REG - Halma PLC - Final Results <Origin Href="QuoteRef">HLMA.L</Origin> - Part 3

HalmaAnnouncement

13/06/2017 07:05

- Part 3: For the preceding part double click  ID:nRSM8716Hb 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Sector Chief Executives, Sector Vice Presidents and Senior Finance Executives.-   Regular visits to remote operations and maintenance of key adviser relationships by     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   senior management, finance staff and Internal Audit support local control.-   The Group's geographic and product diversity reduces risk.                                  
 CompetitionThe Group faces competition in the form of pricing, service, reliability and substitution.                                                                                                                                                                                                                                                                                                                                                                                -   Loss of market share due to price pressure and changing markets.-   Reduced financial performance arising from competitive threats both from third parties and customers bringing production in-house.                                                                                                                                                                                                                                                                                                                                                   -   By empowering and resourcing innovation in local operations to respond to changing market needs, the potential adverse impact of downward price pressure and          
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   competition can be mitigated and growth maintained.-   We recognise the competitive threat coming from emerging economies and by operating within these economies,        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   typically using local staff, we are better placed to make fast progress ourselves.-   The Group operates in specialised global niche markets offering high barriers to    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   entry.                                                                                                                                                                    
 Economic conditions In times of uncertain economic conditions, businesses face additional or elevated levels of risk. These include market and customer risk, customer default, fraud, supply chain risk and liquidity risk. The decision made in the UK to leave the EU (Brexit) creates additional uncertainty.                                                                                                                                                                    -   Reduced financial performance.-   Loss of market share.-   Unforeseen liabilities. -   Disruption of service to customers.-   Breaches of legal or regulatory requirements resulting in fines/ penalties impacting the Group financially and reputationally. -   Potential impairment of goodwill.                                                                                                                                                                                                                                                       -   Risks are primarily managed at the operating company level where local knowledge is situated. The financial strength and availability of pooled finances within the   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Group mitigates local risks faced by operating companies as does the robust credit management processes in place across the Group.-   The Halma Executive Board identifies 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   any wider trends which require action.-   A Brexit Committee has been created to assess, monitor and publish guidance on potential impacts due to Brexit. The agility of  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Group operations is expected to help mitigate any adverse impacts of Brexit.-   The Group's geographic diversity limits its exposure to economic risk arising in any one  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   territory. The Group does not have significant operations, cash deposits or sources of funding in economically uncertain regions.                                         
 FinancialFundingA key risk is that the Group may run out of cash or not have access to adequate funding. In addition, cash deposits are required to be held in a secure form and location.                                                                                                                                                                                                                                                                                           -   Constraints on trading and/or acquiring new companies limiting the Group's growth aspirations.-   Availability of additional funding in traditional debt markets.-   Permanent loss of shareholders' funds and/or restrictions on dividend payments.                                                                                                                                                                                                                                                                                                     -   The strong cash flow generated by the Group provides financial flexibility. Cash needs are monitored regularly. Gearing has reduced during the year.-   The Group     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   increased its funding capacity in January 2016 via a US$250m US Private Placement. In addition to short-term overdraft facilities, the Group renewed and increased to     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   £550m its five-year revolving credit facility in November 2016 providing security of funding and sufficient headroom for its current needs.-   Cash deposits are monitored 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   centrally and spread amongst a number of high credit-rated banks.                                                                                                         
 TreasuryBreaches of banking/US Private Placement covenants and foreign currency risk are the most significant treasury-related risks for the Group. In times of increased volatility this can have a significant impact on performance. The Group is exposed to a lesser extent to other treasury risks such as interest rate risk and liquidity risk.                                                                                                                               -   Volatile financial performance arising from translation of earnings from the Group's increasing proportion of overseas operations or poorly-managed foreign exchange exposures.-   Deviation from core strategy through the use of speculative or overly complex financial instruments.-   Financial penalties, reputational damage and withdrawal of facilities arising from breach of banking/ US Private Placement covenants.-   Increased interest rate risk on higher borrowings.-   Currency markets continue to be volatile causing uncertainty.  -   The risk has increased because more of the Group's profits are derived from non-Sterling currencies. Currency profits are not hedged. Currency hedging must fit with  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   the commercial needs of the business and we have in place a hedging strategy to manage Group exposures. This requires the hedging of a substantial proportion of expected 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   future transactions up to 12 months (and in exceptional cases 24 months) ahead. Longer-term currency trends can only be covered through a wide geographic spread of       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   operations.-   The Group does not use overly complex derivative financial instruments and no speculative treasury transactions are undertaken.-   We closely monitor      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   performance against the financial covenants on our revolving credit facility and US Private Placement and operate well within these covenants.                            
 Pension deficitTo meet our pension obligations, we must adequately fund our closed UK defined benefit pension plans.                                                                                                                                                                                                                                                                                                                                                                 -   Excessive consumption of cash, limiting investment in operations.-   Unexpected variability in the Company's financial results.                                                                                                                                                                                                                                                                                                                                                                                                                          -   There is regular dialogue with pension fund trustees and pension strategy is a regular Halma Board agenda item. The Group's strong cash flows and access to adequate  
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   borrowing facilities mean that the pensions risk can be adequately managed.-   The Group has maintained additional pension contributions with the overall objective of    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   paying off the deficit in line with the Actuary's recommendations over an appropriate period. Alternative means of reducing pension risk is evaluated in light of the best 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   long-term interest of shareholders.                                                                                                                                       
 Cyber security/Information Technology/Business interruption/Natural disastersGroup and operational management depend on timely and reliable information from our IT systems to run their businesses. We seek to ensure continuous availability, security and operation of those information systems.Cyber threats continue to show an increasing trend.We also aim to have wider business continuity plans in place should one or more of our premises suddenly became unavailable.  -   Delay or impact on decision making through lack of availability of sound data or disruption in/denial of service.-   Reduced service to customers due to poor information handling or interruption of business.-   Loss of commercially sensitive and/or personal information.-   Intended and unintended actions of employees cause disruption, including fraud.                                                                                                                                                                                        -   There is substantial redundancy and back-up built into Group-wide systems and the spread of business offers good protection from individual events.-   A small central 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   resource, Halma IT Services, assists Group companies with strategic IT needs and ensures adequate IT security policies are used across the Group.-   An IT security       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   committee exists, comprising central and subsidiary IT personnel.-   Halma IT is ISO 27001 certified for its information security management systems.-   Regular IT health 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   checks of all companies are conducted by the Group IT team. Comprehensive IT systems monitoring is in place.-   Cyber risk and security is a regular Board agenda item    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   addressing the landscape as it evolves.-   External penetration testing is utilised and a centralised IT disaster recovery solution is in place to supplement local       
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   processes.-   Business continuity plans exist for each business unit with ongoing testing.-   Education/awareness of cyber threats continues to ensure Group employees    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   protect themselves and Group assets.                                                                                                                                      
 AcquisitionsThe identification and purchase of suitable businesses which are an important part of our strategy for developing the Group, as is ensuring the new businesses are rapidly integrated into the Group.                                                                                                                                                                                                                                                                    -   Failure to attract sufficient numbers of high-quality businesses to meet our strategic growth target.-   Failure to deliver expected results resulting from poor acquisition selection.-   Failure to identify new markets in which to expand.-   Reduced financial performance arising from failure to integrate acquisitions into the Group. -   Unforeseen liabilities arising from a failure to understand acquisition targets fully.                                                                                                                -   The sector management teams provide resource to focus on M&A activities, including a dedicated M&A Director for each sector. Such resources remain under constant     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   review.-   We acquire businesses whose technology and markets we know well or who operate in adjacent markets.-   Sector Chief Executives are responsible for finding and 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   completing acquisitions in their business sectors, subject to Board approval, supported by sector and central resources, as necessary. We employ detailed post-acquisition 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   integration plans.-   Thorough due diligence is performed by a combination of in-house and external experts to ensure that a comprehensive appraisal of the commercial,   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   legal and financial position of every target is obtained.-   Incentives are aligned to encourage acquisitions which are value-enhancing from day one.                     
 Laws and regulations Group operations are subject to wide-ranging laws and regulations including business conduct, employment, export controls/sanctions, environmental and health and safety legislation. There is also exposure to product litigation and contractual risk. The laws and regulations we are exposed to as our businesses expand around the world increase each year.                                                                                               -   Unfavourable changes in laws and regulations that restrict the export of our products.-   Reputational damage and/or loss arising from non-compliance.-   Diversion of management resources resulting in lost opportunities.-   Penalties arising from breach of laws and regulations.-   Loss of revenue and profit associated with contractual disputes.                                                                                                                                                                                               -   The Group's emphasis on excellent internal controls, high ethical standards, the deployment of high-quality management resources and the strong focus on quality      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   control over products and processes in each operating business help to protect us from product failure, litigation, fraudulent activities and contractual issues.-   Each 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   operating company has a health and safety manager responsible for compliance and our performance in this area is good. Health and Safety policies, guidance and monthly   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   reporting requirements are updated to reflect changing reporting and governance requirements and to enhance compliance. Our well-established policies on bribery and      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   corruption have been maintained during the year to ensure continued compliance with best practice internally, via the Group Code of Conduct and externally, via           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   appropriate clauses included in third-party agreements.-   Comprehensive insurance covers all standard categories of insurable risk. Contract review and approval         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   processes mitigate exposure to contractual liability.-   The Group's whistleblowing policy and externally facilitated hotline assist the timely identification of         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   potential problem areas.-   Continued investment in international markets may introduce additional risk while we develop the appropriate commercial infrastructure        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   necessary to build a direct presence.                                                                                                                                     
 Talent and diversityGroup performance is dependent on having high-quality talent and diversity at all levels of the organisation allowing us to continue to grow through acquisition as well as driving organic growth.                                                                                                                                                                                                                                                              -   Failure to recruit and to retain key staff leading to reduced innovation and progress in the business.-   Acquisition growth limited due to our organisation's and leaders' inability to effectively manage acquisition integration.-   International growth increasing the need for high-quality local talent.                                                                                                                                                                                                                                          -   Group development programmes are under continuous review to ensure they deliver enhanced skills for executives and middle managers as needed in their current and     
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   future roles.-   Comprehensive recruitment and ongoing evaluation processes assist high-quality hiring and development.-   The Group regularly surveys staff to assess the 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   alignment of individuals with Group values.-   The Group Talent Director assists the identification and development of Group executives.-   Ongoing focus on increasing   
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   the diversity of our employees worldwide to better meet our markets' needs and provide sufficient opportunities for advancement as well as clear succession planning.-    
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   Considerable time spent assessing senior management talent and establishing better processes to improve the talent pipeline has advanced our succession planning and      
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   talent quality.                                                                                                                                                           
 Research & Development and Intellectual 

- More to follow, for following part double click  ID:nRSM8716Hd