Interim Results

Halma PLC 03 December 2002 HALMA p.l.c. INTERIM RESULTS FOR THE HALF YEAR TO 28 SEPTEMBER 2002 3 DECEMBER 2002 Halma p.l.c., the leading safety and environmental technology group, today announced its interim results for the half year to 28 September 2002. Highlights include: • Trading in the first half as predicted with profit before taxation* of £21.2 million (2001: £22.7 million) • 10% dividend increase • Sales slightly lower but overseas sales amounting to a record 70% of the total Legislation based demand and product superiority supports pricing power and underpins sales • High returns and high margins continue • Very strong cash generation leading to a record net cash balance of £37 million at the half year end • BEA acquisition in October - excellent strategic fit and immediately earnings enhancing * before goodwill amortisation Commenting on the results, Stephen O'Shea, Chief Executive of Halma, said: 'We have yet to experience an upturn in the UK or USA, our two main markets. However the Group is strongly profitable and highly cash generative. We are creating new products and finding new ways to protect life and health in the workplace. We will benefit from the new products and additional customers brought in by BEA. This puts us in a strong position to benefit quickly from any improvement in the economic conditions in our markets.' For further information, please contact: Stephen O'Shea, Chief Executive +44 (0)1494 721111 Kevin Thompson, Finance Director +44 (0)1494 721111 Hogarth Partnership Limited +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. A copy of the Interim Report will be sent to shareholders and will be available to the general public on written request to the Company's registered office at: Misbourne Court, Rectory Way, Amersham, Bucks HP7 0DE. PHOTOGRAPHS High resolution photos of Halma senior management, including Chief Executive Stephen O'Shea, and images illustrating Halma business activities can be downloaded from our website: www.halma.com. Click on the 'News' link, then 'Image Gallery'. Photo queries: David Waller +44 (0)20 8205 0038, e-mail: dwaller@halmapr.com. 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 28 September 2002 Financial Highlights Turnover - 5% to £123.8 million Overseas sales - 4% to £86.1 million Profit before taxation * - 6% to £21.2 million Earnings per share * - 8% to 3.91p Dividend per share + 10% to 2.285p Net margin on sales * 17.1% Return on capital employed ** 34.9% * Before goodwill amortisation ** Return on capital employed is defined as the annualised profit before taxation* expressed as a % of net tangible assets Financial Overview Profit before tax reduced by 6% to £21.2 million and earnings per share by 8% to 3.91 pence. Both figures are expressed before goodwill amortisation. Sales were 5% lower at £123.8 million but overseas sales, expressed as a percentage of total sales, increased to 70%. The Group's net cash balances as at the end of the half year rose to a record level of £37 million. Chief Executive's Review Stephen O'Shea, Chief Executive of Halma, said: 'Those parts of the Group where we have built up high market shares have produced good results despite the prevailing economic conditions. Careful management of costs and of product mix resulted in profits for the Group in total a little lower than in the first half of last year on marginally lower sales. We have maintained our high return on sales and made a high return on capital employed, resulting in strong cash generation. Net cash reached a record level. 'Immediately after the end of the period we acquired the BEA Group of companies using the cash we had earned from our existing companies. BEA makes the sensors that control automatic doors in shops, offices and factories. It is the world market leader and is growing profits. Within the Group we already own the market leader in sensors that control elevator doors. BEA is an excellent fit with the Group and is immediately earnings enhancing. The initial consideration was Euro 72 million and we will make additional payments for BEA only if demanding profit growth targets are achieved. Even at the maximum possible price for BEA under this earn-out formula the return on this acquisition will be well above our cost of capital. 'We have built up powerful market positions in the Fire and Gas, Process Safety, Elevator Electronics and Water sectors. Together they made sales close to last year and profits very close to last year. Costs are being reduced and we are improving the effectiveness of routes to market of a number of our products. 'We are market leaders in high power resistors, particularly for safety applications. This sector supplies the heavier industries and transport and is strongest in the USA. Demand in this market has reduced and we have made sales and profits a little lower than last year despite good management action. 'In our Optics and Specialist sector sales were lower than the same period last year by £3 million and profits were also somewhat lower. In this sector we have smaller market shares and less pricing power. 'Because of legislation, the requirement for safety products is significantly more robust than the industries to which they are supplied. This tends to underpin our sales even in adverse market conditions, and this was again demonstrated in the period. 'Although sales in the UK and USA were down by 7%, sales into Europe increased, leading to an overall 5% reduction. Halma companies are successfully searching out opportunities for current and new products, offsetting much of the market pressure. 'We have yet to experience an upturn in the UK or USA, our two main markets. However the Group is strongly profitable and highly cash generative. We are creating new products and finding new ways to protect life and health in the workplace. We will benefit from the new products and additional customers brought in by BEA. This puts us in a strong position to benefit quickly from any improvement in the economic conditions in our markets.' Chairman's Review David Barber, Chairman of Halma, said: 'The continuing incidence of low inflation has prompted the Directors to review our pattern of dividend increases. We have established an enviable record of progressively increasing our dividend per share over a very long period. It is our aim and intention to continue this and the Board have increased the interim dividend per share by a further 10%. This interim dividend, which will amount to 2.285p per share, will be paid on 3 February 2003 to shareholders on the register at the close of business on 6 January 2003. 'The acquisition of BEA is expected to make a useful contribution to our profits, and I believe that the results for the full financial year will provide encouraging evidence of the Group's potential for growth.' Interim Results for the 26 weeks to 28 September 2002 Consolidated Profit and Loss Account £000 Unaudited 26 weeks to 28 September 2002 Unaudited Audited Before 26 weeks to 52 weeks to goodwill Goodwill 29 September 30 March amortisation amortisation Total 2001 2002 Turnover 123,846 - 123,846 130,773 267,597 ======= ======= ======= ======= ======= Operating profit before goodwill amortisation 20,723 - 20,723 22,555 48,018 Goodwill amortisation (note 2) - (1,138) (1,138) (1,141) (2,297) _______ _______ _______ _______ _______ Operating profit 20,723 (1,138) 19,585 21,414 45,721 Interest 496 - 496 108 237 _______ _______ _______ _______ _______ Profit on ordinary activities before taxation 21,219 (1,138) 20,081 21,522 45,958 Taxation (note 3) (6,942) 173 (6,769) (7,169) (14,801) _______ _______ _______ _______ _______ Profit for the financial period 14,277 (965) 13,312 14,353 31,157 _______ _______ _______ _______ _______ Dividends Ordinary dividends (8,355) (7,608) (19,323) _______ _______ _______ Profit transferred to reserves 4,957 6,745 11,834 ======= ======= ======= Ordinary dividend per share 2.285p 2.077p 5.283p Earnings per ordinary share before goodwill amortisation 3.91p 4.23p 9.10p Earnings per ordinary share 3.64p 3.96p 8.58p Diluted earnings per ordinary share 3.63p 3.95p 8.54p Consolidated Balance Sheet £000 Unaudited Unaudited Audited 28 September 29 September 30 March 2002 2001 2002 Fixed assets Intangible assets (note 2) 38,837 41,021 40,042 Tangible assets 42,833 44,940 43,860 _______ _______ _______ 81,670 85,961 83,902 _______ _______ _______ Current Assets Stocks 31,872 40,602 35,212 Debtors 62,580 63,783 67,993 Cash and short-term deposits 52,453 22,560 45,657 _______ _______ _______ 146,905 126,945 148,862 _______ _______ _______ Creditors: amounts falling due within one year Borrowings 15,524 6,266 15,047 Creditors 32,054 33,499 36,946 Current taxation 6,779 10,032 6,844 Dividends payable 8,353 7,562 11,712 _______ _______ _______ 62,710 57,359 70,549 _______ _______ _______ Net current assets 84,195 69,586 78,313 _______ _______ _______ Total assets less current liabilities 165,865 155,547 162,215 Creditors: amounts falling due after one year 488 1,872 491 Provisions for liabilities and charges 4,990 3,603 4,167 _______ _______ _______ 160,387 150,072 157,557 ======= ======= ======= Capital and reserves Called up share capital 36,545 36,393 36,473 Share premium account 6,336 4,748 5,631 Other reserves 185 185 185 Profit and loss account 117,321 108,746 115,268 _______ _______ _______ Shareholders' funds (note 4) 160,387 150,072 157,557 ======= ======= ======= Consolidated Cash Flow Statement £000 Unaudited Unaudited Audited 26 weeks to 26 weeks to 52 weeks to 28 September 29 September 30 March 2002 2001 2002 Cash flow from operating activities (note 5) 27,450 22,755 55,860 Return on investments and servicing of finance Interest received 876 398 770 Interest paid (298) (299) (522) _______ _______ _______ 578 99 248 _______ _______ _______ Taxation Current taxation paid (6,544) (6,666) (17,023) Capital expenditure Purchase of tangible fixed assets (3,733) (4,709) (8,120) Sale of tangible fixed assets 253 506 1,667 _______ _______ _______ (3,480) (4,203) (6,453) _______ _______ _______ Acquisitions and disposals Acquisition of businesses (25) (2,495) (2,571) Equity dividends paid (11,714) (10,108) (17,673) _______ _______ _______ 6,265 (618) 12,388 _______ _______ _______ Management of liquid resources (Increase)/decrease in short-term deposits (7,856) 461 (20,912) Financing Issue of ordinary share capital 777 3,419 4,382 Increase in loans - - 8,253 _______ _______ _______ 777 3,419 12,635 _______ _______ _______ (Decrease)/increase in cash (note 5) (814) 3,262 4,111 ======= ======= ======= Segmental Analysis £000 Geographical analysis By destination By origin Unaudited Unaudited Unaudited Unaudited 26 weeks to 26 weeks to 26 weeks to 26 weeks to 28 September 29 September 28 September 29 September 2002 2001 2002 2001 Turnover United Kingdom 37,748 40,977 78,265 80,540 United States of America 38,783 41,684 39,717 43,170 Europe excluding UK 26,281 26,079 9,585 10,223 Far East and Australasia 12,608 11,986 4,149 4,162 Africa, Near and Middle East 4,277 4,372 - - Other 4,149 5,675 1,556 1,941 Inter-segmental sales - - (9,426) (9,263) _______ _______ _______ _______ 123,846 130,773 123,846 130,773 ======= ======= ======= ======= Profit before taxation United Kingdom 11,960 12,790 United States of America 6,477 7,340 Other countries 2,286 2,425 _______ _______ 20,723 22,555 Goodwill amortisation (1,138) (1,141) Interest 496 108 _______ _______ Profit on ordinary activities before taxation 20,081 21,522 ======= ======= Sector analysis Unaudited Unaudited 26 weeks to 26 weeks to 28 September 29 September 2002 2001 Turnover Fire and Gas 33,049 33,620 Water 15,842 16,022 Elevator Electronics 16,022 16,501 Process Safety 17,352 18,308 Resistors 14,363 15,855 Optics and Specialist 27,547 30,941 Inter-segmental sales (329) (474) _______ _______ 123,846 130,773 ======= ======= Notes on the Interim Report 1 Basis of preparation The interim report for the 26 weeks to 28 September 2002 is prepared on the basis of the accounting policies set out in the accounts for the 52 weeks to 30 March 2002. The figures shown for the 52 weeks to 30 March 2002 are an abridged version of the Group's statutory accounts for that period, which received an unqualified audit report and have been filed with the Registrar of Companies. 2 Intangible assets Goodwill arising on acquisitions after 28 March 1998 is capitalised and is classified as an intangible asset in the Consolidated Balance Sheet. Goodwill arising on acquisitions prior to that date was written off to reserves, and would be included in the determination of profit or loss arising from the sale or closure of the business to which it relates. Capitalised goodwill is amortised through the Consolidated Profit and Loss Account on a straight line basis over its estimated economic life of 20 years. 3 Taxation The tax charge for the 26 weeks to 28 September 2002 of £6,769,000 comprises a current taxation charge of £6,464,000 (2001: £6,774,000) and a deferred tax charge of £305,000 (2001: £395,000). The current taxation charge is based on the estimated effective tax rate for the year. The tax charge includes £2,665,000 (2001: £2,816,000) in respect of overseas tax. 4 Reconciliation of shareholders' funds £000 Unaudited Unaudited Audited 26 weeks to 26 weeks to 52 weeks to 28 September 29 September 30 March 2002 2001 2002 Shareholders' funds brought forward 157,557 141,469 141,469 Profit transferred to reserves 4,957 6,745 11,834 Net proceeds of shares issued 777 3,419 4,382 Exchange adjustments (2,904) (1,561) (128) _______ _______ _______ Shareholders' funds carried forward 160,387 150,072 157,557 _______ _______ _______ 5 Notes on cash flow statement £000 Unaudited Unaudited Audited 26 weeks to 26 weeks to 52 weeks to 28 September 29 September 30 March 2002 2001 2002 Reconciliation of operating profit to net cash inflow from operating activities Operating profit 19,585 21,414 45,721 Depreciation 3,592 3,658 7,371 Goodwill amortisation 1,138 1,141 2,297 Loss on sale of tangible fixed assets 125 73 48 Increase SSAP 24 pension prepayment (591) - (126) Decrease/(increase) in stocks 2,444 (795) 5,097 Decrease in debtors 4,383 5,233 1,825 Decrease in creditors (3,226) (7,969) (6,373) _______ _______ _______ Net cash inflow from operating activities 27,450 22,755 55,860 _______ _______ _______ Reconciliation of net cash flow to movement in net cash (Decrease)/increase in cash (814) 3,262 4,111 Increase/(decrease) in liquid resources 7,856 (461) 20,912 Loan notes issued (1,083) - - Cash inflow from loans - - (8,253) Exchange adjustments 360 (233) 114 _______ _______ _______ 6,319 2,568 16,884 Net cash brought forward 30,610 13,726 13,726 _______ _______ _______ Net cash carried forward 36,929 16,294 30,610 _______ _______ _______ This information is provided by RNS The company news service from the London Stock Exchange

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