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(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 intangibles in the Medical sector is £12,429,000 impairment to a customer relationship asset of Visiometrics. Related to this impairment, included within the Medical sector, there is a credit arising from a revision to the estimate of the 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 same customer. The
transaction costs arose mainly on the acquisition of 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 VAS by £356,000, 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 (£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. 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 2017.
Geographic information The Group's revenue from external customers (by location of customer) is as follows:
Revenue by destination
Unaudited 6 months to30 September 2017£000 Unaudited 26 weeks to 1 October 2016£000 Audited 52 weeks to 1 April2017 £000
United States of America 181,808 160,807 345,295
Mainland Europe 109,011 95,965 210,342
United Kingdom 79,746 72,901 154,920
Asia Pacific 83,928 69,686 151,626
Africa, Near and Middle East 30,750 26,742 60,765
Other countries 21,086 16,020 38,714
Group revenue 506,329 442,121 961,662
3 Finance income
Unaudited 6 months to30 September 2017£000 Unaudited 26 weeks to 1 October 2016£000 Audited 52 weeks to 1 April2017£000
Interest receivable 106 96 211
Fair value movement on derivative financial instruments - - 283
106 96 494
4 Finance expense
Unaudited 6 months to30 September 2017 £000 Unaudited 26 weeks to 1 October 2016 £000 Audited 52 weeks to 1 April2017 £000
Interest payable on loans and overdrafts 3,470 3,463 6,977
Amortisation of finance costs 454 325 1,040
Net interest charge on pension plan liabilities 888 832 1,553
Other interest payable 75 25 126
4,887 4,645 9,696
Fair value movement on derivative financial instruments 29 267 53
Unwinding of discount on provisions 26 75 31
4,942 4,987 9,780
5 Taxation The total Group tax charge for the 6 months to 30 September 2017 of £15,104,000 (26 weeks to 1 October 2016: £13,013,000; 52 weeks to 1 April 2017: £28,014,000) comprises a current tax charge of £17,991,000 (26 weeks to 1 October 2016: £15,032,000; 52 weeks to 1 April 2017: £34,766,000) and a deferred tax credit of £2,887,000 (26 weeks to 1 October 2016: £2,019,000; 52 weeks to 1 April 2017: £6,752,000). The tax charge is based on the estimated effective tax rate for the year. The tax charge
includes £14,885,000 (26 weeks to 1 October 2016: £12,253,000; 52 weeks to 1 April 2017: £27,525,000) in respect of overseas tax.
6 Earnings per ordinary share Basic and diluted earnings per ordinary share are calculated using the weighted average of 379,219,351 (1 October 2016: 378,549,906; 1 April 2017: 378,685,730) shares in issue during the period (net of shares purchased by the Company and held as treasury and Employee Benefit Trust shares). There are no dilutive or potentially dilutive ordinary shares. Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation and impairment of acquired
intangible assets; acquisition items; restructuring costs; profit or loss on disposal of operations; and the 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 6 months to 30 September 2017£000 Unaudited 26 weeks to 1 October 2016£000 Audited 52 weeks to 1 April2017 £000
Earnings from continuing operations 61,715 52,212 129,689
Amortisation of acquired intangible assets (after tax) 11,832 10,383 21,452
Impairment of acquired intangible assets (after tax) - - 9,322
Acquisition transaction costs (after tax) 574 - 240
Release of fair value adjustments to inventory (after tax) 62 490 569
Adjustments to contingent consideration (after tax) (725) 300 (10,650)
Disposal of operations and restructuring (after tax) - 1,847 1,648
Adjusted earnings 73,458 65,232 152,270
Per ordinary share
Unaudited 6 months to 30 September 2017pence Unaudited 26 weeks to 1 October 2016pence Audited 52 weeks to 1 April2017 pence
Earnings from continuing operations 16.27 13.79 34.25
Amortisation of acquired intangible assets (after tax) 3.12 2.74 5.66
Impairment of acquired intangible assets (after tax) - - 2.46
Acquisition transaction costs (after tax) 0.15 - 0.06
Release of fair value adjustments to inventory (after tax) 0.02 0.13 0.15
Adjustments to contingent consideration (after tax) (0.19) 0.08 (2.81)
Disposal of operations and restructuring (after tax) - 0.49 0.44
Adjusted earnings 19.37 17.23 40.21
7 Dividends
Per ordinary share
Unaudited 6 months to30 September 2017pence Unaudited 26 weeks to 1 October 2016pence Audited 52 weeks to 1 April2017 pence
Amounts recognised as distributions to shareholders in the period
Final dividend for the year to 1 April 2017 (2 April 2016) 8.38 7.83 7.83
Interim dividend for the year to 1 April 2017 - - 5.33
8.38 7.83 13.16
Dividends in respect of the period
Interim dividend for the year to 31 March 2018 (1 April 2017) 5.71 5.33 5.33
Final dividend for the year to 1 April 2017 - - 8.38
5.71 5.33 13.71
Unaudited 6 months to 30 September 2017£000 Unaudited 26 weeks to 1 October 2016£000 Audited 52 weeks to 1 April2017 £000
Amounts recognised as distributions to shareholders in the period
Final dividend for the year to 1 April 2017 (2 April 2016) 31,733 29,605 29,605
Interim dividend for the year to 1 April 2017 - - 20,183
31,733 29,605 49,788
Dividends in respect of the period
Interim dividend for the year to 31 March 2018 (1 April 2017) 21,678 20,183 20,183
Final dividend for the year to 1 April 2017 - - 31,733
21,678 20,183 51,916
8 Notes to the Consolidated Cash Flow Statement
Unaudited 6 months to30 September 2017£000 Unaudited 26 weeks to 1 October 2016£000 Audited 52 weeks to 1 April 2017 £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 81,767 70,159 167,070
Financial instruments at Fair value through profit or loss (193) - -
Depreciation of property, plant and equipment 9,139 8,743 17,798
Amortisation of computer software 845 696 1,432
Amortisation of capitalised development costs and other intangibles 3,375 3,508 6,947
Impairment of intangibles - - 98
Amortisation of acquired intangible assets 17,316 15,192 31,469
Impairment of acquired intangible assets - - 12,429
Share-based payment expense in excess of/(less than) amounts paid 552 (695) 1,880
Additional payments to pension plans (5,358) (5,104) (10,213)
Loss on restructuring of operation - 2,057 1,252
(Profit)/loss on sale of property, plant and equipment and computer software (522) 14 138
Operating cash flows before movement in working capital 106,921 94,570 230,300
Increase in inventories (8,688) (2,350) (5,406)
Decrease/(increase) in receivables 4,007 12,680 (14,262)
(Decrease)/increase in payables and provisions (8,106) (18,104) 5,750
Revision to estimate of contingent consideration payable (627) 323 (10,701)
Cash generated from operations 93,507 87,119 205,681
Taxation paid (17,482) (16,774) (33,188)
Net cash inflow from operating activities 76,025 70,345 172,493
Unaudited30 September 2017£000 Unaudited1 October 2016£000 Audited1 April 2017£000
Analysis of cash and cash equivalents
Cash and bank balances 71,671 76,093 66,827
Overdrafts (included in current Borrowings) (5) (1,825) (1,190)
Cash and cash equivalents 71,666 74,268 65,637
At 1 April 2017 £000 Reclass £000 Cash flow £000 Net cash/(debt)acquired £000 Loan notes repaid£000 Exchange adjustments £000 At 30 September 2017 £000
Analysis of net debt
Cash and bank balances 66,827 - 5,795 155 - (1,106) 71,671
Overdrafts (1,190) - 1,185 - - - (5)
Cash and cash equivalents 65,637 - 6,980 155 - (1,106) 71,666
Loan notes falling due within one year (161) (175) - - 161 - (175)
Loan notes falling due after more (181,157) 175 - - - 1,916 (179,066)
than one year
Bank loans falling due after more (80,761) - 2,552 - - 4,794 (73,415)
than one year
Total net debt (196,442) - 9,532 155 161 5,604 (180,990)
Overdrafts and Loan notes falling due within one year are included as current borrowings in the Consolidated Balance Sheet. Loan notes and Bank loans falling due after more than one year are included as non-current borrowings.
9 Alternative performance measures The Board uses certain non-GAAP measures to help it effectively monitor the performance of the Group. The Directors consider that these represent a more consistent measure of underlying performance. These measures include Return on Total Invested Capital, Return on Capital Employed, Organic growth at constant currency, Adjusted operating profit and Adjusted operating cash flow.
Return on Total Invested Capital (ROTIC)
Unaudited 6 months to 30 September 2017£000 Unaudited 26 weeks to 1 October 2016£000 Audited52 weeks to1 April2017£000
Profit after tax 61,715 52,212 129,689
Adjustments3 11,743 13,020 22,581
Adjusted3 profit after tax 73,458 65,232 152,270
Shareholders' funds 775,315 690,568 778,637
Add back retirement benefit obligations 66,825 94,024 74,856
Less associated deferred tax assets (12,424) (17,506) (13,947)
Cumulative amortisation of acquired intangible assets 179,650 136,963 168,031
Historical adjustments to goodwill4 89,549 89,549 89,549
Total Invested Capital 1,098,915 993,598 1,097,126
Average Total Invested Capital2 1,098,021 942,335 994,099
Return on Total Invested Capital (annualised)1 13.4% 13.8% 15.3%
Return on Capital Employed (ROCE)
Unaudited 6 months to 30 September 2017£000 Unaudited 26 weeks to 1 October 2016£000 Audited 52 weeks to 1 April 2017 £000
Profit before tax 76,819 65,225 157,703
Adjustments3 17,722 18,405 36,301
Net finance costs 4,836 4,891 9,286
Adjusted operating profit3 after share of results of associates 99,377 88,521 203,290
Computer software costs within intangible assets 4,633 3,353 4,466
Capitalised development costs within intangible assets 30,027 25,985 28,782
Other intangibles within intangible assets 1,079 1,099 1,111
Property, plant and equipment 102,620 103,417 106,016
Inventories 124,231 113,757 118,780
Trade and other receivables 203,408 179,659 212,236
Trade and other payables (125,730) (109,841) (135,257)
Provisions (4,752) (5,571) (6,776)
Net tax liabilities (14,511) (11,972) (15,931)
Non-current trade and other payables (11,383) (11,387) (10,780)
Non-current provisions (16,888) (18,859) (16,917)
Add back contingent purchase consideration 15,228 18,500 16,444
Capital Employed 307,962 288,140 302,174
Average Capital Employed2 305,068 273,394 280,411
Return on Capital Employed (annualised)1 65.2% 64.8% 72.5%
1 The ROTIC and ROCE measures are calculated as annualised Adjusted profit after tax divided by Average Total Invested Capital and annualised Adjusted operating profit after share of results of associates divided by Average Capital Employed respectively.
2 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 2016 Total Invested Capital and Capital Employed balances were £891,071,000 and £258,648,000 respectively.
3 Adjustments set out in note 2 include the amortisation and impairment of acquired intangible assets; acquisition items; restructuring costs and profit or loss on disposal of operations, and where applicable, the associated taxation thereon.
4 Includes goodwill amortised prior to 3 April 2004 and goodwill taken to reserves.
Organic growth and constant currencyOrganic growth measures the change in revenue and profit from continuing Group operations. The measure equalises the effect of acquisitions by: i. removing from the year of acquisition their entire revenue and profit before taxation, andii. 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. Constant currency measures the change in revenue and profit excluding the effects of currency movements. The measure restates the current year's revenue and profit at last year's exchanges rates. Organic growth at constant currency has been calculated below:
Organic growth and constant currency
Organic growth measures the change in revenue and profit from continuing Group
operations. The measure equalises the effect of acquisitions by: i.
removing from the year of acquisition their entire revenue and profit before
taxation, andii. 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. Constant
currency measures the change in revenue and profit excluding the effects of
currency movements. The measure restates the current year's revenue and profit
at last year's exchanges rates. Organic growth at constant currency has been
calculated below:
Revenue Adjusted profit* before taxation
Unaudited6 months to30 September 2017 £000 Unaudited26 weeks to 1 October 2016 £000 % growth Unaudited6 months to 30 September2017£000 Unaudited26 weeks to 1 October 2016£000 % growth
Continuing operations 506,329 442,121 14.5% 94,541 83,630 13.0%
Acquired and disposed revenue/profit (3,587) (172)
Organic growth 502,742 442,121 13.7% 94,369 83,630 12.8%
Constant currency adjustment (20,277) (4,154)
Organic growth at constant currency 482,465 442,121 9.1% 90,215 83,630 7.9%
* Adjustments include the amortisation and impairment of acquired intangible assets; acquisition items; restructuring costs; and profit or loss on disposal of operations.
Sector organic growth at constant currencyOrganic growth at constant currency is calculated for each segment using the same method as described above.
Process Safety Revenue Adjusted* segment profit
Unaudited6 months to30 September 2017 £000 Unaudited26 weeks to 1 October 2016 £000 % growth Unaudited6 months to 30 September2017£000 Unaudited26 weeks to 1 October 2016£000 % growth
Continuing operations 88,794 76,743 15.7% 20,247 17,395 16.4%
Acquisition and currency adjustments (2,710) (596)
Organic growth at constant currency 86,084 76,743 12.2% 19,651 17,395 13.0%
Infrastructure Safety Revenue Adjusted* segment profit
Unaudited6 months to30 September 2017 £000 Unaudited26 weeks to 1 October 2016 £000 % growth Unaudited6 months to 30 September2017£000 Unaudited26 weeks to 1 October 2016£000 % growth
Continuing operations 167,923 147,988 13.5% 35,736 31,991 11.7%
Acquisition and currency adjustments (5,491) (1,008)
Organic growth at constant currency 162,432 147,988 9.8% 34,728 31,991 8.6%
Medical Revenue Adjusted* segment profit
Unaudited6 months to30 September 2017 £000 Unaudited26 weeks to 1 October 2016 £000 % growth Unaudited6 months to 30 September2017£000 Unaudited26 weeks to 1 October 2016£000 % growth
Continuing operations 133,270 118,664 12.3% 28,730 28,876 (0.5)%
Acquisition and currency adjustments (8,360) (1,663)
Organic growth at constant currency 124,910 118,664 5.3% 27,067 28,876 (6.3)%
Environmental & Analysis Revenue Adjusted* segment profit
Unaudited6 months to30 September 2017 £000 Unaudited26 weeks to 1 October 2016 £000 % growth Unaudited6 months to 30 September2017£000 Unaudited26 weeks to 1 October 2016£000 % growth
Continuing operations 116,513 98,797 17.9% 21,776 16,022 35.9%
Acquisition and currency adjustments (7,303) (1,379)
Organic growth at constant currency 109,210 98,797 10.5% 20,397 16,022 27.3%
* Adjustments include the amortisation and impairment of acquired intangible assets; acquisition items; restructuring costs; and profit or loss on disposal of operations.
Adjusted operating profit
Unaudited6 months to30 September 2017£000 Unaudited26 weeks to 1 October 2016£000 Audited52 weeks to 1 April 2017 £000
Operating profit 81,767 70,159 167,070
Add back:
Acquisition items 406 1,113 (9,507)
Loss on restructuring - 2,100 1,910
Amortisation of acquired intangible assets 17,316 15,192 31,469
Impairment of acquired intangible assets - - 12,429
Adjusted operating profit 99,489 88,564 203,371
Adjusted operating cash flow
Unaudited6 months to30 September 2017£000 Unaudited26 weeks to 1 October 2016£000 Audited52 weeks to 1 April 2017£000
Net cash from operating activities (note 8) 76,025 70,345 172,493
Add back:
Net acquisition costs 932 - 363
Taxes paid 17,482 16,774 33,188
Proceeds from sale of property, plant and equipment 1,177 287 1,495
Share awards vested not settled by Own shares* 3,346 3,310 3,309
Less:
Purchase of property, plant and equipment (9,134) (10,728) (21,875)
Purchase of computer software and other intangibles (1,089) (911) (2,760)
Development costs capitalised (5,034) (4,814) (10,731)
Adjusted operating cash flow 83,705 74,263 175,482
Cash conversion % (adjusted operating cash flow/adjusted operating profit) 84% 84% 86%
* See Consolidated Statement of Changes in Equity.
10 Acquisitions In the provisional accounting, 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 30 September 2017, the Group made two acquisitions: Cas Medical Systems Inc's Non-Invasive Blood Pressure Monitoring product line ("CasMed NIBP") and Cardios Sistemas Comercial e Industrial Ltda and Cardio Dinamica Ltda (together "Cardios"). The combined fair value adjustments made for the acquisitions, excluding acquired intangible assets recognised and deferred taxation thereon, resulted in reducing the goodwill recognised by £558,000. Below are summaries of the assets acquired and liabilities
assumed and the purchase consideration of: a) the total of CasMed NIBP and Cardios;b) CasMed NIBP, on a stand-alone basis; andc) Cardios, on a stand-alone basis.
(A) Total of CasMed NIBP and Cardios
Total £000
Non-current assets
Intangible assets 9,817
Property, plant and equipment 232
Current assets
Inventories 768
Trade and other receivables 1,834
Cash and cash equivalents 155
Total assets 12,806
Current liabilities
Trade and other payables (925)
Provisions (27)
Corporation tax liability (8)
Non-current liabilities
Deferred tax (2,317)
Total liabilities (3,277)
Net assets of businesses acquired 9,529
Initial cash consideration paid 15,872
Initial cash consideration payable 23
Contingent purchase consideration estimated to be paid 1,314
Total consideration 17,209
Goodwill arising on acquisitions 7,680
Due to their contractual dates, the fair value of receivables acquired (shown above) approximate to the gross contractual amounts receivable. The amount of gross contractual receivables not expected to be recovered is immaterial. There are no material contingent liabilities recognised in accordance with paragraph 23 of IFRS 3 (revised). As at the date of approval of these Condensed Financial Statements the accounting for the acquisitions remains provisional. The measurement window expires in July 2018 for
CasMed NIBP and in August 2018 for Cardios.
Analysis of cash outflow in the Consolidated Cash Flow Statement
Unaudited 6 months to30 September 2017£000 Unaudited 26 weeks to 1 October 2016£000 Audited 52 weeks to 1 April 2017£000
Initial cash consideration paid 15,872 - 9,878
Initial cash consideration adjustment on prior year acquisitions - (166) -
Cash acquired on acquisition (155) - (496)
Deferred contingent consideration paid and loan notes repaid in cash in relation to prior year acquisitions* 1,369 314 590
Net cash outflow relating to acquisitions (per Consolidated Cash Flow Statement) 17,086 148 9,972
* The £1,369,000 comprises £161,000 loan notes and £1,208,000 contingent consideration paid in respect of prior period acquisitions all of which had been provided in the prior period's financial statements.
(B) CasMed NIBP, on a stand-alone basis
Total £000
Non-current assets
Intangible assets 2,909
Net assets of business acquired 2,909
Initial cash consideration paid 3,449
Contingent purchase consideration estimated to be paid 693
Total consideration 4,142
Goodwill arising on acquisition 1,233
The Group acquired the trade and assets of the non-invasive blood pressure (NIBP) monitoring product line on 25 July 2017 for an initial cash consideration of US$4,500,000 (£3,449,000). The maximum contingent consideration payable is US$2,000,000 (£1,533,000). The current provision of US$905,000 (£693,000) represents the fair value of the estimated payable based on performance to date and the expectation of future cash flows. The earn-out is payable on the achievement of product net sales above a target
threshold for the 24-month period to June 2019. CasMed NIBP was purchased by SunTech Medical Inc within the Medical sector. NIBP monitoring products provide SunTech with more clinical grade options for OEM customers seeking NIBP technology for multi-parameter monitors, EMS defibrillators, haemodialysis machines and various other clinical monitoring devices. The excess of the fair value of the consideration paid over the fair value of the assets acquired is represented by customer related intangibles of
£1,250,000; and technology related intangibles of £1,659,000; with residual goodwill arising of £1,233,000. The goodwill represents: a) the technical expertise of the acquired workforce;b) the opportunity to leverage this expertise across some of Halma's businesses through future technologies; andc) the ability to exploit the Group's existing customer base. Acquisition costs totalling £354,000 were recorded in the Consolidated Income Statement. The goodwill arising on the acquisition is expected
to be deductible for tax purposes.
(C) Cardios, on a stand-alone basis
Total £000
Non-current assets
Intangible assets 6,908
Property, plant and equipment 232
Current assets
Inventories 768
Trade and other receivables 1,834
Cash and cash equivalents 155
Total assets 9,897
Current liabilities
Trade and other payables (925)
Provisions (27)
Corporation tax liability (8)
Non-current liabilities
Deferred tax (2,317)
Total liabilities (3,277)
Net assets of businesses acquired 6,620
Initial cash consideration paid 12,423
Initial cash consideration payable 23
Contingent purchase consideration estimated to be paid 621
Total consideration 13,067
Goodwill arising on acquisition 6,447
The Group acquired the entire share capital of Cardios Sistemas Comercial e Industrial Ltda and Cardio Dinamica Ltda (together "Cardios") on 4 August 2017 for an initial cash consideration of R$50,000,000 (£12,423,000), adjustable based on closing date net assets and cash. The adjustment was determined to be R$93,000 (£23,000). The maximum contingent consideration payable is R$5,000,000 (£1,242,000). The current provision of R$2,500,000 (£621,000) represents the fair value of the estimated payable based on
performance to date and the expectation of future cash flows. The earn-out is payable on gross margin growth in excess of a target threshold for the 12-month period post-acquisition. Cardios, located in São Paulo, Brazil, designs and manufactures ambulatory ECG recorders and ambulatory blood pressure monitors for Brazilian healthcare providers. These devices are used by cardiologists and general practitioners to diagnose and prevent heart and blood vessel related diseases such as hypertension, diabetes,
heart attacks, and heart arrhythmias. These products are similar or complementary to patient assessment devices currently manufactured and marketed by Halma's Medical sector. The excess of the fair value of the consideration paid over the fair value of the assets acquired is represented by customer related intangibles of £934,000; trade name of £2,303,000 and technology related intangibles of £3,578,000; with residual goodwill arising of
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