REG - Halma PLC - Half Year Results
16/11/2023 07:00
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RNS Number : 6212T Halma PLC 16 November 2023
Halma plc
HALF YEAR RESULTS 2023/24
Record first half results and continued dividend growth
Halma, the global group of life-saving technology companies focused on growing
a safer, cleaner, healthier future for everyone, every day, today announces
results for the 6 months to 30 September 2023.
Highlights
"Halma made good progress in the first half. The Group performance reflects
the strength we derive from our Sustainable Growth Model and the long-term
growth drivers that underpin our diverse portfolio. These enabled us to
deliver record revenue, profit and dividend, while further enhancing our
growth opportunities through increased strategic investment, supported by a
strong cash flow performance and continued balance sheet strength. We remain
on track to make further progress in the second half of the year." Marc
Ronchetti, Group Chief Executive.
Change 2023/24 2022/23
Revenue +9% £950.5m £875.5m
Adjusted(1) Earnings before Interest and Taxation (EBIT) +7% £189.9m £177.9m
Adjusted(1) Profit before Taxation +3% £177.5m £171.7m
Adjusted Earnings per Share(2) +4% 36.90p 35.65p
Statutory Earnings before Interest and Taxation +7% £162.6m £151.7m
Statutory Profit before Taxation +3% £150.2m £145.5m
Statutory Earnings per Share +3% 31.39p 30.39p
Interim Dividend per Share(3) +7% 8.41p 7.86p
Adjusted(1) EBIT margin (30)bps 20.0% 20.3%
Return on Sales(4) (90)bps 18.7% 19.6%
Return on Total Invested Capital(5) (60)bps 13.2% 13.8%
· Record revenue and profit:
o Revenue +9%; organic constant currency(6) (OCCY) revenue +5%;
o Adjusted(1) Profit before Taxation +3%; OCCY(6) in line with first half of
last year;
o Statutory Profit before Taxation +3%.
· Healthy contribution from recent acquisitions(7), adding over 5%
to revenue and profit growth.
· Adjusted(1) EBIT margin resilient at 20.0% (2022/23: 20.3%).
· Return on Sales(4) of 18.7% (2022/23: 19.6%): principally
reflecting higher net finance expense; compares to strong performance, above
pre-COVID level, in 2022/23 first half.
· Continued strategic investment to support future growth:
o R&D investment up 5% to £52m, representing 5.5% of revenue;
o Five acquisitions completed in financial year to date (three in first half)
for £126m maximum total consideration; healthy pipeline of potential
acquisitions.
· Strong cash performance; continued balance sheet strength: cash
conversion(9) of 96% (2022/23: 63%), above 90% target; net debt/EBITDA 1.4
times, within operating range of up to 2 times.
· Revenue growth in all sectors:
o Safety: continued strong progress including good OCCY(6) growth and healthy
acquisition contribution;
o Environmental & Analysis: good reported and OCCY(6) growth; includes
very strong growth in photonics and water, partly offset by weaker trends in
spectroscopy;
o Healthcare: modest reported growth; flat OCCY(6) revenue reflects strong
growth in sensors & analytics and ophthalmology therapeutics, offset by
continuing OEM customer destocking, especially in Life Sciences, and budgetary
caution at healthcare providers.
· Adjusted(1) EBIT margin increase in Safety and Healthcare
sectors; lower Environmental & Analysis margin mainly reflects reduction
in higher margin spectroscopy revenue.
· Revenue growth in all regions except Asia Pacific: strong growth
in largest regions of USA and Mainland Europe; Asia Pacific mainly reflects
weaker China trends.
· Interim dividend +7%: reflects the Board's continued confidence
in the Group's growth prospects in a continued uncertain environment.
Marc Ronchetti, Group Chief Executive of Halma, commented:
"Halma made good progress in the first half. The Group's performance reflects
the strength we derive from our Sustainable Growth Model and the long-term
growth drivers that underpin our diverse portfolio. These enabled us to
deliver record revenue, profit and dividend, while further enhancing our
growth opportunities through increased strategic investment, supported by a
strong cash flow performance and continued balance sheet strength.
The current operating environment presents both challenges and opportunities.
Our continued success in current varied market conditions is enabled by our
Sustainable Growth Model. We benefit from our focus on markets aligned to our
purpose, which present substantial opportunities for growth underpinned by
resilient, long-term growth drivers; from the portfolio and geographic
diversity of our businesses; from our talented people and our collaborative
and entrepreneurial culture; from the agility of our business model; and from
the strength of our sustainable financial model.
We remain on track to make further progress in the second half of the year and
to deliver good organic constant currency(6) revenue growth in the full year
to March 2024. Group order intake remains ahead of the comparable period last
year and close to revenue in the year to date. Our current expectation is for
full year 2024 Adjusted(1) Profit before Taxation to be in line with analyst
consensus expectations(10)."
Notes:
1 Adjusted to remove the amortisation of acquired intangible assets; acquisition
items; significant restructuring costs; and profit or (loss) on disposal of
operations, totalling £27.3m (2022/23: £26.2m). See note 2 to the Condensed
Interim Financial Statements for details.
2 Adjusted to remove the amortisation of acquired intangible assets, acquisition
items, significant restructuring costs, profit or (loss) on disposal of
operations and the associated taxation thereon. See note 2 to the Condensed
Interim Financial Statements for details.
3 Interim dividend declared per share.
4 Return on Sales is defined as Adjusted(1) Profit before Taxation from
continuing operations expressed as a percentage of revenue from continuing
operations.
5 Return on Total Invested Capital (ROTIC) is defined as post-tax Adjusted(1)
Profit as a percentage of average Total Invested Capital. See note 9 to the
Condensed Interim Financial Statements for details.
6 Organic constant currency (OCCY) measures exclude the effect of movements in
foreign exchange rates on the translation of revenue and Adjusted(1) Profit
into Sterling, as well as acquisitions in the year following completion and
disposals. See note 9 to the Condensed Interim Financial Statements for
details.
7 Net of disposals. The contribution to revenue or profit (as appropriate) from
acquisitions made in the 12 months to 30 September 2023, less the effect on
these measures from disposals made in the same period.
8 Adjusted(1) Earnings before Interest and Taxation, Adjusted(1) Profit before
Taxation, Adjusted(2) Earnings per Share, organic growth rates, Return on
Sales, ROTIC and net debt are alternative performance measures used by
management. See notes 2, 6 and 9 to the Condensed Interim Financial Statements
for details.
9 Cash conversion is defined as adjusted operating cash flow as a percentage of
adjusted operating profit. See note 9 to the Condensed Interim Financial
Statements for details.
10 Consensus available at www.halma.com (www.halma.com) , based on an aggregation
of publicly available forecasts, collated from eleven research analysts in the
period 4 October 2023 to 11 October 2023 is for Adjusted(1) Profit before
Taxation of £389.0m in the full year to end March 2024, with a range of
£377.4m to £396.2m.
For further information, please contact:
Halma plc +44 (0)1494 721 111
Marc Ronchetti, Group Chief Executive
Steve Gunning, Chief Financial Officer
Charles King, Head of Investor Relations +44 (0)7776 685948
Clayton Hirst, Director of Corporate Affairs +44 (0)7384 796013
MHP Group
Oliver Hughes/Rachel Farrington/Ollie Hoare
+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 (http://www.halma.com) . The webcast
of the results presentation will be available on the Halma website later
today: www.halma.com (http://www.halma.com)
NOTE TO EDITORS
1. Halma is a global group of life-saving technology companies, focused on
growing a safer, cleaner, healthier future for everyone, every day. Its
purpose defines the three broad markets it operates in:
· Safety Protecting people's safety and the environment as populations grow, and
enhancing worker safety.
· Environment Addressing the impacts of climate change, pollution and waste, protecting
life-critical resources and supporting scientific research.
· Health Meeting the increasing demand for better healthcare as chronic illness rises,
driven by growing and ageing populations and lifestyle changes.
It employs over 8,000 people in more than 20 countries, with major operations
in the UK, Mainland Europe, the USA and Asia Pacific. Halma is listed on the
London Stock Exchange (LON: HLMA) and is a constituent of the FTSE 100 index.
Halma has been named one of Britain's Most Admired Companies for the past five
years.
2. You can view or download copies of this announcement and our latest Annual
Report from the website at www.halma.com (http://www.halma.com) , or request
free printed copies of our Annual Report by contacting halma@halma.com
(mailto:halma@halma.com) .
3. 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
Halma made further progress in the first half of the year, achieving record
results in an operating environment which, while it presents significant
opportunities for future growth, also remains challenging and volatile.
Our continued success in these varied market conditions is enabled by our
Sustainable Growth Model and by the diversity of our portfolio, and is
underpinned by the long-term growth drivers in our companies' markets. The key
elements of our Sustainable Growth Model are unchanged: a strong purpose which
unites our people in tackling some of the largest and most important issues
facing the planet today; an operating model which allows our companies to
respond rapidly to opportunities and changes in their individual markets; a
culture that encourages supportive collaboration and entrepreneurialism; and a
sustainable financial model that allows for continued investment, both
organically and by acquisition, in growth opportunities and to maintain our
geographic and portfolio diversity.
The Sustainable Growth Model also allows us to evolve continuously in response
to changing circumstances and to emphasise specific elements which have
particular immediate relevance. In the current environment, we have focused on
maximising the ability of our companies to address both the very substantial
opportunities for growth that their markets offer, and the challenges that are
presented by the wider operating environment. We have placed particular
emphasis on the value of collaboration and the network amongst our companies,
recognising the substantial benefits of sharing experience and capabilities,
and on the autonomy of our companies to drive their own growth strategies. We
are also ensuring that our companies continue to receive the support they ask
for from our central teams to grow sustainably, with examples including help
in recruiting and retaining talented people, in accessing new markets
internationally, and in expanding their growth opportunities and technological
capabilities through bolt-on acquisitions.
Record first half results
In our full year results announcement in June, we set out four priorities:
1. ensuring our continued organic growth by our focus on
delivering value-added products and solutions to our customers;
2. retaining our disciplined approach to inorganic growth in
markets which are aligned with our purpose and which offer long-term growth
and high returns;
3. ensuring we maintain the agility of our business model
through our decentralised organisational structure and our entrepreneurial and
collaborative culture; and
4. optimising the returns on the substantial investments we are
making.
I am pleased to report that we made good progress in these areas in the first
half of this year. Our companies' agility has enabled good organic revenue
growth in varied market conditions. We have delivered a healthy contribution
from acquisitions, supported by the investments we have made in our M&A
capabilities, our strong cash performance and the strength of our balance
sheet. Returns, although lower than in the first half of last year mainly as a
result of higher interest rates and lower organic constant currency(1) profit
growth, remain high and well ahead of our cost of capital.
Revenue increased by 8.6%, to £950.5m (2022/23: £875.5m), which included
revenue growth in all sectors, and in all regions except Asia Pacific. We
delivered good organic constant currency(1) growth of 5.4%. This included
price increases averaging around 2%, with a stronger contribution in the
Safety sector which underpinned that sector's margin in the period. These
price increases were supported by continued Group-wide investment in our
products and services to ensure they continue to address our customers' needs
and resulted in a stable gross margin at the Group level. There was a healthy
contribution to revenue growth from recent acquisitions (net of disposals)(1)
of 5.3%. The appreciation of Sterling resulted in a negative effect on revenue
growth of 2.1%.
Adjusted(1) Earnings before Interest and Tax (Adjusted(1) EBIT) increased by
6.7% to £189.9m (2022/23: £177.9m) and the Adjusted(1) EBIT margin was
resilient at 20.0% (2022/23: 20.3%). This reflected the mix of sector
performance as described below.
Adjusted(1) Profit before Taxation was up 3.4% to £177.5m (2022/23:
£171.7m), with acquisitions contributing 5.2% to growth (net of
disposals)(1). There was a negative effect from currency of 1.8%. As a result,
Adjusted(1) Profit before Taxation on an organic constant currency(1) basis
was unchanged. Return on Sales(1) was 18.7% (2022/23: 19.6%), with the
movement principally driven by the increase in net finance expense to £12.4m
(2022/23: £6.2m) as a result of higher interest rates and higher average
levels of indebtedness following recent acquisition spend. This accounted for
60 basis points of the change, with the remainder reflecting the Adjusted(1)
EBIT margin movement.
Statutory Profit before Taxation increased by 3.2% to £150.2m (2022/23:
£145.5m), in line with the change in Adjusted(1) profit before taxation.
It is a strength of Halma's business model that we are able to simultaneously
deliver a strong operating performance and maintain a strong balance sheet,
while making substantial strategic investments to support our future growth.
We further increased organic investment in the first half, for example through
a 4.9% increase in R&D expenditure to £52.0m, representing 5.5% of Group
revenue (2022/23: £49.6m; 5.7% of Group revenue).
We also further expanded our opportunities for growth in markets highly
aligned to our purpose through investment in acquisitions, with three
acquisitions in the first half for an aggregate maximum total consideration of
£79m on a cash- and debt-free basis. We have made two further acquisitions
following the period end, for an aggregate maximum total consideration of
approximately £47m, bringing the total in the year to date to approximately
£126m. Details of these acquisitions are given later in this review.
Cash conversion (adjusted operating cash flow as a percentage of adjusted
operating profit - see note 9) was strong at 96%, a significant improvement
compared to the 63% in the first half of last year, and above our cash
conversion Key Performance Indicator (KPI) of 90%. We maintained a strong
balance sheet and ended the period with net debt of £618.8m, equivalent to
1.4 times annualised Adjusted EBITDA (31 March 2023: net debt of £596.7m; 1.4
times Adjusted EBITDA). The strength of our cash generation and our balance
sheet underpin our ongoing investment in future organic growth, provide
substantial capacity for acquisitions, and support our progressive dividend
policy.
Return on Total Invested Capital(1) was 13.2% (2022/23: 13.8%), well above our
KPI of 12% and our weighted average cost of capital, which we estimate at
approximately 9% (2022/23: 7%). The change from 13.8% in the comparative
period mainly reflects the effect of higher interest rates and the lower level
of organic constant currency(1) profit growth in the period.
The Board has declared an increase of 7% in the interim dividend to 8.41p per
share (2022/23: 7.86p per share). The interim dividend will be paid on 2
February 2024 to shareholders on the register on 22 December 2023.
Broad-based organic constant currency(1) revenue growth by region
External revenue by destination
Half year 2023/24 Half year 2022/23
£m % of total Change % % organic growth at constant currency(1)
£m
growth
% of total
£m
United States of America 402.0 42 364.2 42 37.8 10.4 9.6
Mainland Europe 203.2 22 170.5 19 32.7 19.2 9.2
United Kingdom 143.6 15 137.2 16 6.4 4.7 3.1
Asia Pacific 133.1 14 142.1 16 (9.0) (6.3) (6.6)
Other regions 68.6 7 61.5 7 7.1 11.5 2.7
950.5 100 875.5 100 75.0 8.6 5.4
Our growth in the period was broadly-based, and revenue grew in all regions
except Asia Pacific, both on a reported and organic constant currency(1)
basis. Reported growth rates in each region were impacted to differing extents
by acquisitions (net of disposals), and effects from foreign currency
translation.
The USA remains our largest sales destination and contributed 42% of total
revenue. Revenue increased by 10.4% or 9.6% on an organic constant currency(1)
basis. Reported revenue included a contribution of 4.3% from recent
acquisitions (net of disposals), including IZI Medical, as well as a negative
effect from currency translation, of 3.5%. On an organic constant currency(1)
basis, the strongest growth was in the Environmental & Analysis sector,
led by the Optical Analysis subsector, where a very strong performance in
Photonics more than offset a decline in Spectroscopy. The Safety sector
delivered a good organic constant currency(1) performance, while Healthcare
revenue was modestly lower on an organic constant currency(1) basis given
destocking by OEM customers and budgetary caution at healthcare providers.
Mainland Europe revenue increased by 19.2%, or 9.2% on an organic constant
currency(1) basis. All sectors grew revenue on both a reported and organic
constant currency(1) basis. There was an acquisition contribution (net of
disposals) of 8.9%, principally from last year's acquisitions of FirePro and
WEETECH in the Safety sector, and a positive effect from currency translation
of 1.1%. On an organic constant currency(1) basis, there was good growth in
Safety, the largest sector, and a very strong performance in the Healthcare
sector, driven by Ophthalmology within the Therapeutic Solutions subsector.
The Environmental & Analysis sector delivered a mixed performance by
subsector, with growth in Water Analysis and Treatment and Environmental
Monitoring partially offset by a decline in Optical Analysis as a result of
weaker trends in Spectroscopy.
Revenue in the UK grew 4.7%, or 3.1% on an organic constant currency(1) basis.
There was a small benefit of 1.6% from acquisitions (net of disposals) in the
period. Growth on an organic constant currency(1) basis was driven by the
Environmental & Analysis sector, principally as a result of a strong
performance in the Water Analysis and Treatment subsector. This was partly
offset by a modest decline on an organic constant currency(1) basis in the
Safety sector, mainly reflecting the end of a significant road safety contract
in the UK.
Asia Pacific's revenue was 6.3% lower, or 6.6% down on an organic constant
currency(1) basis. Reported growth included a 5.1% benefit from acquisitions
(net of disposals) and a negative effect from currency translation of 4.8%.
The region's organic constant currency(1) performance reflected weaker trends
in China, as well as in a number of other smaller markets, partly offset by
strong growth in Australasia. By sector, there was strong organic constant
currency(1) growth in Safety, driven by a very strong performance in
Australasia, and including good growth in China reflecting recovery from the
effects of COVID lockdowns in the prior period. There was a very weak
performance in Environmental & Analysis, principally as a result of
weakness in the Chinese spectroscopy market and a decline in the Environmental
Monitoring subsector in India and China. Healthcare revenues were also lower,
reflecting weakness in Life Sciences OEM demand in China.
Revenue in other regions, which represent 7% of Group revenue, grew by 11.5%,
and by 2.7% on an organic constant currency(1) basis. Reported growth included
a 10.3% benefit from acquisitions (net of disposals), mainly FirePro in the
Safety sector, and a negative effect from currency translation of 1.5%.
Sector revenue and Adjusted(1) Profit
External revenue by sector
Half year 2023/24 Half year 2022/23
£m £m Change % % organic growth at constant currency1
£m
growth
Safety 400.7 355.4 45.3 12.7 6.5
Environmental & Analysis 284.1 263.8 20.3 7.7 8.8
Healthcare 266.3 256.7 9.6 3.7 0.3
Inter-segmental revenue (0.6) (0.4) (0.2)
950.5 875.5 75.0 8.6 5.4
Adjusted(1) Profit (EBIT) by sector
Half year 2023/24 Half year 2022/23
£m £m Change % % organic growth at constant currency(1)
£m
growth
Safety 89.5 75.4 14.1 18.7 6.9
Environmental & Analysis 59.3 65.4 (6.1) (9.3) (9.5)
Healthcare 62.4 56.4 6.0 10.6 4.9
Sector profit(2) (EBIT) 211.2 197.2 14.0 7.1 0.9
Central administration costs (21.3) (19.3) (2.0)
Net finance expense (12.4) (6.2) (6.2)
Adjusted(1) Profit before Taxation 177.5 171.7 5.8 3.4 -
Safety sector
Revenue increased by 12.7% to £400.7m (2022/23: £355.4m) and organic
constant currency(1) revenue increased by 6.5%. There was a positive
contribution from acquisitions (net of disposals) of 8.0% and there was a
negative effect from currency translation of 1.8%. Growth was broadly spread,
with the sector delivering revenue growth across its core markets and regions.
There was strong growth in Industrial and Power Safety, supported by strong
execution and good customer demand for interlock and pressure management and
safe storage technologies, and last year's acquisition of WEETECH. Good
organic growth in Fire Safety was supported by demand for fire systems and
specialist and wireless fire detection products; the subsector's reported
revenue also benefited from the recent acquisitions of FirePro and
Thermocable. Performance in Urban Safety was more mixed, with good demand for
elevator safety and emergency communications solutions in the USA and United
Kingdom, but a weaker performance in people and vehicle flow solutions
reflecting order book normalisation and the end of a significant road safety
contract in the UK. Together, these resulted in a modest decline in Urban
Safety revenue overall.
By region, there was strong growth in Mainland Europe, the sector's largest
region, and in Asia Pacific which included a strong performance in Australia
and also reflected recovery from lockdowns in China in the first half of last
year. Both regions benefited from recent acquisitions (WEETECH, FirePro,
Thermocable and Lazer Safe). Good momentum in the USA reflected growth across
the sector, primarily in Fire Safety and elevator safety and emergency
communications. UK revenue growth was modest, and declined slightly on an
organic constant currency(1) basis, with a strong performance in Industrial
Safety offset by the end of the road safety contract referred to above.
Revenue in other regions, which represent 9% of sector revenues, grew
strongly, principally reflecting strong growth in safe storage and transfer
solutions.
Adjusted Profit(2) was 18.7% higher at £89.5m (2022/23: £75.4m), and
included 6.9% organic constant currency(1) growth, a benefit of 13.8% from
recent acquisitions (net of disposals), and a negative effect from currency
translation of 2.0%. The sector EBIT margin(1) increased to 22.3% (2022/23:
21.2%), reflecting good progress as expected in recovery from last year's
supply chain challenges. R&D expenditure of £21.8m remained at a good
level, which, with an increase in absolute investment of £2.2m, represented
5.4% of revenue (2022/23: 5.5%).
Environmental & Analysis sector
Revenue increased by 7.7% to £284.1m (2022/23: £263.8m), comprising 8.8%
organic constant currency(1) growth, a 1.7% contribution from acquisitions
(net of disposals), and a negative effect of 2.8% from currency translation.
There was very strong growth in the Photonics segment within the Optical
Analysis subsector, reflecting continued successful performance for a
long-standing major technology customer. The Photonics segment is expected to
benefit from a further acceleration of demand for technologies that support
the transformation of digital and data capabilities in the second half of the
year.
Within Optical Analysis, this strength in Photonics was partly offset by a
weak performance in Spectroscopy, which saw a substantial reduction in revenue
as a result of declines in a number of end markets including biopharma (mainly
as a result of OEM destocking), and quality testing of semiconductors
(particularly in the Chinese market) and consumer electronics. These effects
were amplified by disruption relating to the deployment of a new IT system in
one Spectroscopy company, which has since been stabilised.
There was strong growth in the Water Analysis and Treatment subsector,
reflecting an increase in project tenders from UK utilities for our water
infrastructure businesses. There was, however, a modest revenue decline in our
water testing and disinfection companies, principally relating to products
focused on consumer discretionary end markets. Environmental Monitoring
revenues were also modestly lower, mainly reflecting a strong comparative in
the first half of the prior year, which had benefited from a significant order
from a major gas detection customer and substantial growth in the flow and
pressure control market in India.
Revenue by region reflected these trends. The sector's largest region, the
USA, which accounts for over half of sector revenue, grew very strongly,
driven by Photonics within Optical Analysis, while momentum in water
infrastructure led strong UK growth. Asia Pacific revenue saw a substantial
decline, largely as a result of weakness in China and India. In other smaller
regions, there was modest growth in Europe, with good performance in most
business segments partly offset by a decline in spectroscopy markets.
Adjusted Profit(2) was 9.3% lower at £59.3m (2022/23: £65.4m) and 9.5%
lower on an organic constant currency(1) basis. There was a 2.0% contribution
from acquisitions (net of disposals) and a negative effect of 1.8% from
currency translation. The sector EBIT margin(1) was 20.9%, compared to 24.8%
in the prior period with the change reflecting a mix effect from the revenue
decline in the higher margin spectroscopy businesses. R&D expenditure of
£13.0m was 4.6% of sales (2022/23: 5.2%), with the change reflecting the
change in the mix of sector revenues in the period.
Healthcare sector
Revenue increased by 3.7% to £266.3m (2022/23: £256.7m). Organic constant
currency(1) revenue was 0.3% ahead of the first half of last year.
Acquisitions made a positive contribution of 5.3% to revenue, and there was a
1.9% negative impact from currency translation.
There was a wide range of performance by subsector. The Therapeutics Solutions
subsector performed well, driven by strong growth in ophthalmology
therapeutics, reflecting high surgical patient caseloads, and also benefiting
from the acquisition of IZI Medical in the prior year. This strong momentum
was partly offset by OEM customer destocking and budgetary caution at
healthcare providers which had some effect on our acute therapeutics
companies.
These factors also influenced the smaller Life Sciences subsector, which saw a
substantial decline in revenues as OEM customers managed the inventory of
diagnostic devices built up to mitigate post-COVID supply chain disruptions.
This was compounded by global macroeconomic headwinds, and low demand in China
where we have a significant Life Sciences footprint.
Our Healthcare Assessment & Analytics subsector benefited from a strong
recovery in sensors and analytics, reflecting demand from healthcare providers
for communication systems to improve efficiency and patient outcomes. This was
offset by a weaker performance in the patient assessment and ophthalmology
diagnostics companies due to OEM customer destocking and healthcare budgetary
restraint, resulting in Healthcare Assessment & Analytics revenue in line
with the first half of last year.
In terms of performance by geographic region, in the USA, the sector's largest
region, the mix of subsector performance described above and the benefit from
the acquisition of IZI Medical resulted in modest growth overall. Mainland
Europe grew strongly, mainly reflecting the strong demand in ophthalmology
therapeutics. The UK saw modest growth, broadly in line with the sector. Asia
Pacific revenue declined, principally reflecting its high Life Sciences
exposure.
Adjusted Profit(2) increased by 10.6% to £62.4m (2022/23: £56.4m), and
by 4.9% on an organic constant currency(1) basis. There was a 6.2%
contribution from acquisitions (net of disposals) and a negative effect of
0.5% from currency translation. The sector EBIT margin(1) increased to 23.4%
(2022/23: 22.0%), principally reflecting a stronger gross margin driven by
favourable portfolio mix and ongoing pricing discipline. R&D spend
was £17.1m, representing 6.4% of revenue (2022/23: 6.3%), and reflecting
continued healthy levels of new product development and investment by sector
companies.
Five acquisitions completed this financial year to date across all three
sectors
We have completed five acquisitions in the year to date, for a maximum total
consideration of approximately £126m on a cash- and debt-free basis, three in
the first half and two since the period end. Two were standalone companies
within their sectors, increasing our opportunities to supplement our organic
growth, while three were bolt-on acquisitions made by our companies to further
expand their capabilities. The five acquisitions in the year to date were
spread across all three sectors and, by region, two of the companies acquired
were based in Mainland Europe, and one each in the USA, the UK and Asia
Pacific.
We have a healthy pipeline of potential acquisitions across all three sectors,
and continue to see good opportunities to acquire small- to medium-sized
businesses which are strongly aligned to our purpose of growing a safer,
cleaner, healthier future for everyone, every day.
In the first half, our Environmental & Analysis sector, we acquired Visual
Imaging Resources LLC as a bolt-on to Minicam in April and Sewertronics Sp. Z
o.o. as a standalone company in May; details of these acquisitions were
previously reported in our 2023 Annual Report and Accounts released in June.
In August, we acquired Lazer Safe Pty. Ltd., an Australia-based designer and
manufacturer of safety solutions for industrial press brake applications, for
A$45m (approximately £23m) on a cash- and debt-free basis, as a standalone
company within the Safety sector. Further details of acquisitions made in the
half year are given in note 10 to the Condensed Interim Financial Statements.
Since the half year end, we acquired the Alpha Instrumatics Group and AprioMed
AB. Alpha Instrumatics, a designer and manufacturer of devices for
high-precision measurement of trace moisture found in gases, was acquired for
Alicat, one of our Environmental & Analysis sector companies, for an
initial cash consideration of £31m on a cash and debt free basis. Additional
earn-out consideration is payable in cash, based on its performance over each
of the two financial years to 31 March 2025, up to an aggregate maximum
of £5.5m.
In our Healthcare sector, we acquired AprioMed AB, a designer, manufacturer
and distributor of medical devices used for bone biopsies, as a bolt-on for
IZI Medical for SEK130m (approximately £10m) on a cash- and debt-free basis.
This acquisition expands IZI's offerings for minimally invasive procedures,
complementing its products used to diagnose and treat cancer.
We also announced after the half year end that PeriGen, our Healthcare sector
company whose AI systems protect mothers and babies during childbirth, had
entered into a strategic partnership with, and invested US$2.5m (approximately
£2m) in, Bloomlife Inc, a company focused on developing innovative solutions
for maternal and foetal health monitoring (see note 14 of the Condensed
Interim Financial Statements for details).
We actively manage our portfolio of global businesses to ensure that it
continues to deliver strong growth and returns and is aligned with our purpose
of growing a safer, cleaner, healthier future for everyone, every day. We made
one small disposal in the first half, of our 70% stake in FireMate Software
Pty. Ltd. (FireMate), for a total consideration of A$6.2m (£3.2m), of which
A$2.1m (£1.1m) is deferred. A profit of £0.5m was recognised on the
disposal. Halma has retained FireMate's Nimbus digital solution that enables
remote connectivity for fire and evacuation systems. See note 11 of the
Condensed Interim Financial Statements for details.
Further progress on sustainability
Sustainability has always been at the heart of our Sustainable Growth Model
and our purpose. We are driving growth in sustainability by encouraging our
companies to target markets, products and applications in sustainable markets
that help our customers address their sustainability challenges, while
supporting our people and protecting our environment by addressing our direct
and supply chain impacts.
In this half year, we relaunched our internal sustainability execution plan
with refreshed requirements for our companies, based on their size and their
impacts, and a focus on embedding sustainability within existing processes,
sectors and functions. During our annual strategic review process, our sector
teams continued to support their companies in identifying sustainability
trends which will drive growth in their markets. Our companies will update
their own Sustainability Action Plans, which seek to protect their environment
and support their people, as part of the budget process during the second half
of this year. We are supporting them by creating further shared resources on
sustainability topics and training and discussion opportunities for our
Divisional Chief Executives and our company Managing Directors and board
members responsible for sustainability.
As part of our internal sustainability execution plan, we have now initiated
the creation of Scope 3 decarbonisation plans, focused initially on a small
number of companies that represent a majority of our Scope 3 emissions. These
will support our work to set appropriate Scope 3 targets. At the Group level,
we are embedding the assessment of wider potential sustainability risks into
our enterprise risk management system as a first step towards a fuller
materiality assessment and preparation for future reporting requirements.
Cash flow and funding
Cash conversion (adjusted operating cash flow as a percentage of adjusted
operating profit - see note 9) in the first half of the year was 96% (2022/23:
63%), above our annualised cash conversion KPI of 90%. This was principally
because of a reduced working capital outflow, given that the investment in
inventory to support supply chain resilience in the prior half year was not
repeated in this period, and lower pension deficit reduction payments (See
"Pensions update" below).
Dividend payments increased to £46.5m (2022/23: £43.6m), in line with
expectations. Tax payments were also higher at £45.5m, compared to £31.2m in
the first half of 2022/23,reflecting the increase in the UK corporation tax
rate to 25% (19% for the year ended 31 March 2023) from 1 April 2023, and the
timing of US tax deductions on R&D expenditure.
Expenditure on acquisitions, which includes debt acquired and settled on
acquisition, acquisition costs and contingent consideration for acquisitions
made in prior years, totalled £65.5m (2022/23: £179.7m).
Capital expenditure (net of disposal proceeds) increased to £19.2m, compared
to £15.6m in the first half of 2022/23. We continue to expect capital
expenditure for the full year to be around £40m.
Net debt at the end of the period was £618.8m (31 March 2023: £596.7m).
Gearing (the ratio of net debt to annualised EBITDA) at half year end was 1.4
times (31 March 2023: 1.4 times), within our typical operating range of up to
two times.
Currency effects on reported revenue and profit
We report our results in Sterling with 48% of Group revenue denominated in US
Dollars and 13% in Euros during the period. Average exchange rates are used to
translate results in the Income Statement. Sterling strengthened against the
US Dollar and the Euro during the first half of 2023/24. This resulted in a 2%
negative currency translation effect on Group revenue and profit in the first
half of 2023/24 relative to 2022/23. If exchange rates remain at current
levels, we expect a further similar negative currency translation effect in
the second half of 2023/24.
Pensions update
On an IAS 19 basis, the Group's defined benefit pension plans at the half year
end had a net surplus of £33.1m (31 March 2023: surplus of £37.9m) before
the related deferred tax asset. The plans' assets decreased due to market
volatility, while there was a smaller decrease in the plans' liabilities due
to an increase in the discount rate used to value those liabilities. Together,
these movements resulted in an overall decrease in the plans' surplus.
The plans' actuarial valuation reviews, rather than the accounting basis,
determine any cash payments by the Group to eliminate the deficit. Following a
triennial actuarial valuation of the two UK pension plans in the 2021/22
financial year, the cash contributions were agreed with the trustees aimed at
eliminating the deficit. During the 2022/23 financial year the aggregate
payments made since the last triennial actuarial valuation, coupled with the
performance of the plan assets and movement in the liabilities resulted in the
Halma Group Pension Plan being funded over the trustees' secondary funding
target and close to the expected current valuation on a solvency basis. As a
result, it has been agreed with the trustees of the Halma Group Pension Plan
that contributions will be suspended until 1 April 2025, when they will either
fall due or be superseded by cash contributions agreed with the trustees in
respect of the latest triennial actuarial valuation. We therefore expect the
cash contributions in this regard for the two UK defined benefit plans in the
2023/24 financial year to be of £3.6m. Together with contributions to smaller
overseas defined benefit plans of £0.6m, this consistent with our previous
guidance of total contributions in the year of £4.2m.
Group effective tax rate higher as expected
The Group has major operating subsidiaries in a number of countries and the
Group's effective tax rate is a blend of these national tax rates applied to
locally generated profits.
The Group's effective tax rate on Adjusted(1) Profit was 21.5% (six months to
30 September 2022: 21.5%; year to 31 March 2023: 20.2%). The rate is higher
than the prior full year rate, as expected, principally due to the increase in
the UK corporation tax rate to 25% (19% for the year ended 31 March 2023) from
1 April 2023.
On 2 April 2019, the European Commission (EC) published its final decision
that the UK controlled Finance Company Partial Exemption (FCPE) constituted
State Aid. In common with many other UK companies, Halma has benefited from
the FCPE and had appealed against the European Commission's decision, as had
the UK Government. The EU General Court delivered its decision on 8 June 2022.
The ruling was in favour of the European Commission but in August 2022 the UK
Government and the taxpayer appealed this decision. Following receipt of
charging notices from HM Revenue & Customs (HMRC) we made a payment in
February 2021 of £13.9m to HMRC in respect of tax, and in May 2021 made a
further payment of approximately £0.8m in respect of interest.
Whilst the EU General Court was in favour of the EC, our assessment is that
there are strong grounds for appeal and we would expect such appeals to be
successful. As the amounts paid are expected to be fully recovered, we
continue to recognise a receivable of £14.7m within non-current assets in the
balance sheet.
Principal risks and uncertainties
A number of potential risks and uncertainties exist, which could have a
material impact on the Group's performance over the second half of the
financial year and thereby cause actual results to differ materially from
expected and historical results.
The Group has processes in place for identifying, evaluating and managing
risk. As part of these processes, we are closely monitoring and assessing the
potential effects on revenue, costs and working capital from macroeconomic and
geopolitical volatility. We expect that our companies' agility, and the
support they receive from across the Group to share best practice in
addressing these challenges, will continue to mitigate any potential material
effects.
Our principal risks, together with a description of our approach to mitigating
them, are set out on pages 91 to 97 of the Annual Report and Accounts 2023,
which is available on the Group's website at www.halma.com (www.halma.com) .
See note 16 to the Condensed Interim Financial Statements for further details.
Going concern
After conducting a review of the Group's business activities, financial
position and main trends and factors likely to affect its future development,
performance and position, and considering potential scenarios and principal
risks, the Directors believe, at the time of approving the financial
statements, that the Company is well placed to manage its business risks
successfully and remains a going concern. For this reason they deem it
appropriate to continue to adopt the going concern basis of accounting for at
least the next 12-month period. Further information is available in the
statement headed "Going concern" within note 1 to the Condensed Interim
Financial Statements.
Summary and Outlook
Halma made good progress in the first half. The Group's performance reflects
the strength we derive from our Sustainable Growth Model and the long-term
growth drivers that underpin our diverse portfolio. These enabled us to
deliver record revenue, profit and dividend, while further enhancing our
growth opportunities through increased strategic investment, supported by a
strong cash flow performance and continued balance sheet strength.
The current operating environment presents both challenges and opportunities.
Our continued success in current varied market conditions is enabled by our
Sustainable Growth Model. We benefit from our focus on markets aligned to our
purpose, which present substantial opportunities for growth underpinned by
resilient, long-term growth drivers; from the portfolio and geographic
diversity of our businesses; from our talented people and our collaborative
and entrepreneurial culture; from the agility of our business model; and from
the strength of our sustainable financial model.
We remain on track to make further progress in the second half of the year and
to deliver good organic constant currency(1) revenue growth in the full year
to March 2024. Group order intake remains ahead of the comparable period last
year and close to revenue in the year to date. Our current expectation is for
full year 2024 Adjusted(1) Profit before Taxation to be in line with analyst
consensus expectations(1).
Marc
Ronchetti Steve Gunning
Group Chief Executive Chief Financial Officer
( 1) See Highlights, above.
( 2) See note 2 to the Condensed Interim Financial Statements. Profit is
Adjusted(1) operating profit before central administration costs after share
of associate which equals Adjusted(1) EBIT.
Independent review report to Halma plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Halma plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Half Year Results of
Halma plc for the 6 month period ended 30 September 2023 (the "period").
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 UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Consolidated Balance Sheet as at 30 September 2023;
· 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 Results of Halma
plc have been prepared in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). 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 Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Results, 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 Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half Year Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half Year Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
16 November 2023
Consolidated Income Statement
Unaudited Unaudited Audited
year to
six months to six months to
31 March
30 September
30 September
2023
2023 2022
Notes Adjusted* Adjustments* Total Adjusted* Adjustments* Total Total
£m
£m
£m
£m (note 2) £m (note 2)
£m
£m
Continuing operations
Revenue 2 950.5 - 950.5 875.5 - 875.5 1,852.8
Operating profit 190.0 (27.8) 162.2 177.9 (26.2) 151.7 308.4
Share of results of associate (0.1) - (0.1) - - - -
Profit on disposal of operations
11 - 0.5 0.5 - - - -
Profit before interest and taxation 189.9 (27.3) 162.6 177.9 (26.2) 151.7 308.4
Finance income 3 1.8 - 1.8 0.8 - 0.8 1.8
Finance expense 4 (14.2) - (14.2) (7.0) - (7.0) (18.7)
Profit before taxation 177.5 (27.3) 150.2 171.7 (26.2) 145.5 291.5
Taxation 5 (38.2) 6.5 (31.7) (36.9) 6.2 (30.7) (57.2)
Profit for the period 139.3 (20.8) 118.5 134.8 (20.0) 114.8 234.3
Attributable to:
Owners of the parent 118.5 115.0 234.5
Non-controlling interests - (0.2) (0.2)
Earnings per share from continuing operations 6
Basic 36.90p 31.39p 35.65p 30.39p 62.04p
Diluted 31.31p 30.35p 61.86p
Dividends in respect of the period 7
Dividends paid and proposed (£m) 31.7 29.7 76.3
Per share 8.41p 7.86p 20.20p
* Adjustments include the amortisation and impairment of acquired
intangible assets; acquisition items; significant restructuring costs; profit
on disposal of operations; and the associated taxation thereon. Note 9
provides more information on alternative performance measures.
Consolidated Statement of Comprehensive Income and Expenditure
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Profit for the period 118.5 114.8 234.3
Items that will not be reclassified subsequently to the Income Statement:
Actuarial (losses)/gains on defined benefit pension plans (8.2) 3.6 (8.8)
Tax relating to components of other comprehensive income that will not be 2.0 (1.4) 1.2
reclassified
Unrealised changes in the fair value of equity instruments at fair value
through other comprehensive income
- 9.3 6.1
Items that may be reclassified subsequently to the Income Statement:
Effective portion of changes in fair value of cash flow hedges (0.7) (1.7) 1.3
Deferred tax in respect of cash flow hedges accounted for in the hedging 0.2 0.3 (0.3)
reserve
Exchange gains on translation of foreign operations and net investment hedge 2.4 162.1 45.1
Other comprehensive (expense)/income for the period (4.3) 172.2 44.6
Total comprehensive income for the period 114.2 287.0 278.9
Attributable to:
Owners of the parent 114.2 287.2 279.2
Non-controlling interests - (0.2) (0.3)
The exchange gains of £2.4m (six months to 30 September 2022: £162.1m gain;
year to 31 March 2023: £45.1m gain) include gains of £1.6m (six months to 30
September 2022: £28.8m losses; year to 31 March 2023: £7.4m losses), which
relate to net investment hedges.
Consolidated Balance Sheet
Notes Unaudited Unaudited Audited
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Non-current assets
Goodwill 1,157.9 1,101.8 1,120.5
Other intangible assets 481.7 418.6 472.3
Property, plant and equipment 230.2 224.5 222.9
Interests in associates and other investments 20.9 19.8 21.0
Retirement benefit asset 33.6 43.9 38.4
Tax receivable 13 14.7 14.7 14.7
Deferred tax asset 2.9 2.8 3.0
1,941.9 1,826.1 1,892.8
Current assets
Inventories 319.6 308.8 312.4
Trade and other receivables 407.2 389.9 410.7
Tax receivable 2.9 1.9 1.5
Cash and bank balances 136.4 213.4 169.5
Derivative financial instruments 12 0.7 1.2 1.5
866.8 915.2 895.6
Total assets 2,808.7 2,741.3 2,788.4
Current liabilities
Trade and other payables 263.8 256.4 280.7
Borrowings 0.6 78.8 1.0
Lease liabilities 19.5 19.4 19.2
Provisions 22.0 26.5 21.0
Tax liabilities 16.8 15.8 18.4
Derivative financial instruments 12 0.8 3.4 0.9
323.5 400.3 341.2
Net current assets 543.3 514.9 554.4
Non-current liabilities
Borrowings 667.6 545.6 677.3
Lease liabilities 67.6 69.2 68.7
Retirement benefit obligations 0.5 0.7 0.5
Trade and other payables 22.3 21.4 21.9
Provisions 12.0 7.9 9.7
Deferred tax liabilities 64.5 69.2 70.2
834.5 714.0 848.3
Total liabilities 1,158.0 1,114.3 1,189.5
Net assets 1,650.7 1,627.0 1,598.9
Equity
Share capital 38.0 38.0 38.0
Share premium account 23.6 23.6 23.6
Own shares (58.3) (46.3) (46.1)
Capital redemption reserve 0.2 0.2 0.2
Hedging reserve 0.1 (1.8) 0.6
Translation reserve 164.7 279.2 162.3
Other reserves* 4.4 7.6 4.4
Retained earnings* 1,477.7 1,326.3 1,415.8
Equity attributable to owners of the Company 1,650.4 1,626.8 1,598.8
Non-controlling interests 0.3 0.2 0.1
Total equity 1,650.7 1,627.0 1,598.9
* See footnote to the Consolidated Statement of Changes in Equity.
Consolidated Statement of Changes in Equity
For the six months to 30 September 2023
Share Share Own Capital Hedging Translation Other Retained Non-controlling interests Total
capital
premium
shares
redemption
reserve
reserve
reserves
earnings
£m
£m
£m
account
£m
reserve
£m
£m
£m
£m
£m
£m
At 1 April 2023 (audited) 38.0 23.6 (46.1) 0.2 0.6 162.3 4.4 1,415.8 0.1 1,598.9
Profit for the period - - - - - - - 118.5 - 118.5
Other comprehensive income and expense - - - - (0.5) 2.4 - (6.2) - (4.3)
Total comprehensive income/(expense) - - - - (0.5) 2.4 - 112.3 - 114.2
Dividends paid - - - - - - - (46.5) - (46.5)
Share-based payments charge - - - - - - - 9.2 - 9.2
Deferred tax on share-based payment transactions - - - - - - - (0.3) - (0.3)
Excess tax deductions related to share-based payments on exercised options - - - - - - - - - -
Purchase of own shares - - (19.7) - - - - - - (19.7)
Performance share plan awards vested - - 7.5 - - - - (12.6) - (5.1)
Non-controlling interest arising on acquisition - - - - - - - - 0.3 0.3
Non-controlling interest disposed - - - - - - - (0.2) (0.1) (0.3)
At 30 September 2023 (unaudited) 38.0 23.6 (58.3) 0.2 0.1 164.7 4.4 1,477.7 0.3 1,650.7
Own shares are ordinary shares in Halma plc purchased by the Company and held
to fulfil the Company's obligations under the Company's share plans. As at 30
September 2023, the number of shares held by the Employee Benefit Trust was
2,471,283 (30 September 2022: 1,913,290 and 31 March 2023: 1,901,415).
The Capital redemption reserve was created on repurchase and cancellation of
the Company's own shares. The Hedging reserve is used to record the portion of
the cumulative net change in fair value of cash flow hedging instruments that
are deemed to be an effective hedge.
The Translation reserve is used to record the difference arising from the
retranslation of the financial statements of foreign operations, offset by net
investment hedges with a carrying value of £32.3m (30 September 2022: £55.3m
and 31 March 2023: £33.9m). The Other reserves represent the cumulative fair
value adjustments on equity instruments held at fair value through other
comprehensive income.
For the six months to 30 September 2022
Share Capital Non-
premium
redemption reserve
Share
account Own
£m Hedging Translation Other Retained controlling interests
capital
£m
shares
reserve
reserve
reserves
earnings
£m
£m
£m
£m
£m
£m
£m Total
£m
At 1 April 2022* (audited) 38.0 23.6 (30.7) 0.2 (0.4) 117.1 (1.7) 1,256.6 0.4 1,403.1
Profit for the period - - - - - - - 115.0 (0.2) 114.8
Other comprehensive income and expense - - - - (1.4) 162.1 9.3 2.2 - 172.2
Total comprehensive income and expense - - - - (1.4) 162.1 9.3 117.2 (0.2) 287.0
Dividends paid - - - - - - - (43.6) - (43.6)
Share-based payments charge - - - - - - - 7.8 - 7.8
Deferred tax on share-based payment transactions - - - - - - - (0.8) - (0.8)
Excess tax deductions related to share-based payments on exercised awards - - - - - - - - - -
Purchase of own shares - - (22.3) - - - - - - (22.3)
Performance share plan awards vested - - 6.7 - - - - (10.9) - (4.2)
At 30 September 2022 (unaudited) 38.0 23.6 (46.3) 0.2 (1.8) 279.2 7.6 1,326.3 0.2 1,627.0
For the year to 31 March 2023
Share Capital Non-
premium
redemption reserve
Share
account Own
£m Hedging Translation Other Retained controlling
capital
£m
shares
reserve
reserve
reserves
earnings
£m
£m
£m
£m
£m
£m interests Total
£m
£m
At 1 April 2022 (audited) 38.0 23.6 (30.7) 0.2 (0.4) 117.1 (1.7) 1,256.6 0.4 1,403.1
Profit for the year - - - - - - - 234.5 (0.2) 234.3
Other comprehensive income and expense - - - - 1.0 45.2 6.1 (7.6) (0.1) 44.6
Total comprehensive income and expense 1.0 45.2 6.1 226.9 (0.3) 278.9
- - - -
Dividends paid - - - - - - - (73.3) - (73.3)
Share-based payments charge
- - - - - - - 17.7 - 17.7
Deferred tax on share-based payment transactions
- - - - - - - (0.7) - (0.7)
Excess tax deductions related to share-based payments on exercised awards
- - - - - - - - - -
Purchase of own shares - - (22.3) - - - - - - (22.3)
Performance share plan awards vested
- - 6.9 - - - - (11.4) - (4.5)
At 31 March 2023 (audited) 38.0 23.6 (46.1) 0.2 0.6 162.3 4.4 1,415.8 0.1 1,598.9
* As disclosed in the Annual Report and Accounts for the year ended 31 March
2023, effective for the year ended 31 March 2022, the share-based payment
reserve, which was previously presented in Other reserves was amalgamated with
Retained earnings, in the Consolidated Statement of Changes in Equity and the
Consolidated Balance Sheet as permitted by IFRS 2. This resulted in the
£13.2m debit in brought forward Other reserves at 1 April 2021 being
transferred to Retained earnings. There is no change in Total equity from this
change, nor the amounts charged or credited to the reserves during the period,
which represents a change in presentational accounting policy only.
Consolidated Cash Flow Statement
Audited Unaudited Unaudited Audited
year to
six months to
six months to
year to
31 March
30 September
30 September
31 March
2023
2023
2022
2023
Notes
£m
£m
£m
Net cash inflow from operating activities 8 154.0 95.1 258.0
Cash flows from investing activities
Purchase of property, plant and equipment (19.3) (16.2) (29.0)
Purchase of computer software (0.3) (0.4) (0.8)
Purchase of other intangibles (0.3) (0.1) (0.3)
Proceeds from sale of property, plant and equipment and capitalised 0.7 1.1 3.1
development costs
Development costs capitalised (7.4) (7.1) (15.8)
Interest received 0.7 0.2 0.7
Acquisition of businesses, net of cash acquired* 10 (58.4) (116.4) (320.1)
Disposal of business, net of cash disposed 1.4 - -
Investment in associates and other equity investments - (2.2) (6.7)
Net cash used in investing activities (82.9) (141.1) (368.9)
Cash flows from financing activities
Dividends paid 7 (46.5) (43.6) (73.3)
Purchase of own shares (19.7) (22.3) (22.3)
Interest paid (13.7) (6.4) (17.5)
Loan arrangement fees (0.3) (4.1) (4.1)
Proceeds from bank borrowings 463.1 258.8 451.8
Repayments of bank borrowings (471.5) (361.9) (394.2)
Repayment of acquired debt on acquisition* (2.6) (58.5) (65.1)
Drawdown of loan notes - 338.1 338.1
Repayment of loan notes - - (74.4)
Repayment of lease liabilities, net of interest (9.6) (8.9) (18.0)
Net cash (used in)/from financing activities (100.8) 91.2 121.0
(Decrease)/increase in cash and cash equivalents (29.7) 45.2 10.1
Cash and cash equivalents brought forward 168.5 156.7 156.7
Exchange adjustments (3.0) 9.7 1.7
Cash and cash equivalents carried forward 135.8 211.6 168.5
* We have re-presented the cashflow for the six months to 30 September 2022
to align with the presentation at year end of debt acquired and immediately
settled. This results in a reclassification of cash outflows of £58.5m from
investing activities to financing activities.
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash and cash equivalents (29.7) 45.2 10.1
Net cash outflow/(inflow) from bank borrowings and loan notes 11.0 (176.5) (256.1)
Net debt acquired (2.6) (58.5) (65.1)
Lease liabilities additions and accretion of interest (9.6) (15.2) (24.9)
Lease liabilities acquired (1.1) (3.0) (9.3)
Lease liabilities and interest repaid 11.2 10.2 20.9
Exchange adjustments (1.3) (27.0) 2.5
Increase in net debt (22.1) (224.8) (321.9)
Net debt brought forward (596.7) (274.8) (274.8)
Net debt carried forward (618.8) (499.6) (596.7)
Notes to the Condensed Interim Financial Statements
1 Basis of preparation
General information
The Half Year Report, which includes the Interim Management Report and
Condensed Interim Financial Statements for the six months to 30 September
2023, was approved by the Directors on 16 November 2023.
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 UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the UK's Financial Conduct
Authority. The Report should be read in conjunction with the annual
consolidated financial statements for the year ended 31 March 2023 which were
prepared in accordance with UK-adopted international accounting standards and
with the requirements of the Companies Act 2006. The same accounting policies
and presentation that were applied in the preparation of the Group's statutory
accounts for the year to 31 March 2023 have also been applied to the interim
consolidated financial statements with the exception of the policy for taxes
on income, which in the interim period is accrued using the estimated
effective tax rates for the year on profits before taxation before
adjustments, with the tax rates applied to the adjustments being established
on an individual basis for each adjustment.
The figures shown for the year to 31 March 2023 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 in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006, 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.
Going concern
The Group's business activities, together with the main trends and factors
likely to affect its future development, performance and position, and the
financial position of the Group as at 30 September 2023, its cash flows,
liquidity position and borrowing facilities are within in the Review of
Operations section. In addition, the Review of Operations section contains
further information concerning the security, currency, interest rates and
maturity of the Group's borrowings.
The financial statements have been prepared on a going concern basis. In
adopting the going concern basis the Directors have considered all of the
above factors, including potential scenarios and its principal risks and
uncertainties set out on note 16. Under the potential scenarios considered,
which includes a severe but plausible downside scenario, the Group remains
within its debt facilities and the attached financial covenants for the
foreseeable future and the Directors therefore believe, at the time of
approving the financial statements, that the Company is well placed to manage
its business risks successfully and remains a going concern. The key facts and
assumptions in reaching this determination are summarised below.
Our financial position remains robust with committed facilities at the balance
sheet date totalling approximately £933m which includes a £550m Revolving
Credit Facility (RCF). The undrawn committed facilities as at 30 September
2023 amounted to £264.9m. In May 2022 the RCF was refinanced with a
maturity date of May 2028, with two one-year extension options, the first of
which was exercised during the period. During May 2022, the Group also
entered into a new Note Purchase Agreement which provided access to loan notes
totalling £330m, which were drawn in various currencies in July 2022. The
financial covenants across the facilities are for leverage (net debt/adjusted
EBITDA) of not more than three and a half times and for adjusted interest
cover of not less than four times.
Our base case scenario has been prepared using forecasts from each of our
companies as well as expectations of cash outflows on future acquisitions.
In addition, a severe but plausible downside scenario has been modelled
showing a decline in trading for the year ending 31 March 2024. This
reduction in trading could be caused by a significant resurgence in COVID-19
lockdowns or other geopolitical crises, or continued macroeconomic volatility
leading to further inflation and interest rate increases. In mitigating the
impacts of the downside scenario there are actions that can be taken which are
entirely discretionary to the business such as reducing acquisitions spend and
dividend growth rates. In addition, the Group has demonstrated strong
resilience and flexibility to manage its overheads and adapt the supply chain
during recent global economic uncertainty. Neither the base case nor severe
but plausible downside scenarios result in a breach of the Group's available
debt facilities or the attached covenants and, accordingly, the Directors
believe there is no material uncertainty in the use of the going concern
assumption and, therefore, deem it appropriate to continue to adopt the going
concern basis of accounting for at least the next 12-month period.
New accounting standards and policies
The following standards, with an effective date of 1 January 2023, have been
adopted without any significant impact on the amounts reported in these
financial statements:
- IFRS 17 Insurance Contracts
- Definition of Accounting Estimates - Amendments to IAS 8
- Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2
- Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - Amendments to IAS 12
- Lease Liability in a Sale and Leaseback - Amendments to IFRS 16
- Classification of Liabilities as Current or Non-current and Non-current
Liabilities with Covenants - Amendments to IAS 1
- Amendments to IAS 12 International Tax Reform Pillar Two Model Rule
The Group has not early adopted any standard, interpretation or amendment that
was issued but is not yet effective. The Group is assessing any potential
implication, but currently do not expect a material impact on the Group.
2 Segmental analysis and revenue from contracts with customers
Sector analysis
The Group has three main reportable segments (Safety, Environmental &
Analysis and Healthcare), 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 disaggregation (by location of external customer)
Unaudited six months to 30 September 2023
Revenue by sector and destination (all continuing operations)
United States of America Mainland Europe United Kingdom Asia Pacific Africa, Other Total
£m
£m
£m
£m
Near and Middle East
countries
£m
£m
£m
Safety 104.3 119.2 77.4 64.2 20.4 15.2 400.7
Environmental & Analysis 160.6 30.4 42.5 36.0 7.3 7.3 284.1
Healthcare 137.1 53.6 24.3 32.9 6.4 12.0 266.3
Inter-segmental sales - - (0.6) - - - (0.6)
Revenue for the period 402.0 203.2 143.6 133.1 34.1 34.5 950.5
Unaudited six months to 30 September 2022
Revenue by sector and destination (all continuing operations)
United States Mainland United Asia Pacific Africa, Other Total
of America
Europe
Kingdom
£m
Near and
countries
£m
£m
£m
£m
Middle East
£m
£m
Safety 99.1 98.9 75.6 54.8 14.9 12.1 355.4
Environmental & Analysis 131.3 29.7 37.9 50.8 7.0 7.1 263.8
Healthcare 134.1 41.9 23.8 36.5 7.3 13.1 256.7
Inter-segmental sales (0.3) - (0.1) - - - (0.4)
Revenue for the period 364.2 170.5 137.2 142.1 29.2 32.3 875.5
Audited year end 31 March 2023
Revenue by sector and destination (all continuing operations)
United States Mainland United Asia Pacific Africa, Other Total
of America
Europe
Kingdom
£m
Near and
countries
£m
£m
£m
£m
Middle East
£m
£m
Safety 205.1 217.1 151.4 112.7 33.2 26.1 745.6
Environmental & Analysis 277.0 67.3 79.5 96.7 15.5 16.1 552.1
Healthcare 298.8 92.0 49.2 73.0 14.9 28.5 556.4
Inter-segmental sales (0.1) - (1.2) - - - (1.3)
Revenue for the period 780.8 376.4 278.9 282.4 63.6 70.7 1,852.8
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 £50.5m (six months to 30 September 2022: £41.4m;
year to 31 March 2023: £105.4m). All revenue was otherwise derived from the
sale of products.
The majority of the Group's revenue is recognised when control passes at a
point in time.
Segment results
Profit (all continuing operations)
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2023
2022
£m
£m
£m
Segment profit/PBIT before allocation of adjustments*
Safety 89.5 75.4 152.5
Environmental & Analysis 59.3 65.4 134.2
Healthcare 62.4 56.4 130.1
211.2 197.2 416.8
Segment profit/PBIT after allocation of adjustments*
Safety 78.6 67.1 123.9
Environmental & Analysis 52.7 58.4 121.5
Healthcare 52.6 45.5 101.6
Segment profit/PBIT 183.9 171.0 347.0
Central administration costs (21.3) (19.3) (38.6)
Net finance expense (12.4) (6.2) (16.9)
Group profit before taxation 150.2 145.5 291.5
Taxation (31.7) (30.7) (57.2)
Profit for the period 118.5 114.8 234.3
* Adjustments include the amortisation and impairment of acquired
intangible assets; acquisition items; significant restructuring costs; and
profit on disposal of operations. Note 9 provides more information on
alternative performance measures.
The accounting policies of the reportable segments are the same as the Group's
accounting policies. Acquisition transaction costs, adjustments to contingent
consideration and inventory acquisition adjustments (collectively
'acquisition items') are recognised in the Consolidated Income Statement.
Segment profit before these acquisition items and other adjustments, is
disclosed separately above as this is the measure reported to the Group Chief
Executive for the purpose of allocation of resources and assessment of segment
performance.
These adjustments are analysed as follows:
Unaudited six months to 30 September 2023
Amortisation Acquisition items
of acquired
intangibles
£m
Total
£m
Transaction Adjustments Release of Total Disposal of
costs
to contingent
acquisition
amortisation
operations and restructuring (note 11)
£m
consideration
adjustments
charge and
£m
£m
to inventory
acquisition
£m
items
£m
Safety (9.6) (0.6) - (1.2) (11.4) 0.5 (10.9)
Environmental & Analysis (5.4) (0.5) 0.1 (0.8) (6.6) - (6.6)
Healthcare (8.4) (0.1) (0.4) (0.9) (9.8) - (9.8)
Total Segment & Group (23.4) (1.2) (0.3) (2.9) (27.8) 0.5 (27.3)
The transaction costs arose mainly on the acquisitions during the period. In
Safety, they relate to the acquisitions of Lazer Safe (£0.4m) in the current
period and FirePro (£0.2m) in the prior year. In Environmental &
Analysis, they relate to the acquisition of Sewertronics (£0.4m) and Visual
Imaging Resources (£0.1m). In Healthcare, they related to the acquisition of
Visiometrics in a previous year (£0.1m).
Adjustment to contingent consideration comprised of a credit of £0.1m in
Environmental & Analysis arising from exchange differences on balances
denominated in Euros. In Healthcare there was a debit of £0.6m arising from
an increase in estimates of the payable for IZI (£0.1m) and Spreo (£0.5m),
partly offset by a credit arising from exchange differences on balances
denominated in Euros (£0.2m).
The £2.9m release of inventory acquisition adjustments related to WEETECH
(£0.1m), Thermocable (£0.4m), FirePro (£0.5m) and Lazer Safe (£0.2m) in
Safety; Visual Imaging Resources (£0.8m) in Environmental & Analysis; and
IZI (£0.9m) in Healthcare. All amounts have been released in relation to IZI,
WEETECH and Thermocable.
Unaudited six months to 30 September 2022
Amortisation Acquisition items
of acquired
intangibles Total
£m
£m
Transaction Adjustments Release of Total Disposal of
costs
to contingent
fair value
amortisation
operations and restructuring
£m
consideration
adjustments
charge and
£m
£m
to inventory
acquisition
£m
items
£m
Safety (8.1) (0.2) - - (8.3) - (8.3)
Environmental & Analysis (6.2) (0.6) 0.2 (0.4) (7.0) - (7.0)
Healthcare (9.8) (1.9) 0.8 - (10.9) - (10.9)
Total Segment & Group (24.1) (2.7) 1.0 (0.4) (26.2) - (26.2)
Segment results continued
The transaction costs arose mainly on the acquisitions during the prior
period. In Environmental & Analysis, they related to the acquisition of
Deep Trekker (£0.6m). In Healthcare, they mostly related to the acquisition
of IZI Medical Products (£1.8m).
Adjustment to contingent consideration comprised of a credit of £0.2m in
Environmental & Analysis arising from a decrease in the estimate of the
payable for Orca. In Healthcare there was a credit of £0.8m arising from a
decrease in estimates of the payable for Infinite Leap (£0.6m) and a credit
arising from exchange differences on balances denominated in Euros (£0.6m),
partially offset by an increase in the estimate of the payable for Meditech
(£0.4m).
The £0.4m release of fair value adjustments to inventory related to Deep
Trekker (£0.3m) and ILT (£0.1m) in Environmental & Analysis. All amounts
were released in relation to Deep Trekker.
Audited year ended 31 March 2023
Acquisition items
Transaction Adjustments Release of Total Disposal of Total
Amortisation costs to contingent fair value amortisation and impairment operations and restructuring £m
and impairment of acquired £m consideration adjustments charge and £m
intangible £m to inventory acquisition
assets £m items
£m £m
Safety (25.1) (3.1) - (0.4) (28.6) - (28.6)
Environmental & Analysis (11.4) (0.9) 0.2 (0.6) (12.7) - (12.7)
Healthcare (20.0) (1.9) (3.9) (2.7) (28.5) - (28.5)
Total Segment & Group (56.5) (5.9) (3.7) (3.7) (69.8) - (69.8)
The transaction costs arose mainly on the acquisitions during the year to
March 2023. In Safety, they related to the acquisition of FirePro (£1.6m),
WEETECH (£1.0m), Thermocable (£0.4m) and Zonegreen (£0.1m). In
Environmental & Analysis, they related to the acquisition of Deep Trekker
(£0.5m) in the year to March 2023 and Sewertronics (£0.4m) that was acquired
in May 2023. In Healthcare, they related to the acquisition of IZI (£1.6m)
in year to March 2023, and the acquisition of Visiometrics in a previous year
(£0.3m).
The £3.7m adjustment to contingent consideration comprised of a credit of
£0.2m in Environmental & Analysis arising from a decrease in the estimate
of the payables for Orca (£0.2m) and a debit of £3.9m in Healthcare arising
from an increase in estimates of the payables for Infinite Leap (£2.7m), IZI
(£1.4m) and Meditech (£0.3m), partially offset by a decrease in the estimate
of the payable for Clayborn Lab (£0.3m) and Spreo (£0.2m).
The £3.7m release of fair value adjustments to inventory related to WEETECH
(£0.3m) and Thermocable (£0.1m) in Safety; Deep Trekker (£0.3m) and
International Light Technologies (£0.3m) in Environmental & Analysis; and
IZI (£2.7m) in Healthcare. All amounts have been released in relation to
International Light Technologies and Deep Trekker.
3 Finance income
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Interest receivable 0.7 0.3 0.7
Net interest credit on pension plans assets 0.9 0.5 1.1
Fair value movement on derivative financial instruments 0.2 - -
1.8 0.8 1.8
4 Finance expense
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Interest payable on borrowings 12.0 5.1 14.5
Interest payable on lease obligations 1.6 1.3 2.9
Amortisation of finance costs 0.5 0.3 0.8
Net interest charge on pension plan liabilities - - -
Other interest payable - - 0.1
Fair value movement on derivative financial instruments 0.1 0.3 0.4
14.2 7.0 18.7
5 Taxation
The total Group tax charge for the six months to 30 September 2023 of £31.7m
(six months to 30 September 2022: £30.7m; year to 31 March 2023: £57.2m)
comprises a current tax charge of £43.5m (six months to 30 September 2022:
£34.4m; year to 31 March 2023: £73.7m) and a deferred tax credit of £11.8m
(six months to 30 September 2022: deferred tax credit £3.7m; year to 31 March
2023: deferred tax credit £16.5m). The tax charge is based on the estimated
effective tax rates for the year, for profit before taxation before
adjustments. The tax rates applied to the adjustments are established on an
individual basis for each adjustment.
The tax charge includes £21.5m (six months to 30 September 2022: £24.6m;
year to 31 March 2023: £41.8m) in respect of overseas tax.
The UK Finance (No. 2) Act 2023, enacted on 11 July 2023, contains the UK's
provisions in relation to a new tax framework (part of the Organisation for
Economic Co-operation and Development (OECD) BEPS initiative), which
introduces a global minimum effective tax rate of 15% to large multinational
groups, effective for accounting periods beginning on or after 31 December
2023 (year ended 31 March 2025 for Halma). On 27 September 2023, the UK
Government published additional updated draft legislation, for technical
consultation, relating to these rules. The Group monitors income tax
developments in the territories in which it operates, as well as the
applicable accounting standards, to understand their potential future impacts.
The Group has applied the exemption under the IAS 12 amendment to recognising
and disclosing information about deferred tax assets and liabilities related
to top-up income taxes.
6 Earnings per ordinary share
Basic earnings per share amounts are calculated by dividing the net profit for
the year attributable to the equity shareholders of the parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to the equity shareholders of the parent by the weighted average
number of shares outstanding during the year plus the weighted average number
of shares that would be in issue on the conversion of all the dilutive
potential shares.
The weighted average number of shares used to calculate both basic and diluted
earnings per share exclude shares held in the employee benefit trust.
Adjusted earnings are calculated as earnings from continuing operations
excluding the amortisation and impairment of acquired intangible assets;
acquisition items; significant restructuring costs, profit or loss on disposal
of operations and the associated taxation thereon. The Directors consider that
adjusted earnings, which constitute an alternative performance measure,
represent a more consistent measure of underlying performance as it excludes
amounts not directly linked with trading. A reconciliation of earnings and the
effect on basic and diluted earnings per share figures is as follows:
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Earnings from continuing operations attributable to owners of the parent 118.5 115.0 234.5
Amortisation and impairment of acquired intangible assets (after tax) 17.6 18.3 42.3
Acquisition transaction costs (after tax) 1.2 2.4 5.3
Adjustments to contingent consideration (after tax) 0.3 (1.1) 3.8
Release of fair value adjustments to inventory (after tax) 2.2 0.3 2.7
Disposal of operations and restructuring (after tax) (0.5) - -
Adjusted earnings attributable to owners of the parent 139.3 134.9 288.6
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
shares, million
shares, million
shares, million
Weighted average number of ordinary shares in issue for basic earnings 378.0
per share 377.5 378.2
Dilutive potential ordinary shares - share awards 1.0 0.5 1.1
Weighted average number of ordinary shares in issue for diluted earnings 378.5 379.1
per share 378.7
Basic and diluted earnings per share
Per share
Unaudited Unaudited Audited
Six months to
Six months to
year to
30 September
30 September
31 March
2023
2022
2023
pence
pence
pence
Basic earnings per share from continuing operations attributable to owners of
the parent
31.39 30.39 62.04
Amortisation and impairment of acquired intangible assets (after tax) 4.68 4.84 11.19
Acquisition transaction costs (after tax) 0.31 0.62 1.41
Adjustments to contingent consideration (after tax) 0.07 (0.29) 1.00
Release of fair value adjustments to inventory (after tax) 0.59 0.09 0.70
Disposal of operations and restructuring (after tax) (0.14) - -
Basic adjusted earnings per share attributable to owners of the parent 36.90 35.65 76.34
Diluted earnings per share from continuing operations attributable to owners
of the parent
31.31 30.35 61.86
7 Dividends
Per share
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
pence
pence
pence
Amounts recognised as distributions and paid to shareholders in the period
Final dividend for the year to 31 March 2023 (31 March 2022) 12.34 11.53 11.53
Interim dividend for the year to 31 March 2023 - - 7.86
12.34 11.53 19.39
Dividends in respect of the period
Proposed interim dividend for the year to 31 March 2023 (31 March 2022) 8.41 7.86 7.86
Final dividend for the year to 31 March 2023 - - 12.34
8.41 7.86 20.20
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Amounts recognised as distributions and paid to shareholders in the period
Final dividend for the year to 31 March 2023 (31 March 2022) 46.5 43.6 43.6
Interim dividend for the year to 31 March 2023 - - 29.7
46.5 43.6 73.3
Dividends in respect of the period
Proposed interim dividend for the year to 31 March 2023 (31 March 2022) 31.7 29.7 29.7
Final dividend for the year to 31 March 2023 - - 46.6
31.7 29.7 76.3
8 Notes to the Consolidated Cash Flow Statement
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Reconciliation of profit from operations to net cash inflow from
operating activities
Profit on continuing operations before finance income and expense, share 162.2 151.7 308.4
of results of associates and profit or loss on disposal of operations
Non-cash movement on hedging instruments 0.1 - 0.1
Depreciation and impairment of property, plant and equipment 22.1 21.5 41.5
Amortisation and impairment of computer software 1.0 1.2 2.2
Amortisation of capitalised development costs and other intangibles 5.1 4.8 9.2
Impairment of capitalised development costs - - 0.5
Amortisation of acquired intangible assets 23.4 24.1 48.7
Impairment of acquired intangible assets - - 7.8
Share-based payment expense less amounts paid 4.7 4.2 12.9
Payments to defined benefit pension plans net of service costs (2.4) (8.7) (15.1)
Profit on sale of property, plant and equipment and computer software (0.3) (0.2) (0.8)
Operating cash flows before movement in working capital 215.9 198.6 415.4
Increase in inventories (4.3) (42.5) (54.9)
Decrease/(increase) in receivables 8.2 (19.9) (52.4)
(Decrease)/increase in payables and provisions (19.1) (7.4) 15.1
Revision to estimate and exchange difference on contingent consideration (1.1) (2.5) 2.0
payable less amounts paid in excess of payable estimated on acquisition
Cash generated from operations 199.6 126.3 325.2
Taxation paid (45.6) (31.2) (67.2)
Net cash inflow from operating activities 154.0 95.1 258.0
Unaudited Unaudited Audited
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Analysis of cash and cash equivalents
Cash and bank balances 136.4 213.4 169.5
Overdrafts (included in current borrowings) (0.6) (1.8) (1.0)
Cash and cash equivalents 135.8 211.6 168.5
At Net cash/(debt) acquired/ disposed Lease liabilities additions At
31 March
2023 £m £m Exchange 30 September
£m
adjustments
2023
Cash flow
£m
£m
£m
Analysis of net debt
Cash and bank balances 169.5 (31.7) 1.6 - (3.0) 136.4
Overdrafts (1.0) 0.4 - - - (0.6)
Cash and cash equivalents 168.5 (31.3) 1.6 - (3.0) 135.8
Loan notes falling due after more than one year (376.9) - - - 0.5 (376.4)
Bank loans falling due after more than one year (300.4) 11.0 (2.6) - 0.9 (291.1)
Lease liabilities (87.9) 11.2 (1.1) (9.6) 0.3 (87.1)
Total net debt (596.7) (9.1) (2.1) (9.6) (1.3) (618.8)
Overdrafts 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.
During the period, the Group has entered into an uncommitted multi-currency
loan facility up to £50m. This allows the Group to manage short term cash
positions more effectively than utilising the Revolving Credit Facility. As
at 30 September 2023 this facility was undrawn. Drawings and repayments in the
period under this arrangement are presented in 'Proceeds from bank borrowings'
and 'Repayments of bank borrowings' respectively in the Consolidated Cash Flow
Statement.
The Group makes use of short-term money market deposits to utilise excess
cash. Deposits can vary in duration up to three months but are typically
overnight. The deposits are shown within Cash and cash equivalents.
9 Alternative performance measures
The Board uses certain alternative performance measures to help it effectively
monitor the performance of the Group. The Directors consider that these
represent a more consistent measure of underlying performance by removing
non-trading items that are not closely related to the Group's trading or
operating cash flows. These measures include Return on Total Invested Capital
(ROTIC), Return on Capital Employed (ROCE), Return on Sales (ROS), organic
growth at constant currency, Earnings before Interest and Tax (EBIT), net
debt, net debt/adjusted EBITDA, Adjusted operating profit, cash conversion and
Adjusted operating cash flow.
Note 2 provides further analysis of the adjusting items in reaching adjusted
profit measures.
Return on Total Invested Capital (ROTIC)
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Profit after tax 118.5 114.8 234.3
Adjustments(1) 20.8 20.0 54.1
Adjusted profit after tax(1) 139.3 134.8 288.4
Total equity 1,650.7 1,627.0 1,598.9
Less net retirement benefit assets (33.1) (43.2) (37.9)
Deferred tax liabilities on retirement benefit asset 8.4 11.0 9.6
Cumulative fair value adjustments on equity investments through other (4.4) (7.7) (4.4)
comprehensive income
Cumulative amortisation and impairment of acquired intangible assets 443.5 415.5 418.1
Historical adjustments to goodwill(2) 89.5 89.5 89.5
Total Invested Capital 2,154.6 2,092.1 2,073.8
Average Total Invested Capital(3) 2,114.2 1,954.7 1,945.5
Return on Total Invested Capital (annualised)(4) 13.2% 13.8% 14.8%
Return on Capital Employed (ROCE)
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Profit before tax 150.2 145.5 291.5
Adjustments(1) 27.3 26.2 69.8
Net finance costs 12.4 6.2 16.9
Lease interest (1.6) (1.3) (2.9)
Adjusted operating profit(1) after share of results of associate 188.3 176.6 375.3
Computer software costs within intangible assets 2.5 3.4 3.2
Capitalised development costs within intangible assets 51.3 48.3 49.6
Other intangibles within intangible assets 4.0 3.8 3.4
Property, plant and equipment 230.2 224.5 222.9
Inventories 319.6 308.8 312.4
Trade and other receivables 407.2 389.9 410.7
Current trade and other payables (263.8) (256.4) (280.7)
Current lease liabilities (19.5) (19.4) (19.2)
Current provisions (22.0) (26.5) (21.0)
Net tax receivable/(payable) 0.8 0.8 (2.2)
Non-current trade and other payables (22.3) (21.4) (21.9)
Non-current provisions (12.0) (7.9) (9.7)
Non-current lease liabilities (67.6) (69.2) (68.7)
Add back contingent purchase consideration provision 20.3 19.5 16.4
Capital Employed 628.7 598.2 595.2
Average Capital Employed(3) 612.0 526.1 524.7
Return on Capital Employed (annualised)(4) 61.6% 67.1% 71.5%
1 Adjustments include the amortisation and impairment of acquired
intangible assets; acquisition items; significant restructuring costs and
profit or loss on disposal of operations. Where after-tax measures, these also
include the associated taxation on adjusting items.
2 Includes goodwill amortised prior to 3 April 2004 and goodwill taken to
reserves.
3 The ROTIC and ROCE measures are expressed as a percentage of the average
of the current period's and prior year's Total Invested Capital and Capital
Employed respectively. Using an average as the denominator is considered to be
more representative. The 1 April 2022 Total Invested Capital and Capital
Employed balances were £1,572.8m and £389.5m respectively.
4 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.
Return on Sales (ROS)
The Group Return on Sales is defined as Adjusted Profit before Taxation as a
percentage of revenue. For the sectors, Return on Sales is defined as Adjusted
segment profit as a percentage of segment revenue. Adjusted Profit before
Taxation and Adjusted segment profit is as defined in note 2.
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:
a. removing from the year of acquisition their entire revenue and profit
before taxation,
b. in the following year, removing from the current year, the revenue and
profit for the number of months equivalent to the pre-acquisition period in
the prior year, and
c. removing from the year prior to acquisition any revenue generated by
sales to the acquired company which would have been eliminated on
consolidation had the acquired company been owned for that period.
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 as follows:
Revenue Adjusted profit* before taxation
Unaudited Unaudited % growth Unaudited Unaudited % growth
six months to
six months to
six months to
six months to
30 September
30 September
30 September
30 September
2023
2022
2023
2022
£m
£m
£m
£m
Continuing operations 950.5 875.5 8.6 177.5 171.7 3.4
Acquired and disposed revenue/profit (48.4) (1.8) (8.9) 0.1
Organic growth 902.1 873.7 3.3 168.6 171.8 (1.9)
Constant currency adjustment 18.6 3.1
Organic growth at constant currency 920.7 873.7 5.4 171.7 171.8 -
* Adjustments include the amortisation of acquired intangible assets and
impairment of acquired intangible assets; significant acquisition items;
significant 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.
Safety
Revenue Adjusted* segment profit/PBIT
Unaudited Unaudited % growth Unaudited Unaudited % growth
six months to
six months to
six months to
six months to
30 September
30 September
30 September
30 September
2023
2022
2023
2022
£m £m £m £m
Continuing operations 400.7 355.4 12.7 89.5 75.4 18.7
Acquisition, disposal and currency adjustments (22.4) (0.3) (8.8) 0.1
Organic growth at constant currency 378.3 355.1 6.5 80.7 75.5 6.9
Environmental & Analysis
Revenue Adjusted* segment profit/PBIT
Unaudited Unaudited % growth Unaudited Unaudited % growth
six months to
six months to
six months to
six months to
30 September
30 September
30 September
30 September
2023
2022
2023
2022
£m £m £m £m
Continuing operations 284.1 263.8 7.7 59.3 65.4 (9.3)
Acquisition and currency adjustments 1.3 (1.4) (0.1) -
Organic growth at constant currency 285.4 262.4 8.8 59.2 65.4 (9.5)
Revenue Adjusted* segment profit/PBIT
Unaudited Unaudited % growth Unaudited Unaudited % growth
six months to
six months to
six months to
six months to
30 September
30 September
30 September
30 September
2023
2022
2023
2022
£m £m £m £m
Continuing operations 266.3 256.7 3.7 62.4 56.4 10.6
Acquisition and currency adjustments (8.7) - (3.2) -
Organic growth at constant currency 257.6 256.7 0.3 59.2 56.4 4.9
Healthcare
* Adjustments include the amortisation of acquired intangible assets and
impairment of acquired intangible assets; acquisition items; significant
restructuring costs; and profit or loss on disposal of operations.
Earnings before Interest and Tax (EBIT)
EBIT is equal to Profit before interest and taxation as presented on the face
of the Consolidated Income Statement.
Net debt/adjusted EBITDA
Net debt is the leverage defined in the Group's RCF agreement as Borrowings
plus lease liabilities net of Cash and bank balances. Adjusted EBITDA
(Earnings before Interest, Tax, Depreciation and Amortisation) is used to
calculate covenant compliance and leverage, and is defined in the RCF
agreement. The Net debt/adjusted EBITDA is calculated as annualised EBITDA
divided by net debt.
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Adjusted operating profit (below) 190.0 177.9 378.2
Add back:
Depreciation, amortisation and impairment (excluding amortisation and 28.2 27.5 53.4
impairment on acquired intangible assets)
EBITDA 218.2 205.4 431.6
Net Debt (note 8) 618.8 499.6 596.7
Net debt/adjusted EBITDA (annualised) ratio 1.4x 1.2x 1.4x
Adjusted operating profit
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Operating profit 162.2 151.7 308.4
Add back:
Acquisition items 4.4 2.1 13.3
Amortisation and impairment of acquired intangible assets 23.4 24.1 56.5
Adjusted operating profit 190.0 177.9 378.2
Adjusted operating cash flow
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Net cash from operating activities (note 8) 154.0 95.1 258.0
Add back:
Net acquisition costs paid 3.1 3.4 4.6
Taxes paid 45.5 31.2 67.2
Proceeds from sale of property, plant and equipment and capitalised 0.7 1.1 3.1
development costs
Share awards vested not settled by own shares* 5.1 4.2 4.5
Deferred consideration paid in excess of payable estimated on acquisition 1.4 1.4 1.7
Less:
Purchase of property, plant and equipment (excluding Right of use assets) (19.3) (16.2) (29.0)
Purchase of computer software and other intangibles (0.6) (0.5) (1.1)
Development costs capitalised (7.4) (7.1) (15.8)
Adjusted operating cash flow 182.5 112.6 293.2
Cash conversion % (adjusted operating cash flow/adjusted operating profit) 96.1% 63.3% 77.5%
* See Consolidated Statement of Changes in Equity.
10 Acquisitions
In accounting for acquisitions, adjustments are made to the book values of the
net assets of the companies acquired to reflect their fair values to the
Group. Other previously unrecognised assets and liabilities at acquisition are
included and accounting policies are aligned with those of the Group where
appropriate.
During the six months ended 30 September 2023, the Group made three
acquisitions namely:
1. Sewertronics' Sp. Z o.o.;
2. Lazer Safe Pty. Ltd.; and
3. Certain trade and assets of Visual Imaging Resources LLC.
Set out on the following pages are summaries of the assets acquired and
liabilities assumed and the purchase consideration of:
a. the total of acquisitions;
b. Sewertronics' Sp. Z o.o.;
c. Lazer Safe Pty. Ltd.;
d. Visual Imaging Resources LLC; and
e. the adjustments in respect of prior year acquisitions.
Due to their contractual dates, the fair value of receivables acquired (shown
below) 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).
The acquisitions contributed £8.0m of revenue and £1.5m of profit after tax
for the six months ended 30 September 2023.
If these acquisitions had been held since the start of the financial year, it
is estimated that the Group's reported revenue and profit after tax would have
been £4.6m and £1.1m higher respectively.
As at the date of approval of the financial statements, the accounting for
all acquisitions since 1 October 2022, is provisional; relating to
finalisation of the valuation of acquired intangible assets, the initial
consideration, which is subject to agreement of certain contractual
adjustments, and certain other provisional balances.
a) Total of acquisitions
Unaudited
£m
Non-current assets
Intangible assets 34.0
Property, plant and equipment 2.3
Deferred tax 0.1
Current assets
Inventories 3.2
Trade and other receivables 3.3
Cash and cash equivalents 1.7
Total assets 44.6
Current liabilities
Payables (2.6)
Borrowings and lease liabilities (2.7)
Provisions (0.4)
Corporation tax liability (1.0)
Non-current liabilities
Borrowings and lease liabilities (1.0)
Provisions (0.4)
Deferred tax (7.8)
Total liabilities (15.9)
Net assets of business acquired 28.7
Attributable to:
Owners of the Company 28.4
Non-controlling interests 0.3
Initial cash consideration paid 60.4
Other adjustments (1.7)
Retention and other amounts to be (received)/paid (0.1)
Contingent purchase consideration estimated to be paid 6.1
Total consideration 64.7
Total goodwill 36.3
Total goodwill of £36.3m comprises £35.8m relating to current year
acquisitions and £0.5m relating to the prior year acquisition of WEETECH,
FirePro and IZI.
Other adjustments are primarily adjustments for acquired working capital once
balances are fully reconciled, forming part of the contractual payment
mechanisms.
Analysis of cash outflow in the Consolidated Cash Flow Statement
Unaudited Unaudited Audited
six months to
six months to
year to
30 September
30 September
31 March
2023
2022
2023
£m
£m
£m
Initial cash consideration paid 60.4 116.0 321.0
Cash acquired on acquisitions (1.7) (4.0) (10.1)
Initial cash consideration adjustment (received)/paid on current year (1.7) 3.0 6.3
acquisitions
Contingent consideration paid in relation to prior year acquisitions 2.8 2.8 4.6
Net cash outflow relating to acquisitions 59.8 117.8 321.8
Included in cash flows from operating activities 1.4 1.4 1.7
Included in cash flows from investing activities 58.4 116.4 320.1
Contingent consideration included in cash flows from operating activities
reflects amounts paid in excess of that estimated in the acquisition balance
sheets.
In addition, immediately after acquisition the Group repaid £2.6m of debt
acquired on acquisition.
b) Sewertronics' Sp. Z o.o.
Unaudited
£m
Non-current assets
Intangible assets 17.9
Property, plant and equipment 1.1
Deferred tax 0.1
Current assets
Inventories 0.5
Trade and other receivables 1.0
Cash and cash equivalents 1.6
Total assets 22.2
Current liabilities
Payables (0.1)
Provisions (0.1)
Corporation tax liability (0.8)
Non-current liabilities
Borrowings and lease liabilities (0.5)
Deferred tax (3.3)
Total liabilities (4.8)
Net assets of businesses acquired 17.4
Attributable to:
Owners of the Company 17.1
Non-controlling interests 0.3
Initial cash consideration paid 35.7
Contingent purchase consideration estimated to be paid 4.7
Total consideration 40.4
Total goodwill 23.3
On 5 May 2023, the Group acquired the Sewertronics Group ('Sewertronics') for
total consideration of €46.2m (£40.4m). The acquisition comprised the
entire share capital of Sewertronics' Sp. Z o.o. and 50% of the share capital
of Applied Resins Ltd which results in a non-controlling interest arising from
the acquisition. Maximum contingent consideration of €18.0m is payable
dependant on profits achieved each year over the next 2 years to 31 March 2025
of which €5.3m (£4.7m) represents the fair value of the estimated amounts
payable recognised on acquisition.
The company's technology repairs and rehabilitates wastewater pipelines
without the need to dig a trench, by inserting a lining into the pipe which is
then cured using its innovative and patented ultraviolet (UV) LED
technology. Based in Rzeszów, Poland, the company has sales and service
partners globally and is now part of the Group's Environmental & Analysis
sector.
On acquisition, acquired intangibles were recognised relating to customer
related intangibles £11.7m; trade name £1.6m and technology related
intangibles £3.9m.
The residual goodwill of £23.3m represents:
a. the technical expertise of the acquired workforce;
b. the opportunity to leverage this expertise across some of the
Group's businesses through future technologies; and
c. the ability to exploit the Group's existing customer base.
Sewertronics contributed £2.0m of revenue and £0.8m of profit after tax for
the six months ended 30 September 2023. If this acquisition had been held
since the start of the financial year, it is estimated that the Group's
reported revenue and profit after tax would have been £0.6m higher and £0.2m
higher respectively.
Acquisition costs totalling £0.4m were recorded in the Consolidated Income
Statement.
The goodwill arising on this acquisition is not expected to be deductible for
tax purposes.
c) Lazer Safe Pty. Ltd.
Unaudited
£m
Non-current assets
Intangible assets 14.9
Property, plant and equipment 0.5
Current assets
Inventories 1.1
Trade and other receivables 2.0
Cash and cash equivalents 0.1
Total assets 18.6
Current liabilities
Payables (1.0)
Borrowings and lease liabilities (2.7)
Provisions (0.2)
Non-current liabilities
Borrowings and lease liabilities (0.2)
Provisions (0.4)
Deferred tax (4.5)
Total liabilities (9.0)
Net assets of business acquired 9.6
Initial cash consideration paid 22.3
Other adjustments (1.5)
Amounts to be received (0.4)
Total consideration 20.4
Total goodwill 10.8
On 4 August 2023, the Group acquired the Lazer Safe Group ('Lazer Safe'), for
total consideration of A$39.4m (£20.4m). The initial consideration comprised
the cash-and debt-free purchase price of A$45.0m (£23.3m) less debt of A$4.9m
(£2.5m) plus amounts due from the shareholders of A$2.9m (£1.5m). This
initial consideration was adjusted for debt from shareholders of A$2.9m
(£1.5m) and closing working capital of A$0.7m (£0.4m). The debt acquired of
A$4.9m (£2.5m) was settled immediately post-acquisition. There is no
contingent consideration payable.
The acquisition comprised of the entire share capital of Lazer Safe
Investments Pty. Ltd and its subsidiary Lazer Safe Pty. Ltd. Lazer Safe, based
in Perth, Australia, designs and manufactures control, safety and operator
protection systems relating to press brake and associated sheet metal
machinery. The technology is designed to protect workers when they are
operating machinery and are used in a wide range of industrial markets. Lazer
Safe will continue to be run under its own management team and has become part
of the Group's Safety sector.
On acquisition acquired intangibles were recognised relating to customer
related intangibles £9.5m; trade names £1.6m and technology related
intangibles £3.8m.
The residual goodwill of £10.8m represents:
a. the technical expertise of the acquired workforce;
b. the opportunity to leverage this expertise across some of the
Group's businesses through future technologies; and
c. the ability to exploit the Group's existing customer base.
Lazer Safe contributed £2.0m of revenue and £0.4m of profit after tax for
the six months ended 30 September 2023. If this acquisition had been held
since the start of the financial year, it is estimated that the Group's
reported revenue and profit after tax would have been £3.8m higher and £0.9m
higher respectively. The lower margin post-acquisition is due to seasonality.
Acquisition costs totalling £0.4m were recorded in the Consolidated Income
Statement.
The goodwill arising on this acquisition is not expected to be deductible for
tax purposes.
d) Visual Imaging Resources LLC
Unaudited
£m
Non-current assets
Intangible assets 1.6
Property, plant and equipment 0.8
Current assets
Inventories 1.4
Trade and other receivables 0.5
Total assets 4.3
Current liabilities
Payables (1.5)
Provisions (0.1)
Non-current liabilities
Borrowings and lease liabilities (0.3)
Deferred tax (0.2)
Total liabilities (2.1)
Net assets of business acquired 2.2
Initial cash consideration paid 2.4
Other adjustments (0.2)
Retention and other amounts to be paid 0.3
Contingent purchase consideration estimated to be paid 1.4
Total consideration 3.9
Total goodwill 1.7
On 24 April 2023, the Group acquired certain trade and assets of Visual
Imaging Resources LLC ('VIR') for an initial cash consideration of US$3.0m
(£2.4m), adjustable for working capital balances determined to be US$0.2m
(£0.2m) receivable. The consideration includes a retention amount of US$0.3m
(£0.3m) held in place of escrow balances and is due 12 months from the date
of acquisition. Contingent consideration is payable based on gross margin of a
maximum of US$1.2m (£1.0m) per year for the three years ending 31 March 2026.
The current contingent consideration payable represents the fair value of the
total estimated amount payable.
VIR is the USA service and distribution partner for Minicam, a company in the
Group's Environmental & Analysis 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 £1.6m;
with residual goodwill arising of £1.7m.
VIR contributed £4.0m of revenue and £0.3m of profit after tax for the six
months ended 30 September 2023. If this acquisition had been held since the
start of the financial year, it is estimated that the Group's reported revenue
and profit after tax would have been £0.2m higher and £0.0m higher
respectively.
Acquisition costs totalling £0.1m were recorded in the Consolidated Income
Statement.
e) Adjustments in respect of prior year acquisitions
Unaudited Total
£m
Non-current assets
Intangible assets (0.4)
Property, plant and equipment (0.1)
Current assets
Inventories 0.2
Trade and other receivables (0.2)
Total assets (0.5)
Current liabilities
Corporation tax liability (0.2)
Non-current liabilities
Deferred tax 0.2
Total liabilities -
Net assets of business acquired (0.5)
Total goodwill 0.5
In finalising the acquisition accounting for the prior year acquisition of
WEETECH, an adjustment of £0.3m was made to increase inventories and £0.1m
was made to reduce property, plant and equipment. Overall this resulted in a
corresponding decrease in goodwill of £0.2m.
In finalising the acquisition accounting for the prior year acquisition of
FirePro, an adjustment of £0.2m was made to increase corporation tax payable.
Overall this resulted in a corresponding increase in goodwill of £0.2m.
In finalising the acquisition accounting for the prior year acquisition of
IZI, the following adjustments were made: £0.4m decrease to intangible
assets, £0.1m decrease to inventory and £0.2m decrease to receivables. There
was an adjustment made to decrease the deferred tax liability of £0.2m.
Overall this resulted in an increase in goodwill of £0.5m.
The adjustments were not material and as such the comparative balance sheet
was not restated; instead the adjustments have been made through the current
year.
11 Disposal of operations
On 4 August 2023, the Group disposed of its 70% interest in FireMate Software
Pty. Ltd. to a third party for proceeds of £3.2m. This transaction resulted
in the recognition of a gain in the Consolidated Income Statement as follows:
Total
£m
Proceeds of disposal 3.2
Less: net assets on disposal (1.2)
Less: allocation of goodwill disposed (1.4)
Less: costs of disposal (0.4)
Less: non-controlling interest 0.3
Profit on disposal 0.5
Cash received on disposal of operations of £1.5m comprised proceeds of
£3.2m, less loan note receivable of £1.1m, less £0.2m of cash disposed and
£0.4m of disposal costs. The loan note receivable accrues interest at 8% per
annum and is receivable in 5 years.
Immediately prior to the disposal, the Group transferred FireMate's wholly
owned subsidiary Nimbus Digital Solutions Ltd (formerly FireMate Limited) to
another Group company. This resulted in the Group retaining the entity on
disposal of FireMate and extinguishing the non-controlling interest in
relation to this entity.
12 Fair values of financial assets and liabilities
As at 30 September 2023, 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 approximates 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 and the Private Placement
completed in May 2022 is estimated to be £341.2m, against a carrying value
of £376.4m.
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 2023, the total forward foreign currency contracts and
swaps outstanding were £75.2m. 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 £0.7m (30
September 2022: £1.2m; 31 March 2023: £1.5m) asset and £0.8m (30 September
2022: £3.4m; 31 March 2023: £0.9m) liability in the Consolidated Balance
Sheet.
Any movements in the fair values of the forward contracts are recognised in
equity until the hedge transaction occurs, when gains/losses are recycled to
finance income or finance expense.
The fair value of equity investments held at fair value through other
comprehensive income is based on the latest observable price where available.
Where there are no recent observable prices, adjustments are made based on
qualitative indicators, such as the financial performance of the entity,
performance against operational milestones and future outlook. This represents
a level 3 measurement in the fair value hierarchy under IFRS 7.
The fair values of the equity instruments held at fair value through other
comprehensive income at 30 September 2023 were £18.9m (30 September 2022:
£17.6m; 31 March 2023: £18.9m). This is within 'Interests in associates and
other investments' on the Consolidated Balance Sheet.
The fair value adjustment recognised in other comprehensive income for the six
months to 30 September 2023 was £Nil (six months to 30 September 2022: gain
of £9.3m; year to 31 March 2023: gain of £6.1m).
13 Contingent liability
Group financing exemptions applicable to UK controlled foreign companies
On 2 April 2019, the European Commission (EC) published its final decision
that the UK controlled Foreign Company Partial Exemption (FCPE) constitutes
State Aid. As previously reported, the Group has benefited from the FCPE,
which amounts to £15.4m of tax for the period from 1 April 2013 to 31
December 2018.
Appeals had been made by the UK Government, the Group and other UK-based
groups to annul the EC decision. On 8 June 2022, the EU General Court
delivered its decision in favour of the EC. In August 2022, the UK Government
appealed this decision.
Notwithstanding this appeal, under EU law, the UK Government is required to
commence collection proceedings. In January 2021, the Group received a
Charging Notice from HM Revenue & Customs (HMRC) for £13.9m assessed for
the period from 1 April 2016 to 31 December 2018. The Group has appealed
against the notice but, as there is no right of postponement, the amount
charged was paid in full in February 2021 with a further £0.8m of interest
paid in May 2021. In February 2021, the
Group received confirmation from HMRC that it was not a beneficiary of State
Aid for the period from 1 April 2013 to 31 March 2016.
Whilst the EU General Court was in favour of the EC, the Group's assessment is
that there are strong grounds for appeal and it would expect such appeals to
be successful. As the amounts paid are expected to be fully recovered, the
Group continues to recognise a receivable of £14.7m (30 September 2022:
£14.7m; 31 March 2023: £14.7m) on the Consolidated Balance Sheet within
non-current assets.
Other contingent liabilities
The Group has widespread global operations and is consequently a defendant in
many legal, tax and customs proceedings incidental to those operations. In
addition, there are contingent liabilities arising in the normal course of
business in respect of indemnities, warranties and guarantees. These
contingent liabilities are not considered to be unusual in the context of the
normal operating activities of the Group. Provisions have been recognised in
accordance with the Group accounting policies where required. None of these
claims are expected to result in a material gain or loss to the Group.
14 Events subsequent to the end of the reporting period
On 2 October 2023, the Group acquired the entire share capital of AprioMed AB
('AprioMed'), based in Uppsala, Sweden, for a cash consideration of SEK130.0m
(approximately £10m) on a cash-and debt-free basis. AprioMed manufactures and
distributes medical devices used for bone biopsies. Its products help
diagnose patients suffering from a range of conditions, principally cancer.
AprioMed will be a bolt-on for IZI Medical Products within the Group's
Healthcare Sector.
On 23 October 2023, the Group acquired the entire share capital of Alpha
Instrumatics Holding Company Limited and its subsidiaries ('Alpha
Instrumatics'), based in Bradford, UK for a cash consideration of £30.5m on a
cash and debt free basis. Additional deferred consideration is payable in
cash, based on its performance over each of the two financial years to 31
March 2025, up to an aggregate maximum of £5.5m. Alpha Instruments designs
and manufactures devices for high-precision measurement of trace moisture
found in gases. It extends Alicat's product offering in its existing and
adjacent end markets within the Group's Environmental and Analysis sector.
A detailed purchase price allocation exercise is currently being performed to
calculate the goodwill arising on these acquisitions.
On 18 October 2023, the Group invested US$2.5m (approximately £2m) in
Bloomlife Inc., a maternal and foetal health monitory company as part of a
strategic partnership with Perigen, within the Group's Healthcare sector.
The investment took the form of a convertible promissory note, bearing
interest of 11% per annum and repayable in 3 years.
There were no other known material non-adjusting events which occurred between
the end of the reporting period and prior to the authorisation of these
financial statements on 16 November 2023.
15 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 2023.
16 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 91 to 97 in the Annual Report and Accounts 2023,
which is available on the Group's website at www.halma.com (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:
- Cyber
- Organic growth
- Acquisitions and investments
- Talent and diversity
- Innovation and digital
- Economic and geopolitical uncertainty
- Natural hazards, including climate change
- Business model and its communications
- Non-compliance with laws and regulations
- Financial controls
- Liquidity
- Product failure or Non-compliance
17 Responsibility statement
The Directors confirm that these Condensed Interim Financial Statements have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
- an indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
- material related party transactions in the first six months and any
material changes in the related party transactions described in the last
annual report.
By order of the Board
Marc Ronchetti Steve Gunning
Group Chief Executive Chief Financial Officer
16 November 2023
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