REG - Halma PLC - Half-year Report <Origin Href="QuoteRef">HLMA.L</Origin> - Part 1

HalmaAnnouncement

22/11/2016 07:05

RNS Number : 7434P
Halma PLC
22 November 2016
HALMA plc
HalF YEAR RESULTS 2016/17
Record first half results and continued dividend growth
Halma, the leading safety, health and environmental technology group, today announces its half year results for the 26weeks to 1October 2016.

Financial Highlights

Change
2016
2015
Continuing Operations 



Revenue
+ 16%
442.1m
379.7m
Adjusted Profit before Taxation1
+ 12%
83.6m
74.7m
Adjusted Earnings per Share2
+ 13%
17.23p
15.19p




Statutory Profit before Taxation
+ 2%
65.2m
64.2m
Statutory Earnings per Share
+ 4%
13.79p
13.27p
Interim Dividend per Share3
+ 7%
5.33p
4.98p




Return on Sales4

18.9%
19.7%
Return on Total Invested Capital5

13.8%
14.7%
Net Debt

237.3m
93.4m
 
Revenue increased 16%, with Adjusted1 pre-tax profit up 12%. Organic constant currency growth5: revenue up 2%, profit up 2%; both increasing to 6% on a weekly average basis when adjusted for 27 weeks in the prior period6.
Revenue growth in all major regions. Good organic constant currency growth in Asia Pacific with solid progress in the USA, Mainland Europe and the UK.
 
Strong revenue and profit growth in the Infrastructure Safety and Medical sectors. Solid progress in Environmental & Analysis and Process Safety on track for improvement in the second half.
 
Good cash generation supports investment in organic growth and acquisitions.
 
Interim dividend up 7%.
 
Revolving Credit Facility increased to 550m, for five years to 2021. Net debt of 237m (Year end 2015/16: 247m).
Acquisition pipeline healthy, benefitting from additional M&A resources across all four sectors.
Andrew Williams, Chief Executive of Halma, commented:
"Halma has continued to make good progress, delivering record revenue, profit and dividends for shareholders. The diversity of our business and the evolution of our organisational model through our four sectors is enabling us to sustain growth in varied market conditions. Since the period end, order intake has continued to be ahead of revenue and order intake last year and we are benefitting from the currency tailwind due to the weakening of Sterling since June. Halma remains on track to make progress in the second half of the year in line with the Board's expectations."
Notes:
1
Adjusted to remove the amortisation of acquired intangible assets, acquisition items and profit or loss on disposal of operations and restructuring, totalling 18.4m (2015/16: 10.4m). See note 2 to the Condensed Financial Statements for details.
2
Adjusted to remove the amortisation of acquired intangible assets, acquisition items, profit or loss on disposal of operations and restructuring, and the associated taxation thereon. See note 6 to the Condensed 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
Organic growth rates and Return on Total Invested Capital (ROTIC) are additional performance measures used by management. See note 9 to the Condensed Financial Statements for details.
6
The first half's trading in the current 2016/17 financial year included 26 weeks from 3 April to 1October 2016. The first half's trading in the 2015/16 financial year included 27weeks from 29March to 3October 2015.
7
The next Trading update is expected to be on 23 March 2017. We also intend to revise the timing of our mid-year Trading update from our AGM in July to the end of September 2017.
For further information, please contact:
Halma plc
Andrew Williams, Chief Executive
Kevin Thompson, Finance Director
+44 (0)1494 721 111

MHP Communications
Rachel Hirst/Andrew Jaques
+44 (0)20 3128 8100
A copy of this announcement, together with other information about Halma, may be viewed on its website: www.halma.com.
NOTE TO EDITORS 
1.
Halma develops and markets products used worldwide to protect life and improve the quality of life. The Group comprises four business sectors:

 Process Safety
Products which protect assets and people at work.

 Infrastructure Safety
Products which detect hazards to protect assets and people in public spaces, transportation and commercial buildings.

 Medical
Products which enhance the quality of life for patients and improve the quality of care delivered by providers.

 Environmental & Analysis
Products and technologies for analysis in safety, life sciences and environmental markets.

The key characteristics of Halma's businesses are that they are based on specialist technology and application knowledge, offering strong growth potential. Many Group businesses are market leaders in their specialist field.
2.
High resolution photos of Halma senior management, including Chief Executive Andrew Williams, and images illustrating Halma business activities can be downloaded from its website: www.halma.com. Click on the 'News & Media' link, then 'Media Gallery'. Photo queries: David Waller +44 (0)1494 721111, e-mail: dwaller@halmapr.com.
3.
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.
4.
This announcement contains certain forward-looking statements which have been made by the Directors in good faith using information available up until the date they approved the announcement. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events.
Review of Operations
Record half year results
Halma made good progress during the first half of the year. Revenue increased by 16% to 442m (2015/16: 380m) including a positive currency translation impact of 8%. Organic revenue growth at constant currency was 2% and 6% on a weekly average basis when adjusted for 27 weeks in the prior period1.
Adjusted1 profit before taxation increased by 12% to 83.6m (2015/16: 74.7m) including a positive currency translation impact of 8%. Organic profit growth at constant currency was 2% and 6% on a weekly average basis1.
Return on Sales1 was 18.9% (2015/16: 19.7%). The slight reduction from the prior year was predominantly due to slower than expected progress from acquisitions made in 2015/16 coupled with increased investment across all sectors in innovation, international expansion, talent development and M&A resources. Excluding prior year acquisitions, Return on Sales was in line with the first half of last year.
Strong financial resources and increased interim dividend
Cash generation remained strong and in November 2016, we increased our Revolving Credit Facility from 360m to 550m for a further five-year term. This combination of good cash generation, a healthy balance sheet and increasing financial resources provides us with the capacity we need to invest in organic growth and acquisitions to meet our growth objectives as well as to sustain our progressive dividend policy.
The Board has declared an increase of 7% in the interim dividend to 5.33p per share (2015/16: 4.98p per share). The interim dividend will be paid on 8 February 2017 to shareholders on the register on 30December 2016. For the past 37 years we have increased our full year dividend by 5% or more each year.
Revenue growth in all major regions
In varied market conditions, we achieved revenue growth in all major regions supported by organic growth, favourable currency translation and acquisitions. Revenue from Asia Pacific rose by 17% including 7% organic constant currency growth - the highest of all our major regions. The USA also grew revenue strongly, increasing by 29% to contribute 36% of total revenue. There were low single-digit organic constant currency growth rates in the UK, Mainland Europe and the USA.
Revenue from regions outside the UK, Mainland Europe and the USA increased by 14% with the strong growth in Asia Pacific, an improved performance in South America and weaker demand in the Near and Middle East. Revenue from China was up by 17% to 29.9m (2015/16: 25.6m) with organic constant currency growth of 8% and increases in all four sectors reflecting the opportunity for continued growth in this market.
The tables below summarise revenue growth by region and by sector, including the underlying rates of organic growth at constant currency. Organic constant currency rates exclude the effect of currency translation and acquisitions but do not include any weekly average adjusted figures.
External revenue by destination
Half year 2016/17
Half year 2015/16




m
% of total
m
% of total
Change
m
%
growth
% organic growth at constant currency
United States of America
160.8
36%
124.5
33%
36.3
29%
3%
Mainland Europe
96.0
22%
85.2
22%
10.8
13%
2%
United Kingdom
72.9
16%
71.5
19%
1.4
2%
1%
Asia Pacific
69.7
16%
59.7
16%
10.0
17%
7%
Other countries
42.7
10%
38.8
10%
3.9
10%
(4%)

442.1
100%
379.7
100%
62.4
16%
2%
External revenue by sector
Half year 2016/17
Half year 2015/16




m
m
Change
m
%
growth
% organic growth at constant currency
Process Safety
76.7
77.8
(1.1)
(1%)
(6%)
Infrastructure Safety
148.0
122.4
25.6
21%
5%
Medical
118.7
92.3
26.4
29%
4%
Environmental & Analysis
98.7
87.2
11.5
13%
4%

442.1
379.7
62.4
16%
2%
Robust sector trading performances
Infrastructure Safety revenue grew strongly by 21% to 148.0m (2015/16: 122.4m) including 5% organic constant currency growth, a 6% positive impact from currency translation and a 10% contribution from acquisitions in the prior year. There was growth in all major market segments with good growth in Fire and Door Safety and steadier progress in Security and Elevator Safety. These trends contributed to higher organic constant currency growth in the UK and Mainland Europe and solid growth rates in Asia Pacific and the USA.
Profit2 increased by an impressive 30% to 32.0m (2015/16: 24.6m) including 17% organic constant currency growth, a 5% positive impact from currency translation and an 8% contribution from the prior year acquisitions. Return on Sales rose from 20.1% to 21.6% with organic improvement coming from a small increase in gross margins and good overhead cost control.
Firetrace, acquired in October 2015, performed below expectations after a delay in shipping a major contract, which is now expected to be released in the first half of 2017. However, we continued to invest in innovation, international expansion and talent management reflecting our confidence in its growth prospects.
The Medical sector's revenue was up by 29% to 118.7m (2015/16: 92.3m) including 4% organic constant current growth, an 11% positive currency translation impact and a 14% contribution from prior year acquisitions. There was growth in all major market segments with the strongest performances from the Patient Care businesses involved in vital signs monitoring and ophthalmology. Regionally, there was excellent organic constant currency growth in Asia Pacific and more modest growth in the UK and the USA. There was a decline in Mainland Europe due to lower demand from a major global ophthalmology OEM customer.
Profit2 increased by 17% to 28.9m (2015/16: 24.6m) including 2% organic constant currency growth, a 10% positive currency translation impact and a 5% contribution from prior year acquisitions. Return on Sales was 24.3% (2015/16: 26.6%) with the majority of the decline due to the lower than average returns from Visiometrics and CenTrak, acquired in 2015/16. CenTrak's performance in the first half was adversely affected by a postponement in the roll-out of a major project in the USA due to third-party delays. We believe that shipments will recommence in the first half of 2017/18. CenTrak has continued to invest in new healthcare applications and geographic expansion and has a number of new pilot projects already underway, underlining its exciting growth potential.
The Environmental & Analysis sector revenue increased by 13% to 98.7m (2015/16: 87.2m) including 4% organic constant currency growth and a 9% positive impact from currency translation. There was strong organic constant currency growth in Asia Pacific and the USA, with a decline in both the UK and Mainland Europe.
Profit2 increased by 9% to 16.0m (2015/16: 14.8m) including a 2% organic constant currency reduction and an 11% positive impact from currency translation. Return on Sales of 16.2% (2015/16: 16.9%) reflected steady performances from the Environmental, Water and Food Safety businesses but reduced profit from the Life Science and Research business.
In September 2016, and following the geographic consolidation of our photonics coatings business (Pixelteq) in 2014/15, we decided to transfer certain technology and assets into Ocean Optics (also based near Tampa, Florida, USA) which will be completed in early 2017. The restructuring of the Pixelteq business is expected to benefit the sector's full year adjusted profit by at least 0.5m in 2016/17 and 1.5m in 2017/18, also improving key returns metrics. This restructuring resulted in exceptional costs amounting to 2.1m, which are included within the adjustments2 to the Income Statement. No further restructuring costs are expected in the second half year.
Process Safety revenue reduced by 1% to 76.7m (2015/16: 77.8m) including an organic constant currency decline of 6% and a positive currency translation impact of 5%. Trading conditions in energy and resource markets, which contribute around 40% of sector revenue, remained challenging and there was organic constant currency revenue decline in all major regions. The year-on-year comparatives will become more favourable during the second half of the year and recent order intake trends support a return to year-on-year growth.
Profit was 9% lower at 17.4m (2015/16: 19.1m) including an organic constant currency decline of 13% and a 4% positive currency translation impact. Return on Sales was 22.7%, compared with 24.5% last year. We continue to balance the need to control costs with investment for growth in non-energy related markets and expect sector profitability to improve in the second half of the year as the benefits of our market diversification efforts continue to emerge.
Continued strategic investment for growth
Halma has achieved sustained success over a long period by building strong competitive positions in market niches with long-term growth drivers. Over many years, these fundamentals have been strengthened further by a relentless determination to increase strategic investment in innovation, international expansion and talent development both centrally and within each sector. Examples during the first half included:
 Our companies increased R&D expenditure by 16% to 23.0m (2015/16: 19.8m) representing 5.2% of Group revenue (2015/16: 5.2%) with higher rates of investment in the Infrastructure Safety and Environmental & Analysis sectors.
 All four sector boards recruited dedicated M&A resources.
 We successfully completed the first of our new flagship HPD Enterprise programmes which encourages our Sector Vice Presidents and MDs to think more entrepreneurially, particularly in the increasingly digital world.
Currency volatility
Currency translation had a significant impact on the half year results and balance sheet. We report our results in Sterling with approximately 45% of Group revenue denominated in US Dollars and approximately 15% in Euros. Average exchange rates are used to translate results in the Income Statement. Sterling weakened in 2016/17, in particular following the result of the EU referendum in the UK, by an average 11% relative to the US Dollar and 12% against the Euro. This resulted in an 8% positive currency translation impact on Group revenue and profit. If exchange rates continue at current levels for the full year, we estimate that the currency translation impact will be approximately 10% positive year on year on both revenue and profit.
Pension deficit
On an IAS19 basis the deficit on the Group's defined benefit plans at the half year has increased to 94.0m (2April 2016: 52.3m) before the related deferred tax asset. The value of plan assets increased in the half year but this was more than offset by the increase in liabilities caused by a reduction from 3.4% to 2.3% in the discount rate used to value liabilities following the result of the EU referendum. Earlier in 2016, increased contributions to the pension plans were agreed and these contributions will be reviewed at the next triennial plan valuations.
Cash flow and balance sheet
Cash conversion (adjusted operating cash flow as a percentage of adjusted operating profit) was 84% (2015/16: 88%) just below our cash conversion target of 85%. As well as continued organic investment, dividend and tax payments increased this half year. Capital expenditure of 11.4m (2015/16: 9.0m) was up 27% as expected, with projects progressing across the Group and in particular in the Infrastructure Safety and Medical sectors. 
Net debt at the end of the period was 237m (2April 2016: 247m). The positive effect of cash generation was partially offset by a 12m increase in net debt due to the translation of debt denominated in US Dollar, Euro and Swiss Franc following the weakening of Sterling. Gearing (the ratio of net debt to EBITDA) at half year end was 1.17 times (2April 2016: 1.27 times), comfortably within our typical operating range of up to 2 times gearing.
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 could cause actual results to differ materially from expected and historical results. The Group has processes in place for identifying, evaluating and managing key risks. These risks, together with a description of our approach to mitigating them, are set out on pages 30 to 33 of the Annual Report and Accounts 2016, which is available on the Group's website at www.halma.com. The principal risks and uncertainties relate to operational, strategic, legal, financial, cyber, people and economic issues. See note 15 to the Condensed Financial Statements for further details. 
The UK referendum decision in June 2016 to leave the European Union has added a new dimension to the uncertainties surrounding global economic growth. In the last financial year, approximately 10% of Group revenue came from direct sales between the UK and Mainland Europe. Our decentralised model with businesses in diverse markets and locations enables each Halma company to adapt quickly to changing trading conditions, such as weaker Sterling, offering competitive pricing opportunities for exports from the UK.
Halma has formed an executive working group that is tasked with assessing and monitoring the impacts on our business and to communicate updates and guidance as the Brexit process evolves. To date, the following principal risks have been identified as having an actual and/or potential impact on our business:
 Economic conditions - increased overall uncertainty including the specific impacts on growth, inflation, interest and FX rates.
 Defined benefit pension liability - movements in bond yields affecting discount rates which may increase the liability.
 Laws and regulations - potential changes to UK and EU based law and regulation including product approvals, patents and import/export tariffs.
The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report and Accounts 2016 and confirm that they remain relevant for the second half of the financial year. As part of their ongoing assessment of risk throughout the period the Directors have considered the above risks in the context of the Group's delivery of its financial objectives. Movements in foreign exchange rates continue to remain a risk to financial performance.
Going concern
After conducting a review of the Group's financial resources the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the Condensed Financial Statements.
Board changes
At the AGM in July 2016, Jane Aikman retired from the Board as a non-executive Director. Jane joined the Board in 2007 and we thank her for her contribution to our success, particularly as Chairman of the Audit Committee. Carole Cran, who was appointed as a non-executive Director in January 2016, has now assumed this role. 
In September 2016, Jennifer Ward, Halma's Group Talent Director, was promoted to the Board as an executive Director. Since joining Halma in 2014, Jennifer has contributed significantly to the evolution of our growth strategy and talent development. Prior to Halma, she held senior positions with divisions of PayPal (an eBay company), Bank of America and Honeywell.
In October 2016, Jo Harlow joined the Board as a non-executive Director. Jo has global executive experience in consumer products encompassing strategy, innovation, product development and marketing including senior positions with Microsoft, Nokia, Reebok and Procter & Gamble.
Full biographies of both Jennifer and Jo can be found on our website, www.halma.com.
Outlook
Halma has continued to make good progress, delivering record revenue, profit and dividends for shareholders. The diversity of our business and the evolution of our organisational model through our four sectors is enabling us to sustain growth in varied market conditions. Since the period end, order intake has continued to be ahead of revenue and order intake last year and we are benefiting from the currency tailwind due to the weakening of Sterling since June. Halma remains on track to make progress in the second half of the year in line with the Board's expectations.
Andrew Williams
Chief Executive
Kevin Thompson
Finance Director
1 See Financial Highlights.
2 See note 2 to the Condensed Financial Statements.
Independent review report to Halma plc
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 week period ended 1October 2016 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income and Expenditure, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement and related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, 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 Ireland) 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.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 week period ended 1October 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
DELOITTE LLP
Chartered Accountants and Statutory Auditor
London, UK
22November 2016
Half year results 2016/17
Condensed Financial Statements
Consolidated Income Statement


Unaudited 26 weeks to 1 October 2016


Unaudited 27 weeks to 3 October 2015
Audited
53 weeks to
2 April
2016

Notes
Before
adjustments*
000
Adjustments*
(note 2)
000
Total
000
Before
adjustments*
000
Adjustments*
(note 2)
000
Total
000
Total
000
Continuing operations








Revenue
2
442,121
-
442,121
379,657
-
379,657
807,805
Operating profit

88,564
(18,405)
70,159
77,657
(11,004)
66,653
142,943
Share of results of associates

(43)
-
(43)
(79)
-
(79)
(159)
Profit on disposal of operations

-
-
-
-
592
592
556
Finance income
3
96
-
96
128
-
128
217
Finance expense
4
(4,987)
-
(4,987)
(3,049)
-
(3,049)
(7,269)
Profit before taxation

83,630
(18,405)
65,225
74,657
(10,412)
64,245
136,288
Taxation
5
(18,398)
5,385
(13,013)
(17,170)
3,143
(14,027)
(27,447)
Profit for the period attributable to equity shareholders

65,232
(13,020)
52,212
57,487
(7,269)
50,218
108,841
Earnings per share
6







From continuing operations








Basic and diluted

17.23p

13.79p
15.19p

13.27p
28.76p
Dividends in respect
of the period
7







Dividends paid and proposed (000)



20,196


18,855
48,472
Per share



5.33p


4.98p
12.81p
*
Adjustments include the amortisation of acquired intangible assets, acquisition items and profit or loss on disposal of operations and restructuring, and the associated taxation thereon.
Consolidated Statement of Comprehensive Income and Expenditure

Unaudited
26 weeks to
1 October 
2016
000
Unaudited
27 weeks to 
3 October
2015
000
Audited 
53 weeks to 
2 April
2016 
000
Profit for the period
52,212
50,218
108,841
Items that will not be reclassified subsequently to the Income Statement:



Actuarial (losses)/gains on defined benefit pension plans
(45,838)
13,122
8,841
Tax relating to components of other comprehensive income that will not be reclassified
9,168
(2,625)
(2,304)
Items that may be reclassified subsequently to the Income Statement:



Effective portion of changes in fair value of cash flow hedges
(453)
(343)
(990)
Exchange gains/(losses) on translation of foreign operations and net investment hedge
57,825
(14,096)
30,036
Exchange losses transferred to Income Statement on disposal of operation
-
22
22
Tax relating to components of other comprehensive income that may be reclassified
91
80
209
Other comprehensive income/(expense) for the period
20,793
(3,840)
35,814
Total comprehensive income for the period attributable to equity shareholders
73,005
46,378
144,655
The exchange gains of 57,825,000 (27weeks to 3October 2015: losses of 14,096,000; 53 weeks to 2April 2016: gain of 30,036,000) include gains of 16,267,000 (27 weeks to 3October 2015: losses of 211,000; 53weeks to 2April 2016: gain of 9,336,000) which relate to net investment hedges.


Consolidated Balance Sheet





Notes
Unaudited
1 October 
2016
000
Unaudited
3 October 
2015
000
Audited
2 April 
2016 
000
Non-current assets




Goodwill

586,940
400,237
544,259
Other intangible assets

235,473
128,781
231,753
Property, plant and equipment

103,417
86,000
96,562
Interests in associates

3,660
3,763
3,722
Deferred tax asset

52,725
25,512
44,424


982,215
644,293
920,720
Current assets




Inventories

113,757
83,014
105,318
Trade and other receivables

179,659
143,144
183,619
Tax receivable

474
547
190
Cash and cash equivalents

76,093
133,716
53,938
Derivative financial instruments

135
173
1,131


370,118
360,594
344,196
Total assets

1,352,333
1,004,887
1,264,916
Current liabilities




Trade and other payables

109,841
90,721
122,791
Borrowings

2,161
-
4,748
Provisions

5,571
2,179
4,437
Tax liabilities

12,446
9,978
15,158
Derivative financial instruments

1,920
270
2,196


131,939
103,148
149,330
Net current assets

238,179
257,446
194,866
Non-current liabilities




Borrowings

311,252
227,103
295,908
Retirement benefit obligations
11
94,024
51,405
52,323
Trade and other payables

11,387
4,058
10,153
Provisions

18,859
2,534
18,510
Deferred tax liabilities

94,304
49,783
92,352


529,826
334,883
469,246
Total liabilities

661,765
438,031
618,576
Net assets

690,568
566,856
646,340
Equity




Share capital

37,965
37,965
37,965
Share premium account

23,608
23,608
23,608
Own shares

(4,896)
(6,452)
(8,219)
Capital redemption reserve

185
185
185
Hedging reserve

(972)
(92)
(610)
Translation reserve

133,212
31,255
75,387
Other reserves

(9,481)
(8,387)
(5,831)
Retained earnings

510,947
488,774
523,855
Shareholders' funds

690,568
566,856
646,340


Consolidated Statement of Changes in Equity

For the 26 weeks ended 1 October 2016

Share 
capital 
000
Share 
premium 
account 
000
Own
shares 
000
Capital 
redemption 
reserve 
000
Hedging
reserve 
000
Translation reserve
000
Other 
reserves 
000
Retained 
earnings 
000
Total 
000
At 2 April 2016 (audited)
37,965
23,608
(8,219)
185
(610)
75,387
(5,831)
523,855
646,340
Profit for the period
-
-
-
-
-
-
-
52,212
52,212
Other comprehensive income and expense:









Exchange differences on translation of foreign operations
-
-
-
-
-
57,825
-
-
57,825
Actuarial losses on defined benefit pension plans
-
-
-
-
-
-
-
(45,838)
(45,838)
Effective portion of changes in fair value of cash flow hedges
-
-
-
-
(453)
-
-
-
(453)
Tax relating to components of other comprehensive income and expense
-
-
-
-
91
-
-
9,168
9,259
Total other comprehensive income and expense
-
-
-
-
(362)
57,825
-
(36,670)
20,793
Dividends paid
-
-
-
-
-
-
-
(29,609)
(29,609)
Share-based payments charge
-
-
-
-
-
-
3,110
-
3,110
Deferred tax on share-based
payment transactions
-
-
-
-
-
-
(127)
-
(127)
Excess tax deductions related to share-based payments on exercised awards
-
-
-
-
-
-
-
1,159
1,159
Performance share plan awards vested
-
-
3,323
-
-
-
(6,633)
-
(3,310)
At 1 October 2016 (unaudited)
37,965
23,608
(4,896)
185
(972)
133,212
(9,481)
510,947
690,568
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 1October 2016 the number of treasury shares held was 462,188 (3 October 2015: 940,421; 2April 2016: 940,421) and the number of shares held by the Employee Benefit Trust was 262,417 (3 October 2015: 89,198; 2April 2016: 311,444).


For the 27 weeks ended 3 October 2015
Share 
capital 
000
Share 
premium
account 
000
Own
shares 
000
Capital 
redemption 
reserve 
000
Hedging 
reserve 
000
Translation 
reserve
000
Other 
reserves 
000
Retained 
earnings 
000
Total 
000
At 28 March 2015 (audited)
37,965
23,608
(8,450)
185
171
45,329
(4,073)
454,213
548,948
Profit for the period
-
-
-
-
-
-
-
50,218
50,218
Other comprehensive income and expense:









Exchange differences on translation of foreign operations
-
-
-
-
-
(14,096)
-
-
(14,096)
Exchange losses transferred to Income Statement on disposal of operation
-
-
-
-
-
22
-
-
22
Actuarial gains on defined benefit pension plans
-
-
-
-
-
-
-
13,122
13,122
Effective portion of changes in fair value of cash flow hedges
-
-
-
-
(343)
-
-
-
(343)
Tax relating to components of other comprehensive income and expense
-
-
-
-
80
-
-
(2,625)
(2,545)
Total other comprehensive income
and expense
-
-
-
-
(263)
(14,074)
-
10,497
(3,840)
Dividends paid
-
-
-
-
-
-
-
(27,630)
(27,630)
Share-based payments charge
-
-
-
-
-
-
1,952
-
1,952
Deferred tax on share-based
payment transactions
-
-
-
-
-
-
(575)
-
(575)
Excess tax deductions related to share-based payments on exercised awards
-
-
-
-
-
-
-
1,476
1,476
Purchase of Employee Benefit Trust shares
-
-
(1,216)
-
-
-
-
-
(1,216)
Performance share plan awards vested
-
-
3,214
-
-
-
(5,691)
-
(2,477)
At 3 October 2015 (unaudited)
37,965
23,608
(6,452)
185
(92)
31,255
(8,387)
488,774
566,856




For the 53 weeks ended 2 April 2016
Share 
capital 
000
Share 
premium
account 
000
Own
shares 
000
Capital 
redemption 
reserve 
000
Hedging 
reserve 
000
Translation 
reserve
000
Other 
reserves 
000
Retained 
earnings 
000
Total 
000
At 28 March 2015 (audited)
37,965
23,608
(8,450)
185
171
45,329
(4,073)
454,213
548,948
Profit for the period
-
-
-
-
-
-
-
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 operation
-
-
-
-
-
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 and expense
-
-
-
-
209
-
-
(2,304)
(2,095)
Total other comprehensive income and expense
-
-
-
-
(781)
30,058
-
6,537
35,814
Dividends paid
-
-
-
-
-
-
-
(46,473)
(46,473)
Share-based payments 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 (audited)
37,965
23,608
(8,219)
185
(610)
75,387
(5,831)
523,855
646,340
Consolidated Cash Flow Statement





Notes
Unaudited 
26 weeks to
1 October 
2016
000
Unaudited 
27 weeks to
3 October 
2015
000
Audited 
53 weeks to 
2 April
2016 
000
Net cash inflow from operating activities
8
70,345
61,886
149,273





Cash flows from investing activities




Purchase of property, plant and equipment

(10,728)
(8,244)
(22,418)
Purchase of computer software

(702)
(778)
(1,669)
Purchase of other intangibles

(209)
(81)
(535)
Proceeds from sale of property, plant and equipment

287
468
2,364
Proceeds from sale of capitalised development costs

-
-
166
Development costs capitalised

(4,814)
(3,990)
(8,579)
Interest received

96
128
217
Acquisition of businesses, net of cash acquired
10
(148)
(12,902)
(202,575)
Disposal of operation, net of cash disposed

- 
908
907
Net cash used in investing activities

(16,218)
(24,491)
(232,122)





Financing activities




Dividends paid

(29,609)
(27,630)
(46,473)
Purchase of Own shares

-
(1,216)
(3,003)
Interest paid

(3,489)
(1,589)
(4,149)
Loan arrangement fee paid

-
-
(770)
Proceeds from bank borrowings

-
87,000
74,788
Repayment of bank borrowings

-
-
(97,000)
Proceeds from issue of loan notes

-
-
167,473
Net cash (used in)/from financing activities

(33,098)
56,565
90,866





Increase in cash and cash equivalents

21,029
93,960
8,017 
Cash and cash equivalents brought forward

49,526
39,525
39,525
Exchange adjustments

3,713
231
1,984
Cash and cash equivalents carried forward

74,268
133,716
49,526






Unaudited 
1 October 
2016
000
Unaudited 
3 October 
2015
000
Audited
2 April 
2016
000
Reconciliation of net cash flow to movement in net debt



Increase in cash and cash equivalents
21,029
93,960
8,017 
Net cash (inflow)/outflow from (drawdown)/repayment of bank borrowings
-
(87,000)
22,212 
Proceeds from issue of loan notes
-
-
(167,473)
Loan notes issued in respect of acquisitions* 
-
(263)
(288)
Loan notes repaid in respect of acquisitions*
241
368
367
Exchange adjustments
(11,873)
442
(8,659)

9,397
7,507
(145,824)
Net debt brought forward
(246,718)
(100,894)
(100,894) 
Net debt carried forward
(237,321)
(93,387)
(246,718)
*
Of the 577,000 loan notes outstanding at the prior period end 241,000 was converted at par into cash on 14May 2016. The remaining loan notes are outstanding. The loan notes, which attract interest of 1%, are convertible into cash by the holder at par on each anniversary of the acquisition date until 14May 2019.
Notes to the Condensed Financial Statements
1 Basis of preparation
General information
The Half Year Report, which includes the Interim Management Report and Condensed Financial Statements for the 26weeks to 1October2016, was approved by the Directors on 22November 2016.
The Report has been prepared in accordance with International Accounting Standard 34, applying the accounting policies and presentation that were applied in the preparation of the Group's statutory accounts for the 53 weeks to 2April 2016.
The figures shown for the 53 weeks to 2April 2016 are based on the Group's statutory accounts for that period and do not constitute the Group's statutory accounts for that period as defined in Section 434 of the Companies Act 2006. These statutory accounts, which were prepared under International Financial Reporting Standards, have been filed with the Registrar of Companies. The audit report on those accounts was not qualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying the report, and did not contain statements under Sections 498 (2) or (3) of the Companies Act2006.
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 Directors believe the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities, which includes a 550m five-year Revolving Credit Facility completed on 4November 2016 of which 428m remains undrawn at the date of this report.
With this in mind, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the half year Condensed Financial Statements.
2 Segmental analysis 
Sector analysis
The Group has four main 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 market characteristics. These segments are consistent with the internal reporting as reviewed by the Chief Executive.
Segment revenue and results

Revenue (all continuing operations)

Unaudited 
26 weeks to
1 October 
2016
000
Unaudited 
27 weeks to 
3 October 
2015
000
Audited 
53 weeks to 
2 April
2016 
000
Process Safety
76,743
77,773
155,467
Infrastructure Safety
147,988
122,411
264,843
Medical
118,664
92,297
198,715
Environmental & Analysis
98,797
87,243
188,928
Inter-segmental sales
(71)
(67)
(148)
Revenue for the period
442,121
379,657
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. The Group does not analyse revenue by product group. Revenue derived from the rendering of services was 14,034,000 (27 weeks to 3 October 2015: 12,165,000; 53weeks to 2April 2016: 25,134,000). All revenue was otherwise derived from the sale of products.

Profit (all continuing operations)

Unaudited 
26 weeks to
1 October 
2016
000
Unaudited 
27 weeks to
3 October 
2015
000
Audited 
53 weeks to 
2 April
2016 
000
Segment profit before allocation of adjustments* 



Process Safety
17,395
19,090
39,557
Infrastructure Safety
31,991
24,591
56,167
Medical
28,876
24,579
51,695
Environmental & Analysis
16,022
14,767
34,527

94,284
83,027
181,946
Segment profit after allocation of adjustments*



Process Safety
15,491
17,393
36,095
Infrastructure Safety
29,735
23,707
50,965
Medical
18,933
18,826
34,747
Environmental & Analysis
11,720
12,689
30,413
Segment profit
75,879
72,615
152,220
Central administration costs 
(5,763)
(5,449)
(8,880)
Net finance expense
(4,891)
(2,921)
(7,052)
Group profit before taxation
65,225
64,245
136,288
Taxation
(13,013)
(14,027)
(27,447)
Profit for the period
52,212
50,218
108,841
* Adjustments include the amortisation of acquired intangible assets, acquisition items and profit or loss on disposal of operations and restructuring.
The accounting policies of the reportable segments are the same as the Group's accounting policies. For acquisitions after 3April2010, acquisition transaction costs and adjustments to contingent purchase consideration are recognised in the Consolidated Income Statement. Segment profit before these acquisition costs, the amortisation of acquired intangible assets and the profit or loss on disposal of continuing operations and restructuring 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:



Unaudited for the 26 weeks ended 1 October 2016


Acquisition items




Amortisation 
of acquired 
intangibles
000
Transaction 
costs 
000
Adjustments 
to contingent 
consideration 
000
Release of
fair value 
adjustments 
to inventory
000
Total
amortisation
charge and
acquisition
items
000
Disposal of
operations and restructuring
000
Total 
000
Process Safety
(1,904)
-
-
-
(1,904)
-
(1,904)
Infrastructure Safety
(2,256)
-
-
-
(2,256)
-
(2,256)
Medical
(8,815)
-
(338)
(790)
(9,943)
-
(9,943)
Environmental & Analysis
(2,217)
-
15
-
(2,202)
(2,100)
(4,302)
Total Segment & Group
(15,192)
-
(323)
(790)
(16,305)
(2,100)
(18,405)
The 338,000 charge to contingent consideration comprises a credit arising from a revision to the estimate of the payable for Value Added Solutions LLC (VAS) by 339,000 from 704,000 (US$1,000,000) to 411,000 (US$535,000) with exchange differences of 46,000, offset by a 677,000 charge arising from changes in the discount rate along with exchange differences on the payable for Visiometrics S.L. (Visiometrics) which is denominated in Euros.
The 790,000 charge relates to the release of the remaining fair value adjustments on revaluing the inventory of CenTrak on acquisition in the prior year. 
The 2,100,000 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.




Unaudited for the 27 weeks ended 3 October 2015


Acquisition items




Amortisation 
of acquired 
intangibles
000
Transaction 
costs 
000
Adjustments 
to contingent 
consideration 
000
Release of
fair value 
adjustments 
to inventory
000
Total 
amortisation 
charge and 
acquisition 
items 
000
Disposal of 
operations and restructuring
000
Total 
000
Process Safety
(1,697)
-
-
-
(1,697)
-
(1,697)
Infrastructure Safety
(411)
(148)
(325)
-
(884)
-
(884)
Medical
(6,217)
(114)
(14)
-
(6,345)
592
(5,753)
Environmental & Analysis
(2,078)
-
-
-
(2,078)
-
(2,078)
Total Segment & Group
(10,403)
(262)
(339)
-
(11,004)
592
(10,412)
The transaction costs arose on the acquisitions of VAS, 114,000; and Firetrace USA LLC, 148,000.
The 325,000 charge to contingent consideration related to the revision of the estimate of the remaining payable for Advanced Electronics Limited.
The 592,000 profit on disposal relates to the disposal of 8.8% of the Group's ownership interest in Optomed Oy on 26 August 2015.



Audited for the 53 weeks ended 2 April 2016


Acquisition items




Amortisation 
of acquired 
intangibles
000
Transaction 
costs 
000
Adjustments 
to contingent 
consideration 
000
Release of
fair value 
adjustments 
to inventory
000
Total
amortisation
charge and
acquisition
items
000
Disposal of
operations and restructuring
000
Total 
000
Process Safety
(3,462)
-
-
-
(3,462)
-
(3,462)
Infrastructure Safety
(2,398)
(1,101)
(827)
(842)
(5,168)
(34)
(5,202)
Medical
(13,018)
(2,926)
(826)
(768)
(17,538)
590
(16,948)
Environmental & Analysis
(4,225)
-
111
-
(4,114)
-
(4,114)
Total Segment & Group
(23,103)
(4,027)
(1,542)
(1,610)
(30,282)
556
(29,726)
The transaction costs arose mainly on the prior year acquisitions of Firetrace in the Infrastructure Safety sector and VAS, Visiometrics and CenTrak in the Medical sector.
The 1,542,000 charge comprised changes in estimate of the deferred contingent consideration payable for Advanced Electronics in the Infrastructure Safety sector, ASL, a prior acquisition, in the Environmental & Analysis sector, and foreign exchange movements on the Visiometrics payable in the Medical sector. The Advanced payable was settled in full in the period.
The release of fair value adjustments to inventory related to the acquisitions of Firetrace and CenTrak.
The 590,000 profit on disposal relates to the disposal of 8.8% of the Group's ownership interest in Optomed Oy on 26 August 2015.
The total assets and liabilities of all four segments have not been disclosed as there have been no material changes to those disclosed in the Annual Report and Accounts 2016.
Geographic information
The Group's revenue from external customers (by location of customer) is as follows:


Revenue by destination

Unaudited
26 weeks to
1 October 
2016
000
Unaudited
27 weeks to
3 October 
2015
000
Audited 
53 weeks to 
2 April
2016 
000
United States of America
160,807
124,415
272,933 
Mainland Europe
95,965
85,190
179,290 
United Kingdom
72,901
71,520
144,821
Asia Pacific
69,686
59,736
124,992
Africa, Near and Middle East
26,742
25,419
55,712
Other countries
16,020
13,377
30,057
Group revenue
442,121
379,657
807,805
3 Finance income




Unaudited
26 weeks to
1 October 
2016
000
Unaudited
27 weeks to
3 October 
2015
000
Audited 
53 weeks to 
2 April
2016 
000
Interest receivable
96 
128
217
4 Finance expense




Unaudited 
26 weeks to
1 October 
2016 
000
Unaudited 
27 weeks to 
3 October 
2015 
000
Audited 
53 weeks to 
2 April
2016 
000
Interest payable on loans and overdrafts
3,463 
1,580 
4,104
Amortisation of finance costs
325 
265 
561
Net interest charge on pension plan liabilities
832 
1,008 
2,013
Other interest payable
25 
9 
45

4,645 
2,862 
6,723
Fair value movement on derivative financial instruments
267 
187 
508
Unwinding of discount on provisions
75 
-
38

4,987 
3,049 
7,269
5 Taxation
The total Group tax charge for the 26 weeks to 1October 2016 of 13,013,000 (27 weeks to 3 October 2015: 14,027,000; 53weeks to 2April 2016: 27,447,000) comprises a current tax charge of 15,032,000 (27 weeks to 3 October 2015: 15,280,000; 53weeks to 2April 2016: 30,685,000) and a deferred tax credit of 2,019,000 (27 weeks to 3 October 2015: 1,253,000; 53weeks to 2April 2016: 3,238,000). The tax charge is based on the estimated effective tax rate for the year.
The tax charge includes 12,253,000 (27 weeks to 3 October 2015: 12,270,000; 53weeks to 2April 2016: 25,014,000) in respect of overseas tax.
6 Earnings per ordinary share
Basic and diluted earnings per ordinary share are calculated using the weighted average of 378,549,906 (3 October 2015: 378,390,374; 2April 2016: 378,412,359) shares in issue during the period (net of shares purchased by the Company and held as treasury and Employee Benefit Trust shares). All remaining share options were exercised during the year ended March 2015, accordingly there are no dilutive potential 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 restructuring, and associated taxation thereon.
The Directors consider that adjusted earnings represent a more consistent measure of underlying performance. A reconciliation of earnings and the effect on basic earnings per share figures is as follows:

Unaudited 
26 weeks to
1 October 
2016
000
Unaudited 
27 weeks to
3 October 
2015
000
Audited 
53 weeks to 
2 April
2016 
000
Earnings from continuing operations
52,212
50,218
108,841
Amortisation of acquired intangible assets (after tax)
10,383
7,351
16,102
Acquisition transaction costs (after tax)
-
171
2,941
Release of fair value adjustments to inventory (after tax)
490
-
998
Adjustments to contingent consideration (after tax)
300
339
1,315
Loss/(profit) on disposal of operations and restructuring (after tax)
1,847
(592)
(556)
Adjusted earnings
65,232
57,487
129,641

Per ordinary share

Unaudited 
26 weeks to
1 October 
2016
pence
Unaudited 
27 weeks to
3 October 
2015
pence
Audited 
53 weeks to 
2 April
2016 
pence
Earnings from continuing operations
13.79
13.27
28.76
Amortisation of acquired intangible assets (after tax)
2.74
1.94
4.26
Acquisition transaction costs (after tax)
-
0.05
0.78
Release of fair value adjustments to inventory (after tax)
0.13
-
0.26
Adjustments to contingent consideration (after tax)
0.08
0.09
0.35
Loss/(profit) on disposal of operations and restructuring (after tax)
0.49
(0.16)
(0.15)
Adjusted earnings
17.23
15.19
34.26
7 Dividends


Per ordinary share

Unaudited 
26 weeks to
1 October 
2016
pence
Unaudited 
27 weeks to
3 October 
2015
pence
Audited 
53 weeks to 
2 April
2016 
pence
Amounts recognised as distributions to shareholders in the period



Final dividend for the year to 2 April 2016 (28 March 2015)
7.83
7.31
7.31
Interim dividend for the year to 2 April 2016
-
-
4.98 

7.83
7.31
12.29 
Dividends in respect of the period



Interim dividend for the year to 1 April 2017 (2 April 2016)
5.33
4.98
4.98 
Final dividend for the year to 2 April 2016
-
-
7.83

5.33
4.98
12.81

Unaudited 
26 weeks to
1 October 
2016
000
Unaudited 
27 weeks to
3 October 
2015
000
Audited 
53 weeks to 
2 April
2016 
000
Amounts recognised as distributions to shareholders in the period



Final dividend for the year to 2 April 2016 (28 March 2015)
29,628
27,630
27,629
Interim dividend for the year to 2 April 2016
-
-
18,844

29,628 
27,630
46,473
Dividends in respect of the period



Interim dividend for the year to 1 April 2017 (2 April 2016)
20,196
18,855
18,844
Final dividend for the year to 2 April 2016
-
-
29,628

20,196
18,855
48,472
8 Notes to the Consolidated Cash Flow Statement




Unaudited 
26 weeks to
1 October 
2016
000
Unaudited 
27 weeks to
3 October 
2015
000
Audited 
53 weeks to 
2 April 
2016 
000
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 
70,159
66,653
142,943
Depreciation of property, plant and equipment
8,743
7,387
15,245
Amortisation of computer software
696
610
1,348
Amortisation of capitalised development costs and other intangibles
3,508
2,347
5,202
Amortisation of acquired intangible assets
15,192
10,403
23,103
Share-based payment expense (less than)/in excess of amounts paid
(695)
(1,052)
1,899
Additional payments to pension plans
(5,104)
(3,241)
(7,728)
Loss on restructuring of operation
2,057
-
-
Loss/(profit) on sale of property, plant and equipment and computer software
14
35
(1,345)
Operating cash flows before movement in working capital
94,570
83,142
180,667
Increase in inventories
(2,350)
(4,525)
(4,809)
Decrease/(increase) in receivables
12,680
11,661
(8,786)
(Decrease)/increase in payables and provisions
(18,104)
(12,398)
7,844
Revision to estimate of contingent consideration payable
323
339
1,543
Cash generated from operations
87,119
78,219
176,459
Taxation paid
(16,774)
(16,333)
(27,186)
Net cash inflow from operating activities
70,345
61,886
149,273

Unaudited
1 October 
2016
000
Unaudited
3 October 
2015
000
Audited
2 April 
2016
000
Analysis of cash and cash equivalents



Cash and bank balances
76,093
133,716
53,938
Overdrafts (included in current Borrowings)
(1,825)
-
(4,412)
Cash and cash equivalents
74,268
133,716
49,526

At 
2 April 
2016 
000
Reclass 
000
Cash flow 
000
Loan notes 
repaid
000
Exchange 
adjustments 
000
At 
1 October
2016 
000
Analysis of net debt






Cash and bank balances
53,938
-
18,442
-
3,713
76,093
Overdrafts
(4,412)
-
2,587
-
-
(1,825)
Cash and cash equivalents
49,526
-
21,029
-
3,713
74,268
Loan notes falling due within one year*
(336)
(241)
-
241
-
(336)
Loan notes falling due after more than one year*
(172,112)
241
-
-
(7,644)
(179,515)
Bank loans falling due after more than one year
(123,796)
-
-
-
(7,942)
(131,738)
Total net debt
(246,718)
-
21,029
241
(11,873)
(237,321)
*  241,000 of the 577,000 loan notes outstanding at the beginning of the period was converted at par into cash on 14May 2016. The remaining loan notes are outstanding. The loan notes, which attract interest of 1%, are convertible into cash by the holder at par on each anniversary of the acquisition date until 14May 2019.
9 Additional performance measures
Return on Total Invested Capital (ROTIC)




Unaudited 
26 weeks to
1 October 
2016
000
Unaudited 
27 weeks to
3 October
2015
000
Audited
53 weeks to
2 April
2016
000
Post-tax profit before adjustments**
65,232
57,487
129,641
Shareholders' funds
690,568
566,856
646,340
Add back retirement benefit obligations
94,024
51,405
52,323
Less associated deferred tax assets
(17,506)
(10,000)
(9,619)
Cumulative amortisation of acquired intangible assets
136,963
93,137
112,478
Historical adjustments to goodwill***
89,549
89,549
89,549
Total Invested Capital
993,598
790,947
891,071
Average Total Invested Capital*
942,335
783,554
833,616
Return on Total Invested Capital (annualised)
13.8%
14.7%
15.6%
Return on Capital Employed (ROCE)




Unaudited 
26 weeks to
1 October 
2016
000
Unaudited 
27 weeks to
3 October 
2015
000
Audited 
53 weeks to 
2 April 
2016 
000
Operating profit before adjustments**, but after share of results of associates 
88,521
77,578
173,066
Computer software costs within intangible assets
3,353
2,981
3,215 
Capitalised development costs within intangible assets
25,985
17,397
23,540 
Other intangibles within intangible assets
1,099
453
903
Property, plant and equipment
103,417
86,000
96,562 
Inventories
113,757
83,014
105,318
Trade and other receivables
179,659
143,144
183,619
Trade and other payables
(109,841)
(90,721)
(122,791)
Provisions
(5,571)
(2,179)
(4,437)
Net tax liabilities
(11,972)
(9,431)
(14,968) 
Non-current trade and other payables
(11,387)
(4,058)
(10,153)
Non-current provisions
(18,859)
(2,534)
(18,510)
Add back contingent purchase consideration
18,500
841
17,075 
Capital Employed
288,140
224,907
259,373
Average Capital Employed*
273,757
222,028
239,261 
Return on Capital Employed (annualised)
64.7%
69.9%
72.3%
*
The ROTIC and ROCE measures are expressed as a percentage of the average of the current period's and prior year's Total Invested Capital and Capital Employed respectively. Using an average as the denominator is considered to be more representative. The March 2015 Total Invested Capital and Capital Employed balances were 776,160,000 and 219,148,000 respectively.
**
Adjustments include the amortisation of acquired intangible assets, acquisition items and profit or loss on disposal of operations and restructuring.
***
Includes goodwill amortised prior to 3 April 2004 and goodwill taken to reserves.
Organic growth
Organic growth measures the change in revenue and profit from continuing Group operations. The calculation equalises the effect of acquisitions by:
i. removing from the year of acquisition their entire revenue and profit before taxation, and
ii. in the following year, removing the revenue and profit for the number of months equivalent to the pre-acquisition period in the prior year.
The resultant effect is that the acquisitions are removed from organic results for one full year of ownership.
The results of disposals are removed from the prior period reported revenue and profit before taxation. The effects of currency changes are removed through restating the current year revenue and profit before taxation at the prior year exchange rates. Organic growth at constant currency has been calculated as follows:



Revenue
Adjusted profit* before taxation

Unaudited
26 weeks to
1 October 
2016
000
Unaudited
27 weeks to 
3 October 2015
000
% growth
Unaudited
26 weeks to
1 October 
2016
000
Unaudited
27 weeks to 
3 October 2015
000
% growth
Continuing operations
442,121
379,657
16.5%
83,630
74,657
12.0%
Acquired and disposed revenue/profit
(25,428)
-

(1,510)
-

Organic growth 
416,693
379,657
9.8%
82,120
74,657
10.0%
Constant currency adjustment
(29,072)
-

(5,978)
-

Organic growth at constant currency
387,621
379,657
2.1%
76,142
74,657
2.0%
*  Adjustments include the amortisation of acquired intangible assets, acquisition items, and profit or loss on disposal of operations and restructuring.
Adjusted operating profit




Unaudited
26 weeks to
1 October 
2016
000
Unaudited
27 weeks to 
3 October 
2015
000
Audited
53 weeks to 
2 April 
2016 
000
Operating profit
70,159
66,653
142,943
Add back:



Acquisition items
1,113
601
7,179
Loss on restructuring of operations
2,100
-
-
Amortisation of acquired intangible assets
15,192
10,403
23,103
Adjusted operating profit
88,564
77,657
173,225
Adjusted operating cash flow




Unaudited
26 weeks to
1 October 
2016
000
Unaudited
27 weeks to 
3 October 
2015
000
Audited
53 weeks to 
2 April 
2016
000
Net cash from operating activities (note 8)
70,345
61,886
149,273 
Add back:



Taxation paid
16,774
16,333
27,186 
Proceeds from sale of property, plant and equipment
287
468
2,364
Proceeds from sale of capitalised development costs
-
-
166
Share awards vested not settled by Own shares*
3,310
2,477
2,478 
Less:



Purchase of property, plant and equipment
(10,728)
(8,244)
(22,418)
Purchase of computer software and other intangibles
(911)
(859)
(2,204) 
Development costs capitalised
(4,814)
(3,990)
(8,579)
Adjusted operating cash flow
74,263
68,071
148,266
Cash conversion % (adjusted operating cash flow/adjusted operating profit)
84%
88%
86%
*  See Consolidated Statement of Changes in Equity.
10 Acquisitions
In the provisional accounting for acquisitions, adjustments are made to the book values of the net assets of the companies acquired to reflect their provisional fair values to the Group. Acquired inventories are valued at fair value adopting Group bases and any liabilities for warranties relating to past trading are recognised. Other previously unrecognised assets and liabilities at acquisition are included and accounting policies are aligned with those of the Group where appropriate.
During the period ended 1October 2016 adjustments were made to the fair values of acquired assets and liabilities included in the provisional accounting for the prior year acquisitions of Firetrace and Visiometrics.
The provisional accounting was updated for non-material changes to certain provisions and inventory valuations and for adjustments to the related deferred tax balances. The initial consideration for CenTrak was also adjusted following the finalisation of the working capital adjustment payable. The combined adjustments made for each acquisition resulted in a net adjustment to goodwill of 230,000. All adjustments to the provisional accounting were made within the goodwill measurement period, relevant to each acquisition, as defined by IFRS 3 (revised) Business Combinations.
As at the date of approval of these Condensed Financial Statements the accounting for Firetrace is complete. The accounting for Visiometrics and CenTrak remains provisional. The measurement window for these acquisitions expires in December 2016 and February 2017 respectively.
Adjustments on prior year acquisitions


Fair value
adjustments
000
Current assets

Inventories
(103)
Trade and other receivables
(123)
Total assets
(226)
Current liabilities

Provisions
(84)
Non-current liabilities

Deferred tax
(15)
Total liabilities
(99)
Net assets of businesses acquired
(325)


Initial consideration adjustment
(555)


Goodwill arising on prior year acquisition
(230)
Analysis of cash outflow in the Consolidated Cash Flow Statement




Unaudited 
26 weeks to
1 October 
2016
000
Unaudited 
27 weeks to
3 October 
2015
000
Audited 
53 weeks to 
2 April 
2016
000
Initial cash consideration paid 
-
3,228
187,601
Initial cash consideration adjustment on prior year acquisitions 
(166)
-
-
Cash acquired on acquisitions
-
-
(1,830)
Deferred contingent consideration paid in relation to current year acquisitions
-
-
6,558
Deferred contingent consideration paid and loan notes repaid in cash in relation to prior year acquisitions*
314
9,674
10,246
Net cash outflow relating to acquisitions (per Consolidated Cash Flow Statement)
148
12,902
202,575
* The 314,000 comprises 241,000 loan notes and 73,000 contingent consideration paid in respect of prior period acquisitions all of which had been provided in the prior period's financial statements.
11 Retirement benefits
The Group's significant defined benefit plans are for the qualifying employees of its UK subsidiaries. The defined benefit obligation at 1October 2016 of 94,024,000 (3 October 2015: 51,405,000; 2April 2016: 52,323,000) has been estimated based on the latest triennial actuarial valuations updated to reflect current assumptions regarding discount rates, inflation rates and asset values. The latest triennial valuations were carried out at 1 December 2014 for the Halma Group Pension Plan and 1 April 2015 for the Apollo Pension and Life Assurance Plan.
The discount rate assumption was set at 2.3% (3 October 2015: 3.75%; 2April 2016: 3.4%). All other assumptions are materially unchanged.
In addition, the defined benefit plan assets have been updated to reflect deficit reduction payments in the period totalling 5,160,000 (3October 2015: 3,300,000; 2April 2016: 7,800,000). The UK plans are closed to future accrual.
12 Fair values of financial assets and liabilities
As at 1October 2016, 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 approximate to the carrying value because interest rates are reset to market rates at intervals of less than one year.
The fair value of the Group's fixed rate loan notes arising from the United States Private Placement completed in January 2016 is estimated to be 186,023,000. The fair value 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 IFRS7.
The fair value of derivative 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 IFRS7.
As at 1October 2016, the total forward foreign currency contracts outstanding were 28,876,000. 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 135,000 (3 October 2015: 173,000; 2April 2016: 1,131,000) asset and 1,920,000 (3 October 2015: 270,000; 2April 2016: 2,196,000) liability in the Consolidated Balance Sheet.
Any movements in the fair values of the contracts are recognised in equity until the hedge transaction occurs, when gains/losses are recycled to finance income or finance expense.
13 Subsequent events
On 4November 2016 the Group completed the refinancing of its 360,000,000 multi-currency revolving credit facility (RCF). The facility which was due to expire in November 2018 is increased to 550,000,000 in Sterling, US Dollar, Euro and Swiss Franc and runs to October 2021 with the potential for a further two years extension with the agreement of the syndicate of banks.
14 Other matters
Seasonality
The Group's financial results have not historically been subject to significant seasonal trends.
Equity and borrowings
Issues and repurchases of Halma plc's ordinary shares and drawdowns and repayments of borrowings are shown in the Consolidated Cash Flow Statement.
Related party transactions
There were no significant changes in the nature and size of related party transactions for the period to those reported in the Annual Report and Accounts 2016.
15 Principal risks and uncertainties
A number of potential risks and uncertainties exist that could have a material impact on the Group's performance over the second half of the financial year and could cause actual results to differ materially from expected and historical results.
The Group has in place processes for identifying, evaluating and managing key risks. These risks, together with a description of the approach to mitigating them, are set out on pages 30 to 33 in the Annual Report and Accounts 2016, which is available on the Group's website at www.halma.com.
The principal risks and uncertainties relate to:
 Globalisation
 Competition
 Economic conditions
 Funding, treasury and pension deficit
 Cyber security/Information Technology/Business interruption
 Acquisitions
 Laws and regulations
 Succession planning and staff quality
 Research & Development and Intellectual Property strategy
The United Kingdom's referendum decision on 23June 2016 to leave the European Union has added an increased level of uncertainty to global economic growth. The Group has formed an executive working group that is tasked with assessing and monitoring the impacts and communicating updates and guidance as matters progress. The following principal risks have been, and are likely to continue to be impacted following the Referendum result:
a) Economic conditions - increased uncertainty, potential impact on growth and inflation, with variability in interest and FX rates
b) Defined benefit pension liability - increased risk as a consequence of the movements in bond yields affecting discount rates which may increase the liability
c) Laws and regulations - potential changes to UK and EU based law and regulation including product approvals, patent regulations and import/export tariffs
Approximately 10% of Group revenue comes from direct sales between the UK and Mainland Europe. Our decentralised model, with businesses in diverse markets and locations together with our autonomous, close-to-market decision making enables our companies to adapt more quickly than many of our competitors, for example with a weaker Sterling offering pricing opportunities for exports from the UK. Weak Sterling is also generally positive for the Group with the translation of non-Sterling revenues into Sterling for reporting purposes.
Although the Group uses forward foreign exchange contracts to mitigate its transactional currency exposure risk, it does not hedge the translation of its currency profits. In the first half of the year, Sterling weakened on average by 11% relative to the US Dollar, and by 12% against the Euro, resulting in an 8% positive currency impact on reported revenue and 8% on reported profit.
16 Responsibility statement
We confirm that to the best of our knowledge:
a)
these Condensed Financial Statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union;
b)
this Half Year Report includes a fair review of the information required by Disclosure and Transparency Rule (DTR) 4.2.7R (indication of important events during the period and description of principal risks and uncertainties for the remainder of the financial year); and
c)
this Half Year Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).
By order of the Board
Andrew Williams
Chief Executive
22November 2016
Kevin Thompson
Finance Director

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  END
IR EFLFLQFFEFBE