Interim Results

RNS Number : 0242J
Halma PLC
27 November 2008
 




HALMA p.l.c.


HALF YEAR REPORT FOR THE 26 WEEKS TO 27 SEPTEMBER 2008


27 NOVEMBER 2008


Strong revenue and profit growth 

reflects Halma's diverse and resilient end markets



Halma, the leading safety, health and sensor technology group, today announces its half year results for the 26 weeks 

to 27 September 2008.


Highlights include:


  • Revenue from continuing operations up 19% to £221.7m (2007/08: £186.2m), including 14% organic revenue growth* (10% at constant currency).


  • Pre-tax profit from continuing operations** up 17% to £39.0m (2007/08: £33.4m), including 13% organic profit growth* (8% at constant currency).


  • Double digit growth in all three business sectors. Revenue outside our traditionally strong markets of the UKUSA and Mainland Europe now represents 21.5% (2007/08: 19%) of total revenue. 


  • Adjusted earnings per share from continuing operations*** up 20% to 7.52p (2007/08: 6.28p). Statutory earnings per share 6.85p (2007/08: 5.94p).


  • Strong margins and returns maintained with return on sales of 17.6% (2007/08: 17.9%) and operating profit** growth of 20%. ROTIC* improved to 14.7% (2007/08: 13.9%).  


  • Strong financial position with modest net debt. Substantial headroom on bank facilities (now extended to 2013) to support acquisitive and organic growth plans.


  • Good cash generation supports a 5% increase in the interim dividend, reflecting the Board's continuing confidence in Halma's long-term growth prospects whilst continuing to improve our dividend cover.


*

Organic growth rates, Return on capital employed (ROCE) and Return on total invested capital (ROTIC) are non-GAAP performance measures used by management in measuring the returns achieved from the Group's asset base. See note 9 for details.

**

Adjusted to remove the amortisation of acquired intangible assets of £3.4m (2007/8: £2.0m).

***

Adjusted to remove the amortisation of acquired intangible assets. See note 4 for details.



Commenting on the results, Andrew Williams, Chief Executive of Halma, said:


'I am pleased to report that we have delivered a strong performance in the six-month period to 27 September 2008, achieving record revenues and profits. Our strong performance over many years confirms the resilience of Halma during challenging macro-economic conditions. In previous times of economic challenge and rapid change, Halma's ability to adapt quickly to the changing market needs has enabled us to sustain growth and frequently gain market share. During the past 20 years or more, our Return on sales has remained high, at above 16%.  


'Since 2005, our strategy has been not only to resume our excellent record of organic growth and successful acquisitions, but also to significantly increase investment in people development, emerging markets, manufacturing and new product innovation. While this increased investment moderated any potential margin expansion over this short period, I am confident that the returns from our investment combined with our strong financial resources will help now to ensure we continue to perform well, relative to markets as a whole.'



For further information, please contact:


Halma p.l.c.
Andrew Williams, Chief Executive
Kevin Thompson, Finance Director


+44 (0)1494 721111

Hogarth Partnership Limited
Rachel Hirst/Andrew Jaques

+44 (0)20 7357 9477



NOTE TO EDITORS 


1.

Halma develops and markets products used worldwide to protect life and improve the quality of life. The Group comprises three business sectors:



  • Infrastructure Sensors

We make products which detect hazards to protect people and property in public and commercial buildings.



  • Health and Analysis

We make components and products used to improve personal and public health. We also develop technologies and products which are used for analysis in safety, environmental and leisure related markets including Water.



  • Industrial Safety

We make products which protect property and people at work.



The key characteristics of Halma's businesses are that they are based on advanced technology and offer strong growth potential. Many Group businesses are a clear market leader in their specialist field and, in a number of cases, are the dominant world supplier.


2.

High resolution photos of Halma senior management, including Chief Executive Andrew Williams, and images illustrating Halma business activities can be downloaded from its website: www.halma.com. Click on the 'News' link, then 'Image Library'. Photo queries:  David Waller +44 (0)20 8205 0038, e-mail: dwaller@halmapr.com.


3.

You can view or download copies of this announcement and our latest Half year and Annual reports from our website at www.halma.com or request free printed copies by contacting halma@halma.com.


4.

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.




HALMA p.l.c.

Half year results for the 26 weeks to 27 September 2008


Financial highlights






Change

Unaudited

26 weeks to

27 September 2008

Unaudited 
26 weeks to

29 September
200
7(5)

Continuing operations 




Revenue

+ 19%

£221.7m

£186.2m

Adjusted profit before taxation(1)

+ 17%

£39.0m

£33.4m

Statutory profit before taxation 

+ 13%

£35.6m

£31.4m





Adjusted earnings per share(2)

+ 20%

7.52p

6.28p

Statutory earnings per share 

+ 15%

6.85p

5.94p

Interim dividend per share

+ 5%

3.15p

3.00p





Return on sales(3)


17.6%

17.9%

Return on total invested capital(4)


14.7%

13.9%

Return on capital employed(4)


57.1%

58.5%


Pro-forma information:


(1)

Adjusted to remove the amortisation of acquired intangible assets of £3,399,000 (2007/08: £1,968,000).


(2)

Adjusted to remove the amortisation of acquired intangible assets. See note 4 for details.



(3)


Return on sales is defined as adjusted(1) profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations.


(4)


Organic growth rates, Return on capital employed (ROCE) and Return on total invested capital (ROTIC) are non-GAAP performance measures used by management in measuring the returns achieved from the Group's asset base. See note 9 for details.


(5)


The comparative figures for 2007/08 as previously reported have been amended to account for the disposal of Post Glover Lifelink, Inc as a discontinued operation. See note 8 for details.




Chairman's statement 


Geoff Unwin, Chairman of Halma, said:


Halma has continued to perform well in uncertain times


Halma: what we do and our strategy
Our business is to make products which protect lives and improve the quality of life for people worldwide. We do this through continuous innovation in market-leading products, which meet the increasing demands for improvements to health, safety and the environment. We build strong positions in markets where the demand is global. Our businesses are autonomous and highly entrepreneurial.


Results

For the first half, revenue from continuing operations increased 19% to £221.7m (2007/08: £186.2m) and adjusted* profit before tax from continuing operations increased 17% to £39.0m (2007/08: £33.4m). Statutory profit before tax increased by 13% to £35.6m. Organic revenue growth** was 14% and 10% at constant currency. Organic profit growth** was 13%; 8% at constant currency. Return on total invested capital** was 14.7% (2007/08: 13.9%).


We continue to invest strongly in products, people and market development. In September 2008 we announced the acquisition of Fiberguide Industries, which manufactures complex optical fibre cables and assemblies, for an initial cash consideration of $14.0m (£7.9m).  In November 2008 we acquired the business and assets of Oerlikon Optics USA Inc's operation located in Golden, Colorado for $6.0m (£4.0m) in cash. The business designs and manufactures optical coatings and optomechanical assemblies.


Dividends

The Board declares an interim dividend of 3.15 pence per share, an increase of 5%, which will be paid on 4 February 2009 to shareholders on the register at 5 January 2009. This increase reflects the Board's confidence in Halma's long-term growth prospects whilst continuing to improve our dividend cover.


Progress

Across the Group, progress has again been good. Our subsidiary boards are much strengthened. There has been a high rate of growth in revenues outside our traditionally strong markets of the UKUSA and Mainland Europe, adding to the growth achieved within these markets.


We have a good pipeline of possible acquisition prospects. However, as we acquire in the private markets, it may take some time for price expectations to align themselves with those prevailing in public markets. Meanwhile we are taking a patient stance regarding the deployment of capital.


Outlook

At the time of writing, stock markets are jittery, as investors begin to see the smoke clearing somewhat from the banking crisis, only to see a weakening global economic perspective. Demand for our products is underpinned by long-term growth drivers and we therefore expect Halma to continue to perform well, relative to markets as a whole.


*     Before amortisation of acquired intangible assets of £3,399,000 (2007/08: £1,968,000)

**   See Financial highlights




Chief Executive's review


Andrew Williams, Chief Executive of Halma, said:


Our strong performance over many years confirms the resilience of Halma


A record performance

I am pleased to report that we have delivered a strong performance in the six-month period to 27 September 2008, achieving record revenues and profits. 


Revenue growth on continuing operations of 19% produced an increase in adjusted* profit (on continuing operations after financing costs) of 17%. Operating profit* growth was 20% demonstrating continued strong product margins and investment in strengthening our sales, technical and operational resources.


Currency movements were favourable, boosting revenue by 4% and adjusted* profit by 5%. Excluding the impact of currency and acquisitions made in the current and previous year, underlying organic revenue and profit growth were 10% and 8% respectively.


Growth in all three sectors

Infrastructure Sensors performed well, increasing revenue by 15% and profit by 18%, raising the Return on sales from 17.1% to 17.6%. This was all organic growth as our Fire Detection sub-sector continued its recent record of strong progress and the benefits of restructuring our Security Sensors business last year started to emerge as planned. Automatic Door Safety also grew revenue and profit whilst profits from our Elevator Safety business were marginally down on the same period last year.


Health and Analysis achieved profit growth of 21% and revenue growth of 25%. Despite good underlying revenue growth and the expected contribution from recent acquisitions, underlying profit growth was slightly disappointing. Product margins were steady, but overhead costs grew faster in absolute terms. Actions are underway to address the specific challenges within the relevant businesses to ensure increases in resources are productive and profitable.


Our Industrial Safety sector goes from strength to strength, increasing profits by 30% and revenues by 19% - almost all organic growth. Each of our four businesses (Gas Detection, Bursting Discs, Safety Interlocks and Asset Monitoring) grew revenue and profit whilst continuing to invest more in improving distribution in new markets.


Growth in all global regions

Revenues increased to all geographic regions, but more substantially outside the UK and USA in accordance with our strategic objective. Progress was boosted by the contribution of Riester, particularly in Mainland Europe and South America. Halma businesses are aiming to increase their presence outside the UKUSA and Mainland Europe and it is pleasing to once again report significant revenue growth in the 'rest of the world' of 35% - now representing 21.5% of total Group sales.


Order intake in the period was 14% ahead of last year and we entered the second half with a larger order book than last year. Unsurprisingly, order intake growth reduced slightly throughout the period in our US and UK companies, but held up well in the other world regions and currently remains within our expectations. This resilience in demand reflects the strengths we derive from operating in diverse geographies and markets and choosing to focus on market niches where long-term sustainable growth drivers underpin demand. 


Strong balance sheet and cash flow 

Cash flow was in line with our strong track record. Our current syndicated revolving credit facility of £165m, which we renegotiated in February 2008 on favourable terms for a further five years, gives us headroom to support organic growth and future acquisitions. We ended the period with net debt of £48m.


Return on capital employed** remained high at 57.1% whilst our overall Group measure of Return on total invested capital** was an impressive 14.7%.


The major risks and uncertainties facing Halma and what we are doing to identify, manage and mitigate them are covered in detail in our latest Annual report on page 14 (see also on www.halma.com). Clearly, recent financial and economic changes have raised the relative importance of treasury risks and risks to organic growth in the remainder of the financial year. Actions have been taken to ensure that we have sufficient headroom to continue with our strategic objectives.


Further acquisition investment

In September 2008 we acquired Fiberguide Industries based in New JerseyUSA for $14.0m.  We followed in November 2008 with the acquisition of the Colorado operations of Oerlikon Optics USA Inc for $6.0m which will become part of Ocean Optics Inc. These each add further product depth to our existing Photonics business within the Health and Analysis sector. Riester, the German Health Optics business acquired in December 2007, performed in line with our expectations and I am particularly pleased with the collaboration between it and other Halma Health Optics businesses. We are actively searching for more acquisitions and believe the wider economic uncertainty may create additional opportunities for us.


Continued investment to drive organic growth

In China, our new manufacturing hub in Shanghai, to accommodate assembly operations for four Halma companies, is in the final phase of installation and will be operational by the end of the year. Our planned £2.5m investment in a joint venture in China to support development of our Fire Detection business did not proceed once it became clear that our respective objectives could be achieved without a formal JV arrangement. In India, our new Halma hub in Mumbai is operational and recruitment of local commercial and technical resources for Halma companies is underway.


Investment in R&D increased broadly in line with revenue growth, representing 5% of Group revenues (2007/08: 5%). Our internal Halma Annual Innovation Awards for 2008 demonstrated the more active approach we have been taking towards improving not just our new product development activities but also our manufacturing operations. Around half of all entries were for process innovations. This year's award was won by Memco for their new Panachrome elevator door sensor with the runners up being the new 'click-n-seal' Fluid Technology connection product from Diba Industries and Volk Optical's new ophthalmic lens polishing manufacturing process.


Capital expenditure during the period increased by 16% to £7.0m (2007/08: £6.0m). Projects included investments which gave businesses a 'step change' in their manufacturing capabilities and promise to drive growth in new market niches.


Outlook

Our strong performance over many years confirms the resilience of Halma during challenging macro-economic conditions. During the past 20 years or more, our Return on sales has remained high, at above 16%. 


In addition to the benefits of being in diverse markets with robust long-term growth drivers, we gain significant advantage from our decentralised operating structure. We have a clear strategic framework, a flat and simple reporting structure, autonomy and accountability at the subsidiary board level and high calibre people throughout our organisation. Decisions are made by those closest to our customers and markets, often resulting in major tactical changes being implemented without delay. In previous times of economic challenge and rapid change, Halma's ability to adapt quickly to the changing market needs has enabled us to sustain growth and frequently gain market share.


Since 2005, our strategy has been not only to resume our excellent record of organic growth and successful acquisitions, but also to significantly increase investment in people development, emerging markets, manufacturing and new product innovation. While this increased investment moderated any potential margin expansion over this short period, I am confident that the returns from our investment combined with our strong financial resources will help now to ensure we continue to perform well, relative to markets as a whole. 


*    Before amortisation of acquired intangible assets

**  See Financial highlights



Responsibility statement


We confirm that to the best of our knowledge:


(a)

these Condensed financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting';


(b)

this Half year report includes a fair review of the information required by Disclosure and Transparency Rule (DTR) 4.2.7R (indication of important events during the period and description of principal risks and uncertainties for the remainder of the financial year); and


(c)

this Half year report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).


By order of the Board


A J Williams

Chief Executive


27 November 2008



K J Thompson

Finance Director




HALF YEAR RESULTS FOR THE 26 WEEKS TO 27 SEPTEMBER 2008


Condensed financial statements



Consolidated income statement

£000 


Unaudited 
26 weeks to 27 September 2008
 

Unaudited  
26 weeks to 29 September 2007 

Audited 
52 weeks to
 
 29 March 
200
8 


Before 
 acquired 
intangibles 
 amortisation 


Amortisation 
 of acquired  
intangibles
 




Total 

Before 
acquired 
intangibles 
amortisation  


Amortisation 
 of acquired  
intangibles
 




Total 




Total 

Continuing operations








Revenue  (note 1)

221,704 
_______

- 
_______

221,704 
_______ 

186,170 
_______ 

- 
_______ 

186,170 
_______ 

395,061 
_______ 









Operating profit

40,859 

(3,399)

37,460 

34,105 

(1,968)

32,137 

70,166 

Finance income

4,277 

- 

4,277 

4,017 

- 

4,017 

8,159 

Finance expense

(6,117)
_______ 

- 
_______ 

(6,117)
_______ 

(4,764)
_______ 

- 
_______ 

(4,764)
_______ 

(10,303)
_______ 









Profit before taxation

39,019 

(3,399)

35,620 

33,358 

(1,968)

31,390 

68,022 

Taxation  (note 3)

(10,925)
_______ 

904 
_______ 

(10,021)
_______ 

(9,978)
_______ 

705 
_______ 

(9,273)
_______ 

(19,688)
_______ 

Profit for the period

from continuing 

operations  



28,094 



(2,495)



25,599 



23,380 



(1,263)



22,117 



48,334 


Discontinued operations








Net profit for the 

period from discontinued 

operations (note 8)




-
 
_______ 




-
 
_______ 




-
 
_______ 




133
 
_______ 




-
 
_______ 




133
 
_______ 




1,950
 
_______ 


Profit for the period 

attributable to equity 

shareholders  (note 1)




28,094 
_______ 




(2,495)
_______ 




25,599 
_______ 




23,513 
_______ 




(1,263)
_______ 




22,250 
_______ 




50,284 
_______ 








Earnings per ordinary 

share (note 4)







From continuing operations







Basic

7.52p 


6.85p 

6.28p 


5.94p 

12.97p 

Diluted



6.83p 



5.91p 

12.90p 


From continuing and 

discontinued operations







Basic

7.52p 


6.85p 

6.31p 


5.97p 

13.49p 

Diluted



6.83p 



5.94p 

13.42p 









Dividends in respect of the 

period (note 5)






Declared (£000)

11,786 



11,190 

28,187 

Declared per share

3.15p 



3.00p 

7.55p 




Consolidated balance sheet




£000 





Unaudited 
27 September 
2008
 


Unaudited 
29 September 
200
7 


Audited 
29 March 
200
8 

Non-current assets









Goodwill




164,723 


129,207 


161,230 

Other intangible assets  




35,980 


14,953 


33,252 

Property, plant and equipment




59,930 


50,287 


57,452 

Deferred tax assets




13,665 
_______ 


9,717 
_______ 


10,069 
_______ 





274,298 
_______ 


204,164 
_______ 


262,003 
_______ 

Current assets









Inventories




47,879 


39,789 


44,267 

Trade and other receivables




98,366 


81,225 


99,741 

Cash and cash equivalents




22,210 
_______ 


25,360 
_______ 


28,118 
_______ 





168,455 
_______ 


146,374 
_______ 


172,126 
_______ 

Total assets




442,753 
_______ 


350,538 
_______ 


434,129 
_______ 

Current liabilities









Borrowings




4,882 


31,752 


7,035 

Trade and other payables




62,928 


55,935 


69,420 

Tax liabilities




10,977 
_______ 


9,936 
_______ 


8,273 
_______ 





78,787 
_______ 


97,623 
_______ 


84,728 
_______ 

Net current assets




89,668 
_______ 


48,751 
_______ 


87,398 
_______ 

Non-current liabilities









Borrowings




65,142 



65,358 

Retirement benefit obligations




48,804 


34,703 


35,957 

Trade and other payables




2,670 


2,538 


2,874 

Deferred tax liabilities




4,106 
_______ 


2,581 
_______ 


6,108 
_______ 





120,722 
_______ 


39,822 
_______ 


110,297 
_______ 

Total liabilities




199,509 
_______ 


137,445 
_______ 


195,025 
_______ 

Net assets




243,244 
_______ 


213,093 
_______ 


239,104 
_______ 

Capital and reserves









Share capital




37,521 


37,394 


37,446 

Share premium account




17,926 


16,263 


16,949 

Treasury shares




(2,197)


(2,058)


(3,292)

Capital redemption reserve




185 


185 


185 

Translation reserve




12,537 


(5,035)


7,144 

Other reserves




3,941 


4,806 


5,106 

Retained earnings




173,331 
_______ 


161,538 
_______ 


175,566 

_______ 

Shareholders' funds




243,244 
_______ 


213,093 
_______ 


239,104 
_______ 




Consolidated statement of recognised income and expense






£000 





Unaudited 
26 weeks to 
27 September 
200
8 



Unaudited 
26 weeks to 
29 September 
2007
 



Audited 
52 weeks to 
29 March 
200
8 


Exchange differences on translation of foreign operations




5,393 


(763)


11,352 

Exchange differences transferred to profit on disposal of foreign operations


- 


- 


64 

Actuarial (losses)/gains on defined benefit pension plans




(15,146)


23 


(3,886)

Tax on items taken directly to reserves




4,309 
_______ 


(750)
_______ 


343 
_______ 

Net (loss)/profit recognised directly in reserves




(5,444)


(1,490)


7,873 

Profit for the period




25,599 
_______ 


22,250 
_______ 


50,284 
_______ 

Total recognised income and expense for the period




20,155 
_______ 


20,760 
_______ 


58,157 
_______ 




Reconciliation of movements in shareholders' funds

£000 





Unaudited 
26 weeks to 
27 September 

2008
 



Unaudited 
26 weeks to 
29 September 

2007
 



Audited 
52 weeks to 
29
 March 
2008
 


Shareholders' funds brought forward




239,104 


206,608 


206,608 










Profit for the period




25,599 


22,250 


50,284 

Dividends paid




(16,997)


(16,139)


(27,329)

Exchange differences on translation of foreign operations




5,393 


(763)


11,352 

Exchange differences transferred to profit on disposal of foreign operations




64 

Actuarial (losses)/gains on defined benefit pension plans


(15,146)


23 


(3,886)

Tax on items taken directly to reserves


4,309 


(750)


343 

Issue of shares 




1,052 


1,106 


1,844 

Movement in treasury shares 




1,095 


(394)


(1,628)

Movement in other reserves




(1,165)
_______ 


1,152 
_______ 


1,452 
_______ 

Total movement in shareholders' funds




4,140 
_______ 


6,485 
_______ 


32,496 
_______ 

Shareholders' funds carried forward




243,244 
_______ 


213,093 
_______ 


239,104 
_______ 




Consolidated cash flow statement








£000 

 




Unaudited 
26 weeks to 
27 September 

2008
 



Unaudited 
26 weeks to 
29 September 

2007
 



Audited 
52 weeks to 
29
 March 
2008
 


Net cash inflow from operating activities (note 6)




29,927 
_______ 


25,963 
_______ 


58,401 
_______ 










Cash flows from investing activities









Purchase of property, plant and equipment




(6,073)


(5,610)


(14,787)

Purchase of computer software




(928)


(438)


(952)

Proceeds from sale of property, plant and equipment




1,683 


482 


831 

Development costs capitalised




(1,694)


(2,078)


(3,796)

Interest received




379 


331 


721 

Acquisition of businesses




(8,064)


(1,212)


(46,537)

Disposal of businesses




309 
_______ 


-  
_______ 


2,405 
_______ 

Net cash used in investing activities




(14,388)
_______ 


(8,525)
_______ 


(62,115)
_______ 










Financing activities









Dividends paid




(16,997)


(16,139)


(27,329)

Proceeds from issue of share capital




1,052 


1,106 


1,844 

Net purchase of treasury shares




(474)


(786)


(1,632)

Interest paid




(1,917)


(877)


(2,473)

(Repayment)/drawdown of borrowings




(3,809)
_______ 


2,300 
_______ 


37,796 
_______ 

Net cash (used in)/from financing activities




(22,145)
_______ 


(14,396)
_______ 


8,206 
_______ 










(Decrease)/increase in cash and cash equivalents (note 6)




(6,606)


3,042 


4,492 

Cash and cash equivalents brought forward




28,118 


22,051 


22,051 

Exchange adjustments




698 
_______ 


267 
_______ 


1,575  
_______ 

Cash and cash equivalents carried forward




22,210 
_______ 


25,360 
_______ 


28,118 
_______ 




Notes to the condensed financial statements


 1

Segmental analysis






Sector analysis

£000 




Revenue 




Unaudited 
26 weeks to 
27 September 

2008
 


Unaudited 
26 weeks to 
29 September 

2007
 


Audited 
52 weeks to 
29
 March 
2008
 



Infrastructure Sensors


92,298 

80,423 

167,262 


Health and Analysis


76,397 

61,017 

134,630 


Industrial Safety


53,325 

44,978 

93,731 


Inter-segmental sales


(316)
_______ 

(248)
_______ 

(562)
_______ 


Continuing operations


221,704 

186,170 

395,061 


Discontinued operations (note 8)



_______ 

1,698 
_______ 

2,894 
_______ 


Revenue for the period


221,704 
_______ 

187,868 
_______ 

397,955 
_______ 


Inter-segmental sales are charged at prevailing market prices











Profit  




Unaudited 
26 weeks to 
27 September 

2008
 


Unaudited 
26 weeks to 
29 September 

2007
 


Audited 
52 weeks to 
29
 March 
2008
 



Infrastructure Sensors


16,248 

13,765 

28,504 


Health and Analysis


14,175 

11,749 

27,842 


Industrial Safety


11,740 

9,030 

19,355 


Central companies


(1,304)
_______ 

(439)
_______ 

(778)
_______ 


Continuing operations


40,859 

34,105 

74,923 


Discontinued operations


205 

436 


Net finance expense


(1,840)
_______ 

(747)
_______ 

(2,144)
_______ 


Group profit before amortisation of acquired intangibles


39,019 

33,563 

73,215 


Amortisation of acquired intangible assets


(3,399)

(1,968)

(4,757)


Profit on disposal of operations before tax (note 8)


1,669 


Taxation


(10,021)
_______ 

(9,345)
_______ 

(19,843)
_______ 


Profit for the period


25,599 
_______ 

22,250 
_______ 

50,284 
_______ 




Geographical analysis





£000 



Revenue by destination 

Revenue by origin 





Unaudited 
26 weeks to 
27 September 

2008
 

Unaudited 
26 weeks to 
29 September 

2007
 


Audited 
52 weeks to 
29
 March 
2008
 


Unaudited 
26 weeks to 
27 September 

2008
 


Unaudited 
26 weeks to 
29 September 

2007
 


Audited 
52 weeks to 
29
 March 
2008
 



United Kingdom

54,363 

51,704 

109,253 

121,269 

109,068 

228,090 


United States of America

55,753 

50,651 

103,013 

62,736 

56,105 

115,932 


Mainland Europe 

63,957 

48,516 

107,883 

43,791 

26,617 

61,709 


Asia Pacific and Australasia

26,306 

19,301 

42,859 

11,475 

9,331 

19,422 


Africa, Near and Middle East

13,717 

11,724 

22,136 


Other countries

7,608 

4,274 

9,917 


Inter-segmental sales


_______ 


_______ 


_______ 

(17,567)
_______ 

(14,951)
_______ 

(30,092)
_______ 


Continuing operations

221,704 

186,170 

395,061 

221,704 

186,170 

395,061 


Discontinued operations (note 8)


_______ 

1,698 
_______ 

2,894 
_______ 


_______ 

1,698 
_______ 

2,894 
_______ 


Group revenue

221,704 
_______ 

187,868 
_______ 

397,955 
_______ 

221,704 
_______ 

187,868 
_______ 

397,955 
_______ 



Inter-segmental sales are charged at prevailing market prices











£000 






Profit by origin 






Unaudited 
26 weeks to 
27 September 

2008
 


Unaudited 
26 weeks to 
29 September 

2007
 


Audited 
52 weeks to 
29
 March 
2008
 



United Kingdom




19,615 

17,406 

37,608 


United States of America




10,926 

11,002 

22,710 


Mainland Europe 




9,358 

4,697 

12,597 


Asia Pacific and Australasia




960 
_______ 

1,000 
_______ 

2,008 
_______ 


Operating profit from continuing operations before amortisation

of acquired intangibles


40,859 


34,105 


74,923 


Discontinued operations (note 8)

205 

436 


Net finance expense




(1,840)
_______ 

(747)
_______ 

(2,144)
_______ 


Group profit before amortisation of acquired intangibles

39,019 

33,563 

73,215 


Amortisation of acquired intangible assets



(3,399)

(1,968)

(4,757)


Profit on disposal of operations before tax (note 8)



1,669 


Taxation 




(10,021) 
_______ 

(9,345) 
_______ 

(19,843) 
_______ 


Profit for the period




25,599 
_______ 

22,250 
_______ 

50,284 
_______ 



 2

Basis of preparation



The Half year report, which includes the Interim management report and Condensed financial statements for the 26 weeks to 27 September 2008, has not been audited or reviewed by the Group's auditors and was approved by the Directors on 
27 November 2008.


The report has been prepared in accordance with International Accounting Standard 34, applying the accounting policies and presentation that were applied in the preparation of the Group's statutory accounts for the 52 weeks to 29 March 2008.


The figures shown for the 52 weeks to 29 March 2008 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 240 of the Companies Act 1985. These statutory accounts, which were prepared under International Financial Reporting Standards, have been filed with the Registrar of Companies. They were unqualified and did not contain statements under sections 237(2) or (3) of the Companies Act 1985.


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.



 3

Taxation



The total Group tax charge (including discontinued operations) for the 26 weeks to 27 September 2008 of £10,021,000 
(26 weeks to 29 September 2007: £9,345,000; 52 weeks to 29 March 2008£19,843,000) comprises a current tax charge of £10,516,000 (26 weeks to 29 September 2007: £9,195,000; 52 weeks to 29 March 2008: £19,688,000) and a deferred tax credit of £495,000 (26 weeks to 29 September 2007: charge of £150,000; 52 weeks to 29 March 2008charge of £155,000).  The tax charge is based on the estimated effective tax rate for the year.


The tax charge includes £6,580,000 (26 weeks to 29 September 2007: £5,227,000; 52 weeks to 29 March 2008: £10,046,000) in respect of overseas tax.



 4

Earnings per ordinary share



Basic earnings per ordinary share are calculated using the weighted average of 373,508,685 (September 2007372,554,066; March 2008: 372,769,853) shares in issue during the period (net of shares purchased by the Company and held as treasury shares). Diluted earnings per ordinary share are calculated using 374,816,680 (September 2007: 374,489,843; March 2008: 374,604,505) shares which includes dilutive potential ordinary shares of 1,307,995 (September 2007: 1,935,777; March 20081,834,652). Dilutive potential ordinary shares are calculated from those exercisable share options where the exercise price is less than the average price of the Company's ordinary shares during the period.

Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation of acquired intangible assets after tax. The Directors consider that adjusted earnings represent a more consistent measure of underlying performance. A reconciliation of earnings and the effect on basic earnings per share figures is presented below:





Unaudited 
26 weeks to 

2
7 September 
200
8 
£000 

Unaudited  
26 weeks to 

29 September 

2007
 
£000 

Audited 
52 weeks to 
29
 March 
2008
 

£000 



Earnings from continuing and discontinued operations


25,599 


22,250 


50,284 


Remove earnings from discontinued operations


- 
_______ 

(133)
_______ 

(1,950)
_______ 


Earnings from continuing operations


25,599 

22,117 

48,334 


Add back amortisation of acquired intangible assets after taxation

2,495 
_______ 

1,263 
_______ 

3,344 
_______ 


Adjusted earnings


28,094 
_______ 

23,380 
_______ 

51,678 
_______ 










Per ordinary share 




Unaudited 
26 we
eks to 
27 September 

2008 

pence
 

Unaudited  
26 weeks to 

29
 September 
2007
 
pence 

Audited 
52 weeks to 
29
 March 
2008
 
pence 



Earnings from continuing and discontinued operations

6.85 

5.97 

13.49 


Remove earnings from discontinued operations


- 
_______ 

(0.03)
_______ 

(0.52)
_______ 


Earnings from continuing operations


6.85 

5.94 

12.97 


Add back amortisation of acquired intangible assets after taxation

0.67 
_______ 

0.34 
_______ 

0.89 
_______ 


Adjusted earnings


7.52 
_______ 

6.28 
_______ 

13.86 
_______ 



 5

Ordinary dividends




Per ordinary share 






Unaudited 
26 weeks to 
27 September 

2008 

pence
 

Unaudited  
26 weeks to 
29 Septem
ber 
200
7 
pence 


Audited 
52 weeks to 
29
 March 
2008
 
pence 



Amounts recognised as distributions to shareholders in the period








Final dividend for the year to 29 March 2008 (31 March 2007)



4.55 


4.33 

 

4.33 


Interim dividend for the year to 29 March 2008



- 
_______ 


- 
_______ 


3.00 
_______ 





4.55 
_______ 


4.33 
_______ 


7.33 
_______ 


Dividends declared in respect of the period









Interim dividend for the year to 28 March 2009 (29 March 2008)



3.15 


3.00 

 

3.00 


Final dividend for the year to 29 March 2008



- 
_______ 


- 
_______ 


4.55 
_______ 





3.15 
_______ 


3.00 
_______ 


7.55 
_______ 







Unaudited 
26 weeks to 
2
7 September 
200
8 
£000
 

Unaudited  
26 weeks to 
29
 September 
2007
 
£000 


Audited 
52 weeks to 

29 March 
200
8 
£000 



Amounts recognised as distributions to shareholders in the period








Final dividend for the year to 29 March 2008 (31 March 2007)



16,997 


16,139 

 

16,139 


Interim dividend for the year to 29 March 2008



- 
_______ 


- 
_______ 


11,190 
_______ 





16,997 
_______ 


16,139 
_______ 


27,329 
_______ 


Dividends declared in respect of the period










Interim dividend for the year to 28 March 2009 (29 March 2008)



11,786 


11,190 


11,190 


Final dividend for the year to 29 March 2008



- 
_______ 


- 
_______ 


16,997 
_______ 





11,786 
_______ 


11,190 
_______ 


28,187 
_______ 



 6

Notes to the consolidated cash flow statement








£000 






Unaudited 
26 weeks to 
27 September 

2008
 



Unaudited 
26 weeks to 
29 September 

2007
 



Audited 
52 weeks to 
29
 March 
2008
 



Reconciliation of profit from operations to net cash inflow from operating activities









Profit from continuing operations before taxation




37,460 


32,13


70,166 


Profit from discontinued operations before taxation




- 


205 


436 


Depreciation and amortisation of computer software




5,038 


4,348 


9,142 


Amortisation of capitalised development costs




1,295 


810 


1,981 


Amortisation of acquired intangible assets




3,399 


1,968 


4,757 


Share-based payment expense in excess of amounts paid




472 


1,064 


1,997 


Additional payments to pension scheme




(3,162)


(3,162)


(6,352)


Profit on sale of property, plant and equipment and computer software


(27)
_______ 


(498)
_______ 


(1,186)
_______ 


Operating cash flows before movement in working capital


44,475 


36,872 


80,941 


Increase in inventories




(1,825)


(927)


(2,278)


Decrease/(increase) in receivables




2,292 


544 


(9,605)


(Decrease)/increase in payables




(7,172)
_______ 


(5,232)
_______ 


6,970 
_______ 


Cash generated from operations




37,770 


31,257 


76,028 


Taxation paid




(7,843)
_______ 


(5,294)
_______ 


(17,627)
_______ 


Net cash inflow from operating activities




29,927 
_______ 


25,963 
_______ 


58,401 
_______ 



Reconciliation of net cash flow to movement in net debt








(Decrease)/increase in cash and cash equivalents




(6,606)


3,042 


4,492 


Repayment/(drawdown) of borrowings




3,809 


(2,300)


(37,796)


Exchange adjustments




(742)
_______ 


577 
_______ 


(3,260)
_______ 






(3,539)


1,319 


(36,564)


Net debt brought forward




(44,275)
_______ 


(7,711)
_______ 


(7,711)
_______ 


Net debt carried forward




(47,814)
_______ 


(6,392)
_______ 


(44,275)
_______ 



 7

Acquisitions










On 5 September 2008 the Group acquired the assets and liabilities of Fiberguide Industries, Inc, which, together with the aggregate of consideration, is summarised below. The contribution of the acquired business to the Group's revenue and profit before tax and amortisation of acquired intangible assets for the period was £299,000 and £35,000 respectively. If the acquisition had taken place at the beginning of the period it is estimated that Group reported revenue would have been £2,176,000 higher and profit before tax and amortisation of acquired intangible assets for the period would have been £221,000 higher.


Adjustments have been made to the book value of the net assets of the company to reflect their provisional fair value to the Group. The allocation of goodwill is also provisional since certain elements of the purchase consideration are conditional on future profitability.











£000 










Unaudited 
26 weeks to 
27 September 

2008
 






Book value 


Fair value 
adjustments
 


Total 


Non-current assets









Intangible assets




- 


5,14


5,147 


Property, plant and equipment 




677 


- 


677 


Current assets




 


 


 


Inventories




943 


(172)


771 


Trade and other receivables


653 
_______ 


(1)
_______ 


652 
_______ 


Total assets


2,273 


4,974 


7,247 


Current liabilities










Trade and other payables




(240)
_______ 


(163)
_______ 


(403)
_______ 


Net assets of business acquired




2,033 
_______ 


4,811 
_______ 


6,844 
_______ 












Cash consideration, including costs








8,174 


Deferred purchase consideration








496 
_______ 


Total consideration








8,670 

_______ 












Goodwill arising on current period acquisition








1,826 


Goodwill arising on prior period acquisitions








(1,640)
_______ 


Goodwill arising on acquisition








186 
_______ 












The adjustment to goodwill arising on prior period acquisitions relates mainly to additional fair value adjustments on the acquisition of PP Medizintechnik GmbH and its subsidiaries (including Rudolf Riester GmbH & Co. KG), and a revision to the estimated deferred purchase consideration on the acquisition of Tritech International /System Technologies.


On 24 November 2008 the Group acquired the Golden, Colorado business, assets and liabilities of Oerlikon Optics USA Inc for cash consideration of $6,025,000 (£3,990,000). Due to the proximity of the acquisition date to the date of approval of the Half year report, it is impracticable to provide further information.



 8

Discontinued operations










The discontinued operations relate to Post Glover Lifelink, Inc (PGL) which is incorporated in the USA and formed part of the Health and Analysis sector. PGL was sold in January 2008 for gross proceeds of £3,035,000 which resulted in a profit on disposal before and after taxation of £1,669,000. At the date of disposal PGL had net assets of £1,005,000.


There were no transactions associated with PGL in the 26 weeks ended 27 September 2008. The revenue associated with PGL in the 26 weeks ended 29 September 2007 was £1,698,000 (52 weeks ended 29 March 2008: £2,894,000); the operating profit in the 26 weeks ended 29 September 2007 was £205,000 (52 weeks ended 29 March 2008: £436,000); and the profit after taxation in the 26 weeks ended 29 September 2007 was £133,000 (52 weeks ended 29 March 2008: £281,000). The comparatives to 29 September 2007 as previously reported have been amended to reflect the transfer of these amounts to discontinued operations.



 9

Non-GAAP measures










Organic growth

Organic growth measures the change in revenue and profit from continuing Group operations. The effect of acquisitions made during the current or prior financial period has been equalised by subtracting from the current period results a pro-rated contribution based on their revenue and profit at the date of acquisition.










£000 





Unaudited 
26 weeks to 

27
 September 
200
8 

Unaudited 
26 weeks to 

29 Septem
ber 
200
7 

Audited 
52 weeks to 
29 March 
2008
 


Return on capital employed









Operating profit from continuing operations before amortisation of acquired intangibles



40,859 



34,105 



74,923 


Operating profit from discontinued operations in prior period before amortisation of acquired intangibles




_______ 



205 

_______ 




_______ 


Operating return




40,859 
_______ 


34,310 
_______ 


74,923 
_______ 












Computer software costs within intangible assets




2,521 


1,675 


1,911 


Capitalised development costs within intangible assets




8,784 


7,380 


8,240 


Property, plant and equipment




59,930 


50,287 


57,452 


Inventories




47,879 


39,789 


44,267 


Trade and other receivables




98,366 


81,225 


99,741 


Trade and other payables




(62,928)


(55,935)


(69,420)


Tax liabilities




(10,977)


(9,936)


(8,273)


Non-current trade and other payables




(2,670)


(2,538)


(2,874)


Add back retirement benefit accruals included within payables


1,595 


2,579 


2,087 


Add back accrued deferred purchase consideration


603 
_______ 


2,830 
_______ 


1,189 
_______ 


Capital employed




143,103 
_______ 


117,356 
_______ 


134,320 
_______ 


Return on capital employed (annualised)




57.1
_______ 


58.5% 
_______ 


55.8
_______ 


Return on total invested capital










Post-tax profit from continuing operations before amortisation of acquired intangibles 



28,094 



23,380 



51,678 


Post-tax profit from discontinued operations in prior period before amortisation of acquired intangibles 




_______ 



133 

_______ 




_______ 


Return




28,094 
_______ 


23,513 
_______ 


51,678 
_______ 












Total shareholders' funds




243,244 


213,093 


239,104 


Add back retirement benefit accruals included within payables


1,595 


2,579 


2,087 


Add back retirement benefit obligations




48,804 


34,703 


35,957 


Less associated deferred tax assets




(13,665)


(9,717)


(10,069)


Cumulative amortisation of acquired intangible assets


13,597 


7,316 


10,112 


Goodwill on disposals




5,441 


5,441 


5,441 


Goodwill amortised prior to 3 April 2004




13,177 


13,177 


13,177 


Goodwill taken to reserves prior to 28 March 1998




70,931 
_______ 


70,931 
_______ 


70,931 
_______ 


Total invested capital




383,124 
_______ 


337,523 
_______ 


366,740 
_______ 


Return on total invested capital (annualised)




14.7
_______ 


13.9% 
_______ 


14.1
_______ 



10

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 p.l.c.'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 for the 52 weeks to 29 March 2008.


Events after the balance sheet date

On 24 November 2008 the Group acquired the Golden, Colorado business, assets and liabilities of Oerlikon Optics USA Inc for $6,025,000 (£3,990,000).



Cautionary note

The Half year 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 risks 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.




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