3.5m) and technology related intangibles (£8.6m).

 

The residual goodwill of £21.6m 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 £5.9m of revenue and £0.6m 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 £0.3m higher and £0.1m higher respectively.

 

Acquisition costs totalling £0.6m 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
£m

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 (£139.3m), which comprised the purchase price of US$153.5m (£137.9m) plus net cash/(debt) adjustments of US$1.5m (£1.4m). The maximum contingent consideration payable is US$14.5m (£13.0m) 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 (£20.4m); trade names (£2.7m) and technology related intangibles (£42.3m).

 

The residual goodwill of £67.0m 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 £14.0m and £3.0m higher respectively.

 

Acquisition costs totalling £1.8m 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 £57.5m comprised proceeds from the sale of £64.8m, less £4.5m of cash disposed and £2.8m of disposal costs. The Group recognised a profit on disposal of operations of £34.0m.

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 £330m 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 £426.2m, against a carrying value of £463.4m.

 

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 £65.8m. 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 £1.2m (30 September 2021: £0.6m; 31 March 2022: £0.7m) asset and £3.4m (30 September 2021: £0.2m; 31 March 2022: £0.9m) 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 £17.6m (30 September 2021: £8.6m; 31 March 2022: £6.9m). The fair value adjustment recognised in other comprehensive income for the six months to 30 September 2022 was a gain of £9.3m (six months to 30 September 2021: £Nil; year to 31 March 2022: loss of £1.7m).

13 Retirement benefits

At 30 September 2022, the Group has IAS 19 Retirement benefit net surplus totalling £43.2m (30 September 2021: net obligation of £5.3m, 31 March 2022: net surplus of £30.5m). The net asset has increased from 31 March 2022 primarily due to changes in the financial assumptions reducing the obligations by £100.4m and additional employer contributions made to the UK defined benefit plans of £8.7m, partly offset by losses on plan assets (excluding interest income) of £85.3m and experience assumptions increasing obligations by £11.5m. 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 £15.4m 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 £13.9m 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 £0.8m 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 £14.7m (30 September 2021: £14.7m, 31 March 2022: £14.7m) 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 €57.5m (approximately £50m) 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

Group Chief Executive

Marc Ronchetti

Group Chief Executive Designate
and Chief Financial Officer

 

17 November 2022

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
IR DBBDBGXBDGDL