Interim Results

Halma PLC 4 December 2001 HALMA p.l.c. INTERIM RESULTS FOR THE HALF YEAR TO 29 SEPTEMBER 2001 4 DECEMBER 2001 Halma p.l.c., the leading safety and environmental technology group, today announced its interim results for the half year to 29 September 2001. Highlights include: - Record turnover of £130.8 million, up 4% - Profit before taxation* of £22.7 million just exceeding last year's record - Sales growth widespread across businesses and territories - Overseas sales amounting to 69% of the total - Building intellectual asset base through increased investment in R&D - Earnings per share* up 2% at 4.23p - Interim dividend up 15% at 2.077p per share, supported by strong returns and cash generation - Major contract wins include supplying water purification technology to Severn Trent's extensive US operations * before goodwill amortisation Commenting on the results, Stephen O'Shea, Chief Executive of Halma, said: 'Our strategic position in safety products makes Halma an exceptionally resilient business. We are not fully insulated from economic conditions but our success in creating new products and winning new customers will benefit the Group when conditions improve. We are a strongly profitable and cash generative business and the management is determined to extend our record of excellent performance relative to our peer group and to continue to build up the value of the Group to our shareholders.' For further information, please contact: Stephen O'Shea, Chief Executive +44 (0)1494 721111 Kevin Thompson, Finance Director +44 (0)1494 721111 Hogarth Partnership (PR) +44 (0)20 7357 9477 Rachel Hirst/Andrew Jaques A copy of this announcement, together with other information about Halma, may be viewed on its website: www.halma.com Photographs are available to registered media users from www.newscast.co.uk A copy of the Interim Report will be sent to shareholders and will be available on written request to the Company's registered office at: Misbourne Court, Rectory Way, Amersham, Bucks HP7 0DE. NOTE TO EDITORS Halma p.l.c. develops products used worldwide to enhance safety and to minimise hazards. The Group comprises six business groups: - Fire and Gas detection - Water leak detection and UV treatment - Elevator Electronics - Bursting discs and sequential locking for Process Safety - High power electrical Resistors - Ophthalmic Optics and Specialist technology The key characteristics of Halma's businesses are that they are based on advanced technology and offer strong growth potential. Each business group is a clear market leader in its specialist field and, in a number of cases, is the dominant world supplier. HALMA p.l.c. Interim Results for the 26 weeks to 29 September 2001 Financial Highlights Turnover + 4% to £130.8 million Overseas sales + 6% to £89.8 million Profit before taxation* + 1% to £22.7 million Earnings per share * + 2% to 4.23p Dividend per share + 15% to 2.077p Net margin on sales * 17.3% Return on capital employed ** 41.6% * Before goodwill amortisation ** Return on capital employed is defined as the annualised profit before taxation* expressed as a % of net tangible assets Financial Overview Pre-tax profits were £22.7 million and earnings per share increased to 4.23p. Both figures are expressed before goodwill amortisation. Sales increased by 4% to a record of £130.8 million and overseas sales now amount to 69% of total sales. All the preceding absolute figures are new records for the Group. Chief Executive's Review Stephen O'Shea, Chief Executive of Halma, said: 'Halma's success arises in part from operating in safety-critical applications, and making innovative and valuable products that reduce or eliminate risks to life and health. Worldwide there is a growing recognition by companies and governments of the need to protect people and equipment. We therefore sell to a diverse customer base in many territories. These are some of the characteristics of Halma that have enabled us to just exceed the record level of half year profit achieved last year. 'The Group sales continue to grow and at our high return on sales and high return on capital employed we remain profitable, cash generative and unborrowed. 'Sales levels increased across the Group's businesses. The Water and Elevator Electronics activities moved ahead whilst Resistors held on to last year's significant increase. Fire and Gas achieved an increase in sales aided by an acquisition made in the second half of last year. Our Process Safety operation changed its US distribution arrangements during the half year and this contributed to an improvement in performance. The Optics and Specialist business achieved slightly lower sales but improved margins. 'We target areas of long-term growth often where safety legislation aids the stability of our sales opportunities. We have been able to capture new customers and develop new applications despite market conditions. Sales increased in the USA, the Far East, the Middle East and the rest of the world and reduced only marginally in the UK. We are effective in building market leadership positions. When economic conditions improve, we expect to reap the benefits of the increased market shares we are currently developing. 'Our focus on new products, new applications and new routes to market remains strong. An important marketing agreement between Severn Trent Services and a Group company will use our advanced technology for the purification of drinking water by ultra-violet light across all of Severn Trent's extensive American operations. 'We are investing more in R&D and continuing to build our intellectual asset base. Over the next 18 months we expect new products to be increasingly important. Group companies are increasingly selling each other's products. Concentrating on high added value activities has also led to increased sourcing of components and assemblies from Eastern Europe and from the Far East. 'Our products are used in every part of the world and by every industry. We are therefore affected to some extent by the current volatile conditions. However, our diverse customer base is a great strength and we see a growing awareness of the need to protect against risks of all kinds. 'We have been finding opportunities for sales growth at the high levels of return on sales and return on capital employed that have been features of Halma for so long and which continue today. We have the resources to self-fund acquisitions but we continue to apply our usual high standards to the acquisition opportunities we evaluate. 'Our strategic position in safety products makes Halma an exceptionally resilient business. We are not fully insulated from economic conditions but our success in creating new products and winning new customers will benefit the Group when conditions improve. We are a strongly profitable and cash generative business and the management is determined to extend our record of excellent performance relative to our peer group and to continue to build up the value of the Group to our shareholders.' Chairman's Review David Barber, Chairman of Halma, said: 'Following the pattern established last year, the interim dividend per share has been increased by a further 15%. This interim dividend, which will amount to 2.077p per share, will be paid on 4 February 2002 to shareholders on the register at the close of business on 4 January 2002. 'The impact of the current political and economic uncertainties, particularly on the significant proportion of our activities in the USA, has made this an unusually difficult period from which to forecast short-term sales and profitability. What I can say with great confidence is that the Group's operations and management are in excellent shape. I believe that our performance relative to other companies will continue to demonstrate the Group's exceptional resilience.' Interim Results for the 26 weeks to 29 September 2001 Consolidated Profit and Loss Account £000 Unaudited 26 weeks to 29 September 2001 Restated Restated Before 26 weeks 52 weeks goodwill Goodwill to to amortisation amortisation Total 30 31 September March 2000 2001 Turnover 130,773 - 130,773 126,274 268,322 ======= ======= ======= ======= ======= Operating profit before goodwill amortisation 22,555 - 22,555 22,339 49,703 Goodwill amortisation - (1,141) (1,141) (862) (1,935) (note 2) _______ _______ _______ _______ _______ Operating profit 22,555 (1,141) 21,414 21,477 47,768 Interest 108 - 108 37 (5) _______ _______ _______ _______ _______ Profit on ordinary activities 22,663 (1,141) 21,522 21,514 47,763 before taxation Taxation (note 3) (7,356) 187 (7,169) (7,253) (15,641) _______ _______ _______ _______ _______ Profit for the financial 15,307 (954) 14,353 14,261 32,122 period _______ _______ _______ _______ _______ Dividends Ordinary dividends (7,608) (6,519) (16,580) _______ _______ _______ Profit transferred to 6,745 7,742 15,542 reserves ======= ======= ======= Ordinary dividends per 2.077p 1.806p 4.593p share Earnings per ordinary share before 4.23p 4.14p 9.34p goodwill amortisation Earnings per ordinary 3.96p 3.96p 8.91p share Diluted earnings per 3.95p 3.95p 8.90p ordinary share Consolidated Balance Sheet £000 Unaudited Restated Restated 29 September 30 September 31 March 2001 2000 2001 Fixed assets Intangible assets (note 2) 41,021 36,227 41,478 Tangible assets 44,940 43,625 44,754 _______ _______ _______ 85,961 79,852 86,232 _______ _______ _______ Current Assets Stocks 40,602 39,003 40,129 Debtors 63,783 63,492 69,713 Cash and short-term deposits 22,560 16,263 21,484 _______ _______ _______ 126,945 118,758 131,326 _______ _______ _______ Creditors: amounts falling due within one year Borrowings 6,266 7,676 7,758 Dividends payable 7,562 6,517 10,062 Current taxation 10,032 11,417 10,224 Creditors 33,499 36,499 43,432 _______ _______ _______ 57,359 62,109 71,476 _______ _______ _______ Net current assets 69,586 56,649 59,850 _______ _______ _______ Total assets less current liabilities 155,547 136,501 146,082 Creditors: amounts falling due after one 1,872 1,559 1,730 year Provisions for liabilities and charges 3,603 2,845 2,883 _______ _______ _______ 150,072 132,097 141,469 ======= ======= ======= Capital and reserves Called up share capital 36,393 36,085 36,099 Share premium account 4,748 1,496 1,623 Other reserves 185 185 185 Profit and loss account 108,746 94,331 103,562 _______ _______ _______ Shareholders' funds (note 5) 150,072 132,097 141,469 ======= ======= ======= Consolidated Cash Flow Statement £000 Unaudited Unaudited Audited 26 weeks to 26 weeks to 52 weeks to 29 September 30 September 31 March 2001 2000 2001 Cash flow from operating activities 22,755 22,960 55,493 (note 6) Return on investments and servicing of finance Interest received 398 465 713 Interest paid (299) (426) (700) _______ _______ _______ 99 39 13 _______ _______ _______ Taxation Current taxation paid (6,666) (4,537) (14,489) Capital expenditure Purchase of tangible fixed assets (4,709) (4,753) (9,441) Sale of tangible fixed assets 506 397 1,161 _______ _______ _______ (4,203) (4,356) (8,280) _______ _______ _______ Acquisitions and disposals Acquisition of businesses (2,495) (4,321) (12,128) Cash and overdrafts acquired - 188 144 Sale of businesses - 46 95 _______ _______ _______ (2,495) (4,087) (11,889) _______ _______ _______ Equity dividends paid (10,108) (8,732) (15,248) _______ _______ _______ (618) 1,287 5,600 _______ _______ _______ Management of liquid resources Decrease in short-term deposits 461 6,840 3,189 Financing Issue of ordinary share capital 3,419 491 632 Decrease in loans - (8,028) (9,278) _______ _______ _______ 3,419 (7,537) (8,646) _______ _______ _______ Increase in cash (note 6) 3,262 590 143 ======= ======= ======= Segmental Analysis £000 Geographical analysis By destination By origin Unaudited Unaudited Unaudited Restated 26 weeks to 26 weeks to 26 weeks to 26 weeks to 29 September 30 September 29 September 30 September 2001 2000 2001 2000 Turnover United Kingdom 40,977 41,891 80,540 79,259 United States of America 41,684 41,120 43,170 41,668 Europe excluding UK 26,079 23,409 10,223 9,421 Far East and Australasia 11,986 10,851 4,162 4,743 Africa, Near and Middle 4,372 4,312 - - East Other 5,675 4,691 1,941 1,411 Inter-segmental sales - - (9,263) (10,228) _______ _______ _______ _______ 130,773 126,274 130,773 126,274 ======= ======= ======= ======= Profit before taxation United Kingdom 12,790 13,649 United States of America 7,340 7,702 Other countries 2,425 988 _______ _______ 22,555 22,339 Goodwill amortisation (1,141) (862) Interest 108 37 _______ _______ Profit on ordinary activities before taxation 21,522 21,514 ======= ======= Sector analysis Unaudited Unaudited 26 weeks to 26 weeks to 29 September 30 September 2001 2000 Turnover Fire and Gas 33,620 31,409 Water 16,022 15,417 Elevator Electronics 16,501 15,272 Process Safety 18,308 17,205 Resistors 15,855 15,966 Optics and Specialist 30,941 31,503 Inter-segmental sales (474) (498) _______ _______ 130,773 126,274 ======= ======= Notes on the Interim Report 1 Basis of The interim report for the 26 weeks to 29 September 2001 is preparation prepared on the basis of the accounting policies set out in the accounts for the 52 weeks to 31 March 2001, except for the adoption of accounting standards applicable since that date. The figures shown for the 52 weeks to 31 March 2001 are an abridged version of the Group's statutory accounts, restated as necessary to comply with Financial Reporting Standard 19 'Deferred Tax'. 2 Intangible Goodwill arising on acquisitions after 28 March 1998 is assets capitalised and is classified as an intangible asset in the Consolidated Balance Sheet. Capitalised goodwill is amortised through the Consolidated Profit and Loss Account on a straight line basis over its estimated economic life of 20 years. Goodwill arising on earlier acquisitions was not restated. 3 Taxation The tax charge for the 26 weeks to 29 September 2001 of £7,169,000 comprises a current taxation charge of £6,774,000 (2000: £6,959,000) and a deferred tax charge of £395,000 (2000: £294,000 as restated). The current taxation charge is based on the estimated effective tax rate for the year. The tax charge includes £2,816,000 (2000: £2,710,000 as restated) in respect of overseas tax. 4 Deferred Financial Reporting Standard 19 'Deferred Tax' has been adopted Taxation for the first time in these financial statements. As required by the standard, deferred taxation has been calculated using the full provision approach rather than the partial provision approach previously employed. This change has been accounted for as a prior year adjustment and previously reported figures have been restated accordingly. The impact of adopting the new policy on the half year to 30 September 2000 has been to reduce profit after tax by £280,000. The impact of adopting the new policy on the year to 31 March 2001 has been to reduce profit after tax by £681,0000. The cumulative effect on reserves at 1 April 2000 is a reduction of £3,745,000 which has been accounted for as a prior year adjustment. If the previous policy had been adopted in the current period's results, the impact would have been to increase the profit after tax by £381,000. 5 Reconciliation of shareholders' £000 funds Unaudited Restated Restated 26 weeks to 26 weeks to 52 weeks to 29 September 30 September 31 March 2001 2000 2001 Shareholders' funds brought forward as previously stated 125,539 125,539 Prior year adjustment (3,745) (3,745) _______ _______ Shareholders' funds brought forward (as restated) 141,469 121,794 121,794 Profit transferred to reserves 6,745 7,742 15,542 Net proceeds of shares issued 3,419 491 632 Exchange adjustments (1,561) 2,070 3,501 _______ _______ _______ Shareholders' funds carried forward 150,072 132,097 141,469 _______ _______ _______ 6 Notes on cash flow statement £000 Unaudited Restated Restated 26 weeks to 26 weeks to 52 weeks to 29 September 30 September 31 March 2001 2000 2001 Reconciliation of operating profit to net cash inflow from operating activities Operating profit 21,414 21,477 47,768 Depreciation 3,658 3,511 7,022 Goodwill amortisation 1,141 862 1,935 Loss on sale of tangible fixed assets 73 149 90 Increase in stocks (795) (2,071) (2,348) Decrease/(increase) in debtors 5,233 2,813 (1,385) (Decrease)/increase in creditors (7,969) (3,781) 2,411 _______ _______ _______ Net cash inflow from operating 22,755 22,960 55,493 activities _______ _______ _______ Reconciliation of net cash flow to movement in net cash Increase in cash 3,262 590 143 Decrease in liquid resources (461) (6,840) (3,189) Short-term deposits acquired - - 861 Cash outflow from loans - 8,028 9,278 Exchange adjustments (233) (391) (567) _______ _______ _______ 2,568 1,387 6,526 Net cash brought forward 13,726 7,200 7,200 _______ _______ _______ Net cash carried forward 16,294 8,587 13,726 _______ _______ _______ Ends

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