REG - Halma PLC - Half-year Report <Origin Href="QuoteRef">HLMA.L</Origin>
RNS Number : 0273XHalma PLC21 November 2017
HALMA plc
HalF YEAR RESULTS 2017/18
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 6months to 30 September 2017.
Highlights
Change
2017
2016
Continuing Operations
Revenue
15%
506.3m
442.1m
Adjusted Profit before Taxation1,5
13%
94.5m
83.6m
Adjusted Earnings per Share2,5
12%
19.37p
17.23p
Statutory Profit before Taxation
18%
76.8m
65.2m
Statutory Earnings per Share
18%
16.27p
13.79p
Interim Dividend per Share3
7%
5.71p
5.33p
Return on Sales4
18.7%
18.9%
Return on Total Invested Capital5
13.4%
13.8%
Net Debt
181.0m
237.3m
Revenue up 15% with Adjusted1 pre-tax profit up 13%. Organic constant currency growth5: revenue up 9%, profit up 8%.
All four sectors achieved good organic constant currency revenue growth.
Revenue growth in all major regions. Significant growth in Asia Pacific where revenue exceeded the UK for the first time; good progress in the USA, Mainland Europe and Other regions.
Strong profit growth in the Process Safety, Infrastructure Safety and Environmental & Analysis sectors; Medical sector profit marginally lower although on track to improve profitability in the second half.
Strong returns with Return on Sales4 of 18.7% and ROTIC5 of 13.4%. R&D expenditure up 19%, representing 5.4% of revenue.
Interim dividend up 7%.
Good cash generation and strong balance sheet support sustained strategic investment; healthy acquisition pipeline with two acquisitions completed in the first half and two further acquisitions completed since the period end.
Andrew Williams, Chief Executive of Halma, commented:
"Halma has continued to make strong 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. 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 and impairment of acquired intangible assets, acquisition items, restructuring costs and profit or loss on disposal of operations, totalling 17.7m (2016/17: 18.4m). See note 2 to the Condensed Financial Statements for details.
2
Adjusted to remove the amortisation and impairment of acquired intangible assets, acquisition items, restructuring costs, profit or loss on disposal of operations, 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
Adjusted1 Profit before Taxation, Adjusted1 Earnings per Share, organic growth rates and Return on Total Invested Capital (ROTIC) are alternative performance measures used by management. See notes 2, 6 and 9 to the Condensed Financial Statements for details.
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 and services that improve the safety and mobility of people and protect commercially and publicly owned infrastructure.
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 environmental safety and life sciences markets.
The key characteristics of Halma's businesses are specialist technology and application knowledge for markets offering strong long term 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'.
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 strong progress during the first half of the year. Revenue increased by 15% to 506m (2016/17: 442m) including a positive currency translation impact of 5%. Organic revenue growth at constant currency was 9%.
Adjusted1 profit before taxation increased by 13% to 94.5m (2016/17: 83.6m) including a positive currency translation impact of 5%. Organic profit growth at constant currency was 8%.
Return on Sales1 remained strong at 18.7% (2016/17: 18.9%). The Gross Margin % was very slightly below the prior year, with two sectors up and two down.
Our companies increased R&D expenditure by 19% to 27.3m (2016/17: 23.0m) representing 5.4% of Group revenue (2016/17: 5.2%) with higher rates of investment in theMedical and Environmental & Analysis sectors.
The Board has declared an increase of7% in the interim dividend to 5.71p per share (2016/17: 5.33p per share). The interim dividend will be paid on 7February 2018 to shareholders on the register on 29 December 2017. For the past 38 years we have increased our full year dividend by5%or more each year.
Widespread revenue growth
We achieved revenue growth across allmajor regions including organic growth atconstant currency in each region.
Asia Pacific revenue increased by 20%,including 14% organic constant currency growth. All sectors grew withInfrastructure Safety and Environmental & Analysis sectors delivering the strongest growth. Sales to Asia Pacific exceeded those to the UK for the first time.
The USA remains our largest sales destination contributing 36% of total revenue, growing 13% in the half year, 6% at organic constant currency.
Revenue in Mainland Europe increased by 14% and in the UK by 9% with both regions achieving 9% organic constant currency growth. Growth in the Near and Middle East, Canada and Brazil contributed to the strong growth in Other regions.
The tables below summarise revenue growth by destination 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.
External revenue by destination
Half year 2017/18
Half year 2016/17
m
% of total
m
% of total
Change
m%
growth% organic growth at constant currency
United States of America
181.8
36%
160.8
36%
21.0
13%
6%
Mainland Europe
109.0
21%
96.0
22%
13.0
14%
9%
United Kingdom
79.8
16%
72.9
16%
6.9
9%
9%
Asia Pacific
83.9
17%
69.7
16%
14.2
20%
14%
Other regions
51.8
10%
42.7
10%
9.1
21%
14%
506.3
100%
442.1
100%
64.2
15%
9%
External revenue by sector
Half year 2017/18
Half year 2016/17
m
m
Change
m%
growth% organic growth at constant currency
Process Safety
88.8
76.7
12.1
16%
12%
Infrastructure Safety
167.9
148.0
19.9
13%
10%
Medical
133.3
118.7
14.6
12%
5%
Environmental & Analysis
116.5
98.8
17.7
18%
11%
Inter-segmental revenue
(0.2)
(0.1)
(0.1)
-
-
506.3
442.1
64.2
15%
9%
Strong revenue growth in all sectors
Infrastructure Safetyrevenue increased by 13% to 167.9m (2016/17: 148.0m) including 10% organic constant currency growth and a 3% positive impact from currency translation. There was growth in all major market segments with strong growth in People & Vehicle flow. These trends contributed to double-digit organic constant currency increases in Asia Pacific, Mainland Europe and Other regions with steady growth in the UK. Weaker demand in our Fire businesses resulted in a mid single-digit organic constant currency revenue decline in the USA.
Profit2 grew by 12% to 35.7m (2016/17: 32.0m) including 9% organic constant currency growth and a 3% positive impact from currency translation. Return on Sales was a healthy 21.4% (2016/17: 21.6%). R&D expenditure increased by 7% to9.4m (2016/17: 8.8m). The sectoris expected to make continued progress in the second half.
In November 2017, following the period end, we acquired Setco as a bolt-on for our global Elevator Safety business, Avire. Setco is based in Barcelona, Spain and adds new wireless communications technology which is highly complementary to Avire's existing product range and new product development roadmap.
Medicalrevenue was up by 12%to 133.3m (2016/17: 118.7m) including 5% organic constant currency growth, a 1% benefit from acquisitions in the last year and a 6% positive impact from currency translation. Our Ophthalmology and Sensors businesses progressed well. We saw weaker performance in our Patient Assessment businesses but our acquisitions of CasMed and Cardios during the first half add new blood pressure monitoring technology and geographic presence to this market segment. The integration of both businesses is proceeding well.
There was healthy single-digit organic constant currency revenue growth in the UK, the USA and Other regions. Organic constant currency revenue was slightly up in Asia Pacific and slightly down in Mainland Europe.
Profit2 was 28.7m, which was marginally below the prior year's 28.9m. This included 6% organic constant currency decline and a 6% positive impact from currency translation. Return on Sales reduced from 24.3% in 2016/17 to 21.6%, due toboth a drop in Gross Margin % mainly due to mix effects andan increase in overhead spend. The majority of this overhead spend was targeted investment in sales, marketing and new product development, where R&D spend grew by 25% to 5.9m (2016/17: 4.7m).
The sector has taken action to control discretionary costs, which is expected to improve profitability during the second half of the year.
Environmental & Analysis revenue rose by 18% to 116.5m (2016/17: 98.8m) including 11% organic constant currency growth, a2% benefit from acquisitions and a5% positive impact from currency translation. There was growth in all main business segments with a strong performance in Spectroscopy & Photonics. Organic constant currency revenue from the UK and Asia Pacific increased significantly. There was steadier organic growth from the USAand small organic declines from Mainland Europe and Other regions.
Profit2 improved by an impressive 36% to 21.8m (2016/17: 16.0m). Organic constant currency profit growth was 27% and there was a 2% benefit from acquisitions in the last year. Currency translation had a 7% positive impact. Return on Sales improved significantly from 16.2% up to 18.7%, as a result of revenue growth this year and the trading impact (and benefit) of restructuring completed in the first half of last year. There was an improvement in the Gross Margin % and increased investment in new product development. R&D spend increased by 33% to 8.9m (2016/17: 6.7m) to represent 7.6% of revenue.
The integration of FluxData, acquired in January 2017, is proceeding well. Companies both inside and outside the sector are exploring collaborative projects using their multi-spectral imaging technologies. Following the half year end, the acquisition of Mini-Cam in October 2017 added new waste water pipeline monitoring solutions to our group of Water businesses.
The sector is well positioned to make progress in the second half, albeit with a stronger prior year comparator.
Process Safety revenue increased by 16% to 88.8m (2016/17: 76.7m). There was organic constant currency growth of 12% and a 4% benefit from currency translation. The Safety Interlocks and Pressure Relief segments had good growth. Gas Detection was in line with the prior year. There was organic constant currency growth in all major regions, with particularly high growth in the USA and Other regions. There was good progress in Mainland Europe and Asia Pacific with steadier growth from the UK.
Profit2 increased by 16% to 20.2m (2016/17: 17.4m) including 13% organic constant currency growth and a 3% positive impact from currency translation. Return on Sales improved marginally to 22.8% (2016/17: 22.7%). R&D spend was up 11% to 3.1m (2016/17: 2.8m). The sector continues to benefit from increased market diversification and improved demand from the USA onshore energy market while other segments of the Oil and Gas market remain depressed. Despite the tougher comparators, the sector is well placed to make progress in the second half.
Four acquisitions completed
In July 2017, we acquired Cas Medical Systems, Inc's (CasMed) non-invasive blood pressure monitoring product line for an initial cash consideration of $4.5m (3.4m) with up to a further $2m (1.5m) payable based on achievement of certain sales targets.
In August 2017, we completed the acquisition of Cardios Sistemas Comercial e Industrial Ltda (Cardios) located in Brazil. The initial cash consideration was R$50m (12.4m) with further payment of up to R$5m (1.2m) payable based on future growth.
In October 2017, following the period end, we acquired Mini-Cam Enterprises Limited and its subsidiaries (Mini-Cam). The initial consideration was 62m, on a cash and debt-free basis, with up to a further 23.1m payable based on annualised profit growth tothe end of March 2020.
In November 2017, we acquired Setco S.A. for a cash consideration of 17m (15.1m). Consolidated 31 December 2016 profit, adjusted to IFRS, was 1.7m (1.5m).
These transactions demonstrate our ability to find attractive, high quality businesses both in, and adjacent to, our existing sectors. The pipeline of potential acquisitions has continued to build across all sectors during the year.
Growing a safer, cleaner and healthier future for everyone, every day
Halma has always had a strong sense of purpose to make a positive impact on people's lives.
This core belief has helped us to build strong competitive positions in market niches with long-term growth drivers and has contributed to our sustained success.
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.
The desire to make a positive difference to people's lives is encompassed in our newly articulated purpose of 'Growing a safer, cleaner and healthier future for everyone, every day'. This refined purpose statement will help to provide greater alignment across the Group as we confront the challenges and opportunities of the 4th Industrial Revolution, where technologies and industries are converging to create new value.
Our portfolio of companies means that we are uniquely positioned to take advantage of these opportunities. As we continue to evolve our strategy we will ensure that we use our ecosystem to leverage the diverse skills and assets we have at our disposal to create even more value for the Group.
This means that in addition to our commitment to continuing to grow our Core, we are exploring new ways to help our companies to add growth opportunities which require a Convergence of technologies and capabilities between two or more businesses and new business models.
In addition, we are building a stronger network of internal and external partnerships to provide us with a greater insight into new digital growth strategies or technologies at the Edge of our current strategic horizons.
Currency impacts
Currency translation had a positive impact on the half year results. 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 during the first half of 2017/18 and has remained relatively weak in the period since. This resulted in a 5% positive currency translation impact on Group revenue and profit in the first half of 2017/18 relative to 2016/17. In the second half of 2017/18, if exchange rates remain at current levels, we expect the positive currency impact seen in the first half to reverse, resulting in a small positive impact for the year as a whole.
Pension deficit
On an IAS19 basis the deficit on the Group's defined benefit plans at the half year has reduced to 66.8m (1April 2017: 74.9m) before the related deferred tax asset. The value of plan liabilities reduced due to an increase in the discount rate used tovalue those liabilities and further employer contributions also reduced the plan deficit. There will be a triennial valuation of the two UK defined benefit pension plans as at December 2017 and April 2018, leading to a review of the amount and timing of future employer contributions to reduce the pension deficit.
Cash flow and funding
Cash conversion (adjusted operating cash flow as a percentage of adjusted operating profit) was 84% (2016/17: 84%) just below our cash conversion target of 85%. Working capital increased more than in the first half of the prior year with higher rates of underlying revenue growth and inventory for new products. As well as continued organic investment, dividend and tax payments increased this half year. Capital expenditure of 10.1m (2016/17: 11.4m) was 12% lower than the prior year due primarily to less property related expenditure.
Net debt at the end of the period was 181m (1 April 2017: 196m). Gearing (the ratio of net debt to EBITDA) at half year end was 0.8 times (1 April 2017: 0.86 times), comfortably within our typical operating range of up to 2times gearing.
In November 2017 we extended the 550m Revolving Credit Facility, putinplace in November 2016, by a further year to 2022. The combination of good cash generation, a healthy balance sheet and committed external financial resources provides us with the capacity we need to invest in organic growth and acquisitions to meet our growth objectives as well asto sustain our progressive dividendpolicy.
Risks and uncertainties
A number of potential risks and uncertainties exist which could have amaterial impact on the Group's performance over the second half of the financial year and could cause actual results to differ materially fromexpected and historical results. The Group has processes in place for identifying, evaluating and managing key risks. These risks, together with adescription of our approach to mitigating them, are set out on pages22 to 27 of the Annual Report and Accounts 2017, 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 and the subsequent triggering of Article 50 in March 2017 mean that the UK is now scheduled to leave the European Union by the end of March 2019. This decision has created a new dimension to the uncertainties surrounding global economic growth.
In 2016/17, approximately 10% of Group revenue came from direct sales between the UK and Mainland Europe.
To date, the following Brexit 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 currency 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
Talent: mobility of the workforce
Halma has an executive working group to assess and monitor the potential impact on us of Brexit, to communicate updates and support our businesses in preparing for the range of possible outcomes.
Our decentralised model, with businesses in diverse markets and locations, will enable each Halma company to adapt quickly to changing trading conditions. This agility, together with the regulation driven demand formany of our products and services, will help us to mitigate any adverse impact and also take advantage of theopportunities presented by the decision to leave the European Union.
In 2017/18, the Board commissioned anexternal review of Halma's cyber related control framework. This review highlighted the strengths of our existing structure and identified further improvements in cyber controls and assurance.
The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report and Accounts 2017 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
In July 2017, the Board announced that Marc Ronchetti, currently Group Financial Controller, will succeed Kevin Thompson as Group Finance Director. The transition process is underway and it is anticipated that it will be completed no later than 31 July 2018.
Outlook
Halma has continued to make strong 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. 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 Director1 See Highlights.
2 See note 2 to the Condensed Financial Statements.
Independent review report to Halma plc
Report on the Half Year Report
Our conclusion
We have reviewed Halma plc's half year financial information (the "interim financial statements") in the Half Year Report of Halma plc for the 6 months ended 30 September 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
- the Consolidated Balance Sheet as at 30 September 2017;
- the Consolidated Income Statement and Consolidated Statement of Comprehensive Income and Expenditure for the period then ended;
- the Consolidated Cash Flow Statement for the period then ended;
- the Consolidated Statement of Changes in Equity for the period then ended; and
- the explanatory notes to the interim financial statements.
The interim financial statements included in the half year report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half year report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the half year report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
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 enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the half year report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Uxbridge
21November 2017
Half year results 2017/18
Condensed Financial Statements
Consolidated Income Statement
Unaudited
6 months to 30 September 2017
Unaudited
26 weeks to 1 October 2016
Audited
52 weeks to
1 April
2017
Notes
Before
adjustments*
000Adjustments*
(note 2)
000Total
000Before
adjustments*
000Adjustments*
(note 2)
000Total
000Total
000Continuing operations
Revenue
2
506,329
-
506,329
442,121
-
442,121
961,662
Operating profit
99,489
(17,722)
81,767
88,564
(18,405)
70,159
167,070
Share of results of associates
(112)
-
(112)
(43)
-
(43)
(81)
Finance income
3
106
-
106
96
-
96
494
Finance expense
4
(4,942)
-
(4,942)
(4,987)
-
(4,987)
(9,780)
Profit before taxation
94,541
(17,722)
76,819
83,630
(18,405)
65,225
157,703
Taxation
5
(21,083)
5,979
(15,104)
(18,398)
5,385
(13,013)
(28,014)
Profit for the period attributable to equity shareholders
73,458
(11,743)
61,715
65,232
(13,020)
52,212
129,689
Earnings per share
from continuing operations
6
Basic and diluted
19.37p
16.27p
17.23p
13.79p
34.25p
Dividends in respect
of the period7
Dividends paid and proposed (000)
21,678
20,183
51,916
Per share
5.71p
5.33p
13.71p
*Adjustmentsincludetheamortisationandimpairmentofacquiredintangibleassets;acquisitionitems;restructuringcosts;profitondisposalofoperations; andtheassociatedtaxationthereon.
Consolidated Statement of Comprehensive Income and Expenditure
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 for the period
61,715
52,212
129,689
Items that will not be reclassified subsequently to the Income Statement:
Actuarial gains/(losses) on defined benefit pension plans
3,506
(45,838)
(31,059)
Tax relating to components of other comprehensive income that will not be reclassified
(667)
9,168
6,082
Items that may be reclassified subsequently to the Income Statement:
Effective portion of changes in fair value of cash flow hedges
(265)
(453)
1,197
Exchange (losses)/gains on translation of foreign operations and net investment hedge
(36,687)
57,825
74,810
Tax relating to components of other comprehensive income that may be reclassified
51
91
(233)
Other comprehensive (expense)/income for the period
(34,062)
20,793
50,797
Total comprehensive income for the period attributable to equity shareholders
27,653
73,005
180,486
The exchange losses of 36,687,000 (26 weeks to 1 October 2016 gains: 57,825,000; 52 weeks to 1 April 2017 gains: 74,810,000) include gains of 6,915,000 (26 weeks to 1 October 2016 losses: 16,267,000; 52 weeks to 1 April 2017 losses: 21,305,000) which relate to net investment hedges.
Consolidated Balance Sheet
Notes
Unaudited
30 September
2017
000
Unaudited
1 October
2016
000
Audited
1 April
2017
000
Non-current assets
Goodwill
586,757
586,940
603,553
Other intangible assets
216,420
235,473
234,430
Property, plant and equipment
102,620
103,417
106,016
Interests in associates
3,431
3,660
3,553
Deferred tax asset
55,340
52,725
56,866
964,568
982,215
1,004,418
Current assets
Inventories
124,231
113,757
118,780
Trade and other receivables
203,408
179,659
212,236
Tax receivable
386
474
124
Cash and cash equivalents
71,671
76,093
66,827
Derivative financial instruments
12
592
135
598
400,288
370,118
398,565
Total assets
1,364,856
1,352,333
1,402,983
Current liabilities
Trade and other payables
125,730
109,841
134,816
Borrowings
180
2,161
1,351
Provisions
4,752
5,571
6,776
Tax liabilities
14,897
12,446
16,055
Derivative financial instruments
12
410
1,920
315
145,969
131,939
159,313
Net current assets
254,319
238,179
239,252
Non-current liabilities
Borrowings
252,481
311,252
261,918
Retirement benefit obligations
11
66,825
94,024
74,856
Trade and other payables
11,383
11,387
11,221
Provisions
16,888
18,859
16,917
Deferred tax liabilities
95,995
94,304
100,121
443,572
529,826
465,033
Total liabilities
589,541
661,765
624,346
Net assets
775,315
690,568
778,637
Equity
Share capital
37,965
37,965
37,965
Share premium account
23,608
23,608
23,608
Own shares
(3,669)
(4,896)
(7,263)
Capital redemption reserve
185
185
185
Hedging reserve
140
(972)
354
Translation reserve
113,510
133,212
150,197
Other reserves
(10,294)
(9,481)
(6,323)
Retained earnings
613,870
510,947
579,914
Shareholders' funds
775,315
690,568
778,637
Consolidated Statement of Changes in Equity
For the 6 months to 30 September 2017
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 1 April 2017 (audited)
37,965
23,608
(7,263)
185
354
150,197
(6,323)
579,914
778,637
Profit for the period
-
-
-
-
-
-
-
61,715
61,715
Other comprehensive income and expense:
Exchange differences on translation of foreign operations
-
-
-
-
-
(36,687)
-
-
(36,687)
Actuarial gains on defined benefit pension plans
-
-
-
-
-
-
-
3,506
3,506
Effective portion of changes in fair value of cash flow hedges
-
-
-
-
(265)
-
-
-
(265)
Tax relating to components of other comprehensive income and expense
-
-
-
-
51
-
-
(667)
(616)
Total other comprehensive income and expense
-
-
-
-
(214)
(36,687)
-
2,839
(34,062)
Dividends paid
-
-
-
-
-
-
-
(31,733)
(31,733)
Share-based payments charge
-
-
-
-
-
-
3,532
-
3,532
Deferred tax on share-based
payment transactions-
-
-
-
-
-
(563)
-
(563)
Excess tax deductions related to share-based payments on exercised awards
-
-
-
-
-
-
-
1,135
1,135
Performance share plan awards vested
-
-
3,594
-
-
-
(6,940)
-
(3,346)
At 30 September 2017 (unaudited)
37,965
23,608
(3,669)
185
140
113,510
(10,294)
613,870
775,315
Own shares are ordinary shares in Halma plc purchased by the Company and held to fulfil the Company's obligations under theCompany's share plans. As at 30 September 2017 the number of treasury shares held was 3,990 (1 October 2016: 462,188; 1April 2017: 462,188) and the number of shares held by the Employee Benefit Trust was 421,991 (1 October 2016: 262,417 and 1April 2017: 512,417).
For the 26 weeks to 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 foreignoperations
-
-
-
-
-
57,825
-
-
57,825
Actuarial losses on defined benefit pensionplans
-
-
-
-
-
-
-
(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 andexpense
-
-
-
-
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
For the 52 weeks to 1 April 2017
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
-
-
-
-
-
-
-
129,689
129,689
Other comprehensive income and expense:
Exchange differences on translation of foreignoperations
-
-
-
-
-
74,810
-
-
74,810
Actuarial losses on defined benefit pensionplans
-
-
-
-
-
-
-
(31,059)
(31,059)
Effective portion of changes in fair value of cash flow hedges
-
-
-
-
1,197
-
-
-
1,197
Tax relating to components of other comprehensive income and expense
-
-
-
-
(233)
-
-
6,082
5,849
Total other comprehensive income and expense
-
-
-
-
964
74,810
-
(24,977)
50,797
Dividends paid
-
-
-
-
-
-
-
(49,788)
(49,788)
Share-based payments charge
-
-
-
-
-
-
6,076
-
6,076
Deferred tax on share-based paymenttransactions
-
-
-
-
-
-
65
-
65
Excess tax deductions related to share-based payments on exercised awards
-
-
-
-
-
-
-
1,135
1,135
Purchase of Own shares
-
-
(2,368)
-
-
-
-
-
(2,368)
Performance share plan awards vested
-
-
3,324
-
-
-
(6,633)
-
(3,309)
At 1 April 2017 (audited)
37,965
23,608
(7,263)
185
354
150,197
(6,323)
579,914
778,637
Consolidated Cash Flow Statement
Notes
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
Audited
52 weeks to
1 April
2017
000
Net cash inflow from operating activities
8
76,025
70,345
172,493
Cash flows from investing activities
Purchase of property, plant and equipment
(9,134)
(10,728)
(21,875)
Purchase of computer software
(972)
(702)
(2,479)
Purchase of other intangibles
(117)
(209)
(281)
Proceeds from sale of property, plant and equipment
1,177
287
1,495
Development costs capitalised
(5,034)
(4,814)
(10,731)
Interest received
106
96
211
Acquisition of businesses, net of cash acquired
10
(17,086)
(148)
(9,972)
Net cash used in investing activities
(31,060)
(16,218)
(43,632)
Cash flows from financing activities
Dividends paid
(31,733)
(29,609)
(49,788)
Purchase of Own shares
-
-
(2,368)
Interest paid
(3,545)
(3,489)
(7,023)
Loan arrangement fee paid
-
-
(2,656)
Proceeds from bank borrowings
30,748
-
-
Repayment of bank borrowings
(33,300)
-
(54,761)
Net cash used in financing activities
(37,830)
(33,098)
(116,596)
Increase in cash and cash equivalents
7,135
21,029
12,265
Cash and cash equivalents brought forward
65,637
49,526
49,526
Exchange adjustments
(1,106)
3,713
3,846
Cash and cash equivalents carried forward
71,666
74,268
65,637
Unaudited 6 months to
30 September 2017
000
Unaudited 26 weeks to
1 October
2016
000
Audited
52 weeks to
1 April
2017
000
Reconciliation of net cash flow to movement in net debt
Increase in cash and cash equivalents
7,135
21,029
12,265
Net cash outflow from repayment of bank borrowings
2,552
-
54,761
Loan notes repaid in respect of acquisitions
161
241
241
Exchange adjustments
5,604
(11,873)
(16,991)
15,452
9,397
50,276
Net debt brought forward
(196,442)
(246,718)
(246,718)
Net debt carried forward
(180,990)
(237,321)
(196,442)
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 6months to 30September2017, was approved by the Directors on 21November 2017.
Effective from this financial year, the Group changed its reporting basis from weeks to calendar months. The Half Year Report is prepared for the 6 month period to 30September 2017 and the Annual Report will be prepared for the year to 31March 2018. For the current financial year, 26weeks is equivalent to 6months so there is no difference between presentation on a weekly or calendar months basis.
Basis of preparation
The Report has been prepared solely to provide additional information to shareholders as a body to assess the Board's strategies and the potential for those strategies to succeed. It should not be relied on by any other party or for any other purpose.
The Report contains certain forward-looking statements which have been made by the Directors in good faith using information available up until the date they approved the Report. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events.
The Report has been prepared in accordance with International Accounting Standard 34, applying the accounting policies and presentation that were applied in the preparation of the Group's statutory accounts for the 52 weeks to 1April 2017, with the exception of the policy for taxes on income, which in the interim period is accrued using the effective tax rate that would be applicable to expected total income for the financial year.
The figures shown for the 52weeks to 1April 2017 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 Act 2006.
Standards and interpretations not yet applied
At the date of authorisation of this Half Year Report, the following Standards and Interpretations that are potentially relevant to the Group, and which have not been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU):
- IFRS 9 'Financial Instruments: Classification and measurement' - effective for accounting periods beginning on or after 1 January 2018.
- IFRS 15 'Revenue from Contracts with Customers' - effective for accounting periods beginning on or after 1 January 2018.
- IFRS 16 'Leases' - effective for accounting periods beginning on or after 1 January 2019.
- Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions - effective for accounting periods beginning on or after 1 January 2018.
- Annual Improvements 2014-2016 Cycle - effective for accounting periods beginning on or after 1 January 2018.
- IFRIC Interpretation 22: Foreign Currency Transactions and Advance Consideration - effective for accounting periods beginning on or after 1 January 2018.
- IFRIC Interpretation 23: Uncertainty over Income Tax Treatments - effective for accounting periods beginning on or after 1 January 2019.
- Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures - effective for accounting periods beginning on or after 1 January 2019.
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group with the exception of IFRS 9 'Financial Instruments', IFRS 15 'Revenue from Contracts with Customers', and IFRS 16 'Leases' where our review of the impact is ongoing as described below.
(a) IFRS 15 'Revenue from Contracts with Customers'
For the Group, transition to IFRS 15 will take effect from 1 April 2018. The half year results for FY18/19 will be IFRS 15 compliant with the first Annual Report published in accordance with IFRS 15 being the 31 March 2019 report. The Group plans to adopt a fully retrospective transition approach and so comparatives for the year ended 31 March 2018 will be restated.
IFRS 15 sets out the requirements for recognising revenue from contracts with customers. The standard requires entities to apportion revenue earned from contracts to individual promises, or performance obligations, on a stand-alone selling price basis, based on a five-step model.
The Group is making good progress in quantifying the full impact of this standard. Having performed an impact assessment in FY16/17, during the first half of FY17/18 the Group has been working through a comprehensive transition exercise at each of its subsidiaries. The autonomous nature of the Group means that each subsidiary sets its own terms and conditions and operating procedures and as such this was the appropriate level for the transition exercise. The transition exercise has involved scoping the Group's revenues to identify revenue streams with like commercial terms and performing sample contract reviews to determine the appropriate revenue recognition under IFRS 15. To ensure a consistent approach to the exercise and consistent judgements, the exercise has been supported from the centre through setting the approach to transition, and providing appropriate tools and guidance, including a revised Group Accounting Manual.
The review and conclusion of this exercise is ongoing, including reviewing the consistency of judgements between companies and review by the Group's auditor. Based on the initial views of the companies we do not expect there to be a material change in the timing or quantum of revenue recognition.
The following areas of potential differences were identified from our initial impact assessment which are being investigated as part of our transition exercise:
- Certain companies across the Group provide a product which involves an element of customisation. Currently under IAS 18 the revenue recognition for such product is at a point in time on transfer of the risk and reward of the transaction to the customer. IFRS 15 requires that for such transactions, where certain criteria are met, revenue is recognised over time. Based on the review of specific contract terms against the requirements of IFRS 15 we do not currently expect the criteria of IFRS 15 to be met and as such do not expect there to be material change in the timing or quantum of revenue recognition in relation to these arrangements.
- Certain companies across the Group arrange shipping and handling on behalf of their customers but, based on assessment of all terms and conditions, determine control of goods to pass on despatch. Accordingly shipping and handling is a separate performance obligation under IFRS 15 and revenue is only recognised when the performance obligation is fulfilled. Having reviewed the terms of the arrangements we do not currently expect there to be a material change in the timing or quantum of revenue recognition.
- Many of our companies have warranty arrangements with their customers. Having reviewed the details of the warranty arrangements, these have been determined to be of an assurance nature and as such there is no material change in accounting required by IFRS 15.
- Many of the companies have variable consideration arrangements with their customers. Having reviewed the details of these arrangements against IFRS 15 and current accounting practices, we do not currently expect there to be a material change in the timing or quantum of revenue recognition.
- Sales commissions and other third-party sales acquisition costs resulting directly from securing contracts with customers are required to be recognised as an asset under IFRS 15 and recognised over the associated contract period where such contract is more than one year in length. Having reviewed the nature of the arrangements we do not currently expect there to be a change in the current accounting.
(b) IFRS 9 'Financial Instruments'
For the Group, transition to IFRS 9 will take effect from 1 April 2018. The half year results for FY18/19 will be IFRS 9 compliant with the first Annual Report published in accordance with IFRS 9 being the 31 March 2019 report. There is no requirement to restate comparatives.
IFRS 9 provides a new expected losses impairment model for financial assets, including trade receivables, and includes amendments to classification and measurement of financial instruments.
During this half year the Group has undertaken a high-level review of the impact of this new standard on its financial statements. The Group's use of financial instruments is limited to short-term trading balances such as receivables and payables, borrowings and derivatives used for hedging foreign exchange risks. We therefore expect that the impact of this standard will be limited to classification of financial instruments and the measurement of impairment of short-term financial assets using the expected losses impairment model.
Through the second half of the year we will be working to establish an appropriate impairment model and accompanying processes to be applied to receivables by our companies. However, the nature of the financial assets is such that we do not expect there will be a material change in level of impairment recognised compared to that based on current procedures.
(c) IFRS 16 'Leases'
For the Group, transition to IFRS 16 will take effect from 1 April 2019. The half year results for FY19/20 will be IFRS 16 compliant with the first Annual Report published in accordance with IFRS 16 being for the year ending 31 March 2020.
IFRS 16 provides a single model for lessees which recognises a right of use asset and lease liability for all leases which are longer than one year or which are not classified as low value. The distinction between finance and operating leases for lessees is removed.
The Group is currently assessing the impact of the new standard. The most significant impact currently identified will be that the Group's land and buildings leases will be brought on to the balance sheet. Further assessment of other leases is currently ongoing. The Group's future lease commitments for land and buildings as at 1 April 2017, which provides an indicator of the value to be brought on to the balance sheet, was 45m.
Going concern
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 (RCF) completed in November 2016 of which 477m remains undrawn at the date of this report. The RCF was extended to November 2022 following the period end.
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
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
Audited
52 weeks to
1 April
2017
000
Process Safety
88,794
76,743
167,007
Infrastructure Safety
167,923
147,988
315,219
Medical
133,270
118,664
260,576
Environmental & Analysis
116,513
98,797
219,118
Inter-segmental sales
(171)
(71)
(258)
Revenue for the period
506,329
442,121
961,662
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 23,399,000 (26 weeks to 1 October 2016: 14,034,000; 52weeks to 1 April 2017: 39,011,000). All revenue was otherwise derived from the sale of products.
Profit (all continuing operations)
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
Audited
52 weeks to
1 April
2017
000
Segment profit before allocation of adjustments*
Process Safety
20,247
17,395
40,243
Infrastructure Safety
35,736
31,991
65,129
Medical
28,730
28,876
66,704
Environmental & Analysis
21,776
16,022
41,698
106,489
94,284
213,774
Segment profit after allocation of adjustments*
Process Safety
18,227
15,491
36,243
Infrastructure Safety
33,177
29,735
60,342
Medical
17,469
18,933
45,804
Environmental & Analysis
19,894
11,720
35,084
Segment profit
88,767
75,879
177,473
Central administration costs
(7,112)
(5,763)
(10,484)
Net finance expense
(4,836)
(4,891)
(9,286)
Group profit before taxation
76,819
65,225
157,703
Taxation
(15,104)
(13,013)
(28,014)
Profit for the period
61,715
52,212
129,689
* Adjustments include the amortisation and impairment of acquired intangible assets; acquisition items; restructuring costs; and profit or loss on disposal of operations.
The accounting policies of the reportable segments are the same as the Group's accounting policies. 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 and impairment of acquired intangible assets, restructuring costs and the profit or loss on disposal of continuing operations 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 6 months to 30 September 2017
Acquisition items
Amortisation and impairment
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
(2,020)
-
-
-
(2,020)
-
(2,020)
Infrastructure Safety
(2,456)
(103)
-
-
(2,559)
-
(2,559)
Medical
(9,941)
(826)
(494)
-
(11,261)
-
(11,261)
Environmental & Analysis
(2,899)
(3)
1,121
(101)
(1,882)
-
(1,882)
Total Segment & Group
(17,316)
(932)
627
(101)
(17,722)
-
(17,722)
The transaction costs arose mainly on the acquisitions of CasMed NIBP and Cardios during the period. Further detail on the acquisitions is contained in note 10.
The 627,000 adjustment to contingent consideration comprises a credit of 1,121,000 in Environmental & Analysis arising from a change in estimate of the payable for FluxData, Inc. (FluxData), a prior year acquisition, offset by 494,000 in Medical arising from exchange differences on the payables for Visiometrics S.L. (Visiometrics) which is denominated in Euros and for Cardios which is denominated in Brazilian Reals.
The 101,000 charge relates to the release of the remaining fair value adjustment on revaluing the inventory of FluxData on acquisition in the prior year.
Unaudited for the 26 weeks to 1 October 2016
Acquisition items
Amortisation and impairment
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 offset by a 677,000 charge arising from changes in the discount rate along with exchange differences on the payable for Visiometrics which is denominated in Euros.
The 790,000 charge relates to the release of the remaining fair value adjustment on revaluing the inventory of CenTrak Inc (CenTrak) on acquisition.
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, Pixelteq Inc (Pixelteq).
Audited for the 52 weeks ended 1 April 2017
Acquisition items
Amortisation and impairment
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
(4,000)
-
-
-
(4,000)
-
(4,000)
Infrastructure Safety
(4,784)
(3)
-
-
(4,787)
-
(4,787)
Medical
(30,702)
(95)
10,687
(790)
(20,900)
-
(20,900)
Environmental & Analysis
(4,412)
(265)
14
(41)
(4,704)
(1,910)
(6,614)
Total Segment & Group
(43,898)
(363)
10,701
(831)
(34,391)
(1,910)
(36,301)
Included within amortisation and impairment of acquired 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 (12,002,000). The majority of this revision relates todeferred 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 to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
Audited
52 weeks to
1 April
2017
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 to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
Audited
52 weeks to
1 April
2017
000
Interest receivable
106
96
211
Fair value movement on derivative financial instruments
-
-
283
106
96
494
4 Finance expense
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
Audited
52 weeks to
1 April
2017
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 April
2017
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
2017
pence
Unaudited
26 weeks to
1 October
2016
pence
Audited
52 weeks to
1 April
2017
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 to
30 September
2017
pence
Unaudited
26 weeks to
1 October
2016
pence
Audited
52 weeks to
1 April
2017
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 April
2017
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 to
30 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 ofresults 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
Unaudited
30 September
2017
000
Unaudited
1 October
2016
000
Audited
1 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
than one year(181,157)
175
-
-
-
1,916
(179,066)
Bank loans falling due after more
than one year(80,761)
-
2,552
-
-
4,794
(73,415)
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
Audited
52 weeks to
1 April
2017
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 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, 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.
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
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
% growth
Unaudited
6 months to
30 September
2017
000
Unaudited
26 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 currency
Organic growth at constant currency is calculated for each segment using the same method as described above.
Process Safety
Revenue
Adjusted* segment profit
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
% growth
Unaudited
6 months to
30 September
2017
000
Unaudited
26 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
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
% growth
Unaudited
6 months to
30 September
2017
000
Unaudited
26 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
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
% growth
Unaudited
6 months to
30 September
2017
000
Unaudited
26 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
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
% growth
Unaudited
6 months to
30 September
2017
000
Unaudited
26 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
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
Audited
52 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
Unaudited
6 months to
30 September
2017
000
Unaudited
26 weeks to
1 October
2016
000
Audited
52 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; and
c) 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 to
30 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; and
c) 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 So 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 6,447,000. 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 new technologies; and
c) the ability to exploit the Group's existing customer base.
Acquisition costs totalling 367,000 were recorded in the Consolidated Income Statement.
11 Retirement benefits
The Group's significant defined benefit plans are for the qualifying employees of its UK subsidiaries. The defined benefit obligation at 30 September 2017 of 66,825,000 (1 October 2016: 94,024,000; 1 April 2017: 74,856,000) has been estimated based on the latest triennial actuarial valuations updated to reflect current assumptions regarding discount rates, inflation rates and asset values. The last 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 2.6% (1 October 2016: 2.3%; 1 April 2017: 2.5%). 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 5,400,000 (1 October 2016: 5,160,000; 1 April 2017: 10,700,000). The UK plans are closed to future accrual.
12 Fair values of financial assets and liabilities
As at 30 September 2017, 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 180,087,000.
The fair value of financial instruments is estimated by discounting the future contracted cash flow using readily available market data and represents a level 2 measurement in the fair value hierarchy under IFRS 7.
As at 30 September 2017, the total forward foreign currency contracts outstanding were 26,396,000. 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 592,000 (1 October 2016: 135,000; 1 April 2017: 598,000) asset and 410,000 (1 October 2016: 1,920,000; 1 April 2017: 315,000) 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
Revolving Credit Facility extension
Effective from November 2017, the Group extended its unsecured five-year 550,000,000 Revolving Credit Facility agreed in November 2016 for a further year to November 2022.
Acquisition of Mini-Cam Enterprises Limited and subsidiaries
On 31October 2017, the Group acquired the entire share capital of Mini-Cam Enterprises Limited and its subsidiary companies for cash consideration of 62,000,000, adjustable based on the closing date net assets and cash. Maximum deferred contingent consideration is payable of 23,100,000 based on annualised profit growth to the period ended 31March 2020.
Mini-Cam, headquartered in Lancashire, UK, specialises in pipeline inspection solutions for waste water systems in the UK and internationally. Mini-Cam's remotely-operated products and software enable utilities to identify leakages, blockages and potential ingress in waste water networks, thereby helping them to improve customer service levels and compliance with environmental regulations. The management team of Mini-Cam will continue to operate the business out of its current locations. Mini-Cam will join the Group's Environmental & Analysis sector where it provides new opportunities for commercial and technical collaboration with the sector's existing water technologies.
Acquisition of Setco
On 9November 2017, the Group acquired the entire share capital of Setco S.A. for 17,000,000 (15,088,000), adjustable based on closing date net assets and cash. Setco, based in Barcelona, Spain, will be a bolt-on for our global Elevator Safety business, Avire, and adds new wireless communications technology which is highly complementary to its existing product range and new product development roadmap. Setco will join the Infrastructure Safety sector.
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 2017.
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 22 to 27 in the Annual Report and Accounts 2017, which is available on the Group's website at www.halma.com. The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report and Accounts.
The principal risks and uncertainties relate to:
Globalisation
Competition
Economic conditions
Funding, treasury and pension deficit
Cyber security/Information Technology/Business interruption/Natural disasters
Acquisitions
Laws and regulations
Talent and diversity
Research & Development and Intellectual Property strategy
Product quality
The UK referendum decision in June 2016 and the subsequent triggering of Article 50 in March 2017 mean that the UK is now scheduled to leave the European Union by the end of March 2019. This decision has created a new dimension to the uncertainties surrounding global economic growth.
In 2016/17, approximately 10% of Group revenue came from direct sales between the UK and Mainland Europe.
To date, the following Brexit 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 currency 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
Talent: mobility of the workforce
Halma has an executive working group to assess and monitor the potential impact on us of Brexit, to communicate updates and support our businesses in preparing for the range of possible outcomes.
Our decentralised model, with businesses in diverse markets and locations, will enable each Halma company to adapt quickly to changing trading conditions. This agility, together with the regulation driven demand for many of our products and services, will help us to mitigate any adverse impact and also take advantage of the opportunities presented by the decision to leave the European Union.
Movements in foreign exchange rates remain a risk to financial performance. 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 6% relative to the US Dollar, and by 7% against the Euro, resulting in a 5% positive currency impact on reported revenue and 5% 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 Guidance 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
21November 2017
Kevin Thompson
Finance Director
This information is provided by RNSThe company news service from the London Stock ExchangeENDIR DBLFLDFFLFBF
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