Halma PLC
07 December 2004
HALMA p.l.c.
INTERIM RESULTS FOR THE HALF YEAR TO 2 OCTOBER 2004
7 DECEMBER 2004
Halma, the leading safety and environmental technology group, today announced
its interim results for the half year to 2 October 2004.
Highlights include:
• Pre-tax profit* increased to £24.6m (2003: £24.4m)
• Margins remained strong with ROCE** reaching its highest ever level at 65%
• The Group remains ungeared and strongly cash generative despite funding two
significant acquisitions from its own resources
• Acquisitions of Ocean Optics and Diba Industries living up fully to the
Board's expectations
• Progressive dividend policy maintained with 6% growth
* before goodwill amortisation of £2.7m (2003: £2.1m)
** ROCE (Return on Capital Employed) is defined as the annualised profit
before taxation* expressed as a % of net tangible assets
Commenting on the results, Stephen O'Shea, Chief Executive of Halma, said:
'There are some excellent features of the Group's performance over the last six
months including underlying sales growth in our ongoing businesses, two valuable
acquisitions, continued high profitability and good cash flow. Whilst we grew
profits less than we had hoped in the first half, we expect the full year to be
within the range of the Board's expectations.
'We have strengthened the Group's businesses and there are opportunities for
volume growth. Currency translation would have had less impact on profits in
the second half than the first, however the US Dollar is currently weakening
further. Our people are committed to consistent growth in sales and profits and
are finding routes to achieve these goals.'
For further information, please contact:
Halma p.l.c.
Stephen O'Shea, Chief Executive +44 (0)1494 721111
Kevin Thompson, Finance Director +44 (0)1494 721111
Hogarth Partnership Limited
Rachel Hirst/Andrew Jaques +44 (0)20 7357 9477
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 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
NOTE TO EDITORS
Halma develops products used worldwide to enhance safety and to minimise
hazards. The Group comprises six business sectors:
• Fire and Gas detection
• Water leak detection and UV treatment
• Elevator and Door Safety
• Bursting discs and sequential locking for Process Safety
• High power electrical Resistors
• 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 2 October 2004
Financial Highlights
Turnover - 2% to £144.1 million
Overseas sales + 1% to £104.6 million
Profit before taxation (1) + 1% to £ 24.6 million
Earnings per share (2) + 1% to 4.59p
Earnings per share - statutory - 2% to 3.91p
Dividend per share + 6% to 2.58p
Return on sales (3) 17.1%
Return on capital employed (4) 65.1%
(1) Before goodwill amortisation of £2,667,000 (2003: £2,116,000).
(2) Before goodwill amortisation of 0.68p (2003: 0.53p) per share.
(3) Return on sales is defined as profit before taxation(1) expressed as a %
of turnover.
(4) Return on capital employed is defined as the annualised profit before
taxation(1) expressed as a % of net tangible assets.
Financial Overview
For the first half of this financial year, we earned profits before tax of a
record £24.6m marginally ahead of last year's £24.4m and earnings per share were
up 1% at 4.59p. Both figures are before goodwill amortisation*. Turnover was
down 2% at £144.1m however adjusting for currency, disposals and acquisition
impacts we did make organic growth of around 3%.
Return on capital employed* reached its highest ever level of 65%, allowing us
to self-fund two excellent acquisitions - Ocean Optics and Diba - and still
remain debt free.
*see Financial Highlights
Chairman's Review
Geoff Unwin, Chairman of Halma, said:
'In line with our progressive dividend policy, the interim dividend will amount
to 2.58 pence per share an increase of 6% and will be paid on 8 February 2005 to
shareholders on the register at 7 January 2005.
'We are making significant progress within the Group in terms of developing our
management, improving our sales effectiveness and creating a stream of new
product innovations, all of which add to the strength and resilience of the
Group.'
Chief Executive's Review
Stephen O'Shea, Chief Executive of Halma, said:
Summary
'There are some excellent features of the Group's performance over the last six
months including underlying sales growth in our ongoing businesses, two valuable
acquisitions, continued high profitability and good cash flow.
'Five of our six sectors grew in local currency terms but the weakness of the US
Dollar affected both sales and profits when translated into Sterling. Our
sales to the Far East grew at the fastest rate and we also demonstrated
increased sales in Europe, the UK and the Middle East. The growth is based
primarily on new products either developed in-house or obtained by acquisition.
Continued strong ratios
'The management of our input costs and our productivity resulted in us
succeeding in reaching a return on sales of 17.1% and return on capital
employed* of 65%. This is a strong performance even though we would be willing
to accept a return to more typical ratios as a route to greater growth. We
completed the half year, having paid £22 million for two acquisitions and a
record £14 million dividend, with net cash in the Group.
Process development
'We are determined to deliver a regular pattern of growth. Ultimately this is
based on the development of our people and improvement in our processes. Sales
process reviews have been completed right across the Group and opportunities for
improvement have been found. We have been working to secure the transfer of
best practice wherever it is found in the Group.
Sectoral development
'The strong growth in Optics and Specialist is a combination of three factors.
The sale of under-performing companies during the prior financial year, growth
of existing companies and two strong acquisitions all contributed. These
acquisitions will contribute more in the second half.
'Our Water sector sales were 14% lower than in the first half of the prior year
as this sector, in common with the Elevator and Door Safety sector, experienced
delays in municipal contracts in the USA. Resistors, who have been having a
difficult time, are working hard on improvement but is the sector most affected
by the substantial rises in stainless steel prices.
Focus on sales
'Much of our growth has come and, in the future, will come from retaining our
typical ratios and increasing turnover. We have been moving resource from other
areas into strengthening our selling teams. We are creating new and better
products to help them with their task. This also opens up new territories for
us to attack. Once again we spent 4% of our sales on research and development.
The work we have been doing for some time to help US subsidiaries to export
shows up in an increase, in US Dollar terms, of 21% in sales for US companies
whilst sales into customers in the USA rose 12%.
Outlook
'Whilst we grew profits less than we had hoped in the first half, we expect the
full year to be within the range of the Board's expectations.
'We have strengthened the Group's businesses and there are opportunities for
volume growth. Currency translation would have had less impact on profits in
the second half than the first, however the US Dollar is currently weakening
further. Our people are committed to consistent growth in sales and profits and
are finding routes to achieve these goals.'
*see Financial Highlights
Interim Results for the 26 weeks to 2 October 2004
Consolidated Profit and Loss Account
£000
Unaudited Unaudited Audited
26 weeks to 2 October 2004 27 weeks to 4 October 2003
Before Before 53 weeks to
goodwill Goodwill goodwill Goodwill 3 April 2004
amortisation amortisation Total amortisation amortisation Total Total
Turnover
Continuing operations 135,138 - 135,138 139,775 - 139,775 279,611
Acquisitions 8,991 - 8,991 - - - -
_______ _______ _______ _______ _______ _______ _______
Ongoing operations 144,129 - 144,129 139,775 - 139,775 279,611
Discontinued operations - - - 7,125 - 7,125 13,029
_______ _______ _______ _______ _______ _______ _______
144,129 - 144,129 146,900 - 146,900 292,640
======= ======= ======= ======= ======= ======= =======
Operating profit
Continuing operations 22,769 (2,156) 20,613 24,563 (2,110) 22,453 46,213
Acquisitions 1,734 (511) 1,223 - - - -
_______ _______ _______ _______ _______ _______ _______
Ongoing operations 24,503 (2,667) 21,836 24,563 (2,110) 22,453 46,213
Discontinued operations - - - (129) (6) (135)
(381)
24,503 (2,667) 21,836 24,434 (2,116) 22,318 45,832
Loss on disposal of - - - - - - (9,149)
discontinued operations
Profit on ordinary
activities before interest
and taxation 24,503 (2,667) 21,836 24,434 (2,116) 22,318 36,683
Interest 115 - 115 15 - 15 232
_______ _______ _______ _______ _______ _______ _______
Profit on ordinary
activities before taxation 24,618 (2,667) 21,951 24,449 (2,116) 22,333 36,915
Taxation (note 3) (7,757) 187 (7,570) (7,876) 165 (7,711) (14,593)
_______ _______ _______ _______ _______ _______ _______
Profit for the financial
period 16,861 (2,480) 14,381 16,573 (1,951) 14,622 22,322
_______ _______ _______ _______ _______ _______ _______
Ordinary dividends (9,559) (8,963) (22,725)
_______ _______ _______
Profit/(loss) transferred
to reserves 4,822 5,659 (403)
======= ======= =======
Ordinary dividend per share 2.58p 2.44p 6.19p
Earnings per ordinary share
before goodwill amortisation
and exceptional items (note 4) 4.59p 4.53p 9.44p
Earnings per ordinary share (note 4) 3.91p 4.00p 6.09p
Diluted earnings per ordinary share 3.91p 3.99p 6.09p
Consolidated Balance Sheet £000
Unaudited Unaudited Audited
2 October 4 October 3 April
2004 2003 2004
Fixed assets
Intangible assets (note 2) 98,356 73,996 71,425
Tangible assets 48,325 50,267 47,139
_______ _______ _______
146,681 124,263 118,564
_______ _______ _______
Current Assets
Stocks 37,080 36,947 31,208
Debtors 67,652 64,913 67,080
Short-term deposits 20,405 22,417 33,898
Cash 10,090 16,244 14,584
_______ _______ _______
135,227 140,521 146,770
_______ _______ _______
Creditors: amounts falling due within one year
Borrowings 28,307 29,485 26,934
Creditors 49,905 43,217 44,394
Current taxation 6,224 6,923 5,563
Dividends payable 9,511 8,945 13,762
_______ _______ _______
93,947 88,570 90,653
_______ _______ _______
Net current assets 41,280 51,951 56,117
_______ _______ _______
Total assets less current liabilities 187,961 176,214 174,681
Creditors: amounts falling due after one year 6,776 496 1,254
Provisions for liabilities and charges 7,202 6,150 6,067
_______ _______ _______
173,983 169,568 167,360
======= ======= =======
Capital and reserves
Called up share capital 36,848 36,659 36,677
Share premium account 9,724 7,558 7,768
Capital redemption reserve 185 185 185
Profit and loss account 127,226 125,166 122,730
_______ _______ _______
Equity shareholders' funds (note 5) 173,983 169,568 167,360
======= ======= =======
Consolidated Cash Flow Statement £000
Unaudited Unaudited Audited
26 weeks to 27 weeks to 53 weeks to
2 October 4 October 3 April
2004 2003 2004
Cash flow from operating activities (note 6) 26,778 31,779 59,782
_______ _______ _______
Return on investments and servicing of finance
Interest received 594 407 952
Interest paid (338) (410) (731)
_______ _______ _______
256 (3) 221
Taxation
Current taxation paid (6,083) (5,575) (14,093)
Capital expenditure
Purchase of tangible fixed assets (4,037) (5,856) (9,686)
Sale of tangible fixed assets 182 731 1,004
_______ _______ _______
(3,855) (5,125) (8,682)
Acquisitions and disposals
Acquisition of businesses (24,319) (1,478) (2,947)
Cash and overdrafts acquired 1,490 - -
Disposal of businesses (512) - 4,567
_______ _______ _______
(23,341) (1,478) 1,620
Equity dividends paid (13,810) (12,910) (21,855)
_______ _______ _______
(20,055) 6,688 16,993
Management of liquid resources
Decrease/(increase) in short-term deposits 13,733 (8,114) (19,662)
Financing
Issue of ordinary share capital 2,127 1,293 1,521
(Decrease)/increase in loans (589) 2,683 2,683
_______ _______ _______
1,538 3,976 4,204
_______ _______ _______
(Decrease)/increase in cash (note 6) (4,784) 2,550 1,535
======= ======= =======
Segmental Analysis £000
Geographical analysis
By destination By origin
Unaudited Unaudited Unaudited Unaudited
26 weeks to 27 weeks to 26 weeks to 27 weeks to
2 October 4 October 2 October 4 October
2004 2003 2004 2003
Turnover
United Kingdom 39,544 38,591 77,805 78,590
United States of America 43,750 43,723 49,211 45,298
Europe excluding UK 34,698 34,139 20,354 22,205
Far East and Australasia 16,085 13,871 7,204 7,336
Africa, Near and Middle East 4,989 4,740 - -
Other 5,063 4,711 1,665 1,420
Inter-segmental sales - - (12,110) (15,074)
_______ _______ _______ _______
Turnover from ongoing operations 144,129 139,775 144,129 139,775
Discontinued operations - 7,125 - 7,125
_______ _______ _______ _______
Group turnover 144,129 146,900 144,129 146,900
======= ======= ======= =======
Profit before taxation
United Kingdom 13,140 12,660
United States of America 6,561 7,045
Europe excluding UK 3,065 3,258
Other countries 1,737 1,600
_______ _______
Ongoing operations 24,503 24,563
Discontinued operations - (129)
_______ _______
Segmental profit 24,503 24,434
Goodwill amortisation (2,667) (2,116)
Interest 115 15
_______ _______
Profit on ordinary activities before taxation 21,951 22,333
======= =======
Sector analysis Unaudited Unaudited
26 weeks to 27 weeks to
2 October 4 October
2004 2003
Turnover
Fire and Gas 37,258 37,008
Water 14,785 17,129
Elevator and Door Safety 30,728 32,785
Process Safety 17,501 18,064
Resistors 13,384 14,097
Optics and Specialist 30,915 21,230
Inter-segmental sales (442) (538)
_______ _______
Ongoing operations 144,129 139,775
Discontinued operations - 7,125
_______ _______
Group turnover 144,129 146,900
======= =======
Notes on the Interim Report
1 Basis of preparation
The interim report for the 26 weeks to 2 October 2004 is prepared on the
basis of the accounting policies set out in the accounts for the 53 weeks
to 3 April 2004.
The figures shown for the 53 weeks to 3 April 2004 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 2 October 2004 of £7,570,000 (2003:
£7,711,000) comprises a current taxation charge of £7,315,000 (2003:
£7,224,000) and a deferred tax charge of £255,000 (2003: £487,000).
The current taxation charge is based on the estimated effective tax rate
for the year.
The tax charge includes £3,607,000 (2003: £4,159,000) in respect of
overseas tax.
4 Earnings per ordinary share
Earnings per ordinary share on a statutory basis are calculated by dividing
the profit for the period of £14,381,000 (2003: £14,622,000) by the
weighted average of 367,669,622 (2003: 365,863,585) shares in issue during
the period.
Earnings per ordinary share before goodwill amortisation and exceptional
items as presented on the Consolidated Profit and Loss Account, represents
a more consistent measure of underlying performance. A reconciliation of
earnings and the effect on per share figures is presented below:
Per ordinary share
Unaudited Unaudited Unaudited Unaudited
26 weeks to 27 weeks to 26 weeks to 27 weeks to
2 October 4 October 2 October 4 October
2004 2003 2004 2003
£000 £000 p p
Earnings 14,381 14,622 3.91 4.00
Add back: goodwill amortisation (after tax) 2,480 1,951 0.68 0.53
_______ _______ _______ _______
Earnings before goodwill amortisation 16,861 16,573 4.59 4.53
_______ _______ _______ _______
5 Reconciliation of equity shareholders' funds £000
Unaudited Unaudited Audited
26 weeks to 27 weeks to 53 weeks to
2 October 4 October 3 April
2004 2003 2004
Equity shareholders' funds brought forward 167,360 163,446 163,446
Profit transferred to reserves 4,822 5,659 (403)
Goodwill transferred to profit and loss account - - 5,595
Net proceeds of shares issued 2,127 1,293 1,521
Exchange adjustments (326) (830) (2,799)
_______ _______ _______
Equity shareholders' funds carried forward 173,983 169,568 167,360
_______ _______ _______
6 Notes on consolidated cash flow statement £000
Unaudited Unaudited Audited
26 weeks to 27 weeks to 53 weeks to
2 October 4 October 3 April
2004 2003 2004
Reconciliation of operating profit to net
cash inflow from operating activities
Operating profit 21,836 22,318 45,832
Depreciation 3,862 4,105 7,879
Goodwill amortisation 2,667 2,116 4,220
Loss on sale of tangible fixed assets 70 74 109
Decrease in SSAP 24 pension prepayment 14 62 112
Property sale receivable - 1,100 1,100
(Increase)/decrease in stocks (1,907) (2,310) 744
Decrease/(increase) in debtors 3,743 6,113 (1,404)
Increase/(decrease) in creditors (3,507) (1,799) 1,190
_______ _______ _______
Net cash inflow from operating activities 26,778 31,779 59,782
_______ _______ _______
Reconciliation of net cash flow to
movement in net cash/(debt)
(Decrease)/increase in cash (4,784) 2,550 1,535
(Decrease)/increase in liquid resources (13,733) 8,114 19,662
Loans acquired (1,125) - -
Cash outflow/(inflow) from loans 589 (2,683) (2,683)
Exchange adjustments (307) 1,288 3,127
_______ _______ _______
(19,360) 9,269 21,641
Net cash/(debt) brought forward 21,548 (93) (93)
_______ _______ _______
Net cash carried forward 2,188 9,176 21,548
_______ _______ _______
This information is provided by RNS
The company news service from the London Stock Exchange
