| Halma plc HALF YEAR RESULTS 2021/22 Record first half results and continued dividend growth
Halma, the global group of life-saving technology companies focused on growing a safer, cleaner and healthier future for everyone, every day, today announces results for the 6 months to 30 September 2021. |
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2021 |
2020 | |||
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| Revenue | +19% | £737.2m | £618.4m | |||
| Adjusted Profit before Taxation1 | +27% | £154.9m | £122.0m | |||
| Adjusted Earnings per Share2 | +25% | 31.96p | 25.54p | |||
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| Statutory Profit before Taxation | +74% | £167.5m | £96.3m | |||
| Statutory Earnings per Share | +76% | 35.83p | 20.37p | |||
| Interim Dividend per Share3 | +7% | 7.35p | 6.87p | |||
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| Return on Sales4 | | 21.0% | 19.7% | |||
| Return on Total Invested Capital5 | | 14.9% | 12.6% | |||
| Net Debt | | £280.2m | £315.0m | |||
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| · Record revenue and profit: revenue up 19%; 23% on an organic constant currency6 basis. Adjusted1 Profit before Taxation up 27%; 32% on an organic constant currency6 basis.
· High Return on Sales of 21.0% (2020/21: 19.7%) given robust gross margins with a slower-than-expected return of variable overhead costs.
· Statutory Profit before Taxation up 74%, including a £34.0m gain on the disposal of Texecom.
· Strong organic constant currency6 revenue and profit growth in all sectors and major regions; very strong growth in the UK and Asia Pacific, against weaker comparatives.
· Increased returns and investment: ROTIC5 of 14.9%, and R&D expenditure up 20%, representing 5.6% of revenue.
· Ten acquisitions completed in the first half and one further small acquisition completed since the period end; a healthy acquisition pipeline across all sectors.
· Solid cash conversion of 85% and a robust balance sheet supporting sustained investment in organic growth and acquisitions, and a 7% increase in the interim dividend.
Andrew Williams, Group Chief Executive of Halma, commented:
"Halma made strong progress in the first half, delivering record revenue, profit and interim dividend, with substantial growth compared to both the first half of last financial year and 2019/20.
Our full year outlook is unchanged, despite variable overhead costs returning and continued impacts on revenue, costs and working capital from increased supply chain, logistics and labour market disruption. In the second half of the year, we expect more typical rates of revenue growth and Return on Sales, with the latter more in line with historical levels.
Our Sustainable Growth Model continues to drive our success, including its focus on global niche markets with long-term growth drivers. Our strong purpose and culture, our portfolio and geographic diversity, together with our agile business model enable us to perform well in varied market conditions and sustain growth and returns over the longer term."
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| Notes:
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| 1 | Adjusted to remove the amortisation of acquired intangible assets, acquisition items and profit or loss on disposal of operations, totalling £(12.6)m (2020/21: £25.7m). See note 2 to the Condensed Interim Financial Statements for details.
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| 2 | Adjusted to remove the amortisation of acquired intangible assets, acquisition items, profit or loss on disposal of operations and the associated taxation thereon. See note 2 to the Condensed Interim Financial Statements for details.
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| 3 | Interim dividend paid and declared per share.
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| 4 | Return on Sales is defined as Adjusted1 Profit before Taxation from continuing operations expressed as a percentage of revenue from continuing operations.
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| 5 | Return on Total Invested Capital (ROTIC) is defined as post-tax Adjusted1 Profit as a percentage of average Total Invested Capital.
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| 6 | Organic constant currency measures exclude the effect of movements in foreign exchange rates on the translation of revenue and profit1 into Sterling, as well as acquisitions in the year following completion and disposals.
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| 7 | Adjusted1 Profit before Taxation, Adjusted2 Earnings per Share, organic growth rates, Return on Sales and ROTIC are alternative performance measures used by management. See notes 2, 6 and 9 to the Condensed Interim Financial Statements for details. |
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For further information, please contact:
| Halma plc Charles King, Head of Investor Relations
| +44 (0)1494 721 111
+44 (0)7776 685948 |
| MHP Communications | +44 (0)20 3128 8572 |
| A copy of this announcement, together with other information about Halma, may be viewed on its website: www.halma.com. The webcast of the results presentation will be available on the Halma website later today: www.halma.com
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| NOTE TO EDITORS |
| 1. | Halma is a global group of life-saving technology companies, focused on growing a safer, cleaner and healthier future for everyone, every day. Its purpose defines the three broad market areas where it operates:
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| | · Safety | Protecting life as populations grow and protecting worker safety.
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| | · Environment | Improving food and water quality, and monitoring air pollution.
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| | · Medical
| Meeting rising healthcare demand as growing populations age and lifestyles change.
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| | Halma employs over 7,000 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.
In January 2021, Halma was named Britain's Most Admired Company 2020 by Management Today.
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| 2. | You can view or download copies of this announcement and the latest Half Year and Annual Reports from the website at www.halma.com or request free printed copies by contacting halma@halma.com.
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| 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
Record half year results
Halma made strong progress in the first half of the year, reflecting the benefits of our Sustainable Growth Model with its strong purpose and culture, and our leading positions in global niche markets with long-term growth drivers. The benefits of a diverse portfolio and the agility of our business model have enabled our companies to respond rapidly to changing conditions in their end markets and to increased supply chain, logistics and labour market disruption.
We achieved record results, with strong growth across all our sectors and all major regions. We delivered substantial growth in revenue and profit compared to the weaker period in the first half of the 2020/21 financial year, when we saw the largest impacts from the COVID-19 pandemic, and the equivalent period in the 2019/20 financial year.
Revenue increased by 19%, to £737.2m (2020/21: £618.4m), reflecting a substantial recovery in demand in those end markets most impacted by lockdowns in the first half of last year. Adjusted1 Profit before Taxation grew even more strongly, by 27% to £154.9m (2020/21: £122.0m), benefiting from robust gross margins and a slower-than-expected return in variable overhead costs.
As a result, Return on Sales1 was above expectations, at 21.0% (2020/21: 19.7%). This comprised an exceptionally strong performance in the first quarter, with Return on Sales1 of 22.5%. Return on Sales1 moderated to 19.5% in the second quarter, with variable overhead costs returning as COVID-related restrictions eased. Variable overhead costs included expenditure of approximately £1m in information technology upgrades. Investment in these programmes in the full year is now expected to be around £11m.
Statutory Profit before Taxation increased by 74% to £167.5m (2020/21: £96.3m) and included a £34.0m gain on the disposal of a Safety sector business in the period. Details of this are given later in this review.
Revenue growth comprised organic constant currency1 revenue growth of 23%, a 2% positive contribution from acquisitions (net of the effects of disposals) completed in this and the previous half year, and a negative currency translation effect of 6%. This strong growth compared with a decline of 11% on an organic constant currency1 basis in the first half of the last financial year.
The 27% increase in Adjusted1 Profit before Taxation included organic constant currency1 growth of 32%, a 2% positive contribution from acquisitions (net of the effects of disposals) completed in this half year and the second half of last year, and a negative currency translation effect of 7%. As with revenue, this strong profit performance compared with an 11% decline on an organic constant currency1 basis in the first half of last year.
We have a strong balance sheet and ended the period with net debt of £280.2m, equivalent to 0.76 times the last 12 months' EBITDA (31 March 2021: net debt of £256.2m; 0.76 times EBITDA). A solid cash conversion of 85% was lower than the exceptionally strong 111% in the first half of last year, and reflected the working capital required to support the strong growth in the period. Our strong balance sheet and continued cash generation underpin our ongoing investment in future organic growth, give us substantial capacity for acquisitions, and support our progressive dividend policy.
We made substantial investments in the first half, both organically and through acquisitions, to support future growth. R&D expenditure increased 20% to £41.3m, representing 5.6% of Group revenue (2020/21: 5.6%). We made ten acquisitions, for a maximum total consideration of £107m, while disposing of one business for £65m. Since the period end, we have made one further acquisition, of Clayborn Lab, for a maximum total consideration of US$6m (£4.4m).
The Board has declared an increase of 7% in the interim dividend to 7.35p per share (2020/21: 6.87p per share). The interim dividend will be paid on 4 February 2022 to shareholders on the register on 24 December 2021.
Strong organic constant currency1 growth in all major regions
| External revenue by destination | | | | | |||
| | Half year 2021 | Half year 2020 | | | | ||
| | £m | % of total | £m | % of total | Change | % | % organic growth at constant currency1 |
| United States of America | 280.9 | 38% | 255.1 | 41% | 25.8 | 10% | 19% |
| Mainland Europe | 146.6 | 20% | 127.2 | 21% | 19.4 | 15% | 18% |
| United Kingdom | 136.2 | 18% | 87.6 | 14% | 48.6 | 55% | 46% |
| Asia Pacific | 124.8 | 17% | 100.0 | 16% | 24.8 | 25% | 30% |
| Other regions | 48.7 | 7% | 48.5 | 8% | 0.2 | 1% | 6% |
| | 737.2 | 100% | 618.4 | 100% | 118.8 | 19% | 23% |
Our growth in the period was broad-based, and revenue grew strongly in all four major regions, both on a reported and organic constant currency1 basis. Growth rates in each region, were also impacted to differing extents by acquisitions (net of disposals), and a negative effect from foreign currency translation, given the relative strength of Sterling.
The USA remains our largest sales destination and contributed 38% of total revenue. Revenue increased by 10%, or by 19% on an organic constant currency1 basis, with all sectors delivering a strong organic constant currency1 performance.
Reported revenue growth in the USA included the effect of the acquisition of PeriGen and the disposal in the prior year of Fiberguide Industries, as well as a negative effect from currency translation. The strongest growth was in the Environmental & Analysis sector, led by strong performances in Optical Analysis and Gas Detection. The Safety sector also delivered strong organic constant currency1 growth, led by Fire Detection and Industrial Access Control. Growth in the Medical sector reflected an increase in demand for products and services related to elective healthcare procedures, partly offset by a decline, from last year's exceptionally high levels, in the demand for products and services related to the diagnosis or treatment of COVID-19.
Mainland Europe revenue increased by 15%, or 18% on an organic constant currency1 basis, with strong performances across all sectors. Reported revenue benefited from a number of acquisitions, including Sensitron and Orca, partly offset by the disposal of Texecom in August. There was a negative effect from currency translation.
Revenue in the UK grew 55%, or 46% on an organic constant currency1 basis, with an exceptionally strong contribution from the Safety sector, against a very weak comparative in the first half of last year. The Environmental & Analysis sector also grew strongly, while the smaller Medical sector revenues more than tripled, benefiting from the prior year acquisition of Static Systems.
Asia Pacific's revenue grew 25%, or 30% on an organic constant currency1 basis. Organic constant currency1 growth reflected very strong performances across all sectors, against a weaker comparative in the first half of last year. This included a very strong performance in China, as well as in a number of other smaller markets in the region.
In other regions, which represent only 7% of Group revenue, revenue was broadly flat, although growing 6% on an organic constant currency1 basis. There was modest growth in the Africa, Near and Middle East territories, while revenue declined in Other countries.
Substantial revenue and profit growth in all sectors
From 1 April 2021, we operate and report under three sectors, Safety, Environmental & Analysis and Medical, aligned with our purpose and our focus on safety, environmental and health markets.
| External revenue by sector | | | | | |
| | Half year 2021 | Half year 2020 | | | |
| | £m | £m | Change | % | % organic growth at constant currency1 |
| Safety | 320.2 | 268.6 | 51.6 | 19% | 25% |
| Environmental & Analysis | 209.5 | 178.0 | 31.5 | 18% | 25% |
| Medical | 208.0 | 172.4 | 35.6 | 21% | 18% |
| Inter-segmental revenue | (0.5) | (0.6) | 0.1 | | |
| | 737.2 | 618.4 | 118.8 | 19% | 23% |
| Profit by sector | | | | | |
| | Half year 2021 | Half year 2020 | | | |
| | £m | £m | Change | % | % organic growth at constant currency1 |
| Safety | 73.5 | 58.0 | 15.5 | 27% | 32% |
| Environmental & Analysis | 53.1 | 42.9 | 10.2 | 24% | 31% |
| Medical | 46.3 | 38.2 | 8.1 | 21% | 20% |
| Sector profit2 | 172.9 | 139.1 | 33.8 | 24% | 28% |
| Central administration costs | (14.0) | (11.3) | (2.7) | | |
| Net finance expense | (4.0) | (5.8) | 1.8 | | |
| Adjusted1 profit before taxation | 154.9 | 122.0 | 32.9 | 27% | 32% |
Safety sector
Revenue increased by 19% to £320.2m (2020/21: £268.6m) and organic constant currency1 revenue increased by 25%. There was a positive contribution from acquisitions of 1%, and negative effects from the disposal of Texecom of 3% and currency translation of 4%.
The sector delivered a strong performance across all major regions, supported by the agility of our companies in successfully responding to new opportunities in their markets and to the substantial increases in customer demand following the easing of lockdown restrictions. This agility also resulted in our companies meeting the challenges arising in the period from supply chain and logistics disruptions and in labour markets. For example, they leveraged their close relationships with suppliers to ensure continued delivery of materials and components, redesigned products and used alternative materials where necessary, selectively increased prices, and formed collaborative teams across functions, companies and geographies to solve specific issues.
This strong performance was led by substantial growth in our Fire Detection businesses. These businesses were affected in the first half of last year by lockdown restrictions and the furloughing of customer employees. This year they benefited from a recovery in demand as construction activity resumed, from an improvement in the ability to gain physical access to customer sites, and from the return to work of previously furloughed customer employees. The same dynamics also led to very strong growth in our Elevator Safety business in the UK, and, together with increasing regulation, our emergency communications business in the USA.
Our People and Vehicle Flow businesses also performed strongly. Significant road safety contracts in the UK and China drove very strong growth at Navtech. BEA, which had delivered a resilient performance in the first half of last year, also grew strongly, as construction activity increased and demand for its touchless and automated entry devices continued to grow to meet the changing needs of our customers as a result of the pandemic.
We also saw benefits from increasing activity in several other market segments and from the ability of our companies to swiftly adapt and scale for changing customer needs. Examples included meeting strong demand from logistics customers for our interlock products in the Industrial Access Control segment and prioritising those technologies which support the decarbonisation of our energy sources in Pressure Management.
However, some business areas, such as those focused on larger projects with longer lead times, such as in Safe Storage and Transfer, are taking longer to recover from the effects of the pandemic. Elsewhere, weakness in some specific markets, such as the aerospace market within Fire Suppression, resulted in revenue declines in a limited number of companies, principally smaller ones within the sector.
The sector's revenue performance by geography reflected these themes. The UK and Asia Pacific grew exceptionally strongly, with organic constant currency1 revenue growth of 69% and 25% respectively, driven by strong growth in Fire Detection and People and Vehicle Flow. The UK's lower revenue growth on a reported basis, at 57%, reflected the net effect of acquisitions and the disposal.
The other two larger regions, the USA and Mainland Europe, also grew strongly, each increasing revenue by 18% on an organic constant currency1 basis. This included strong growth in Fire Detection and in People and Vehicle Flow in Europe, and in the USA in emergency communications, Industrial Access Control and Pressure Management.
Revenue declines in the much smaller regions, of 9% in total (on an organic constant currency1 basis), principally reflected the timing of project-based business and a continued shift away from oil and gas-related business in these regions and the sector as a whole.
Profit2 was 27% higher at £73.5m (2020/21: £58.0m), and included 32% organic constant currency1 growth, and negative effects of 1% from the Texecom disposal (net of a small contribution from acquisitions) and 4% from currency translation. Return on Sales1 increased to 23.0% (2020/21: 21.6%), benefiting from the slower-than-expected return of variable overhead costs in the first quarter and a stable gross margin. R&D expenditure of £18.0m remained at a good level, with a significant increase in absolute investment representing 5.6% of revenue (2020/21: 5.5%).
Our current expectation is for the sector to make further progress in the second half, against a stronger comparative (notably at the profit level). Although risks remain in relation to supply chain, logistics and labour market disruptions, it is expected to deliver a strong full year performance.
Environmental & Analysis sector
Revenue increased by 18% to £209.5m (2020/21: £178.0m), comprising 25% organic constant currency1 growth, a 4% contribution from acquisitions, and the negative effects of 4% from last year's disposal of Fiberguide Industries and 7% from currency translation.
While many sector companies experienced supply chain and labour market challenges to varying degrees in the period, the sector delivered strong revenue growth in all segments and regions, as our companies responded to substantial increases in customer demand for their products and services. This demand was driven by higher activity as COVID-19 restrictions eased, and by increasing focus on protecting the environment and scarce natural resources. These trends supported a strong recovery in the Gas Detection subsector and greater demand for wastewater solutions within our Water Analysis & Treatment segment. Photonics also performed very well on an organic constant currency1 basis and continued to benefit from increasing demand for technologies that support the building of digital and data capabilities.
In the USA, revenue grew 27% on an organic constant currency1 basis, driven by further growth in a continuing large Photonics contract, and in Gas Detection. The latter reflected its customers' increasing focus on the minimisation of emissions of methane, a potent greenhouse gas, and an ever-increasing desire to improve public safety.
Asia Pacific revenue growth was also very strong, at 34% on an organic constant currency1 basis, including substantial revenue growth in China, with several other smaller markets in the region, such as India, Japan, Singapore and Australasia also performing strongly. The Water Analysis and Treatment segment's continued focus on the region led to increased market penetration, while the recovery in industrial activity, as pandemic restrictions eased, supported strong growth in the Optical Analysis segment.
Organic constant currency1 revenue growth of 14% in the UK reflected the continued focus of our customers on the integrity of water and wastewater infrastructure, which supported a strong performance in our pipeline inspection business. However, this was partly offset by weakness in our water pressure and leak detection business against a strong comparative in the first half of last year, reflecting reduced demand from UK water utilities as they focus more on addressing their wastewater challenges.
Mainland Europe delivered strong organic constant currency1 revenue growth and, on a reported basis, also benefited from the acquisitions of Sensitron, Orca and Dancutter. Other regions, which represent less than 10% of sector revenue, delivered a very strong growth, led by Gas Detection.
Profit2 increased by 24% to £53.1m (2020/21: £42.9m). Organic constant currency1 profit growth was 31% and there was a 3% contribution from acquisitions and negative effects of 2% from prior year disposals and 8% from currency translation. Return on Sales1 improved from 24.1% to 25.4%, due to proactive overhead management, despite a decline in gross margin driven by business mix. Despite such strong revenue growth, R&D expenditure of £10.3m was maintained at a good level at 4.9% of sales (2020/21: 5.8%).
The sector is currently expected to perform strongly over the full year. In the second half, we expect strong revenue growth, albeit with continued risks from supply chain, logistics and labour market disruption. We expect a more typical level of Return on Sales1 given a more normal business mix and increased investment.
Medical sector
Revenue increased by 21% to £208.0m (2020/21: £172.4m). Organic constant currency1 revenue growth was 18%, and there was an 8% negative effect from currency translation and an 11% positive contribution from acquisitions, primarily Static Systems and PeriGen.
There was growth across all segments and geographies, reflecting a gradual improvement in demand for elective surgeries and discretionary ophthalmic diagnostic procedures as the effects of the pandemic on healthcare systems moderated. As expected, this was partly offset by a reduction in demand for products and services related to the treatment of COVID-19 from the very high levels experienced in the first half of last year. Sector companies have successfully responded to these varying market conditions and to continuing operational challenges. These include supply chain and labour market disruption, and a varying ability to access hospitals in Sensors & Analytics.
These trends were reflected in the performance of the individual segments. Health Assessment saw the strongest growth, supported by recent acquisitions. On an organic basis, the recovery in demand for ophthalmic diagnostic procedures and growth in Sensors & Analytics supporting care systems' focus on greater efficiency and ensuring the effectiveness of hygiene protocols, were key growth drivers. However, revenue from products focused on the monitoring of vital signs declined. In Therapeutic Solutions, strong growth in demand for products supporting elective surgeries was partly offset by a reduction for products supporting the oxygenation of patients. Life Sciences revenue also grew, notably in China, but growth was more subdued in other regions which continue to be impacted by the ongoing focus on COVID-19 testing and point-of-care diagnostics.
The USA, the sector's largest region, grew revenue by 9% (12% on an organic constant currency1 basis). This was a good performance when compared to the strong growth of 14% in the first half of last year. On a reported basis, USA revenue also benefited from the acquisition of PeriGen, although this was more than offset by the negative effect of currency translation.
In the other major regions, Mainland Europe revenue grew strongly, by 17% on an organic constant currency1 basis, against growth of 6% in the comparable period last year. Growth rates were highest in the UK and Asia Pacific, at 52% and 32% respectively on an organic constant currency1 basis, reflecting a recovery in demand and a weaker comparative in the first half of last year. On a reported basis, UK revenue more than tripled, reflecting the recent acquisition of Static Systems, as well as very strong organic constant currency1 growth off a small base.
Profit2 increased by 21% to £46.3m (2020/21: £38.2m). Return on Sales1 increased to 22.3% (2020/21: 22.1%), reflecting a benefit to gross margin from favourable product mix and a slower-than-expected increase in overheads as customer-facing employees began to return to normal activity. R&D spend of £12.8m reflected a significant increase in investment in new product development, with the increase to 6.2% of revenue (2020/21: 5.5%) being attributable to changes in business mix and investment by recently acquired companies.
The Medical sector is currently expected to make further progress in the second half, and to deliver a good performance for the year as a whole.
Eleven acquisitions and one disposal completed to enhance our growth opportunities
We continue to actively manage our portfolio of global businesses to ensure that it is aligned with our purpose of growing a safer, cleaner, healthier future for everyone, every day, and can deliver strong and sustainable growth and returns. We have a healthy acquisition pipeline across all three sectors and continue to find attractive, high-quality businesses to enhance our existing market strengths as well as to enter emerging market opportunities.
We made 10 acquisitions in the period, for a maximum total consideration of £107m (on a cash- and debt-free basis), in core and adjacent markets to expand our future growth opportunities and geographical reach. These were broadly spread across all three sectors and our four major geographical regions. They comprised three companies which will be standalone within the Halma group, and seven bolt-on acquisitions which will strengthen the technologies and capabilities of existing Halma companies.
In April and May 2021, we completed six acquisitions (including five bolt-on acquisitions).
· PeriGen, Inc., whose advanced technology protects mothers and their unborn babies during childbirth by alerting doctors, midwives and nurses to potential problems, was acquired for a cash consideration of US$58m (approximately £41m) on a cash- and debt-free basis.
· Assets and IP associated with monitored safety valves were purchased from FluidSentry Pty for A$0.6m (£0.3m), and added to Fortress Interlocks.
· Argus Security S.R.L. acquired its Italian distributor for €0.6m (£0.5m).
· Anton Industrial Services, Crowcon's UK flue gas analyser distribution partner, was purchased for £1.9m.
· Orca GmbH, a German manufacturer of ultraviolet disinfection systems, joined our UV Group of companies for a maximum consideration of €8.7m (£7.6m), on a cash- and debt-free basis.
· Assets and IP associated with the US-based RNK's digital stethoscope used in telemedicine and augmented tele-auscultation, were purchased by Riester for a consideration of US$3.0m (£2.3m).
In August 2021, we announced that we had completed a further three acquisitions, as follows:
· the Ramtech group of companies, a UK-based supplier of wireless fire systems for temporary sites, was purchased for a cash consideration of £15.5m, on a cash- and debt-free basis.
· Dancutter A/S, a Danish designer and manufacturer of trenchless pipeline rehabilitation equipment, was acquired for a cash consideration of €17.6m (£15.0m), on a cash- and debt-free basis.
· Sensitron S.R.L., an Italian gas detection company, joined Halma for a cash consideration of €20.1m (£17.2m), on a cash- and debt-free basis.
In September 2021, we acquired Meditech Kft, a Hungarian manufacturer of ambulatory blood pressure monitors and ECG Holter devices, for a maximum total consideration of €6.4m (approximately £5.5m). It will be integrated with our SunTech business.
Since the period end, we have made one further acquisition, of Clayborn Lab, a provider of custom heat tape solutions primarily for heated sample lines in the environmental monitoring market. Clayborn Lab will become part of our Perma Pure business and was acquired for an initial cash consideration of US$4.5m (£3.3m) with an additional earn-out consideration of US$1.5m (£1.1m), payable in cash, subject to performance over the next two years.
We also made one disposal in the period, demonstrating our disciplined approach to portfolio management and supporting our strategy of maintaining a growth-oriented portfolio of companies. In August 2021, we sold Texecom, a UK-based provider of electronic security systems, for a total cash consideration of £65m on a cash- and debt-free basis. Texecom was acquired by Halma in 2005 for a consideration of £26m.
Further progress aligned with our Sustainability Framework
We seek to create sustainable value for our stakeholders through our Sustainable Growth Model. This is focused on delivering consistently strong growth and returns with a positive impact in the markets we serve and beyond, consistent with our purpose of growing a safer, cleaner, healthier future for everyone, every day. Our Sustainability Framework, which we launched in June this year, is designed to amplify this positive impact through purpose-aligned growth. It prioritises three Key Sustainability Objectives (KSOs), namely Climate Change, the Circular Economy, and Diversity, Equity and Inclusion (DEI). These KSOs are, in turn, supported by policies and metrics that we consider essential to growing our business responsibly.
During this half year, we have developed programmes to support our companies' existing sustainability initiatives while further raising awareness of Halma's KSOs within our Group and companies' management teams. We are helping our companies to deliver against our KSOs through the creation of collaboration and best practice networks and the provision of tools and resources to raise awareness and address specific challenges. These include launching a new "Inclusive Leadership" programme for our Divisional Chief Executives and Managing Directors, a new collaboration with EcoVadis to enable our companies to assess the sustainability credentials of their key suppliers, and a revised car policy that encourages and incentivises the adoption of zero emission vehicles.
To ensure that sustainability and climate change risks and opportunities are integrated into company board discussions and are ultimately fully incorporated into each company's sustainable growth strategies, we have asked each of our companies to nominate a board member responsible for sustainability. Each company is also creating a KSO Action Plan over the next 12 months, which will include their detailed plans to contribute towards the Group's Scope 1 & 2 greenhouse gas emissions goals of Net Zero by 2040, including a 42% absolute emissions reduction from our 2020 baseline by 2030. A number of our companies have already made good progress towards creating their KSO Action Plans and are implementing workstreams to reduce energy consumption, switch to renewable energy, reduce waste and investigate more circular product solutions.
At the Group level, we made further progress in assessing the possible materiality, impacts and timescales of potential risks and opportunities associated with climate change, to fulfil our commitment to report in line with the Task Force on Climate-related Financial Disclosures (TCFD) framework in our next Annual Report. In addition, we have commenced work on quantifying our Scope 3 emissions to establish the full value chain commitments and targets that will be most appropriate for Halma as part of our Climate Change KSO.
In support of our Diversity, Equity and Inclusion KSO, we refreshed our DEI strategy and this now includes a stretching target to achieve 40-60% gender diversity on our company boards by the end of March 2024 (compared to the current 23% female representation).
One of Halma's challenges is to minimise the sustainability reporting burden on our relatively small operating companies, while improving the breadth and robustness of information available to both monitor our progress and enhance our disclosure to our stakeholders as a FTSE 100 group. As part of our technology transformation project, we are working towards identifying solutions to collect this information more efficiently. Alongside this, we are planning to incorporate sustainability targets related to some of our KSOs into remuneration for our senior executives, with effect from 1 April 2022.
Negative currency effects on reported revenue and profit
We report our results in Sterling with 46% of Group revenue denominated in US Dollars and 12% 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 2021/22. This resulted in a 6% negative currency translation effect on Group revenue and 7% on profit in the first half of 2021/22 relative to 2020/21. If exchange rates remain at current levels, we expect a further, although smaller, negative currency translation effect in the second half of 2021/22.
Pension deficit reduced
On an IAS 19 basis the net deficit on the Group's defined benefit plans at the half year end reduced to £5.3m (31 March 2021: £22.5m) before the related deferred tax asset. The plans' liabilities increased due to a decrease in the discount rate used to value those liabilities, but this was more than offset by further employer contributions which, together with the return from the plans' assets, resulted in the overall reduction in the plans' deficit. The plans' actuarial valuation reviews, rather than the accounting basis, determine any cash payments by the Group to eliminate the deficit. We expect the aggregate cash contributions in this regard for the two UK defined benefit plans in the 2021/22 financial year to be consistent with our previous guidance of £14.2m.
Group tax rate higher as expected
The Group's effective tax rate on adjusted profit was 21.8%, slightly higher than guidance, principally due to profit mix. This is based on the forecast effective tax rate for the year as a whole which, as expected, is higher than the prior year rate of 20.1%.
On 2 April 2019, the European Commission 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 has appealed against the European Commission's decision, as has the UK Government. 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. We expect these payments to be refundable in the event of a successful appeal and therefore have recognised a receivable of £14.7m in the balance sheet.
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 85%, which was below our annualised cash conversion target of 90%. This was principally because of an increase in working capital of £25.5m (2020/21: reduction of £6.4m) to fund the Group's very strong growth, the full effects of which were partly mitigated by continued strong working capital control.
Dividend payments increased to £40.8m (2020/21: £37.7m). Tax payments were also higher at £27.6m, compared to £14.0m in the first half of 2020/21, an unusually low level due to changes in the timing of tax payments and one-off tax refunds.
Expenditure on acquisitions, which include acquisition costs and contingent consideration for acquisitions made in prior years, plus the net of proceeds from disposals, totalled £58.0m (2020/21: £8.2m).
Capital expenditure (net of disposal proceeds) increased to £14.2m, compared to £11.1m in the first half of 2020/21 when we limited capital investment to essential projects and R&D only. We continue to expect capital expenditure for the full year to be around £30m.
Net debt at the end of the period was £280.2m (31 March 2021: £256.2m). Gearing (the ratio of net debt to the last 12 months' EBITDA) at half year end was 0.76 times (31 March 2021: 0.76 times), which is well within our typical operating range of up to two times.
Board and senior leadership changes
As announced earlier this year and confirmed at our AGM in July 2021, Dame Louise Makin became Halma's Chair and Paul Walker, Adam Meyers and Daniela Barone Soares retired from Halma's Board. The Chair transition from Paul to Louise was completed smoothly and the Board continues to work effectively.
Since the period end, we have announced the appointment of Sharmila Nebhrajani OBE as an independent non-executive Director, effective 1 December 2021. Sharmila brings a wealth of experience gained across a variety of roles, spanning both the public and private/NGO sectors, and has a particularly strong background in sustainability and health.
Following the change to three sectors in April 2021, and the promotion of Wendy McMillan and Constance Baroudel to the roles of Sector Chief Executive (SCE) for the Safety and Environmental & Analysis sectors respectively, Steve Brown has replaced Laura Stoltenberg as SCE for our Medical sector. Steve has been a Divisional Chief Executive since 2018, having previously served as a successful Managing Director of one of our largest businesses, Apollo Fire Detectors, since 2015. These appointments further strengthen our Executive Board and demonstrate the strength of our talent development and succession planning processes together with our ambition for the future.
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 effects on revenue, costs and working capital from the currently elevated levels of disruption in supply chains, logistics and in labour markets. 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 78 to 83 of the Annual Report and Accounts 2021, which is available on the Group's website at www.halma.com. See note 17 to the Condensed Interim Financial Statements for further details.
Going concern
After conducting a review of the Group's financial resources, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the Condensed Interim Financial Statements.
Summary and Outlook
Halma made strong progress in the first half, delivering record revenue, profit and interim dividend, with substantial growth compared to both the first half of last financial year and 2019/20.
Our full year outlook is unchanged, despite variable overhead costs returning and continued impacts on revenue, costs and working capital from increased supply chain, logistics and labour market disruption. In the second half of the year, we expect more typical rates of revenue growth and Return on Sales, with the latter more in line with historical levels.
Our Sustainable Growth Model continues to drive our success, including its focus on global niche markets with long-term growth drivers. Our strong purpose and culture, our portfolio and geographic diversity, together with our agile business model enable us to perform well in varied market conditions and sustain growth and returns over the longer term.
Andrew Williams Marc Ronchetti
Group Chief Executive Chief Financial Officer
1 See Highlights, page 1.
2 See note 2 to the Condensed Interim Financial Statements. Profit is Adjusted1 operating profit before central administration costs after share of associate.
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 Report of Halma plc for the 6 month period ended 30 September 2021 (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.
What we have reviewed
The interim financial statements comprise:
- the Consolidated Balance Sheet as at 30 September 2021;
- the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income and Expenditure - for the period then ended;
- the Consolidated Cash Flow Statement for the period then ended;
- the Consolidated Statement of Changes in Equity for the period then ended; and
- the explanatory notes to the interim financial statements.
The interim financial statements included in the Half Year Report 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.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half Year Report, including the interim financial statements, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the Half Year Report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the Half Year Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Half Year Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Watford
18 November 2021
Condensed Interim Financial Statements
Consolidated Income Statement
| | | Unaudited Six months to | Unaudited Six months to | Audited | ||||
| | Notes | Before adjustments* £m | Adjustments* (note 2) | Total | Before adjustments* £m | Adjustments* (note 2) | Total | Total |
| Continuing operations | | | | | | | | |
| Revenue | 2 | 737.2 | - | 737.2 | 618.4 | - | 618.4 | 1,318.2 |
| Operating profit | | 159.0 | (21.4) | 137.6 | 127.8 | (25.7) | 102.1 | 240.8 |
| Share of results of associates | | (0.1) | - | (0.1) | - | - | - | - |
| Gain on disposal of operations | 11 | - | 34.0 | 34.0 | - | - | - | 22.1 |
| Finance income | 3 | 0.6 | - | 0.6 | 1.0 | - | 1.0 | 1.0 |
| Finance expense | 4 | (4.6) | - | (4.6) | (6.8) | - | (6.8) | (11.0) |
| Profit before taxation | 154.9 | 12.6 | 167.5 | 122.0 | (25.7) | 96.3 | 252.9 | |
| Taxation | 5 | (33.8) | 2.0 | (31.8) | (25.1) | 6.1 | (19.0) | (49.6) |
| Profit for the period | | 121.1 | 14.6 | 135.7 | 96.9 | (19.6) | 77.3 | 203.3 |
| Attributable to: | | | | | | | | |
| Owners of the parent | | | | 135.8 | | | 77.3 | 203.4 |
| Non-controlling interests | | | | (0.1) | | | - | (0.1) |
| | | | | | | | | |
| Earnings per share from continuing operations | 6 | | | | | | | |
| Basic and diluted | | 31.96p | | 35.83p | 25.54p | | 20.37p | 53.61p |
| Dividends in respect of the period | 7 | | | | | | | |
| Dividends paid and proposed (£m) | | | | 27.8 | | | 26.1 | 66.8 |
| Per share | | | | 7.35p | | | 6.87p | 17.65p |
* Adjustments include 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. Note 9 provides more information on alternative performance measures.
Consolidated Statement of Comprehensive Income
and Expenditure
| | Unaudited | Unaudited | Audited |
| Profit for the period | 135.7 | 77.3 | 203.3 |
| Items that will not be reclassified subsequently to the Income Statement: | | | |
| Actuarial gains/(losses) on defined benefit pension plans | 10.4 | (46.3) | (30.6) |
| Tax relating to components of other comprehensive income that will not be reclassified | (1.0) | 8.8 | 5.9 |
| Items that may be reclassified subsequently to the Income Statement: | | | |
| Effective portion of changes in fair value of cash flow hedges | (0.8) | (0.6) | 1.0 |
| Deferred tax in respect of cash flow hedges accounted for in the hedging reserve | 0.2 | 0.1 | (0.2) |
| Exchange gains/(losses) on translation of foreign operations and net investment hedge | 18.5 | (14.9) | (72.7) |
| Exchange gain on translation of foreign operations recycled on disposal | - | - | (2.8) |
| Other comprehensive income/(expense) for the period | 27.3 | (52.9) | (99.4) |
| Total comprehensive income for the period | 163.0 | 24.4 | 103.9 |
| Attributable to: | | | |
| Owners of the parent | 163.1 | 24.4 | 104.0 |
| Non-controlling interests | (0.1) | - | (0.1) |
The exchange gains of £18.5m (six months to 30 September 2020: £14.9m loss; year to 31 March 2021: £72.7m loss) include losses of £3.6m (six months to 30 September 2020: £4.2m gains; year to 31 March 2021: £19.9m gains), which relate to net investment hedges.
Consolidated Balance Sheet
| | Notes | Unaudited | Unaudited £m | Audited |
| Non-current assets | | | | |
| Goodwill | | 867.4 | 829.8 | 808.5 |
| Other intangible assets | | 319.3 | 303.8 | 290.0 |
| Property, plant and equipment | | 186.7 | 184.7 | 180.8 |
| Interests in associates and other investments | | 9.9 | 4.8 | 9.3 |
| Retirement benefit asset | 13 | 4.8 | - | - |
| Tax receivable | 14 | 14.7 | - | 13.9 |
| Deferred tax asset | | 1.9 | 5.6 | 1.3 |
| | | 1,404.7 | 1,328.7 | 1,303.8 |
| Current assets | | | | |
| Inventories | | 193.2 | 175.8 | 167.8 |
| Trade and other receivables | | 279.2 | 245.3 | 268.0 |
| Tax receivable | | 4.4 | 6.5 | 2.5 |
| Cash and bank balances | | 131.1 | 125.5 | 134.1 |
| Derivative financial instruments | 12 | 0.6 | 0.4 | 1.7 |
| | | 608.5 | 553.5 | 574.1 |
| Total assets | | 2,013.2 | 1,882.2 | 1,877.9 |
| Current liabilities | | | | |
| Trade and other payables | | 206.1 | 158.7 | 186.7 |
| Borrowings | | 3.0 | 76.1 | 3.0 |
| Lease liabilities | | 14.2 | 13.0 | 13.3 |
| Provisions | | 22.0 | 30.5 | 35.4 |
| Tax liabilities | | 13.8 | 11.3 | 8.9 |
| Derivative financial instruments | 12 | 0.2 | 0.9 | 0.7 |
| | | 259.3 | 290.5 | 248.0 |
| Net current assets | | 349.2 | 263.0 | 326.1 |
| Non-current liabilities | | | | |
| Borrowings | | 340.7 | 300.0 | 322.3 |
| Lease liabilities | | 53.4 | 51.4 | 51.7 |
| Retirement benefit obligations | 13 | 10.1 | 45.0 | 22.5 |
| Trade and other payables | | 15.2 | 16.3 | 16.8 |
| Provisions | | 6.3 | 14.3 | 8.4 |
| Deferred tax liabilities | | 51.1 | 41.7 | 40.6 |
| | | 476.8 | 468.7 | 462.3 |
| Total liabilities | | 736.1 | 759.2 | 710.3 |
| Net assets | | 1,277.1 | 1,123.0 | 1,167.6 |
| Equity | | | | |
| Share capital | | 38.0 | 38.0 | 38.0 |
| Share premium account | | 23.6 | 23.6 | 23.6 |
| Own shares | | (22.0) | (5.2) | (20.9) |
| Capital redemption reserve | | 0.2 | 0.2 | 0.2 |
| Hedging reserve | | 0.1 | (0.6) | 0.7 |
| Translation reserve | | 91.7 | 133.8 | 73.2 |
| Other reserves | | (26.4) | (18.9) | (13.6) |
| Retained earnings | | 1,171.4 | 952.8 | 1,065.8 |
| Equity attributable to owners of the Company | | 1,276.6 | 1,123.7 | 1,167.0 |
| Non-controlling interests | | 0.5 | (0.7) | 0.6 |
| Total equity | | 1,277.1 | 1,123.0 | 1,167.6 |
Consolidated Statement of Changes in Equity
| | | For the six months to 30 September 2021 | ||||||||
| | Share | Share | Own | Capital | Hedging | Translation | Other | Retained | Non-controlling interest | Total |
| At 1 April 2021 (audited) | 38.0 | 23.6 | (20.9) | 0.2 | 0.7 | 73.2 | (13.6) | 1,065.8 | 0.6 | 1,167.6 |
| Profit for the period | - | - | - | - | - | - | - | 135.8 | (0.1) | 135.7 |
| | | | | | | | | | | |
| Other comprehensive income and expense: | | | | | | | | | | |
| Exchange differences on translation of foreign operations | - | - | - | - | - | 18.5 | - | - | - | 18.5 |
| Actuarial gains on defined benefit pension plans | - | - | - | - | - | - | - | 10.4 | - | 10.4 |
| Effective portion of changes in fair value of cash flow hedges | - | - | - | - | (0.8) | - | - | - | - | (0.8) |
| Tax relating to components of other comprehensive income and expense | - | - | - | - | 0.2 | - | - | (1.0) | - | (0.8) |
| Total other comprehensive income and expense | - | - | - | - | (0.6) | 18.5 | - | 9.4 | - | 27.3 |
| | | | | | | | | | | |
| Dividends paid | - | - | - | - | - | - | - | (40.8) | - | (40.8) |
| Share-based payments charge | - | - | - | - | - | - | 4.0 | - | - | 4.0 |
| Deferred tax on share-based payment transactions | - | - | - | - | - | - | (0.5) | - | - | (0.5) |
| Excess tax deductions related to share-based payments on exercised awards | - | - | - | - | - | - | - | 1.2 | - | 1.2 |
| Purchase of own shares | - | - | (10.4) | - | - | - | - | - | - | (10.4) |
| Performance share plan awards vested | - | - | 9.3 | - | - | - | (16.3) | - | - | (7.0) |
| At 30 September 2021 (unaudited) | 38.0 | 23.6 | (22.0) | 0.2 | 0.1 | 91.7 | (26.4) | 1,171.4 | 0.5 | 1,277.1 |
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 2021 the number of shares held by the Employee Benefit Trust was 870,370 (30 September 2020: 262,551 and 31 March 2021: 891,622).
The Translation reserve is used to record the difference arising from the retranslation of the financial statements of foreign operations. 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 Capital redemption reserve was created on repurchase and cancellation of the Company's own shares. The Other reserves represent the provision for the value of the Group's equity-settled share plans.
| | | For the six months to 30 September 2020 | ||||||||
| | Share | Share | Own | Capital | Hedging | Translation | Other | Retained | Non- controlling interest | Total |
| At 1 April 2020 (audited) | 38.0 | 23.6 | (14.3) | 0.2 | (0.1) | 148.7 | (7.7) | 949.2 | (0.7) | 1,136.9 |
| Profit for the period | - | - | - | - | - | - | - | 77.3 | - | 77.3 |
| | | | | | | | | | | |
| Other comprehensive income and expense: | | | | | | | | | | |
| Exchange differences on translation of foreign operations | - | - | - | - | - | (14.9) | - | - | - | (14.9) |
| Actuarial gains on defined benefit pension plans | - | - | - | - | - | - | - | (46.3) | - | (46.3) |
| Effective portion of changes in fair value of cash flow hedges | - | - | - | - | (0.6) | - | - | - | - | (0.6) |
| Tax relating to components of other comprehensive income and expense | - | - | - | - | 0.1 | - | - | 8.8 | - | 8.9 |
| Total other comprehensive income and expense | - | - | - | - | (0.5) | (14.9) | - | (37.5) | - | (52.9) |
| | | | | | | | | | | |
| Dividends paid | - | - | - | - | - | - | - | (37.7) | - | (37.7) |
| Share-based payments charge | - | - | - | - | - | - | 5.0 | - | - | 5.0 |
| Deferred tax on share-based | - | - | - | - | - | - | 0.4 | - | - | 0.4 |
| Excess tax deductions related to share-based payments on exercised awards | - | - | - | - | - | - | - | 1.5 | - | 1.5 |
| Performance share plan awards vested | - | - | 9.1 | - | - | - | (16.6) | - | - | (7.5) |
| At 30 September 2020 (unaudited) | 38.0 | 23.6 | (5.2) | 0.2 | (0.6) | 133.8 | (18.9) | 952.8 | (0.7) | 1,123.0 |
| | | For the year to 31 March 2021 | ||||||||
| | Share | Share | Own | Capital | Hedging | Translation | Other | Retained | Non- controlling interest £m | Total |
| At 1 April 2020 (audited) | 38.0 | 23.6 | (14.3) | 0.2 | (0.1) | 148.7 | (7.7) | 949.2 | (0.7) | 1,136.9 |
| Profit for the year | - | - | - | - | - | - | - | 203.4 | (0.1) | 203.3 |
| | | | | | | | | | | |
| Other comprehensive income and expense: | | | | | | | | | | |
| Exchange differences on translation of foreign operations and net investment hedge | - | - | - | - | - | (72.7) | - | - | - | (72.7) |
| Exchange loss on translation of foreign operations recycled to income statement on disposal | - | - | - | - | - | (2.8) | - | - | - | (2.8) |
| Actuarial loss on defined benefit pension plans | - | - | - | - | - | - | - | (30.6) | - | (30.6) |
| Effective portion of changes in fair value of cash flow hedges | - | - | - | - | 1.0 | - | - | - | - | 1.0 |
| Tax relating to components of other comprehensive income and expense | - | - | - | - | (0.2) | - | - | 5.9 | - | 5.7 |
| Total other comprehensive income and expense | - | - | - | - | 0.8 | (75.5) | - | (24.7) | - | (99.4) |
| | | | | | | | | | | |
| Dividends paid | - | - | - | - | - | - | - | (63.7) | - | (63.7) |
| Share-based payments charge | - | - | - | - | - | - | 11.9 | - | - | 11.9 |
| Deferred tax on share-based | - | - | - | - | - | - | (0.4) | - | - | (0.4) |
| Excess tax deductions related to share-based payments on exercised awards | - | - | - | - | - | - | - | 1.6 | - | 1.6 |
| Purchase of own shares | - | - | (16.2) | - | - | - | - | - | - | (16.2) |
| Performance share plan awards vested | - | - | 9.6 | - | - | - | (17.4) | - | - | (7.8) |
| Adjustments to non-controlling interest arising on acquisition | - | - | - | - | - | - | - | - | 1.4 | 1.4 |
| At 31 March 2021 (audited) | 38.0 | 23.6 | (20.9) | 0.2 | 0.7 | 73.2 | (13.6) | 1,065.8 | 0.6 | 1,167.6 |
Consolidated Cash Flow Statement
| | Notes | Unaudited | Unaudited | Audited |
| Net cash inflow from operating activities | 8 | 112.0 | 137.1 | 277.6 |
| | | | | |
| Cash flows from investing activities | | | | |
| Purchase of property, plant and equipment | | (13.7) | (10.2) | (22.8) |
| Purchase of computer software | | (0.5) | (0.5) | (2.8) |
| Purchase of other intangibles | | (0.4) | (0.9) | (1.2) |
| Proceeds from sale of property, plant and equipment and capitalised development costs | | 0.4 | 0.5 | 0.9 |
| Development costs capitalised | | (6.8) | (7.0) | (15.4) |
| Interest received | | 0.2 | 0.1 | 0.8 |
| Acquisition of businesses, net of cash acquired | 10 | (105.0) | (6.7) | (46.4) |
| Disposal of business, net of cash disposed | | 57.5 | - | 26.1 |
| Purchase of equity investments | | (0.7) | - | (3.4) |
| Net cash used in investing activities | | (69.0) | (24.7) | (64.2) |
| | | | | |
| Cash flows from financing activities | | | | |
| Dividends paid | 7 | (40.8) | (37.7) | (63.7) |
| Purchase of own shares | | (10.4) | - | (16.2) |
| Interest paid | | (3.9) | (5.7) | (10.0) |
| Proceeds from bank borrowings | | 100.0 | 9.1 | 129.4 |
| Repayments of bank borrowings | | (85.2) | (52.7) | (136.7) |
| Repayment of loan notes | | - | - | (72.2) |
| Repayment of lease liabilities | | (7.0) | (7.1) | (14.1) |
| Net cash used in financing activities | | (47.3) | (94.1) | (183.5) |
| | | | | |
| (Decrease)/increase in cash and cash equivalents | | (4.3) | 18.3 | 29.9 |
| Cash and cash equivalents brought forward | | 131.1 | 105.4 | 105.4 |
| Exchange adjustments | | 1.3 | (0.3) | (4.2) |
| Cash and cash equivalents carried forward | | 128.1 | 123.4 | 131.1 |
| | Unaudited | Unaudited | Audited |
| Reconciliation of net cash flow to movement in net debt | | | |
| (Decrease)/increase in cash and cash equivalents | (4.3) | 18.3 | 29.9 |
| Net cash (inflow)/outflow from (drawdown)/repayment of bank borrowings | (14.8) | 43.6 | 7.3 |
| Loan notes repaid | - | - | 72.2 |
| Lease liabilities additions | (7.9) | (11.9) | (25.0) |
| Lease liabilities acquired | (3.8) | - | (0.5) |
| Lease liabilities disposed of | 2.1 | - | 1.8 |
| Lease liabilities and interest repaid | 8.1 | 8.2 | 16.4 |
| Exchange adjustments | (3.4) | 2.1 | 17.0 |
| (Increase)/decrease in net debt | (24.0) | 60.3 | 119.1 |
| Net debt brought forward | (256.2) | (375.3) | (375.3) |
| Net debt carried forward | (280.2) | (315.0) | (256.2) |
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 2021, was approved by the Directors on 18 November 2021.
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 2021 which were prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The same accounting policies and presentation that were applied in the preparation of the Group's statutory accounts for the year to 31 March 2021 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 tax 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 2021 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.
For the year to 31 March 2022 the annual financial statements will be prepared in accordance with IFRS as adopted by the UK Endorsement Board. This change in basis of preparation is required by UK company law for the purposes of financial reporting as a result of the UK's exit from the EU on 31 January 2020 and the cessation of the transition period on 31 December 2020. This change does not constitute a change in accounting policy but rather a change in framework which is required to ground the use of IFRS in company law. There is no impact on recognition, measurement or disclosure between the two frameworks in the period reported.
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 2021, its cash flows, liquidity position and borrowing facilities are set out on pages 2 to 7.
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 set out in note 17. 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 totalling approximately £656m which includes a £550m Revolving Credit Facility maturing in November 2023 of which £315.8m remains undrawn at the date of this Report. The earliest maturity in these facilities is for £70.0m in January 2023. The financial covenants on these facilities are for leverage (net debt/adjusted EBITDA*) of not more than three times and for adjusted interest cover of not less than four times.
* net debt and adjusted EBITDA are on a pre-IFRS 16 basis for covenant purposes
Our base case scenario has been prepared using forecasts from each of our Operating Companies as well as cash outflows on acquisitions in line with pre COVID-19 levels. In addition, a severe but plausible downside scenario has been modelled showing trading at similar levels to those in FY21. This reduction in trading to that currently forecasted could be caused by further significant, unexpected COVID-19 impacts or another significant downside event. In mitigating the impacts of the downside scenario there are actions that can be taken which are entirely discretionary to the business such as acquisitions spend and dividend growth rates. In addition, the Group has demonstrated strong resilience and flexibility in the first half of the prior year in managing overheads which could be used to further mitigate the impacts of the downside scenario.
Neither of these 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.
New accounting standards and policies
The following Standards, with an effective date of 1 January 2021 and 1 April 2021 respectively, have been adopted without any significant impact on the amounts reported in these financial statements:
- Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16
- Amendments to IFRS 16: COVID-19-Related Rent Concessions
2 Segmental analysis and revenue from contracts with customers
Sector analysis
From 1 April 2021, the Group aligned its organisational structure and financial reporting with its purpose and focus on safety, environmental and health markets. The Group now has three main reportable segments (Safety, Environmental & Analysis and Medical), 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 Group Chief Executive.
Segment revenue disaggregation (by location of external customer)
| | Unaudited Six months to 30 September 2021 | ||||||
| | Revenue by sector and destination (all continuing operations) | ||||||
| | United States of America | Mainland Europe | United Kingdom | Asia Pacific | Africa, | Other | Total |
| Safety | 77.7 | 89.7 | 77.5 | 51.9 | 15.1 | 8.3 | 320.2 |
| Environmental & Analysis | 99.0 | 24.7 | 38.9 | 37.3 | 5.2 | 4.4 | 209.5 |
| Medical | 104.7 | 32.2 | 19.8 | 35.6 | 5.7 | 10.0 | 208.0 |
| Inter-segmental sales | (0.5) | - | - | - | - | - | (0.5) |
| Revenue for the period | 280.9 | 146.6 | 136.2 | 124.8 | 26.0 | 22.7 | 737.2 |
| | Unaudited Six months to 30 September 2020 | ||||||
| | Revenue by sector and destination (all continuing operations) Restated* | ||||||
| | | ||||||
| | United States | Mainland | United | Asia Pacific | Africa, | Other | Total |
| Safety | 71.0 | 78.5 | 49.3 | 42.6 | 16.4 | 10.8 | 268.6 |
| Environmental & Analysis | 88.3 | 19.7 | 32.9 | 29.6 | 4.4 | 3.1 | 178.0 |
| Medical | 96.2 | 29.0 | 5.6 | 27.8 | 4.0 | 9.8 | 172.4 |
| Inter-segmental sales | (0.4) | - | (0.2) | - | - | - | (0.6) |
| Revenue for the period | 255.1 | 127.2 | 87.6 | 100.0 | 24.8 | 23.7 | 618.4 |
| | Audited year end 31 March 2021 | ||||||
| | Revenue by sector and destination (all continuing operations) Restated* | ||||||
| | United States | Mainland | United | Asia Pacific | Africa, | Other | Total |
| Safety | 143.7 | 170.8 | 124.9 | 90.9 | 34.1 | 22.6 | 587.0 |
| Environmental & Analysis | 165.1 | 44.2 | 70.1 | 65.9 | 9.2 | 6.6 | 361.1 |
| Medical | 200.6 | 61.0 | 19.2 | 59.3 | 10.8 | 20.4 | 371.3 |
| Inter-segmental sales | (0.6) | - | (0.6) | - | - | - | (1.2) |
| Revenue for the period | 508.8 | 276.0 | 213.6 | 216.1 | 54.1 | 49.6 | 1,318.2 |
*Restated to reflect the new reporting segments.
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 £28.8m (six months to 30 September 2020: £21.3m; year to 31 March 2021: £52.6m). 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 Restated* | Audited 2021 Restated* |
| Segment profit before allocation of adjustments** | | | |
| Safety | 73.5 | 58.0 | 135.3 |
| Environmental & Analysis | 53.1 | 42.9 | 89.3 |
| Medical | 46.3 | 38.2 | 86.6 |
| | 172.9 | 139.1 | 311.2 |
| Segment profit after allocation of adjustments** | | | |
| Safety | 99.1 | 49.3 | 117.3 |
| Environmental & Analysis | 46.6 | 36.7 | 101.7 |
| Medical | 39.8 | 27.4 | 66.8 |
| Segment profit | 185.5 | 113.4 | 285.8 |
| Central administration costs | (14.0) | (11.3) | (22.9) |
| Net finance expense | (4.0) | (5.8) | (10.0) |
| Group profit before taxation | 167.5 | 96.3 | 252.9 |
| Taxation | (31.8) | (19.0) | (49.6) |
| Profit for the period | 135.7 | 77.3 | 203.3 |
* Restated to reflect the new reporting segments.
** Adjustments include the amortisation and impairment of acquired intangible assets; acquisition items; significant restructuring costs; and profit or loss 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 release of fair value adjustments to inventory (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 for the Six months to 30 September 2021 | |||||
| Amortisation | Acquisition items | | |
|
| |||
| Transaction | Adjustments | Release of | Total | Disposal of |
| |||
| Safety | (7.3) | (0.5) | - | (0.6) | (8.4) | 34.0 | 25.6 |
|
| Environmental & Analysis | (5.1) | (0.7) | 0.1 | (0.8) | (6.5) | - | (6.5) |
|
| Medical | (8.4) | (1.7) | 3.8 | (0.2) | (6.5) | - | (6.5) |
|
| Total Segment & Group | (20.8) | (2.9) | 3.9 | (1.6) | (21.4) | 34.0 | 12.6 |
|
The transaction costs arose mainly on the acquisitions during the year. In Safety, they related to the acquisition of Ramtech (£0.4m) and IBIT (£0.1m). In Environmental & Analysis, they related to the acquisition of Dancutter (£0.3m), Sensitron (£0.2m), Orca (£0.1m) and Anton (£0.1m). In Medical, they related to the acquisition of PeriGen (£1.3m), Meditech (£0.1m) and RNK (£0.1m), in the current year and the acquisition of Visiometrics in a previous year (£0.2m).
The £3.9m adjustment to contingent consideration comprised of a credit of £0.1m in Environmental & Analysis arising from a decrease in the estimate of the payables for Invenio and a credit of £3.8m in Medical arising from a decrease in estimates of the payables for NovaBone (£1.2m), NeoMedix (£2.5m) and Spreo (£0.1m) partially offset by an increase in the estimate of the payable for Infowave (£0.1m) and a credit of £0.1m arising from exchange differences on balances denominated in Euros.
The £1.6m release of fair value adjustments to inventory related to Ramtech (£0.6m) in Safety; Dancutter (£0.1m), Orca (£0.6m) and Sensitron (£0.1m) in Environmental & Analysis; and Meditech (£0.2m) in Medical. All amounts have been released in relation to Dancutter and Orca.
| | | | Unaudited for the Six months to 30 September 2020 Restated* | |||||
| Amortisation | Acquisition items | | |
|
| |||
| Transaction | Adjustments | Release of | Total | Disposal of |
| |||
| Safety | (7.8) | - | (0.9) | - | (8.7) | - | (8.7) |
|
| Environmental & Analysis | (5.3) | - | - | (0.9) | (6.2) | - | (6.2) |
|
| Medical | (8.5) | (0.6) | (0.2) | (1.5) | (10.8) | - | (10.8) |
|
| Total Segment & Group | (21.6) | (0.6) | (1.1) | (2.4) | (25.7) | - | (25.7) |
|
* Restated to reflect the new reporting segments.
The transaction costs relate to the acquisition of Visiometrics in a previous year.
The £1.1m adjustment to contingent consideration comprised: a charge of £0.9m in Safety arising from an increase in estimates of the payable for FireMate (£0.9m); and a charge of £0.2m in Medical arising from an increase in estimate of the payable for Infowave (£0.7m), a decrease in the estimate payable for NeoMedix (£1.0m) and a charge of £0.5m arising from exchange differences on balances denominated in Euros.
The £2.4m release of fair value adjustments to inventory relates to Sensit (£0.9m) in Environmental & Analysis and NovaBone (£1.3m) and Maxtec (£0.2m) in Medical.
| | | | | Audited year ended 31 March 2021 Restated* | |||
| | | Acquisition items | | | | ||
| |
Amortisation of acquired intangible assets £m | Transaction costs £m | Adjustments to contingent consideration £m | Release of fair value adjustments to inventory £m | Total amortisation charge and acquisition items £m | Disposal of operations and restructuring (note 11) £m | Total £m |
| Safety | (15.6) | - | (2.4) | - | (18.0) | - | (18.0) |
| Environmental & Analysis | (10.2) | - | 1.3 | (0.8) | (9.7) | 22.1 | 12.4 |
| Medical | (16.5) | (1.9) | 0.4 | (1.8) | (19.8) | - | (19.8) |
| Total Segment & Group | (42.3) | (1.9) | (0.7) | (2.6) | (47.5) | 22.1 | (25.4) |
* Restated to reflect the new reporting segments.
The transaction costs arose on the acquisition of Static Systems (£0.5m) during the year and costs relating to Visiometrics (£1.4m), both in the Medical sector.
The £0.7m adjustment to contingent consideration comprised: a charge of £2.4m in Safety arising from an increase in the estimate of the payables for Navtech (£1.5m) and FireMate (£0.9m); a credit of £1.3m in Environmental & Analysis arising from a decrease in estimate of the payables for Invenio (£0.8m) and Enoveo (£0.5m), and a credit of £0.4m in Medical arising from a decrease in the estimated payable for NeoMedix (£1.7m), offset by an increase in estimate of the payable for Infowave (£0.9m) and Spreo (£0.2m), and a charge of £0.2m arising from exchange differences on balances denominated in Euros.
The £2.6m release of fair value adjustments to inventory relates to Sensit (£0.8m) in Environmental & Analysis and NovaBone (£1.3m), Maxtec (£0.2m) and Static Systems (£0.3m) in Medical. All amounts have now been released in relation to Sensit, NovaBone, Maxtec and Static Systems.
Segment assets and liabilities
| | | Assets | | Liabilities |
| Before goodwill, interest in associates and other investments and acquired intangible assets are allocated to specific segment assets/liabilities | Unaudited 30 September 2021 £m | Audited 31 March 2021 £m Restated* | Unaudited 30 September 2021 £m | Audited 31 March 2021 £m Restated* |
| Safety | 255.9 | 276.9 | 78.6 | 95.6 |
| Environmental & Analysis | 143.5 | 136.2 | 61.7 | 56.8 |
| Medical | 173.4 | 155.7 | 70.5 | 54.0 |
| Total segment assets/liabilities excluding goodwill, interest in associates and other investments and acquired intangible assets | 572.8 | 568.8 | 210.8 | 206.4 |
| Goodwill | 867.4 | 808.5 | - | - |
| Interest in associate and other investments | 9.9 | 9.3 | - | - |
| Acquired intangible assets | 271.3 | 241.7 | - | - |
| Total segment assets/liabilities including goodwill, interest in associates and other investments and acquired intangible assets | 1,721.4 | 1,628.3 | 210.8 | 206.4 |
| | Assets | Liabilities | ||
| After goodwill, interest in associates and other investments and acquired intangible assets are allocated to specific segment assets/liabilities | Unaudited 30 September 2021 £m | Audited 31 March 2021 £m Restated* | Unaudited 30 September 2021 £m | Audited 31 March 2021 £m Restated* |
| Safety | 644.7 | 665.8 | 78.6 | 95.6 |
| Environmental & Analysis | 392.3 | 345.0 | 61.7 | 56.8 |
| Medical | 684.4 | 617.5 | 70.5 | 54.0 |
| Total segment assets/liabilities including goodwill, interest in associates and other investments and acquired intangible assets | 1,721.4 | 1,628.3 | 210.8 | 206.4 |
| Cash and bank balances/borrowings | 131.1 | 134.1 | 343.7 | 325.3 |
| Derivative financial instruments | 0.6 | 1.7 | 0.2 | 0.7 |
| Other unallocated assets/liabilities | 160.1 | 113.8 | 181.4 | 177.9 |
| Total Group | 2,013.2 | 1,877.9 | 736.1 | 710.3 |
* Restated to reflect the new reporting segments.
Segment assets and liabilities, excluding the allocation of goodwill, interest in associate and other investments and acquired intangible assets, have been disclosed separately above as this is the measure reported to the Group Chief Executive for the purpose of monitoring segment performance and allocating resources between segments. Other unallocated assets include land and buildings, right-of-use assets, retirement benefit assets, deferred tax assets and other central administration assets. Unallocated liabilities include contingent purchase consideration, retirement benefit obligations, deferred tax liabilities, lease liabilities and other central administration liabilities.
3 Finance income
| | Unaudited | Unaudited | Audited |
| Interest receivable | 0.2 | 0.1 | 0.8 |
| Net interest credit on pension plan liabilities | - | - | 0.1 |
| Fair value movement on derivative financial instruments | 0.4 | 0.9 | 0.1 |
| | 0.6 | 1.0 | 1.0 |
4 Finance expense
| | Unaudited | Unaudited | Audited |
| Interest payable on loans and overdrafts | 2.7 | 4.5 | 7.7 |
| Interest payable on lease obligations | 1.1 | 1.2 | 2.3 |
| Amortisation of finance costs | 0.3 | 0.3 | 0.7 |
| Net interest charge on pension plan liabilities | 0.2 | - | - |
| Other interest payable | 0.1 | - | 0.1 |
| | 4.4 | 6.0 | 10.8 |
| Fair value movement on derivative financial instruments | 0.2 | 0.8 | 0.2 |
| | 4.6 | 6.8 | 11.0 |
5 Taxation
The total Group tax charge for the six months to 30 September 2021 of £31.8m (six months to 30 September 2020: £19.0m; year to 31 March 2021: £49.6m) comprises a current tax charge of £33.1m (six months to 30 September 2020: £22.0m; year to 31 March 2021: £53.9m) and a deferred tax credit of £1.3m (six months to 30 September 2020: deferred tax credit £3.0m; year to 31 March 2021: deferred tax credit £4.3m). The tax charge is based on the estimated effective tax rates for the year, applied to profit before tax before adjustments. The tax rates applied to the adjustments are established on an individual basis for each adjustment.
The tax charge includes £21.4m (six months to 30 September 2020: £20.0m; year to 31 March 2021: £40.7m) in respect of overseas tax.
The Finance Bill 2021 received Royal Assent on 10 June 2021 and included the increase in the UK corporation tax rate from 19% to 25% from 1 April 2023. Accordingly, our UK deferred tax balances have been restated to 25%, resulting in a £2.6m charge to the profit and loss account, included as an adjusting item, and a £1.1m credit to reserves.
6 Earnings per ordinary share
Basic and diluted earnings per ordinary share are calculated using the weighted average of 378,763,653 (30 September 2020: 379,092,489; 31 March 2021: 379,157,495) shares in issue during the period (net of shares purchased by the Company and held as Employee Benefit Trust shares). There are no dilutive or potentially dilutive ordinary shares.
Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation 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 represent a more consistent measure of underlying performance as it excludes amounts not directly linked to trading. A reconciliation of earnings and the effect on basic earnings per share figures is as follows:
| | Unaudited | Unaudited | Audited |
| Earnings from continuing operations attributable to owners of the parent | 135.8 | 77.3 | 203.4 |
| Amortisation of acquired intangible assets (after tax) | 16.9 | 16.4 | 32.0 |
| UK tax rate change (Note 5) | 2.6 | - | - |
| Acquisition transaction costs (after tax) | 2.7 | 0.5 | 1.6 |
| Adjustments to contingent consideration (after tax) | (3.9) | 1.0 | 0.7 |
| Release of fair value adjustments to inventory (after tax) | 1.1 | 1.7 | 2.0 |
| Disposal of operations and restructuring (after tax) | (34.0) | - | (17.1) |
| Adjusted earnings attributable to owners of the parent | 121.2 | 96.9 | 222.6 |
| | Per ordinary share | ||
| | Unaudited | Unaudited | Audited |
| Earnings per share from continuing operations attributable to owners of the parent | 35.83 | 20.37 | 53.61 |
| Amortisation of acquired intangible assets (after tax) | 4.46 | 4.30 | 8.44 |
| UK tax rate change | 0.69 | - | - |
| Acquisition transaction costs (after tax) | 0.70 | 0.14 | 0.43 |
| Adjustments to contingent consideration (after tax) | (1.03) | 0.27 | 0.20 |
| Release of fair value adjustments to inventory (after tax) | 0.30 | 0.46 | 0.52 |
| Disposal of operations and restructuring (after tax) | (8.99) | - | (4.53) |
| Adjusted earnings per share attributable to owners of the parent | 31.96 | 25.54 | 58.67 |
7 Dividends
| | Per ordinary share | ||
| | Unaudited | Unaudited | Audited |
| Amounts recognised as distributions and paid to shareholders in the period | | | |
| Final dividend for the year to 31 March 2021 (31 March 2020) | 10.78 | 9.96 | 9.96 |
| Interim dividend for the year to 31 March 2021 | - | - | 6.87 |
| | 10.78 | 9.96 | 16.83 |
| Dividends in respect of the period | | | |
| Proposed interim dividend for the year to 31 March 2022 (31 March 2021) | 7.35 | 6.87 | 6.87 |
| Final dividend for the year to 31 March 2021 | - | - | 10.78 |
| | 7.35 | 6.87 | 17.65 |
| | Unaudited | Unaudited | Audited |
| Amounts recognised as distributions and paid to shareholders in the period | | | |
| Final dividend for the year to 31 March 2021 (31 March 2020) | 40.8 | 37.7 | 37.7 |
| Interim dividend for the year to 31 March 2021 | - | - | 26.0 |
| | 40.8 | 37.7 | 63.7 |
| Dividends in respect of the period | | | |
| Proposed interim dividend for the year to 31 March 2022 (31 March 2021) | 27.8 | 26.0 | 26.0 |
| Final dividend for the year to 31 March 2021 | - | - | 40.8 |
| | 27.8 | 26.0 | 66.8 |
8 Notes to the Consolidated Cash Flow Statement
| | Unaudited | Unaudited | Audited |
| Reconciliation of profit from operations to net cash inflow from operating activities | | | |
| Profit on continuing operations before finance income and expense, share of results of associates and profit or loss on disposal of operations | 137.6 | 102.1 | 240.8 |
| Depreciation of property, plant and equipment | 18.1 | 18.5 | 37.8 |
| Amortisation of computer software | 1.2 | 1.5 | 2.8 |
| Amortisation of capitalised development costs and other intangibles | 4.7 | 3.7 | 8.3 |
| Impairment of capitalised development costs | 1.7 | 2.3 | 1.9 |
| Amortisation of acquired intangible assets | 20.8 | 21.6 | 42.3 |
| Share-based payment expense less amounts paid | (2.5) | (2.0) | 3.7 |
| Payments to defined benefit pension plans net of charge | (7.0) | (6.5) | (13.1) |
| Loss on sale of property, plant and equipment and computer software | 0.1 | 0.1 | 0.7 |
| Operating cash flows before movement in working capital | 174.7 | 141.3 | 325.2 |
| Increase in inventories | (22.1) | (7.2) | (6.7) |
| (Increase)/decrease in receivables | (9.1) | 36.5 | 4.3 |
| Increase/(decrease) in payables and provisions | 7.2 | (20.6) | 7.9 |
| Revision to estimate of contingent consideration payable less amounts paid in excess of payable estimated on acquisition | (11.1) | 1.1 | 0.7 |
| Cash generated from operations | 139.6 | 151.1 | 331.4 |
| Taxation paid | (27.6) | (14.0) | (53.8) |
| Net cash inflow from operating activities | 112.0 | 137.1 | 277.6 |
| | Unaudited | Unaudited | Audited |
| |||||||
| Analysis of cash and cash equivalents | | | |
| |||||||
| Cash and bank balances | 131.1 | 125.5 | 134.1 |
| |||||||
| Overdrafts (included in current borrowings) | (3.0) | (2.1) | (3.0) |
| |||||||
| Cash and cash equivalents | 128.1 | 123.4 | 131.1 |
| |||||||
|
| | | |
| |||||||
| | At | Cash flow | Net cash/(debt) acquired £m | Net (cash)/debt disposed | Lease liabilities additions £m | Exchange | At 30 September | ||||
| Analysis of net debt | | | | | | | | ||||
| Cash and bank balances | 134.1 | (18.0) | 18.2 | (4.5) | - | 1.3 | 131.1 | ||||
| Overdrafts | (3.0) | - | - | - | - | - | (3.0) | ||||
| Cash and cash equivalents | 131.1 | (18.0) | 18.2 | (4.5) | - | 1.3 | 128.1 | ||||
| Loan notes falling due after more than one year | (105.3) | - | - | - | - | (0.7) | (106.0) | ||||
| Bank loans falling due after more than one year | (217.0) | (14.8) | - | - | - | (2.9) | (234.7) | ||||
| Lease liabilities | (65.0) | 8.1 | (3.8) | 2.1 | (7.9) | (1.1) | (67.6) | ||||
| Total net debt | (256.2) | (24.7) | 14.4 | (2.4) | (7.9) | (3.4) | (280.2) | ||||
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 changed the presentation of the proceeds from and the repayments of bank borrowings in the Consolidated Cash Flow Statement. In the year ended 31 March 2021 these were presented as net repayments of £7.3m, which has been updated to proceeds of £129.4m and repayments of £136.7m.
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), organic growth at constant currency, Adjusted operating profit, Adjusted operating cash flow and Return on Sales.
Note 2 provides further analysis of the adjusting items in reaching adjusted profit measures.
Return on Total Invested Capital (ROTIC)
| | Unaudited | Unaudited | Audited |
| Profit after tax | 135.7 | 77.3 | 203.3 |
| Adjustments1 | (14.6) | 19.6 | 19.2 |
| Adjusted profit after tax1 | 121.1 | 96.9 | 222.5 |
| Total equity | 1,277.1 | 1,123.0 | 1,167.6 |
| Add back net retirement benefit obligations | 5.3 | 45.0 | 22.5 |
| Less associated deferred tax assets | (0.8) | (8.1) | (4.0) |
| Cumulative amortisation of acquired intangible assets | 316.8 | 300.6 | 297.2 |
| Historical adjustments to goodwill2 | 89.5 | 89.5 | 89.5 |
| Total Invested Capital | 1,687.9 | 1,550.0 | 1,572.8 |
| Average Total Invested Capital3 | 1,630.4 | 1,532.3 | 1,543.7 |
| Return on Total Invested Capital (annualised)4 | 14.9% | 12.6% | 14.4% |
Return on Capital Employed (ROCE)
| | Unaudited | Unaudited | Audited |
| Profit before tax | 167.5 | 96.3 | 252.9 |
| Adjustments1 | (12.6) | 25.7 | 25.4 |
| Net finance costs | 4.0 | 5.8 | 10.0 |
| Lease interest | (1.1) | (1.2) | (2.3) |
| Adjusted operating profit1 after share of results of associates | 157.8 | 126.6 | 286.0 |
| Computer software costs within intangible assets | 5.3 | 4.8 | 6.0 |
| Capitalised development costs within intangible assets | 39.1 | 36.7 | 38.9 |
| Other intangibles within intangible assets | 3.6 | 3.8 | 3.4 |
| Property, plant and equipment | 186.7 | 184.7 | 180.8 |
| Inventories | 193.2 | 175.8 | 167.8 |
| Trade and other receivables | 279.2 | 245.3 | 268.0 |
| Current trade and other payables | (206.1) | (158.7) | (186.7) |
| Current lease liabilities | (14.2) | (13.0) | (13.3) |
| Current provisions | (22.0) | (30.5) | (35.4) |
| Net tax asset/(liabilities) | 5.3 | (4.8) | 7.5 |
| Non-current trade and other payables | (15.2) | (16.3) | (16.8) |
| Non-current provisions | (6.3) | (14.3) | (8.4) |
| Non-current lease liabilities | (53.4) | (51.4) | (51.7) |
| Add back contingent purchase consideration provision | 14.8 | 34.5 | 29.4 |
| Capital Employed | 410.0 | 396.6 | 389.5 |
| Average Capital Employed3 | 399.8 | 406.8 | 403.2 |
| Return on Capital Employed (annualised)4 | 78.9% | 62.2% | 70.9% |
1 Adjustments include the amortisation 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 March 2020 Total Invested Capital and Capital Employed balances were £1,338.3m and £358.9m 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.
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 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 |
| Continuing operations | 737.2 | 618.4 | 19.2% | 154.9 | 122.0 | 27.0% |
| Acquired and disposed revenue/profit | (27.6) | (12.0) | | (4.4) | (1.3) | |
| Organic growth | 709.6 | 606.4 | 17.0% | 150.5 | 120.7 | 24.7% |
| Constant currency adjustment | 37.4 | - | | 8.5 | - | |
| Organic growth at constant currency | 747.0 | 606.4 | 23.2% | 159.0 | 120.7 | 31.7% |
* Adjustments include the amortisation of acquired intangible assets; significant acquisition items; restructuring costs; and profit or loss on disposal of operations.
Sector organic growth at constant currency
Organic growth at constant currency is calculated for each segment using the same method as described above.
Safety
| | Revenue | Adjusted* segment profit | ||||
| | Unaudited
| Unaudited Restated** | % growth | Unaudited
| Unaudited Restated** | % growth |
| Continuing operations | 320.2 | 268.6 | 19.2% | 73.5 | 58.0 | 26.6% |
| Acquisition and currency adjustments | 9.0 | (5.9) | | 2.0 | (0.6) | |
| Organic growth at constant currency | 329.2 | 262.7 | 25.3% | 75.5 | 57.4 | 31.6% |
Environmental & Analysis
| | Revenue | Adjusted* segment profit | ||||
| | Unaudited
| Unaudited Restated** | % growth | Unaudited
| Unaudited Restated** | % growth |
| Continuing operations | 209.5 | 178.0 | 17.7% | 53.1 | 42.9 | 23.8% |
| Acquisition and currency adjustments | 5.6 | (6.1) | | 2.0 | (0.7) | |
| Organic growth at constant currency | 215.1 | 171.9 | 25.1% | 55.1 | 42.2 | 30.5% |
Medical
| | Revenue | Adjusted* segment profit | ||||
| | Unaudited
| Unaudited Restated** | % growth | Unaudited
| Unaudited Restated** | % growth |
| Continuing operations | 208.0 | 172.4 | 20.6% | 46.3 | 38.2 | 21.3% |
| Acquisition and currency adjustments | (4.9) | - | | (0.4) | - | |
| Organic growth at constant currency | 203.1 | 172.4 | 17.8% | 45.9 | 38.2 | 20.2% |
* Adjustments include the amortisation of acquired intangible assets; acquisition items; significant restructuring costs; and profit or loss on disposal of operations.
** Restated to reflect the new reporting segments.
Adjusted operating profit
| | Unaudited | Unaudited | Audited |
| Operating profit | 137.6 | 102.1 | 240.8 |
| Add back: | | | |
| Acquisition items | 0.6 | 4.1 | 5.2 |
| Amortisation of acquired intangible assets | 20.8 | 21.6 | 42.3 |
| Adjusted operating profit | 159.0 | 127.8 | 288.3 |
Adjusted operating cash flow
|
| Unaudited | Unaudited | Audited |
| Net cash from operating activities (note 8) | 112.0 | 137.1 | 277.6 |
| Add back: | | | |
| Net acquisition costs | 2.9 | 1.5 | 2.4 |
| Taxes paid | 27.6 | 14.0 | 53.8 |
| Proceeds from sale of property, plant and equipment | 0.4 | 0.5 | 0.9 |
| Share awards vested not settled by own shares* | 7.0 | 7.5 | 7.8 |
| Deferred consideration paid in excess of payable estimated on acquisition | 7.2 | - | - |
| Less: | | | |
| Purchase of property, plant and equipment | (13.7) | (10.2) | (22.8) |
| Purchase of computer software and other intangibles | (0.9) | (1.4) | (4.0) |
| Development costs capitalised | (6.8) | (7.0) | (15.4) |
| Adjusted operating cash flow | 135.7 | 142.0 | 300.3 |
| Cash conversion % (adjusted operating cash flow/adjusted operating profit) | 85% | 111% | 104% |
* See Consolidated Statement of Changes in Equity.
Return on Sales
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.
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 2021, the Group made 10 acquisitions namely:
- Dancutter A/S;
- Orca GmbH;
- PeriGen, Inc.;
- Ramtech Electronics Limited;
- Sensitron S.R.L.;
- Meditech Kft;
- Anton Industrial Services Limited;
- Certain trade and assets of FluidSentry Pty;
- Certain trade and assets of RNK Products Inc.;
- Certain trade and assets of IBIT S.R.L.
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) Dancutter A/S;
c) Orca GmbH;
d) PeriGen, Inc.;
e) Ramtech Electronics Limited;
f) Sensitron S.R.L.;
g) Other 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 £14.3m of revenue and £2.7m of profit after tax for the six months ended 30 September 2021.
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 £11.0m and £1.6m higher respectively.
As at the date of approval of the financial statements, the accounting for all current and prior year acquisitions 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 |
| Non-current assets | |
| Intangible assets | 47.1 |
| Property, plant and equipment | 7.1 |
| Deferred tax | 5.2 |
| Current assets | |
| Inventories | 8.3 |
| Trade and other receivables | 10.4 |
| Tax | 0.4 |
| Cash and cash equivalents | 18.2 |
| Total assets | 96.7 |
| Current liabilities | |
| Payables | (14.8) |
| Borrowings and lease liabilities | (0.5) |
| Provisions | (0.1) |
| Tax | (0.7) |
| Non-current liabilities | |
| Borrowings and lease liabilities | (3.3) |
| Deferred tax | (12.6) |
| Total liabilities | (32.0) |
| Net assets of businesses acquired | 64.7 |
| | |
| Initial cash consideration paid | 106.5 |
| Other adjustments | 11.9 |
| Retention and other amounts to be paid | 1.3 |
| Contingent purchase consideration estimated to be paid | 0.5 |
| Total consideration | 120.2 |
| | |
| Total goodwill | 55.5 |
Analysis of cash outflow in the Consolidated Cash Flow Statement
| | Unaudited | Unaudited | Audited |
| Initial cash consideration paid | 106.5 | - | 37.0 |
| Cash acquired on acquisitions | (18.2) | - | (7.9) |
| Initial cash consideration adjustment on current year acquisitions | 11.9 | - | 6.9 |
| Contingent consideration paid and loan notes repaid in cash in relation to prior year acquisitions | 12.0 | 5.7 | 10.4 |
| Other amounts paid in relation to prior year acquisitions | - | 1.0 | - |
| Net cash outflow relating to acquisitions | 112.2 | 6.7 | 46.4 |
| Included in cash flows from operating profit | 7.2 | - | - |
| Included in cash flows from investing activities | 105.0 | 6.7 | 46.4 |
b) Dancutter A/S
| | Unaudited |
| Non-current assets | |
| Intangible assets | 8.8 |
| Property, plant and equipment | 1.3 |
| Current assets | |
| Inventories | 0.5 |
| Trade and other receivables | 0.5 |
| Cash and cash equivalents | 0.9 |
| Total assets | 12.0 |
| Current liabilities | |
| Payables | (0.6) |
| Borrowings and lease liabilities | (0.1) |
| Tax | (0.1) |
| Non-current liabilities | |
| Borrowings and lease liabilities | (1.1) |
| Deferred tax | (1.9) |
| Total liabilities | (3.8) |
| Net assets of businesses acquired | 8.2 |
| | |
| Initial cash consideration paid | 15.0 |
| Other adjustments | 0.5 |
| Retention amount | 0.4 |
| Total consideration | 15.9 |
| | |
| Total goodwill | 7.7 |
On 24 June 2021, the Group acquired the entire share capital of Dancutter A/S and Repipe Lining Systems A/S (together 'Dancutter') for consideration of €18.1m (£15.5m), which comprised the purchase price of €18.0m (£15.4m) plus net cash/(debt) adjustments of €0.6m (£0.5m) less a retention amount of €0.5m (£0.4m). The retention amount, held in place of escrow balances, is due 18 months from the date of acquisition. There is no contingent consideration payable.
Dancutter, located in Denmark, is a designer and manufacturer of trenchless pipeline rehabilitation equipment. This is used to maintain and extend the life of wastewater networks, reducing blockages and leakage and ultimately reducing environmental contamination. Dancutter will be managed as part of Halma's MiniCam business and will become part of Halma's Environmental & Analysis sector. Key members of Dancutter's leadership team will remain with the business and it will continue to operate in its current facility.
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 £6.4m; trade name of £0.7m and technology related intangibles of £1.7m; with residual goodwill arising of £7.7m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Dancutter contributed £0.9m of revenue and £0.3m of profit after tax for the six months ended 30 September 2021. 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 £1.1m higher and £0.2m higher respectively.
Acquisition costs totalling £0.3m were recorded in the Consolidated Income Statement.
The goodwill arising on this acquisition is not expected to be deductible for tax purposes.
c) Orca GmbH
| | Unaudited |
| Non-current assets | |
| Intangible assets | 2.4 |
| Property, plant and equipment | 0.1 |
| Current assets | |
| Inventories | 1.1 |
| Trade and other receivables | 0.4 |
| Cash and cash equivalents | 1.0 |
| Total assets | 5.0 |
| Current liabilities | |
| Payables | (0.2) |
| Tax | (0.5) |
| Non-current liabilities | |
| Deferred tax | (0.9) |
| Total liabilities | (1.6) |
| Net assets of business acquired | 3.4 |
| | |
| Initial cash consideration paid | 5.4 |
| Other adjustments | 0.5 |
| Contingent purchase consideration estimated to be paid | 0.4 |
| Total consideration | 6.3 |
| | |
| Total goodwill | 2.9 |
On 3 May 2021, the Group acquired the entire share capital of Orca GmbH ('Orca'), for €6.8m (£5.9m), which comprised the purchase price of €6.2m (£5.4m) plus net cash/(debt) adjustments of €0.6m (£0.5m). The maximum contingent consideration payable is €2.5m (£2.2m) based on profit-based targets for the years ending 31 March 2022, 31 March 2023 and 31 March 2024.
Orca is a German manufacturer of ultraviolet disinfection systems, primarily for the food and beverage sector. Orca has joined the Group as part of UV Group, part of 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 £0.7m; trade name of £0.1m and technology related intangibles of £1.6m; with residual goodwill arising of £2.9m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Orca contributed £1.5m of revenue and £0.3m of profit after tax for the six months ended 30 September 2021. 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 £0.3m and £0.1m higher respectively.
Acquisition costs totalling £0.1m were recorded in the Consolidated Income Statement.
The goodwill arising on the Orca acquisition is not expected to be deductible for tax purposes.
d) PeriGen, Inc.
| | Unaudited |
| Non-current assets | |
| Intangible assets | 17.1 |
| Property, plant and equipment | 2.0 |
| Deferred tax | 5.2 |
| Current assets | |
| Inventories | 0.2 |
| Trade and other receivables | 3.9 |
| Tax | 0.2 |
| Cash and cash equivalents | 6.3 |
| Total assets | 34.9 |
| Current liabilities | |
| Payables | (7.4) |
| Borrowings and lease liabilities | (0.2) |
| Non-current liabilities | |
| Borrowings and lease liabilities | (1.6) |
| Deferred tax | (4.4) |
| Total liabilities | (13.6) |
| Net assets of businesses acquired | 21.3 |
| | |
| Initial cash consideration paid | 40.6 |
| Other adjustments | 5.5 |
| Total consideration | 46.1 |
| | |
| Total goodwill | 24.8 |
On 27 April 2021, the Group acquired the entire share capital of PeriGen, Inc., ('PeriGen') for an initial cash consideration of US$58.0m (£40.6m). Additional amounts paid in respect of working capital adjustments were determined to be US$7.8m (£5.5m).
PeriGen, based in North Carolina, USA offers innovative perinatal software solutions, and its advanced technology protects mothers and their unborn babies by alerting doctors, midwives and nurses to potential problems during childbirth. The company continues to run under its own management team and has become part of the Group's Medical sector.
The excess of the fair value of the consideration paid over the fair value of the assets acquired is represented by customer related intangibles of £6.6m; trade name of £1.9m and technology related intangibles of £8.6m; with residual goodwill arising of £24.8m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
PeriGen contributed £6.5m of revenue and £1.4m of profit after tax for the six months ended 30 September 2021. 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 £1.0m and £0.2m higher respectively.
Acquisition costs totalling £1.3m were recorded in the Consolidated Income Statement.
The goodwill arising on the PeriGen acquisition is not expected to be deductible for tax purposes.
e) Ramtech Electronics Limited
| | Unaudited |
| Non-current assets | |
| Intangible assets | 4.7 |
| Property, plant and equipment | 1.3 |
| Current assets | |
| Inventories | 3.2 |
| Trade and other receivables | 1.5 |
| Cash and cash equivalents | 3.9 |
| Total assets | 14.6 |
| Current liabilities | |
| Payables | (2.5) |
| Non-current liabilities | |
| Deferred tax | (1.5) |
| Total liabilities | (4.0) |
| Net assets of businesses acquired | 10.6 |
| | |
| Initial cash consideration paid | 15.5 |
| Other adjustments | 4.1 |
| Total consideration | 19.6 |
| | |
| Total goodwill | 9.0 |
On 29 July 2021, the Group acquired the Ramtech group of companies ('Ramtech'), for an initial cash consideration of £15.5m, adjustable for cash acquired. Additional amounts paid in respect of cash acquired and other adjustments were determined to be £4.1m.
Ramtech is headquartered in Nottingham, UK and supplies wireless fire systems for temporary sites, primarily in the construction and leisure markets. The company continues to run under its own management team and has become part of the Group's Safety 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 £1.4m; trade name of £0.8m and technology related intangibles of £2.5m; with residual goodwill arising of £9.0m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Ramtech contributed £1.9m of revenue and £0.2m of profit after tax for the six months ended 30 September 2021. 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 £3.7m and £0.3m higher respectively.
Acquisition costs totalling £0.4m were recorded in the Consolidated Income Statement.
The goodwill arising on the Ramtech acquisition is not expected to be deductible for tax purposes.
f) Sensitron S.R.L.
| | Unaudited |
| Non-current assets | |
| Intangible assets | 10.1 |
| Property, plant and equipment | 0.8 |
| Current assets | |
| Inventories | 1.4 |
| Trade and other receivables | 3.0 |
| Tax | 0.2 |
| Cash and cash equivalents | 4.2 |
| Total assets | 19.7 |
| Current liabilities | |
| Payables | (3.3) |
| Borrowings and lease liabilities | (0.1) |
| Non-current liabilities | |
| Borrowings and lease liabilities | (0.6) |
| Deferred tax | (2.9) |
| Total liabilities | (6.9) |
| Net assets of business acquired | 12.8 |
| | |
| Initial cash consideration paid | 21.4 |
| Total consideration | 21.4 |
| | |
| Total goodwill | 8.6 |
On 29 July 2021, the Group acquired the entire share capital of Sensitron S.R.L. ('Sensitron') for an initial cash consideration of €25.0m (£21.4m).
Sensitron, located in Milan, Italy, is a gas detection company whose devices, which include detectors for hazardous locations and for new refrigerant gases, enhance safety by detecting the release of gases harmful to people and the environment. Sensitron will continue to run under its own management team and will become part of Halma'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 £4.8m; trade name of £1.3m and technology related intangibles of £4.0m; with residual goodwill arising of £8.6m.
The goodwill represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer base.
Sensitron contributed £1.3m of revenue and £0.2m of profit after tax for the six months ended 30 September 2021. 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 £3.6m and £0.6m higher respectively.
Acquisition costs totalling £0.2m were recorded in the Consolidated Income Statement.
The goodwill arising on this acquisition is not expected to be deductible for tax purposes.
g) Other acquisitions
| | Unaudited |
| Non-current assets | |
| Intangible assets | 4.0 |
| Property, plant and equipment | 1.6 |
| Current assets | |
| Inventories | 1.9 |
| Trade and other receivables | 1.1 |
| Cash and cash equivalents | 1.9 |
| Total assets | 10.5 |
| Current liabilities | |
| Payables | (0.8) |
| Borrowings and lease liabilities | (0.1) |
| Provisions | (0.1) |
| Tax | (0.1) |
| Non-current liabilities | |
| Deferred tax | (1.0) |
| Total liabilities | (2.1) |
| Net assets of businesses acquired | 8.4 |
| | |
| Initial cash consideration paid | 8.6 |
| Additional amounts paid in respect of cash acquired and other adjustments | 1.3 |
| Retention and other amounts to be paid | 0.9 |
| Contingent purchase consideration estimated to be paid | 0.1 |
| Total consideration | 10.9 |
| | |
| Total goodwill | 2.5 |
On 1 April 2021, Fortress Interlocks Pty Limited, an industrial access control company in the Group's Safety sector, bought the assets and IP associated with monitored safety valves from FluidSentry Pty in Australia for consideration of A$0.6m (£0.3m).
On 26 April 2021, Argus Security S.R.L., a fire safety company in the Group's Safety sector, purchased the trade and assets of its Italian distributor, IBIT, for total consideration of €0.6m (£0.5m); this includes an amount of £0.4m payable six months from the date of acquisition.
On 30 April 2021, the Group acquired Anton Industrial Services Limited (Anton), the UK flue gas analyser distribution partner of Crowcon Detection Instruments Limited, a company in the Group's Environmental & Analysis sector, for consideration of £1.9m, adjustable for cash acquired. Additional amounts paid in respect of cash acquired and other adjustments was determined to be £1.3m. The consideration includes a retention amount of £0.2m held in place of escrow balances and is due 18 months from the date of acquisition.
On 7 May 2021, Rudolf Riester GmbH, a company in the Group's Medical sector acquired the trade and assets of RNK, a US-based digital stethoscope company, for an initial consideration of US$3.0m (£2.3m).
On 1 September 2021, the Group acquired Meditech Kft, a Hungarian manufacturer of ambulatory blood pressure monitors and ECG devices, for total consideration of €5.4m (£4.6m); this includes an amount payable of €0.4m (£0.3m). The maximum contingent consideration payable is €1.0m (£0.9m) based on profit-based targets for one year post acquisition. The company has become part of the Group's Medical sector.
In respect of these acquisitions, 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 £2.8m; trade name of £0.1m and technology related intangibles of £1.1m; with residual goodwill arising of £2.5m.
These acquisitions contributed £2.2m of revenue and £0.3m of profit after tax cumulatively for the six months ended 30 September 2021. 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 £1.3m and £0.2m higher respectively.
Acquisition costs totalling £0.4m were recorded in the Consolidated Income Statement.
The goodwill arising on these acquisitions is not expected to be deductible for tax purposes.
11 Disposal of operations
During the current year the Group recognised a profit on disposal of operations of £34.0m (Six months to 30 September 2020: £nil; year to March 2021: £22.1m).
On 10 August 2021, the Group disposed of its entire interest in Texecom Limited to a third party for proceeds of £64.8m. This transaction resulted in the recognition of a gain in the Consolidated Income Statement as follows:
| | Unaudited £m |
| Proceeds of disposal | 64.8 |
| Less: net assets on disposal | (19.0) |
| Less: allocation of goodwill disposed | (9.0) |
| Less: costs of disposal | (2.8) |
| Profit on disposal | 34.0 |
Cash received on disposal of operations in the year of £57.5m comprised proceeds from the sale of Texecom Limited of £64.8m, less £4.5m of cash disposed and £2.8m of disposal costs.
In the prior year, in December 2020, the Group disposed of its entire interest in Fiberguide Industries, Inc. to a third party for sale proceeds of £27.6m less disposal costs of £1.1m. Disposal costs of £0.4m relating to the spin-out and partial disposal of OneThird B.V. were also paid.
12 Fair values of financial assets and liabilities
As at 30 September 2021, 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 is estimated to be £107.7m, against a carrying value of £106.0m.
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 2021, the total forward foreign currency contracts outstanding were £52.2m. 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 £0.6m (30 September 2020: £0.4m; 31 March 2021: £1.7m) asset and £0.2m (30 September 2020: £0.9m; 31 March 2021: £0.7m) 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.
13 Retirement benefits
At 30 September 2021, the Group has IAS 19 Retirement benefit net obligations totalling £5.3m (30 September 2020: net obligation of £45.0m, 31 March 2021: net obligation of £22.5m). The net obligation has decreased from 31 March 2021 primarily due to returns on plan assets (excluding interest income) of £15.8m and additional employer contributions made to the UK defined benefit plans of £7.1m partially offset by changes in the financial assumptions, with the largest impacts being the decrease in discount rate and the increase in inflation rate in the UK defined benefit plans from 1.95% and 3.20% at 31 March 2021 to 1.90% and 3.35% at 30 September 2021 respectively.
14 Contingent liability
Group financing exemptions applicable to UK controlled foreign companies
On 24 November 2017, the European Commission ('EC') published an opening decision that the United Kingdom controlled foreign company ('CFC') group financing partial exemption ('FCPE') constitutes State Aid. On 2 April 2019, the EC's final decision concluded that the FCPE rules, as they applied up to 31 December 2018, constitute State Aid. As previously reported, the Group has benefited from the FCPE with the total benefit for the periods from 1 April 2013 to 31 December 2018 being approximately £15.4m in respect of tax.
Appeals have been made by the UK government, the Group, and other UK-based groups to annul the EC decision. Notwithstanding these appeals, 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. 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.
In April 2021, a Charging Notice for £0.8m was received. The £0.8m comprised interest on the £13.9m assessment noted above and the interest was paid in May 2021.
The final impact on the Group remains uncertain. However, based on its current assessment, the Group considers that the appeal will be successful and therefore £14.7m is included within non-current assets on the Consolidated Balance Sheet to reflect the Group's view that the amount paid will ultimately be recovered.
The Group's maximum potential exposure at 30 September 2021 in respect of recoverability of non-current assets is £14.7m (30 September 2020: £Nil, 31 March 2021: £13.9m).
The EU General Court hearing was held on Monday 18 October 2021 in Luxembourg. No indication of timing was given during the hearing on when the Court would give its decision. However, we currently expect this to be delivered some time in 2022.
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.
15 Events subsequent to the end of the reporting period
On 26 October 2021, Perma Pure, a company in the Group's Medical sector acquired certain trade and assets of Clayborn Lab, a US-based provider of custom heat tape solutions, for an initial consideration of US$4.5m (£3.3m). The maximum contingent consideration payable is US$1.5m (£1.1m) determined by revenue-based targets for the years ending 30 September 2022 and 30 September 2023. A detailed purchase price allocation exercise is currently being performed to calculate the goodwill arising on acquisition.
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 18 November 2021.
16 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 2021.
17 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 78 to 83 in the Annual Report and Accounts 2021, which is available on the Group's website at www.halma.com. The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report and Accounts.
The principal risks and uncertainties relate to:
- Cyber
- Organic growth
- Acquisitions and investments
- Talent and diversity
- Innovation
- Economic and geopolitical uncertainty
- Climate change and natural hazards
- Business model and its communications
- Non-compliance with laws and regulations
- Financial controls
- Liquidity
- Product failure
18 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
Andrew Williams Marc Ronchetti
Group Chief Executive Chief Financial Officer
18 November 2021
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