Interim Results - Pre-tax Profit Up 6%
Halma PLC
7 December 1999
GROUP RESULTS FOR THE 26 WEEKS TO 2 OCTOBER 1999
HALMA p.l.c.
CHAIRMAN'S STATEMENT
RESULTS
In the Chairman's Statement in the 1999 Annual Report I expressed the view
that we should be able to look to the future with confidence. I am very
pleased, therefore, to report that for the twenty-fourth consecutive year the
Group has produced record interim profits.
Pre-tax profits increased by 6% to £20.2 million and earnings per share by 6%
to 3.90p, both figures being before exceptional items and goodwill
amortisation. Sales turnover increased to £110.0 million and overseas sales,
having increased by 5% to £69.7 million, now amount to 63% of total Group
sales which is also a new record.
CASH FLOW
Cash flow continued to be strong and, having spent £12.0 million on
acquisitions during the first half, the Group's net cash balance as at the end
of the half year was £21.2 million.
TRADING PATTERN
It is worthy of comment that in the five-year period from October 1994 the
Group has spent some £60 million cash on acquisitions, of which approximately
75% has been overseas and 25% within the UK. The trading figures reflect this
picture, with an increasing proportion of Group sales being produced overseas.
Within this pattern, growth of sales turnover in the USA remained strong,
Europe, excluding the UK, recorded a steady increase and the Far East and
Australasia, whilst not recovering the record levels of two years ago, have
stabilised and again look promising.
ACQUISITION AND DEVELOPMENT
The businesses which were acquired during the year to March 1999 have all
continued to perform very satisfactorily. During the current financial year a
further three significant acquisitions have been completed, each of which
supplements the Group's existing strength in a designated growth sector.
Three major Group companies are already well established in the specialist
field of elevator safety. The acquisition of E-Motive Display Pte Ltd in
Singapore and T. L. Jones Limited in New Zealand has added further strength in
this area. The acquisition of Oklahoma Safety Equipment Co., Inc. adds to
the Group's already strong position in emergency pressure relief devices.
During the first half, two subsidiary companies, American Tech Manufacturing
Corporation and Tradinco Instrumenten-Apparaten B.V., were sold and a further
two companies, Marathon Monitors Inc. and Standard Cressall Limited, were
materially re-organised. Those costs of the programme which were exceptional
items were comfortably within the estimates set out in the Annual Report and
all other costs have been fully provided within the half year figures.
BUY-BACK OF SHARES
A key factor in the Group's highly successful strategy over an extended period
has been the use of internally generated funds to finance acquisitions for
cash. Second only to continuing investment in our existing subsidiary
companies, this remains the optimum use of our surplus cash.
However, purchase of our own shares for cancellation provides an additional
option when the arithmetic favours this. Following approval by shareholders
at the AGM in August, it is intended to allocate initially up to £5 million
for this purpose as and when appropriate buying opportunities present
themselves.
PREFERENCE SHARES
Early in the second half the Company's Preference shares have been cancelled
and repaid in accordance with the programme approved at the AGM. The cost of
redemption was £0.6 million and the impact on our on-going results will be
marginally favourable.
DIVIDENDS
The Directors have again authorised a 20% increase in the net interim dividend
per share. This is now the twenty-second consecutive year in which the
dividend per share has increased by 20% or more. This interim dividend, which
will amount to 1.57p per share, will be paid on 7 February 2000 to
shareholders on the register at the close of business on 6 January 2000.
PROSPECTS
A review of the prospects for the second half of the year as against the
results for the first half suggests a number of favourable factors. The first
half comprised 26 weeks as against 27 weeks in the comparative period. Also
the cumulative impact of our acquisition activities and of the above mentioned
disposals and re-organisations should be more apparent in the second half.
These factors, allied to continuing resilient performances from many of the
subsidiary companies, should provide a solid platform for the Group's second
half results.
David S Barber
7 December 1999 Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT £000
Unaudited
26 weeks to 2 October 1999
Before Unaudited Audited
except'l 27 weeks 53 weeks
items and to to
goodwill Except'l Goodwill 3 October 3 April
amortis'n items amortis'n Total 1998 1999
Notes
TURNOVER 109,991 - - 109,991 106,341 217,758
======= ======= ======= ======= ======= =======
OPERATING PROFIT
BEFORE GOODWILL
AMORTISATION 19,907 - - 19,907 18,695 40,777
Goodwill
amortisation 2 - - (481) (481) (121) (276)
_______ _______ _______ _______ _______ _______
OPERATING PROFIT 19,907 - (481) 19,426 18,574 40,501
EXCEPTIONAL ITEMS 3
Costs of closure
and sale of
businesses - (3,302) - (3,302) - -
Related goodwill
adjustment - (4,732) - (4,732) - -
_______ _______ _______ _______ _______ _______
Loss on closure and
sale of businesses - (8,034) - (8,034) - -
_______ _______ _______ _______ _______ _______
19,907 (8,034) (481) 11,392 18,574 40,501
Interest 318 - - 318 459 1,046
_______ _______ _______ _______ _______ _______
PROFIT ON ORDINARY
ACTIVITIES BEFORE
TAXATION 20,225 (8,034) (481) 11,710 19,033 41,547
Taxation 4 (6,128) 891 - (5,237) (5,842) (12,959)
_______ _______ _______ _______ _______ _______
PROFIT FOR THE
FINANCIAL PERIOD 14,097 (7,143) (481) 6,473 13,191 28,588
_______ _______ _______ _______ _______ _______
DIVIDENDS
Preference dividends (19) (19) (38)
Ordinary dividends (5,681) (4,726) (12,021)
_______ _______ _______
PROFIT TRANSFERRED
TO RESERVES 773 8,446 16,529
======= ======= =======
ORDINARY DIVIDENDS PER SHARE 1.570p 1.308p 3.327p
EARNINGS PER ORDINARY SHARE
BEFORE EXCEPTIONAL ITEMS AND
GOODWILL AMORTISATION 3.90p 3.68p 7.99p
EARNINGS PER ORDINARY SHARE 1.79p 3.65p 7.91p
DILUTED EARNINGS PER
ORDINARY SHARE 1.78p 3.64p 7.88p
CONSOLIDATED BALANCE SHEET £000
Unaudited Unaudited Audited
2 October 3 October 3 April
Notes 1999 1998 1999
FIXED ASSETS
Intangible assets 2 26,353 6,801 14,058
Tangible assets 40,486 39,758 40,644
_______ _______ _______
66,839 46,559 54,702
_______ _______ _______
CURRENT ASSETS
Stocks 33,745 32,927 34,790
Debtors 55,019 50,779 59,530
Cash and short-term deposits 27,835 29,065 29,894
_______ _______ _______
116,599 112,771 124,214
_______ _______ _______
CREDITORS: AMOUNTS FALLING DUE
DUE WITHIN ONE YEAR
Borrowings 6,646 7,295 7,730
Dividends payable 5,676 4,722 7,294
Current taxation 14,618 12,772 11,927
Creditors 32,220 27,599 33,639
_______ _______ _______
59,160 52,388 60,590
_______ _______ _______
NET CURRENT ASSETS 57,439 60,383 63,624
_______ _______ _______
TOTAL ASSETS LESS CURRENT LIABILITIES 124,278 106,942 118,326
CREDITORS: AMOUNTS FALLING DUE
AFTER ONE YEAR 3,374 - 2,167
_______ _______ _______
120,904 106,942 116,159
======= ======= =======
CAPITAL AND RESERVES
Called up share capital 36,500 36,440 36,473
Share premium account 1,012 718 894
Profit and loss account 83,392 69,784 78,792
_______ _______ _______
SHAREHOLDERS' FUNDS (INCLUDING
NON-EQUITY INTERESTS) 5 120,904 106,942 116,159
======= ======= =======
CONSOLIDATED CASH FLOW STATEMENT £000
Unaudited Unaudited Audited
26 weeks 27 weeks 53 weeks
to to to
2 October 3 October 3 April
Notes 1999 1998 1999
CASH FLOW FROM OPERATING
ACTIVITIES 6 22,042 19,536 42,972
RETURN ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 686 729 1,690
Interest paid (318) (266) (632)
Preference dividends paid (19) (38) (57)
_______ _______ _______
349 425 1,001
_______ _______ _______
TAXATION
Current taxation paid (2,794) (3,016) (10,998)
CAPITAL EXPENDITURE
Purchase of tangible fixed assets (3,762) (3,353) (6,960)
Sale of tangible fixed assets 645 476 796
_______ _______ _______
(3,117) (2,877) (6,164)
_______ _______ _______
ACQUISITIONS AND DISPOSALS
Acquisition of businesses (11,981) (7,357) (14,622)
Cash and overdrafts acquired 192 751 822
Sale of businesses 949 165 282
Overdrafts sold 313 - -
_______ _______ _______
(10,527) (6,441) (13,518)
_______ _______ _______
EQUITY DIVIDENDS PAID (7,299) (6,072) (10,795)
_______ _______ _______
(1,346) 1,555 2,498
_______ _______ _______
MANAGEMENT OF LIQUID RESOURCES
Decrease/(increase) in
short-term deposits 2,336 (6,815) (7,282)
FINANCING
Issue of ordinary share capital 145 125 334
(Decrease)/increase in loans (770) 4,359 3,312
_______ _______ _______
(625) 4,484 3,646
_______ _______ _______
INCREASE/(DECREASE) IN CASH 6 365 (776) (1,138)
======= ======= =======
SEGMENTAL ANALYSIS £000
GEOGRAPHICAL ANALYSIS By destination By origin
Unaudited Unaudited Unaudited Unaudited
26 weeks 27 weeks 26 weeks 27 weeks
to to to to
2 October 3 October 2 October 3 October
1999 1998 1999 1998
TURNOVER
United Kingdom 40,333 40,087 74,462 76,456
United States of America 31,047 27,660 31,030 27,365
Europe excluding UK 21,728 20,896 8,471 8,396
Far East and Australasia 10,342 10,353 3,619 2,221
Africa, Near and Middle East 2,858 3,813 - -
Other 3,683 3,532 1,487 895
Inter-segmental sales - - (9,078) (8,992)
_______ _______ _______ _______
109,991 106,341 109,991 106,341
======= ======= ======= =======
PROFIT BEFORE TAXATION
United Kingdom 12,925 13,822
United States of America 5,627 4,036
Other countries 1,355 837
_______ _______
19,907 18,695
Goodwill amortisation (481) (121)
Exceptional items (8,034) -
Interest 318 459
_______ _______
Profit on ordinary
activities before taxation 11,710 19,033
======= =======
SECTOR ANALYSIS Unaudited Unaudited
26 weeks 27 weeks
to to
2 October 3 October
1999 1998
TURNOVER
Detection 52,018 51,278
Protection 49,299 47,075
Other 8,982 8,411
Inter-segmental sales (308) (423)
_______ _______
109,991 106,341
======= =======
PROFIT BEFORE TAXATION
Detection 9,030 8,659
Protection 8,750 8,205
Other including holding companies 2,127 1,831
_______ _______
19,907 18,695
Goodwill amortisation (481) (121)
Exceptional items (8,034) -
Interest 318 459
_______ _______
Profit on ordinary
activities before taxation 11,710 19,033
======= =======
NOTES ON THE INTERIM REPORT £000
1 BASIS OF PREPARATION
The interim report for the 26 weeks to 2 October 1999 is prepared on the
basis of the accounting policies set out in the accounts for the 53 weeks
to 3 April 1999, except for the adoption of accounting standards applicable
since that date. The figures shown for the 53 weeks to 3 April 1999 are an
abridged version of the Group's statutory accounts, which received an
unqualified auditors' 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.
Capitalised goodwill is amortised through the Consolidated Profit and Loss
Account on a straight line basis over 20 years. Goodwill arising on
earlier acquisitions has not been restated.
3 EXCEPTIONAL ITEMS
Exceptional items arise on the closure and sale of parts of the business of
Marathon Monitors Inc., the sale of the business of American Tech
Manufacturing Corporation and the shoe machinery business of Standard
Cressall Limited, and the sale of the entire share capital of Tradinco
Instrumenten-Apparaten B.V.
4 TAXATION
The tax charge for the 26 weeks to 2 October 1999 of £5,237,000 is based on
the estimated effective tax rate for the year and includes £1,139,000
(1998: £1,379,000) in respect of overseas tax. The tax credit on
exceptional items predominantly relates to overseas tax.
5 RECONCILIATION OF SHAREHOLDERS' FUNDS
Unaudited Unaudited Audited
26 weeks 27 weeks 53 weeks
to to to
2 October 3 October 3 April
1999 1998 1999
SHAREHOLDERS' FUNDS BROUGHT FORWARD 116,159 98,249 98,249
Profit transferred to reserves 773 8,446 16,529
Net proceeds of shares issued 145 125 334
Goodwill adjustment on closure
and sale of businesses 4,732 - -
Exchange adjustments (905) 122 1,047
_______ _______ _______
SHAREHOLDERS' FUNDS CARRIED FORWARD 120,904 106,942 116,159
_______ _______ _______
The only non-equity interest included within shareholders' funds is
£344,000 (1998: £344,000) 11% cumulative preference share capital which was
cancelled and repaid in October 1999.
6 NOTES ON CASH FLOW STATEMENT
Unaudited Unaudited Audited
26 weeks 27 weeks 53 weeks
to to to
2 October 3 October 3 April
1999 1998 1999
RECONCILIATION OF OPERATING PROFIT
TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
Operating profit 19,426 18,574 40,501
Depreciation 3,001 2,866 5,748
Goodwill amortisation 481 121 276
(Profit)/loss on sale of tangible
fixed assets (60) 23 58
Increase in stocks (654) (2,809) (2,632)
Decrease in debtors 5,053 7,620 294
Decrease in creditors (4,752) (6,322) (582)
Net cash flow relating to exceptional
items (453) (537) (691)
_______ _______ _______
Net cash inflow from operating
activities 22,042 19,536 42,972
_______ _______ _______
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET CASH
Increase/(decrease) in cash 365 (776) (1,138)
(Decrease)/increase in liquid resources (2,336) 6,815 7,282
Short-term deposits acquired 227 - -
Loans acquired (126) - (281)
Cash outflow/(inflow) from loans 770 (4,359) (3,312)
Exchange adjustments 125 235 (242)
_______ _______ _______
(975) 1,915 2,309
Net cash brought forward 22,164 19,855 19,855
_______ _______ _______
Net cash carried forward 21,189 21,770 22,164
_______ _______ _______
7 MILLENNIUM
Each Group company has assessed the impact of the Millennium software
issue on information systems and other aspects of its operations and is
responsible for ensuring that necessary actions are being taken to address
any issues in a timely manner. Issues arising in each Group company in
relation to the Millennium are discussed, evaluated and monitored
principally by the Divisional Finance Directors who report individual
division's progress to Head Office. The Audit Committee reviews the
progress.
It should be noted that Group companies are stand-alone businesses and
predominantly use standard computer software. Each Group company has
assessed its own position and all significant systems and products are
already Millennium compliant. As regards Millennium issues relating to key
customers and suppliers, each Group company has assessed the risk to its
business and sought assurances of Millennium compliance.
Because internal and external assurances can never be absolute and Group
companies may be adversely affected by the inability of third parties to
manage Millennium issues, contingency plans have been developed to mitigate
risk. The total incremental costs to the Group to address all identified
issues is not significant.
A copy of the Interim Report will be sent to all 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
Contact for further information: Mr Stephen R O'Shea
Chief Executive, Halma p.l.c.
Tel: +44 (0)1494 721111
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