REG - Halma PLC - Half Yearly Report <Origin Href="QuoteRef">HLMA.L</Origin> - Part 2
18/11/2014 08:00
- Part 2: For the preceding part double click ID:nRSR2493Xa
Excess tax deductions related to share-based payments on exercised options - - - - - - 997 997
Net movement in treasury shares - - (2,520) - - - - (2,520)
At 29 March 2014 (audited) 37,902 22,778 (7,054) 185 14,363 (2,745) 420,571 486,000
Consolidated Cash Flow Statement
Notes Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Net cash inflow from operating activities 8 61,924 55,934 121,538
Cash flows from investing activities
Purchase of property, plant and equipment (9,419) (7,266) (15,838)
Purchase of computer software (473) (585) (1,529)
Purchase of other intangibles (268) (4) -
Proceeds from sale of property, plant and equipment 543 271 1,708
Development costs capitalised (3,239) (2,447) (5,196)
Interest received 64 116 252
Acquisition of businesses, net of cash acquired 10 (87,145) (16,669) (16,685)
Disposal of business, net of cash disposed 11 4,221 1,925 1,917
Net cash used in investing activities (95,716) (24,659) (35,371)
Financing activities
Dividends paid (25,800) (24,049) (40,485)
Proceeds from issue of share capital 828 177 194
Purchase of treasury shares (3,042) (5,715) (7,515)
Interest paid (1,499) (1,390) (2,716)
Proceeds from borrowings 152,435 7,434 7,498
Repayment of borrowings (77,367) (15,329) (57,791)
Net cash from/(used in) financing activities 45,555 (38,872) (100,815)
Increase/(decrease) in cash and cash equivalents 11,763 (7,597) (14,648)
Cash and cash equivalents brought forward 33,126 49,723 49,723
Exchange adjustments (329) (1,193) (1,949)
Cash and cash equivalents carried forward 44,560 40,933 33,126
Unaudited Unaudited Audited
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash and cash equivalents 11,763 (7,597) (14,648)
Cash (inflow)/outflow from (drawdowns)/repayment of borrowings (75,068) 7,895 50,293
Net debt acquired (468) - -
Loan notes issued* (608) (2,731) (2,731)
Loan notes repaid* 2,731 2,515 2,515
Exchange adjustments (130) 441 365
(61,780) 523 35,794
Net debt brought forward (74,496) (110,290) (110,290)
Net debt carried forward (136,276) (109,767) (74,496)
* The £2,731,000 loan note issued on 3 June 2013 was converted at par into cash on 2 June 2014. Loan notes totalling £608,000 were issued on 14 May 2014 and 3 September 2014 as part of the consideration payable in relation to the acquisition of Advanced Electronics Limited on 14 May 2014. These loan notes, which attract interest of 1%, are convertible into cash at par on each anniversary of the acquisition date until 14 May 2019.
Notes to the Condensed Financial Statements
1 Basis of preparation General informationThe Half Year Report, which includes the Interim Management Report and Condensed Financial Statements for the 26 weeks to 27 September 2014, has not been audited or reviewed by the Group's Auditor and was approved by the Directors on 18 November 2014. The Report has been prepared in accordance with International Accounting Standard 34, applying the accounting policies and presentation that were applied in the preparation of the Group's statutory accounts for the
52 weeks to 29 March 2014. The figures shown for the 52 weeks to 29 March 2014 are based on the Group's statutory accounts for that period and do not constitute the Group's statutory accounts for that period as defined in Section 434 of the Companies Act 2006. These statutory accounts, which were prepared under International Financial Reporting Standards, have been filed with the Registrar of Companies. The audit report on those accounts was not qualified, did not include a reference to any matters to which
the Auditor drew attention by way of emphasis without qualifying the report, and did not contain statements under Sections 498 (2) or (3) of the Companies Act 2006. The Report has been prepared solely to provide additional information to shareholders as a body to assess the Board's strategies and the potential for those strategies to succeed. It should not be relied on by any other party or for any other purpose. The Report contains certain forward-looking statements which have been made by the Directors in
good faith using information available up until the date they approved the Report. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events. The Directors believe the Group is well placed to manage its business risks successfully. The Group's forecasts
and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities, which includes a £360m five-year revolving credit facility due to expire in November 2018. The Directors are aware of the requirements of the updated UK Corporate Governance Code. These apply to reporting periods beginning on or after 1 October 2014 and will impact the reporting of the Group's assessment of going concern
and require the inclusion of a separate long-term viability statement in the Annual and Interim Reports issued for periods ending after that date. The Directors intend to incorporate the requirements, including the new viability statement, in the period ending 2 April 2016, the first period in which the updated guidance will apply to the Group. In accordance with the UK Corporate Governance Code as it currently applies to the Group, the Directors have a reasonable expectation that the Company and Group have
adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the Half Year Report.
1 Basis of preparation
General information
The Half Year Report, which includes the Interim Management Report and
Condensed Financial Statements for the 26 weeks to 27 September 2014, has not
been audited or reviewed by the Group's Auditor and was approved by the
Directors on 18 November 2014. The Report has been prepared in accordance with
International Accounting Standard 34, applying the accounting policies and
presentation that were applied in the preparation of the Group's statutory
accounts for the 52 weeks to 29 March 2014. The figures shown for the 52 weeks
to 29 March 2014 are based on the Group's statutory accounts for that period
and do not constitute the Group's statutory accounts for that period as
defined in Section 434 of the Companies Act 2006. These statutory accounts,
which were prepared under International Financial Reporting Standards, have
been filed with the Registrar of Companies. The audit report on those accounts
was not qualified, did not include a reference to any matters to which the
Auditor drew attention by way of emphasis without qualifying the report, and
did not contain statements under Sections 498 (2) or (3) of the Companies Act
2006. The Report has been prepared solely to provide additional information to
shareholders as a body to assess the Board's strategies and the potential for
those strategies to succeed. It should not be relied on by any other party or
for any other purpose. The Report contains certain forward-looking statements
which have been made by the Directors in good faith using information
available up until the date they approved the Report. Forward-looking
statements should be regarded with caution as by their nature such statements
involve risk and uncertainties relating to events and circumstances that may
occur in the future. Actual results may differ from those expressed in such
statements, depending on the outcome of these uncertain future events. The
Directors believe the Group is well placed to manage its business risks
successfully. The Group's forecasts and projections, taking account of
reasonably possible changes in trading performance, show that the Group should
be able to operate within the level of its current committed facilities, which
includes a £360m five-year revolving credit facility due to expire in November
2018. The Directors are aware of the requirements of the updated UK Corporate
Governance Code. These apply to reporting periods beginning on or after 1
October 2014 and will impact the reporting of the Group's assessment of going
concern and require the inclusion of a separate long-term viability statement
in the Annual and Interim Reports issued for periods ending after that date.
The Directors intend to incorporate the requirements, including the new
viability statement, in the period ending 2 April 2016, the first period in
which the updated guidance will apply to the Group. In accordance with the UK
Corporate Governance Code as it currently applies to the Group, the Directors
have a reasonable expectation that the Company and Group have adequate
resources to continue in operational existence for the foreseeable future.
Thus they continue to adopt the going concern basis in preparing the Half Year
Report.
2 Segmental analysis Sector analysisThe Group has four main reportable segments (Process Safety, Infrastructure Safety, Medical and Environmental & Analysis), which are defined by markets rather than product type. Each segment includes businesses with similar operating and market characteristics. These segments are consistent with the internal reporting as reviewed by the Chief Executive.
Sector analysis
The Group has four main reportable segments (Process Safety, Infrastructure
Safety, Medical and Environmental & Analysis), which are defined by markets
rather than product type. Each segment includes businesses with similar
operating and market characteristics. These segments are consistent with the
internal reporting as reviewed by the Chief Executive.
Segment revenue and results
Revenue (all continuing operations)
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Process Safety 73,579 62,173 126,704
Infrastructure Safety 112,693 107,299 220,254
Medical 78,464 81,062 163,181
Environmental & Analysis 76,256 82,607 166,547
Inter-segmental sales (89) (75) (180)
Revenue for the period 340,903 333,066 676,506
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 and has no material revenue derived from the rendering of services.
Profit (all continuing operations)
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Segment profit before allocation of adjustments*
Process Safety 20,439 16,137 34,878
Infrastructure Safety 22,821 20,608 44,445
Medical 20,847 19,586 41,826
Environmental & Analysis 11,861 15,005 31,740
75,968 71,336 152,889
Segment profit after allocation of adjustments*
Process Safety 18,187 15,692 34,125
Infrastructure Safety 23,165 20,399 45,010
Medical 15,227 13,358 41,554
Environmental & Analysis 11,590 12,771 27,574
Segment profit 68,169 62,220 148,263
Central administration costs excluding the effects of closure to future benefit accrual of the Defined Benefit pension plan net of associated costs** (4,478) (3,965) (7,922)
Effects of closure to future benefit accrual of the Defined Benefit pension plan net of associated costs** (46) - 3,054
Net finance expense (2,472) (2,313) (4,718)
Group profit before taxation 61,173 55,942 138,677
Taxation (13,631) (13,325) (32,350)
Profit for the period 47,542 42,617 106,327
* Adjustments include the amortisation of acquired intangible assets, acquisition items, the effects of closure to future benefit accrual of the Defined Benefit pension plan net of associated costs, and profit or loss on disposal of operations.** The Defined Benefit plan referred to here is the Halma Group Pension Plan only, which is not practical to allocate by segment. The accounting policies of the reportable segments are the same as the Group's accounting policies. For acquisitions after 3 April
2010, acquisition transaction costs and adjustments to contingent purchase consideration are recognised in the Consolidated Income Statement. Segment profit before these acquisition costs, the amortisation of acquired intangible assets and the profit or loss on disposal of continuing operations is disclosed separately above as this is the measure reported to the Chief Executive for the purpose of allocation of resources and assessment of segment performance. These adjustments are analysed as follows:
For the 26 weeks ended 27 September 2014
Acquisition items
Amortisation Transaction Adjustments Total Disposal of Effects of closure to future benefit accrual of Defined Benefit pension plans*£000 Total
of acquired costs to contingent amortisation operations £000
intangibles £000 consideration charge and (note 11)
£000 £000 acquisition £000
items
£000
Process Safety (1,344) (908) - (2,252) - - (2,252)
Infrastructure Safety (354) (386) - (740) 1,084 - 344
Medical (5,962) (4) - (5,966) 346 - (5,620)
Environmental & Analysis (1,935) - 1,664 (271) - - (271)
Total Segment (9,595) (1,298) 1,664 (9,229) 1,430 - (7,799)
Central administration costs - - - - - (46) (46)
Total Group (9,595) (1,298) 1,664 (9,229) 1,430 (46) (7,845)
* The loss of £46,000 relates to the closure to future benefit accrual of the Halma Group Pension Plan as decided in the prior period.
The transaction costs arose on the acquisitions of Rohrback Cosasco Systems Inc., £908,000; Advanced Electronics Limited, £386,000; and Plasticspritzerei AG, £4,000. The £1,664,000 credit to contingent consideration related to the revision of the estimate of the remaining ASL Holdings Limited payable from £2,500,000 to £836,000, after payment of £1,000,000 in May 2014. Within the Infrastructure Safety segment, the £1,084,000 profit relates to the disposal, on 30 May 2014, of Monitor Elevator Products, Inc.
Within the Medical segment, the £346,000 profit comprises the disposal, on 2 May 2014, of the Group's 50% ownership interest in PSRM Immobilien AG (£131,000) and, on 14 July 2014, of 11% of its ownership interest in Optomed Oy (£215,000). See note 11 for further details.
For the 26 weeks ended 28 September 2013
Acquisition items
Amortisation Transaction Adjustments Total Disposal of Total
of acquired costs to contingent amortisation operations £000
intangibles £000 consideration charge and (note 11)
£000 £000 acquisition £000
items
£000
Process Safety (309) - - (309) (136) (445)
Infrastructure Safety (72) (98) - (170) (39) (209)
Medical (6,402) (2) 176 (6,228) - (6,228)
Environmental & Analysis (2,184) (50) - (2,234) - (2,234)
Total Group (8,967) (150) 176 (8,941) (175) (9,116)
For the 52 weeks ended 29 March 2014
Acquisition items
Amortisation Transaction Adjustments Total Disposal of Effects of closure to future benefit accrual of Defined Benefit pension plans*£000 Total
of acquired costs to contingent amortisation operations £000
intangibles £000 consideration charge and (note 11)
£000 £000 acquisition £000
items
£000
Process Safety (598) - (17) (615) (138) - (753)
Infrastructure Safety (144) (140) - (284) (45) 894 565
Medical (12,530) 102 12,456 28 (300) - (272)
Environmental & Analysis (4,243) (53) 130 (4,166) - - (4,166)
Total Segment (17,515) (91) 12,569 (5,037) (483) 894 (4,626)
Central administration costs - - - - - 3,054 3,054
Total Group (17,515) (91) 12,569 (5,037) (483) 3,948 (1,572)
* The effects of closure to future benefit accrual of Defined Benefit pension plans, which were gains of £894,000 and £3,054,000, arose on the closure of the
Apollo Pension and Life Assurance Plan and Halma Group Pension Plan respectively. It is not practical to apportion the latter gain by segment. The £12,456,000 credit to contingent consideration related mainly to a revision in the estimate of the MST payable from US$25,000,000 to US$6,504,000. The total assets of the Process Safety sector were £144,783,000 at 27 September 2014 (£68,423,000 at 28 September 2013; £68,428,000 at 29 March 2014) and of the Infrastructure Safety sector were £187,523,000 at 27
September 2014 (£169,356,000 at 28 September 2013; £170,540,000 at 29 March 2014). The increase in assets in the period for both sectors was primarily due to additional goodwill and acquired intangible assets arising from acquisitions (see note 10). The other two sectors' total assets have not been disclosed as there have been no material changes to those disclosed in the 2014 Annual Report and Accounts.
Geographical information The Group's revenue from external customers (by location of customer) is as follows:
Revenue by destination
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
United States of America 104,110 107,597 214,493
Mainland Europe 79,216 79,304 163,707
United Kingdom 67,225 62,215 127,877
Asia Pacific 56,248 55,965 111,572
Africa, Near and Middle East 19,055 16,219 33,037
Other countries 15,049 11,766 25,820
Group revenue 340,903 333,066 676,506
3 Finance income
Unaudited (Restated)*Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Interest receivable 64 116 252
Fair value movement on derivative financial instruments - 358 370
64 474 622
* The return and interest charge on pension plan assets and liabilities of
£3,930,000 and £4,915,000 respectively, previously shown gross, are disclosed
as a net £985,000 expense in note 4 in accordance with IAS 19 (revised).
Further details regarding the IAS 19 restatement can be found on page 102 of
the 2014 Annual Report and Accounts.
4 Finance expense
Unaudited (Restated)*Unaudited Audited
26 weeks to 27 September 26 weeks to 52 weeks to
2014 28 September 29 March
£000 2013 2014
£000 £000
Interest payable on bank loans and overdrafts 1,499 1,384 2,691
Amortisation of finance costs 265 317 599
Net interest charge on pension plan liabilities 701 985 1,875
Other interest payable - 4 25
2,465 2,690 5,190
Fair value movement on derivative financial instruments 49 - -
Unwinding of discount on provisions 22 97 150
2,536 2,787 5,340
* See note 3 for details regarding the restatement.
5 Taxation
The total Group tax charge for the 26 weeks to 27 September 2014 of £13,631,000 (26 weeks to 28 September 2013: £13,325,000; 52 weeks to 29 March 2014: £32,350,000) comprises a current tax charge of £14,608,000 (26 weeks to 28 September 2013: £14,951,000; 52 weeks to 29 March 2014: £29,845,000) and a deferred tax credit of £977,000 (26 weeks to 28 September 2013: credit of £1,626,000; 52 weeks to 29 March 2014: charge of £2,505,000). The tax charge is based on the estimated effective tax rate for the year.
The tax charge includes £10,620,000 (26 weeks to 28 September 2013: £10,708,000; 52 weeks to 29 March 2014: £20,872,000) in respect of overseas tax.
6 Earnings per ordinary share
Basic earnings per ordinary share are calculated using the weighted average of 378,115,425 (28 September 2013: 377,750,281; 29 March 2014: 377,805,248) shares in issue during the period (net of shares purchased by the Company and held as treasury shares). Diluted earnings per ordinary share are calculated using 378,383,111 (28 September 2013: 378,101,945; 29 March 2014: 378,035,662) shares which includes dilutive potential ordinary shares of 267,686 (28 September 2013: 351,664; 29 March 2014: 230,414).
Dilutive potential ordinary shares are calculated from those exercisable share options where the exercise price is less than the average price of the Company's ordinary shares during the period. Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation of acquired intangible assets, acquisition items, the effects of closure to future benefit accrual of the Defined Benefit pension plans net of associated costs, profit or loss on disposal of operations, and the
associated taxation thereon. The Directors consider that adjusted earnings represent a more consistent measure of underlying performance. A reconciliation of earnings and the effect on basic earnings per share figures is as follows:
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Earnings from continuing operations 47,542 42,617 106,327
Cessation of DB pension accrual (after tax) 36 - (3,040)
Amortisation of acquired intangible assets (after tax) 6,801 6,249 11,820
Acquisition transaction costs (after tax) 1,286 150 91
Adjustments to contingent consideration (after tax) (1,664) (136) (8,104)
(Profit)/loss on disposal of operations (after tax) (857) 175 470
Adjusted earnings 53,144 49,055 107,564
Per ordinary share
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
pence pence pence
Earnings from continuing operations 12.57 11.28 28.14
Cessation of DB pension accrual (after tax) 0.01 - (0.80)
Amortisation of acquired intangible assets (after tax) 1.80 1.66 3.14
Acquisition transaction costs (after tax) 0.34 0.04 0.02
Adjustments to contingent consideration (after tax) (0.44) (0.04) (2.15)
Profit/(loss) on disposal of operations (after tax) (0.23) 0.05 0.12
Adjusted earnings 14.05 12.99 28.47
7 Dividends
Per ordinary share
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Amounts recognised as distributions to shareholders in the period
Final dividend for the year to 29 March 2014 (30 March 2013) 6.82 6.37 6.37
Interim dividend for the year to 29 March 2014 - - 4.35
6.82 6.37 10.72
Dividends in respect of the period
Interim dividend for the year to 28 March 2015 (29 March 2014) 4.65 4.35 4.35
Final dividend for the year to 29 March 2014 - - 6.82
4.65 4.35 11.17
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Amounts recognised as distributions to shareholders in the period
Final dividend for the year to 29 March 2014 (30 March 2013) 25,800 24,049 24,049
Interim dividend for the year to 29 March 2014 - - 16,436
25,800 24,049 40,485
Dividends in respect of the period
Interim dividend for the year to 28 March 2015 (29 March 2014) 17,612 16,436 16,436
Final dividend for the year to 29 March 2014 - - 25,800
17,612 16,436 42,236
8 Notes to the Consolidated Cash Flow Statement
Unaudited Unaudited Audited
26 weeks to 26 weeks to 52 weeks to
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Reconciliation of profit from operations to net cash inflow from operating activities
Profit on continuing operations before finance income and expense, share of results of associates and (profit)/loss on disposal of operations 62,150 58,645 143,571
Depreciation of property, plant and equipment 6,822 6,761 13,625
Amortisation of computer software 568 595 1,168
Amortisation of capitalised development costs and other intangibles 2,829 1,860 4,002
Amortisation of acquired intangible assets 9,595 8,967 17,515
Share-based payment expense in excess of amounts paid 2,079 1,813 3,470
Additional payments to pension plans (3,250) (3,072) (5,892)
Profit on sale of property, plant and equipment and computer software (114) (54) (26)
Effects of closure to future benefit accrual of Defined Benefit pension plans - - (4,246)
Operating cash flows before movement in working capital 80,679 75,515 173,187
Increase in inventories (3,037) (4,973) (5,127)
Decrease/(increase) in receivables 6,073 4,458 (9,111)
(Decrease)/increase in payables and provisions (7,318) (6,619) 3,334
Revision to estimate of contingent consideration payable (1,664) - (12,394)
Cash generated from operations 74,733 68,381 149,889
Taxation paid (12,809) (12,447) (28,351)
Net cash inflow from operating activities 61,924 55,934 121,538
Unaudited Unaudited Audited
27 September 28 September 29 March
2014 2013 2014
£000 £000 £000
Analysis of cash and cash equivalents
Cash and bank balances 49,177 41,141 34,531
Overdrafts (included in current Borrowings) (4,617) (208) (1,405)
Cash and cash equivalents 44,560 40,933 33,126
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