REG - Halma PLC - Final Results <Origin Href="QuoteRef">HLMA.L</Origin> - Part 4
13/06/2017 07:05
- Part 4: For the preceding part double click ID:nRSM8716Hc
Property strategyNew, high-quality products are critical to our organic growth and underpin our ability to earn high margins and high returns over the long term. - Loss of market share resulting from product obsolescence and failure to innovate to meet customer needs.- Loss of market share resulting from a failure to protect key intellectual property.- Diversion of resources to address related matters. - Devolving control of product development to the autonomous operating businesses spreads risk and ensures that the people best placed to service the customers' needs
are driving innovation.- New product development 'best practice' is shared between Group companies and return on investment of past and future innovation projects is
tracked monthly. This ensures that the collective experience and expertise of the Group can be utilised to maximum effect.- Large R&D projects, especially those which
are capitalised, require Head Office approval, ensuring that the Group's significant projects are aligned to overall strategy.- Workforce quality and retention is a
central objective. This focus ensures that intangible resources stay and grow within the business.- Operating businesses are actively encouraged to develop and protect
know-how in local jurisdictions.- Innovation is encouraged and fostered throughout the Group and recognised at Halma's Annual Innovation Awards.
Product qualityThe quality and reliability of our products is vital to meet the needs of our customers and ensure compliance with regulations. - Loss of market share resulting from product quality issues including the necessity to recall/replace product.- Reputational damage and financial loss due to unexpected liability for injuries, fatalities and/or damage to property. - Strict product development and testing procedures in place to ensure quality of products and compliance with appropriate regulations.- Rigorous testing of products
during development and also during the manufacturing process.- Terms and conditions of sale limit liability as much as practically possible. Insurance is in place.
Going Concern Statement
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, its cash flows, liquidity position and borrowing facilities, are set out herein.The Group has considerable financial resources (including a £550m five-year revolving credit facility, of which £469m was undrawn at 1 April 2017) together with contracts with a diverse range of customers and suppliers across different geographic
areas and industries. No one customer accounts for more than 2% of Group turnover. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.After conducting a formal review of the Group's financial resources, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the
Annual Report and Accounts.
Longer-term Viability
During the year, the Board carried out a robust assessment of the principal risks affecting the Company, including those that would threaten its business model, future performance, solvency or liquidity. The Board has assessed the viability of the Company over a three-year period, taking into account the Group's current position and the potential impact of the principal risks and uncertainties. Whilst the Board has no reason to believe that the Group will not be viable over a longer period, it has
determined that three years is an appropriate period, as it is aligned with the Group's strategic planning process and therefore provides greater certainty over forecasting and, therefore, increases reliability in the modelling and stress testing of the Company's viability.In making their assessment, the Board carried out a comprehensive exercise of financial modelling and stress-tested the model with various scenarios based on the principal risks identified in the Group's annual risk assessment process. In
each scenario, the effect on the Group's KPIs and borrowing covenants was considered, along with any mitigating factors.Based on this assessment, the Board confirms that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period to 31 March 2020. The full Viability Statement is set out in the Annual Report and Accounts 2017.
Responsibility Statement of the Directors
on the Annual Report and Accounts The responsibility statement below has been prepared in connection with the Company's full Annual Report and Accounts for the 52 weeks to 1 April 2017. Certain parts thereof are not included within these Results.We confirm
that to the best of our knowledge:
- the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the
consolidation taken as a whole;
- the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that
they face; and
- the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position, performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 13 June 2017 and is signed on its behalf by:
A J WilliamsChief Executive K J ThompsonFinance Director
Results for the 52 weeks to 1 April 2017
Consolidated Income Statement
52 weeks to 1 April 2017 53 weeks to 2 April 2016
Notes Beforeadjustments*£000 Adjustments* (note 2)£000 Total Beforeadjustments*£000 Adjustments*(note 2)£000 Total£000
£000
Continuing operations
Revenue 2 961,662 - 961,662 807,805 - 807,805
Operating profit 203,371 (36,301) 167,070 173,225 (30,282) 142,943
Share of results of associate (81) - (81) (159) - (159)
Profit on disposal of operations 9 - - - - 556 556
Finance income 3 494 - 494 217 - 217
Finance expense 4 (9,780) - (9,780) (7,269) - (7,269)
Profit before taxation 194,004 (36,301) 157,703 166,014 (29,726) 136,288
Taxation 5 (41,734) 13,720 (28,014) (36,373) 8,926 (27,447)
Profit for the year attributable 2 152,270 (22,581) 129,689 129,641 (20,800) 108,841
to equity shareholders
Earnings per share 6
From continuing operations
Basic and diluted 40.21p 34.25p 34.26p 28.76p
Dividends in respect 7
of the year
Paid and proposed (£000) 51,916 48,449
Paid and proposed per share 13.71p 12.81p
* Adjustments include the amortisation and impairment of acquired intangible assets; acquisition items; restructuring costs; profit or loss on disposal of operations; and the associated taxation thereon.
Consolidated Statement of Comprehensive Income and Expenditure
52 weeks to 1 April 2017£000 53 weeks to2 April2016£000
Profit for the year 129,689 108,841
Items that will not be reclassified subsequently to the Consolidated Income Statement:
Actuarial (losses)/gains on defined benefit pension plans (31,059) 8,841
Tax relating to components of other comprehensive income that will not be reclassified 6,082 (2,304)
Items that may be reclassified subsequently to the Consolidated Income Statement:
Effective portion of changes in fair value of cash flow hedges 1,197 (990)
Exchange gains on translation of foreign operations and net investment hedge 74,810 30,036
Exchange losses transferred to Income Statement on disposal of operation - 22
Tax relating to components of other comprehensive income that may be reclassified (233) 209
Other comprehensive income for the year 50,797 35,814
Total comprehensive income for the year attributable to equity shareholders 180,486 144,655
The exchange gain of £74,810,000 (2016: gain of £30,036,000) includes gains of £21,305,000 (2016: gains of £9,336,000) which relate to net investment hedges as described in the Annual Report and Accounts 2017.
Consolidated Balance Sheet
1 April 2017£000 (Restated)*2 April 2016£000
Non-current assets
Goodwill 603,553 542,097
Other intangible assets 234,430 235,654
Property, plant and equipment 106,016 96,562
Interest in associate 3,553 3,722
Deferred tax asset 56,866 44,424
1,004,418 922,459
Current assets
Inventories 118,780 105,283
Trade and other receivables 212,236 184,126
Tax receivable 124 190
Cash and bank balances 66,827 53,938
Derivative financial instruments 598 1,131
398,565 344,668
Total assets 1,402,983 1,267,127
Current liabilities
Trade and other payables 134,816 122,791
Borrowings 1,351 4,748
Provisions 6,776 4,789
Tax liabilities 16,055 15,158
Derivative financial instruments 315 2,196
159,313 149,682
Net current assets 239,252 194,986
Non-current liabilities
Borrowings 261,918 295,908
Retirement benefit obligations 74,856 52,323
Trade and other payables 11,221 10,153
Provisions 16,917 19,355
Deferred tax liabilities 100,121 93,366
465,033 471,105
Total liabilities 624,346 620,787
Net assets 778,637 646,340
Equity
Share capital 37,965 37,965
Share premium account 23,608 23,608
Own shares (7,263) (8,219)
Capital redemption reserve 185 185
Hedging reserve 354 (610)
Translation reserve 150,197 75,387
Other reserves (6,323) (5,831)
Retained earnings 579,914 523,855
Shareholders' funds 778,637 646,340
* Comparatives have been restated, as required by IFRS 3 (revised) Business Combinations, for material changes arising on the provisional accounting for prior period acquisitions. See note 8.
Consolidated Statement of Changes in Equity
Share capital Share premium account Own shares Capital redemption reserve Hedgingreserve£000 Translation reserve£000 Other reserves Retained earnings Total
£000 £000 £000 £000 £000 £000 £000
At 2 April 2016 37,965 23,608 (8,219) 185 (610) 75,387 (5,831) 523,855 646,340
Profit for the year - - - - - - - 129,689 129,689
Other comprehensive income and expense:
Exchange differences on translation of foreign operations - - - - - 74,810 - - 74,810
Actuarial losses on defined benefit pension plans - - - - - - - (31,059) (31,059)
Effective portion of changes in fair value of cash flow hedges - - - - 1,197 - - - 1,197
Tax relating to components of other comprehensive income - - - - (233) - - 6,082 5,849
Total other comprehensive income and expense - - - - 964 74,810 - (24,977) 50,797
Dividends paid - - - - - - - (49,788) (49,788)
Share-based payment charge - - - - - - 6,076 - 6,076
Deferred tax on share-based payment transactions - - - - - - 65 - 65
Excess tax deductions related to share-based payments on exercised awards - - - - - - - 1,135 1,135
Purchase of Own shares - - (2,368) - - - - - (2,368)
Performance share plan awards vested - - 3,324 - - - (6,633) - (3,309)
At 1 April 2017 37,965 23,608 (7,263) 185 354 150,197 (6,323) 579,914 778,637
Own shares are ordinary shares in Halma plc purchased by the Company and held to fulfil the Company's obligations under the Group's share plans. At 1 April 2017 the number of treasury shares held was 462,188 (2016: 940,421) and the number of shares held by the Employee Benefit Trust was 512,417 (2016: 311,444). The market value of Own shares was £9,980,000 (2016: £11,417,000). 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.
Share capital Share premium account Own shares Capital redemption reserve Hedgingreserve£000 Translationreserve£000 Other reserves Retained earnings Total
£000 £000 £000 £000 £000 £000 £000
At 28 March 2015 37,965 23,608 (8,450) 185 171 45,329 (4,073) 454,213 548,948
Profit for the year - - - - - - - 108,841 108,841
Other comprehensive income and expense:
Exchange differences on translation of foreign operations - - - - - 30,036 - - 30,036
Exchange losses transferred to Income Statement on disposal of operations - - - - - 22 - - 22
Actuarial gains on defined benefit pension plans - - - - - - - 8,841 8,841
Effective portion of changes in fair value of cash flow hedges - - - - (990) - - - (990)
Tax relating to components of other comprehensive income - - - - 209 - - (2,304) (2,095)
Total other comprehensive - - - - (781) 30,058 - 6,537 35,814
income and expense
Dividends paid - - - - - - - (46,473) (46,473)
Share-based payment charge - - - - - - 3,845 - 3,845
Deferred tax on share-based payment transactions - - - - - - 109 - 109
Excess tax deductions related to share-based payments on exercised awards - - - - - - - 737 737
Purchase of Own shares - - (3,003) - - - - - (3,003)
Performance share plan awards vested - - 3,234 - - - (5,712) - (2,478)
At 2 April 2016 37,965 23,608 (8,219) 185 (610) 75,387 (5,831) 523,855 646,340
Consolidated Cash Flow Statement
Notes 52 weeks to 1 April 2017 53 weeks to
£000 2 April 2016
£000
Net cash inflow from operating activities 10 172,493 149,273
Cash flows from investing activities
Purchase of property, plant and equipment (21,875) (22,418)
Purchase of computer software (2,479) (1,669)
Purchase of other intangibles (281) (535)
Proceeds from sale of property, plant and equipment 1,495 2,364
Proceeds from sale of capitalised development costs - 166
Development costs capitalised (10,731) (8,579)
Interest received 211 217
Acquisition of businesses, net of cash acquired 8 (9,972) (202,575)
Disposal of operations, net of cash disposed 9 - 907
Net cash used in investing activities (43,632) (232,122)
Financing activities
Dividends paid (49,788) (46,473)
Purchase of Own shares (2,368) (3,003)
Interest paid (7,023) (4,149)
Loan arrangement fee paid (2,656) (770)
Proceeds from bank borrowings - 74,788
Repayment of bank borrowings 10 (54,761) (97,000)
Proceeds on issue of loan notes - 167,473
Net cash (used in)/generated from financing activities (116,596) 90,866
Increase in cash and cash equivalents 10 12,265 8,017
Cash and cash equivalents brought forward 49,526 39,525
Exchange adjustments 3,846 1,984
Cash and cash equivalents carried forward 65,637 49,526
Notes 52 weeks to 1 April 2017 53 weeks to2 April 2016
£000 £000
Reconciliation of net cash flow to movement in net debt
Increase in cash and cash equivalents 12,265 8,017
Net cash outflow from repayment of bank borrowings 10 54,761 22,212
Proceeds from issue of loan notes - (167,473)
Loan notes issued in respect of acquisitions - (288)
Loan notes repaid in respect of acquisitions 10 241 367
Exchange adjustments (16,991) (8,659)
50,276 (145,824)
Net debt brought forward (246,718) (100,894)
Net debt carried forward (196,442) (246,718)
Notes to the Results 1 Basis of preparationGeneral Information The Results are based on the Company's financial statements which are prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union (EU) and therefore comply with Article 4 of the EU IAS legislation and with those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS. The financial statements have also been prepared in accordance with IFRS and International
Financial Reporting Interpretations Committee (IFRIC) interpretations issued and effective at the time of preparing these accounts.With the exception of the new standards adopted in the year, as discussed below, there have been no significant changes in accounting policies from those set out in Halma plc's Annual Report and Accounts 2016. The accounting policies have been applied consistently throughout the years ended 1 April 2017 and 2 April 2016 other than those noted below.The financial information set
out in these Results does not constitute the Group's statutory accounts for the years ended 1 April 2017 and 2 April 2016 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General Meeting. The auditor's reports on the 2016 and the 2017 accounts were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.The following Standards with an effective date of 1 January 2016 have been adopted without any significant impact on the amounts reported in these financial statements:- IAS 16 and IAS 38 (amended) 'Clarification of Acceptable Methods of Depreciation and Amortisation';- Annual Improvements 2012-2014 Cycle, specifically amendments to IAS 34 'Interim Financial Reporting';- Amendments to IAS 1;- Amendments to IAS 27 'Equity
Method in Separate Financial Statements'; and- Amendments to IFRS 11 'Accounting for Acquisitions of Interests in Joint Operations'.These Results were approved by the Board of Directors on 13 June 2017.
Notes to the Results
1 Basis of preparationGeneral Information The Results are based on the Company's financial statements which are prepared
in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union (EU) and
therefore comply with Article 4 of the EU IAS legislation and with those parts of the Companies Act 2006 that are
applicable to companies reporting under IFRS. The financial statements have also been prepared in accordance with IFRS and
International Financial Reporting Interpretations Committee (IFRIC) interpretations issued and effective at the time of
preparing these accounts.With the exception of the new standards adopted in the year, as discussed below, there have been
no significant changes in accounting policies from those set out in Halma plc's Annual Report and Accounts 2016. The
accounting policies have been applied consistently throughout the years ended 1 April 2017 and 2 April 2016 other than
those noted below.The financial information set out in these Results does not constitute the Group's statutory accounts for
the years ended 1 April 2017 and 2 April 2016 but is derived from those accounts. Statutory accounts for 2016 have been
delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General
Meeting. The auditor's reports on the 2016 and the 2017 accounts were unqualified, did not draw attention to any matters by
way of emphasis without qualifying their report and did not contain a statement under section 498(2) or (3) of the
Companies Act 2006.The following Standards with an effective date of 1 January 2016 have been adopted without any
significant impact on the amounts reported in these financial statements:- IAS 16 and IAS 38 (amended) 'Clarification
of Acceptable Methods of Depreciation and Amortisation';- Annual Improvements 2012-2014 Cycle, specifically
amendments to IAS 34 'Interim Financial Reporting';- Amendments to IAS 1;- Amendments to IAS 27 'Equity Method
in Separate Financial Statements'; and- Amendments to IFRS 11 'Accounting for Acquisitions of Interests in Joint
Operations'.These Results were approved by the Board of Directors on 13 June 2017.
2 Segmental analysis Sector analysisThe Group has four reportable segments (Process Safety, Infrastructure Safety, Medical, and Environmental & Analysis), which are defined by markets rather than product type. Each segment includes businesses with similar operating and marketing characteristics. These segments are consistent with the internal reporting as reviewed by the Chief Executive.
Segment revenue and results Revenue(all continuing operations)
52 weeks to1 April 2017 £000 53 weeks to2 April 2016 £000
Process Safety 167,007 155,467
Infrastructure Safety 315,219 264,843
Medical 260,576 198,715
Environmental & Analysis 219,118 188,928
Inter-segmental sales (258) (148)
Revenue for the year 961,662 807,805
Inter-segmental sales are charged at prevailing market prices and have not been disclosed separately by segment as they are not considered material. Revenue derived from the rendering of services was £39,011,000 (2016: £25,134,000). All revenue was otherwise derived from the sale of products.
Profit (all continuing operations)
52 weeks to 1 April 2017 53 weeks to
£000 2 April 2016
£000
Segment profit before allocation of adjustments*
Process Safety 40,243 39,557
Infrastructure Safety 65,129 55,579
Medical 66,704 51,695
Environmental & Analysis 41,698 34,527
213,774 181,358
Segment profit after allocation of adjustments*
Process Safety 36,243 36,095
Infrastructure Safety 60,342 50,376
Medical 45,804 34,747
Environmental & Analysis 35,084 30,413
Segment profit 177,473 151,631
Central administration costs (10,484) (8,291)
Net finance expense (9,286) (7,052)
Group profit before taxation 157,703 136,288
Taxation (28,014) (27,447)
Profit for the year 129,689 108,841
* Adjustments include the amortisation and impairment of acquired intangible assets; acquisition items; restructuring costs; and profit or loss on disposal of operations.
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 the other adjustments, is disclosed separately above as this is the measure reported to the Chief Executive for the purpose of allocation of resources
and assessment of segment performance. These adjustments are analysed as follows:
52 weeks to 1 April 2017
Acquisition items
Amortisationand impairmentof acquiredintangible assets£000 Transactioncosts£000 Adjustmentsto contingentconsideration £000 Release offair valueadjustmentsto inventory £000 Totalamortisationcharge andacquisitionitems£000 Disposal of operationsand restructuring (note 9) £000 Total£000
Process Safety (4,000) - - - (4,000) - (4,000)
Infrastructure Safety (4,784) (3) - - (4,787) - (4,787)
Medical (30,702) (95) 10,687 (790) (20,900) - (20,900)
Environmental & Analysis (4,412) (265) 14 (41) (4,704) (1,910) (6,614)
Total Segment & Group (43,898) (363) 10,701 (831) (34,391) (1,910) (36,301)
Included within amortisation and impairment of acquired intangible assets in the Medical sector is £12,429,000 impairment to a customer relationship asset of Visiometrics S.L. (Visiometrics), acquired in the prior year. Related to this impairment, included within the Medical sector, there is a credit arising from a revision to the estimate of the associated deferred contingent consideration payable for Visiometrics of £10,087,000 (E12,002,000). The majority of this revision relates to deferred contingent
consideration payable on sales to the related customer.The transaction costs arose mainly on the acquisition of FluxData, Inc. (FluxData) on 6 January 2017. The £10,701,000 credit to contingent consideration comprises mainly the revision to estimate of the payable for Visiometrics discussed above. The remaining credit relates to the change in estimate to the payable for Value Added Solutions LLC (VAS) by £356,000 from £704,000 (US$1,000,000) to £427,000 (US$535,000), and for ASL Holdings Limited (ASL) by
£14,000 on final settlement of the payable, and a credit of £244,000 arising from exchange differences on the Visiometrics payable which is denominated in Euros. The £831,000 charge relates to the release of the fair value adjustment on revaluing the inventories of CenTrak Inc. (CenTrak) (£790,000) and FluxData (£41,000) on acquisition. All amounts have now been released in relation to CenTrak.The £1,910,000 charge relates to inventory and fixed asset write downs and severance costs arising on the
restructuring of non-core operations in one of the Group's subsidiaries, Pixelteq, Inc. (Pixelteq).
53 weeks to
- More to follow, for following part double click ID:nRSM8716HeRecent news on Halma
See all newsREG - Halma PLC - Acquisition
AnnouncementREG - Halma PLC - Director/PDMR Shareholding
AnnouncementREG - Halma PLC - Trading Update
AnnouncementREG - Halma PLC - Acquisition
AnnouncementREG - Halma PLC - Director/PDMR Shareholding
Announcement