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Halma plc
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Company Information
Address: Misbourne Court
Rectory Way
Amersham
Bucks
HP7 0DE
Index: FTSE 250
FTSE 350
FTSE 350 Lower Yield
FTSE All Share
Tel: 01494 721111 Sector: Electronic & Electrical Equipment
Fax: 01494 728032
E-Mail: investor.relations@halma.com Epic: HLMA
Secretary: Carol Chesney    
Registrar: Computershare Investor Services PLC Updated: 2/04/2014

News from RSS Feed

Tue, 01 Apr 2014 09:00:00 GMT

Jennifer Ward Joins Halma as Group Talent Director

Jennifer Ward Joins Halma as Group Talent Director 01 April 2014 Jennifer Ward has joined Halma plc, the leading safety, health and environmental technology group, as Group Talent Director and member of Halma's Executive Board. This newly created position has global responsibility for management talent development across Halma with a strong focus on Halma's senior management and the boards of its subsidiary businesses. In her new role Jennifer will ensure that Halma has a well-developed pipeline of talent coming through (and into) the organisation aligned with each subsidiary management's growth strategy. This will include responsibility for Halma's ongoing investment in training and people development programmes. Jennifer's early career was spent in manufacturing businesses within Allied Signal/Honeywell International where she qualified as a Six Sigma Black Belt. She spent seven years with Bank of America in both the UK and USA, as a Senior Vice President, which included having responsibility for Learning and Leadership Development. Jennifer has led succession and top talent development processes throughout her career. Most recently, Jennifer was the Senior Director of Human Resources at PayPal (an eBay Inc. company), dividing her time between California and London, where she is currently based. She has a master's degree from Michigan State University and a Bachelor of Science degree from Oregon State University. Welcoming Jennifer Ward to the group, Halma Chief Executive Andrew Williams said: "Improving the ways in which we attract, identify, assess and develop Board-level talent is a critical factor in achieving our mid to long-term strategic goals. I believe that this appointment is an exciting milestone for Halma, reinforcing our commitment to continuously improving the quality and performance of Halma's management talent across the world." Jennifer Ward (jennifer.ward@halma.com) will be based at Halma's Head Office in Amersham, UK.

Company Overview

Halma is an international group of companies that make products for:
- hazard detection
- life protection
- personal and public health improvement
- environmental protection.
They have 40 businesses in 23 countries and major operations in Europe, the USA and Asia. Our businesses are highly cash generative and able to deliver world class returns on a sustainable basis.

Company Strategy

Their objective is to double Group revenue and profit every five years.

They aim to achieve this through a mix of acquisitions and organic growth. Return on Sales in excess of 18% and Return on Capital Employed over 45% ensure that cash generation is strong enough to sustain growth and increase dividends without the need for high levels of external funding.

 
Annual Reports
Description Report Date Published Current  
bullet point Annual Report 2013 in PDF 30/03/2013 13/06/2013 Yes  
bullet point Annual Report 2012 in PDF 31/03/2012 14/06/2012 No  
bullet point Annual Report 2011 in PDF 2/04/2011 21/06/2011 No  
bullet point Annual Report 2010 in PDF 3/04/2010 27/06/2010 No  
bullet point Annual Report 2009 in PDF 28/03/2009 16/06/2009 No  
bullet point Annual Report 2008 in PDF 29/03/2008 17/06/2008 No  
bullet point Annual Report 2007 in PDF 31/03/2007 19/06/2007 No  
bullet point Annual Report 2006 in PDF (0Mb) 1/04/2006 20/06/2006 No  
bullet point Annual Report 2005 in PDF (1.62Mb) 2/04/2005 21/06/2005 No  
bullet point Annual Report 2004 in PDF (1.11Mb) 3/04/2004 22/06/2004 No  
bullet point Annual Report 2003 in PDF (2.18Mb) 29/03/2003 17/06/2003 No  
bullet point Annual Report 2002 in PDF (0.7Mb) 30/03/2002 18/06/2002 No  
bullet point Annual Report 2001 in PDF (0.69Mb) 31/03/2001 19/06/2001 No  
bullet point Annual Report 2000 in PDF (0.69Mb) 1/04/2000 20/06/2000 No  
 
Interim Reports
Description Report Date Published Current  
bullet point Interim Results 2013 in PDF 28/09/2013 19/11/2013 Yes  
bullet point Interim Results 2012 in PDF 29/09/2012 20/11/2012 No  
bullet point Interim Results 2011 in PDF 1/10/2011 22/11/2011 No  
bullet point Interim Results 2010 in PDF 2/10/2010 30/11/2010 No  
bullet point Interim Results 2009 in PDF 3/10/2009 3/12/2009 No  
bullet point Interim Results 2008 in PDF 27/09/2008 27/11/2008 No  
bullet point Interim Results 2007 in PDF 29/09/2007 29/11/2007 No  
bullet point Interim Results 2006 in PDF 30/09/2006 5/12/2006 No  
bullet point Interim Results 2005 in PDF (0.48Mb) 1/10/2005 6/12/2005 No  
bullet point Interim Results 2004 in PDF (0.88Mb) 2/10/2004 7/12/2004 No  
bullet point Interim Results 2003 in PDF (0.11Mb) 4/10/2003 9/12/2003 No  
bullet point Interim Results 2002 in PDF (0.07Mb) 28/09/2002 3/12/2002 No  
bullet point Interim Results 2001 in PDF (0.1Mb) 29/09/2001 4/12/2001 No  
 
Other Links
Description
bullet point Home
bullet point Site Map
bullet point Investor Relations
bullet point Events Calendar
bullet point Results Index
bullet point Contacts
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Dividend History
Type Payment Date Dividend
Interim 5/02/2014 4.35 p
Final 19/07/2013 6.37 p
Interim 6/02/2013 4.06 p
Final 22/08/2012 5.95 p
Interim 8/02/2012 3.79 p
Final 24/08/2011 5.56 p
Interim 9/02/2011 3.54 p
Final 25/08/2010 5.19 p
Interim 10/02/2010 3.31 p
Final 19/08/2009 4.78 p
Interim 4/02/2009 3.15 p
Final 20/08/2008 4.55 p
Interim 6/02/2008 3 p
Final 22/08/2007 4.33 p
Interim 7/02/2007 2.85 p
Final 23/08/2006 4.12 p
Interim 8/02/2006 2.71 p
Final 24/08/2005 3.92 p
Interim 8/02/2005 2.58 p
Final 23/08/2004 3.75 p
Interim 9/02/2004 2.44 p
Final 18/08/2003 3.527 p
Interim 3/02/2003 2.285 p
Final 19/08/2002 3.206 p
Interim 4/02/2002 2.077 p
Final 20/08/2001 2.787 p
Interim 5/02/2001 1.806 p
Final 21/08/2000 2.423 p
Interim 7/02/2000 1.57 p
Final 30/08/1999 2.019 p
Interim 28/02/1999 1.308 p

News from RSS Feed

Tue, 01 Apr 2014 09:00:00 GMT

Jennifer Ward Joins Halma as Group Talent Director

Jennifer Ward Joins Halma as Group Talent Director 01 April 2014 Jennifer Ward has joined Halma plc, the leading safety, health and environmental technology group, as Group Talent Director and member of Halma's Executive Board. This newly created position has global responsibility for management talent development across Halma with a strong focus on Halma's senior management and the boards of its subsidiary businesses. In her new role Jennifer will ensure that Halma has a well-developed pipeline of talent coming through (and into) the organisation aligned with each subsidiary management's growth strategy. This will include responsibility for Halma's ongoing investment in training and people development programmes. Jennifer's early career was spent in manufacturing businesses within Allied Signal/Honeywell International where she qualified as a Six Sigma Black Belt. She spent seven years with Bank of America in both the UK and USA, as a Senior Vice President, which included having responsibility for Learning and Leadership Development. Jennifer has led succession and top talent development processes throughout her career. Most recently, Jennifer was the Senior Director of Human Resources at PayPal (an eBay Inc. company), dividing her time between California and London, where she is currently based. She has a master's degree from Michigan State University and a Bachelor of Science degree from Oregon State University. Welcoming Jennifer Ward to the group, Halma Chief Executive Andrew Williams said: "Improving the ways in which we attract, identify, assess and develop Board-level talent is a critical factor in achieving our mid to long-term strategic goals. I believe that this appointment is an exciting milestone for Halma, reinforcing our commitment to continuously improving the quality and performance of Halma's management talent across the world." Jennifer Ward (jennifer.ward@halma.com) will be based at Halma's Head Office in Amersham, UK.
Tue, 11 Feb 2014 07:00:00 GMT

Interim Management Statement

Interim Management Statement 11 February 2014 Halma, the leading safety, health and environmental technology group today releases an Interim Management Statement covering the period from 29 September 2013 to date. Based on current trading and forecasts, the Board expects adjusted profit before tax for the full year ending 29 March 2014 to be within the range of £139m to £140m. The trading patterns reported for the first six months of the financial year have continued with revenue growth in all regions and all sectors, despite the increased strength of Sterling against the US Dollar and Euro. Order intake has remained slightly ahead of revenue. Asia Pacific has continued to grow strongly with good growth in China. The rate of growth in the UK has improved, Mainland Europe has maintained good progress, whilst there has been lower growth in the US. This reflects Halma’s ability to sustain growth in both developed and developing regions. All four sectors generated revenue growth with strong underlying performances in the Process Safety and Infrastructure Safety businesses. The Medical sector made slower progress whilst Environmental & Analysis is starting to show improved performance. The final phase of reorganisation of certain businesses within this latter sector is proceeding well, with one-off costs expected to be within our previous estimate of £1m. Across the Group, we have continued to increase investment in R&D resources, People Development and the expansion of our global footprint to support organic growth. On 29 November 2013, Halma announced that it increased and extended its syndicated revolving credit facility to £360m (from £260m) through to November 2018 (from October 2016). There have been no other material events or transactions during the period impacting the Group’s financial position, which remains strong. We continue to identify potential acquisition opportunities which meet our strategic and financial criteria. The full year results for the period ending 29 March 2014 are expected to be released on 12 June 2014. Conference call Andrew Williams (Chief Executive) and Kevin Thompson (Finance Director) will host a conference call for analysts and investors on this announcement at 8.00am (UK time) today (11 February). To join the call, please use the dial-in numbers below: Dial: +44 (0)20 3139 4830 PIN: 99831684# Note added 12 Feb 2014: You can now listen to a recording of the conference call here: http://media.investis.com/H/Halma-plc/audios/halma-ims-conference-call-feb-2014.mp3 For further information, please contact: Halma plc Tel: +44 (0)1494 721111 Andrew Williams, Chief Executive Kevin Thompson, Finance Director MHP Communications Tel: +44 (0)20 3128 8100 Rachel Hirst / Andrew Jaques Notes: Adjusted profit before tax is before amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration and profit on disposal of operations. The Board believes current market forecasts for adjusted profit before tax to be in the range of £136.8m to £143m with consensus of £140.8m. This Interim Management Statement has been prepared solely to provide additional information to the shareholders of Halma plc, in order to meet the requirements of the UK Listing Authority’s Disclosure and Transparency Rules. It should not be relied on by any other party, for other purposes. Forward-looking statements have been made by the Directors in good faith using information available up until the date that they approved this statement. Forward-looking statements should be regarded with caution because of the inherent uncertainties in economic trends and business risks.
Fri, 29 Nov 2013 07:00:00 GMT

Revolving credit facility

Revolving credit facility Halma, the leading safety, health and environmental technology group, today announces that it has increased and extended its syndicated revolving credit facility with its existing core group of banks. The facility has been increased to £360m (from £260m) and the term extended to November 2018 (from October 2016). Kevin Thompson, Finance Director of Halma, commented: "I am pleased that Halma has amended and extended the existing credit facility, providing the Group with increased financial capacity to operate within its existing business model for the medium term." Contact for further information: Kevin Thompson, Finance Director Tel: +44 (0)1494 721111
Tue, 19 Nov 2013 07:00:00 GMT

Half Year Report 2013/14

Half Year Report for the 26 weeks to 28 September 2013 19 November 2013 Record first half results and continued dividend growth Halma, the leading safety, health and environmental technology group, today announces its half year results for the 26 weeks to 28 September 2013. Highlights include: Revenue from continuing operations up 12% to £333.1m (2012/13: £298.1m) and adjusted profit1 up 9% at £65.1m (2012/13: £59.7m2). Organic growth3: revenue up 8%, profit up 5% (at constant currency up 6% and 2% respectively). Widespread revenue growth: Asia Pacific up 15%, including 32% in China, USA up 15%, UK up 9% and Europe up 8%. Organic growth in all regions. Revenue growth in all four sectors, excluding prior year disposal. Good profit growth in Process Safety, Infrastructure Safety and Medical. Environmental & Analysis reorganisation on track, to be completed in the second half. Adjusted earnings per share from continuing operations4 up 7% to 12.99p (2012/13: 12.12p). Statutory earnings per share down 13% to 11.28p (2012/13: 12.93p2) as prior year benefited from significant gain on disposal. Interim dividend of 4.35p per share, up 7% (2012/13: 4.06p). Net debt of £110m (March 2013: £110m). Strong financial position underpinned by good operating cashflow. Financial capacity for further organic growth and acquisitions. Acquisition pipeline remains healthy. Andrew Williams, Chief Executive of Halma, commented: "Halma made strong progress during the period, achieving record revenue and profit, while continuing to increase investment in Innovation, People Development and International Expansion. Order intake since the period end has continued to be slightly ahead of revenue and in line with our expectations. Halma remains on track to make further progress in the second half of the year." Notes: Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration and profit on disposal of operations of £9.1m charge (2012/13: £1.4m credit). See note 2 to the Condensed Financial Statements. The Group adopted IAS 19 (revised) in 2013/14, which changed the accounting for defined benefit pension plans. The prior period has been restated resulting in a £1.1m reduction in its adjusted profit1. The consequent change to the prior period’s adjusted earnings per share4 is shown in note 1 to the Condensed Financial Statements.  Organic growth rates are non-GAAP performance measures used by management to assess underlying performance. See note 9 to the Condensed Financial Statements. Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs, movement in contingent consideration, profit on disposal of operations and the associated tax. See note 6 to the Condensed Financial Statements. For further information, please contact: Halma plc Andrew Williams, Chief Executive, Tel: +44 (0)1494 721111 Kevin Thompson, Finance Director, Tel: +44 (0)1494 721111 MHP Communications Rachel Hirst/Andrew Jaques, Tel: +44 (0)20 3128 8100 Note to editors Halma develops and markets products used worldwide to protect life and improve the quality of life. The Group comprises four business sectors: Process Safety Products which protect assets and people at work. Infrastructure Safety Products which detect hazards to protect assets and people in public spaces and commercial buildings. Medical  Products used to improve personal and public health. Environmental & Analysis Products and technologies for analysis in safety, life sciences and environmental markets.   The key characteristics of Halma's businesses are that they are based on specialist technology and application knowledge, offering strong growth potential. Many Group businesses are market leaders in their specialist field. High resolution photos of Halma senior management, including Chief Executive Andrew Williams, and images illustrating Halma business activities can be downloaded from the Image library on this website. Photo queries: David Waller +44 (0)1494 721111, e-mail: dwaller@halmapr.com. You can view or download copies of this announcement and our latest Half Year and Annual Reports from this website or request free printed copies by contacting halma@halma.com. A copy of the Annual Report and Accounts will be made available to shareholders on 25 June 2013 either by post or online at www.halma.com and will be available to the general public online or on written request to the Company's registered office at Misbourne Court, Rectory Way, Amersham, Bucks HP7 0DE, UK. 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 plc Half year results for the 26 weeks to 28 September 2013 Financial Highlights   Change Unaudited 26 weeks to 28 September 2013 (Restated)7 Unaudited 26 weeks to 29 September 2012 Continuing Operations: Revenue +12% £333.1m £298.1m Adjusted Profit before Taxation 1 +9% £65.1m £59.7m Statutory Profit before Taxation 2 -8% £55.9m £61.1m         Adjusted Earnings per Share 3 +7% 12.99p 12.12p Statutory Earnings per Share 2 -13% 11.28p 12.93p Total Dividend per Share 4 +7% 4.35p 4.06p         Return on Sales 5 19.5% 20.0% Return on Total Invested Capital 6 15.6% 16.1% Return on Capital Employed 6 71.3% 71.0% Net debt £109.8m £74.1m Notes: Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration and profit on disposal of operations of £9.1m charge (2012/13: £1.4m credit). See note 2 to the Condensed Financial Statements for details. The decrease in statutory figures is primarily due to the prior period benefiting from a £8.2m gain on disposal of operations. See notes 2, 6 and 11 to the Condensed Financial Statements for details. Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration, profit on disposal of operations and the associated tax. See note 6 to the Condensed Financial Statements for details. Interim dividend declared per share. Return on Sales is defined as adjusted1 profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations. Organic growth rates, Return on Total Invested Capital and Return on Capital Employed are non-GAAP performance measures used by management in measuring the returns achieved from the Group’s asset base. See note 9 to the Condensed Financial Statements for details. The Group adopted IAS 19 (revised) in 2013/14, which changed the accounting for defined benefit pension plans. The prior period has been restated resulting in a £1.1m reduction in its adjusted profit1. The consequent change to the prior period's adjusted earnings per share3 is shown in note 1 to the Condensed Financial Statements. Review of operations Halma made strong progress during the period, achieving record revenue and profit while continuing to increase investment in Innovation, People Development and International Expansion.  Strong half year results Revenue growth was encouraging. Total revenue increased by 12% to £333m (2012/13: £298m) with organic growth1 of 8% including a 2% positive benefit from currency movements. Excluding disposed companies, total revenue growth was 14%. Adjusted1 profit before tax increased by 9% to £65.1m (2012/13: £59.7m) with organic growth of 5% including a 3% positive benefit from currency movements. Excluding disposed companies, profit growth was 11%. Statutory profit before tax was lower at £55.9m (2012/13: £61.1m), due to the £8m gain on the disposal in 2012/13 of our Asset Monitoring business, Tritech (see note 11 to the Condensed Financial Statements for details). Return on Sales1 remained strong at 19.5% (2012/13: 20.0%) albeit marginally lower than the prior year mainly due to increasing strategic investment to support future growth. This included the Halma Innovation & Technology Exposition (HITE) 2013, the second-year roll out of the Halma Graduate Development Programme and expansion in Brazil and China. As flagged in the 2013 Annual Report and Accounts, IAS 19 (revised) 'Employee Benefits' has been adopted amending the accounting for pensions, in particular, within the Consolidated Income Statement. We have restated the prior year figures to reflect this change. In broad terms, IAS 19 has reduced 2013/14 first half adjusted profit by £1.2m (2012/13 restatement: £1.1m reduction) when compared with the previous basis of accounting and the full year profit impact is expected to be a £2.4m reduction (2013 restatement: £2.1m reduction). Further details are given in note 1 to the Condensed Financial Statements.  Increasing Dividends The Board declares a 7% increase in the interim dividend to 4.35 pence per share which will be paid on 5 February 2014 to shareholders on the register at 3 January 2014. This increase reflects the Board’s ongoing confidence in Halma's long-term growth prospects. Organic revenue growth in all regions Revenue from Asia Pacific increased by 15% to £56m (2012/13: £49m) including 32% growth in China. Revenue from outside our traditional home markets in the USA, Mainland Europe and UK contributed 25.2% of the Group total (2012/13: 24.8%). However, growth within the USA, Mainland Europe and UK was also encouraging. In the USA, revenue grew by 15% to £108m (2012/13: £93m) whilst Mainland Europe and UK revenue was up by 8% and 9% respectively. Organic revenue growth at constant currency was 6% in the USA, 4% in Mainland Europe and 6% in the UK. External revenue by destination   Half year 2013/14 Half year 2012/13   £m % of total £m % of total Change £m % growth United States of America 107.6 32% 93.5 31% 14.1 15% Mainland Europe 79.3 24% 73.3 25% 6.0 8% United Kingdom 62.2 19% 57.2 19% 5.0 9% Asia Pacific 56.0 17% 48.8 16% 7.2 15% Other Countries 28.0 8% 25.3 9% 2.7 11%   333.1 100% 298.1 100% 35.0 12% Organic revenue growth in all sectors Process Safety revenue from continuing operations (excluding the prior year disposal) increased by 8% to £62m (2012/13: £57m) including 7% organic growth at constant currency. Profit from continuing operations (excluding the prior year disposal) improved 11% to £16.1m (2012/13: £14.5m). Strong growth in the USA, Asia Pacific and Near/Middle East more than compensated for lower growth in the UK and Mainland Europe. All major product lines made good progress with a particularly strong performance from our Bursting Disk explosion protection businesses. We are seeing good opportunities in the oil and gas markets as operators seek to improve the safety of their processes.  Infrastructure Safety revenue grew by 7% to £107m (2012/13: £101m) including 4% organic growth at constant currency. Profit improved by 10% to £20.6m (2012/13: £18.8m). Revenue was up in all geographic regions with the highest rates of growth in the USA and Mainland Europe. All major product lines contributed to growth supported by strengthening Health and Safety regulation and increasing Halma investment to diversify into new market niches both organically and through acquisition. Our Medical sector achieved another strong performance boosted by recent acquisitions. Revenue increased by 36% to £81m (2012/13: £60m) including 11% organic growth at constant currency. Profit grew by 27% to £19.6m (2012/13: £15.4m). Profit growth was below revenue growth due to a combination of increased investment in international expansion and recent acquisitions having slightly lower net margins than the sector. Growth was delivered in all regions with the highest growth in the USA, Asia Pacific and Near/Middle East. Although there have been some macro-economic headwind factors in our largest market, the USA, the performance of our recent acquisitions has been good. Our Chinese based business Longer Pump, acquired in January 2013, is trading in line with expectations.  Environmental & Analysis revenue increased by 9% to £83m (2012/13: £75m) with organic growth at constant currency of 3%. Profit reduced by 3% to £15.0m (2012/13: £15.5m) predominantly due to the previously announced restructuring within our Photonics companies and the cost of addressing a supplier component quality issue within our Water Monitoring business. The Photonics reorganisation, which includes both consolidation in the USA and the creation of a new standalone company in China, is proceeding satisfactorily with completion now expected by the end of the financial year. Taking these adverse factors into account, the rate of revenue growth within the Environmental & Analysis sector during the first half has been encouraging, and we believe we will end the year well placed to resume profit growth. External revenue by sector   Half year 2013/14 Half year 2012/13   £m £m Change £m % growth % organic growth % organic growth at constant currency Process Safety 62.2 62.5 (0.3) +8% +8% +7% Infrastructure Safety 107.3 100.5 +6.8 +7% +6% +4% Medical 81.1 59.7 +21.4 +36% +15% +11% Environmental & Analysis 82.5 75.4 +7.1 +9% +5% +3% Total Group 333.1 298.1 35.0 +12% +8% +6% Good cash generation Our operating companies maintained good cash generation in line with the typical pattern we see in the first half of the year. Cash conversion (adjusted operating cash flow as a % of adjusted operating profit – see note 9 to the Condensed Financial Statements for details) was 86% (2012/13: 81%) which, together with investment, dividend and tax payments, resulted in net debt of £109.8m (2012/13: £74.1m) at the end of the period. We remain in a strong financial position and our objective is to keep headroom within our financial resources for investment, with moderate levels of gearing relative to the size of our business. We aim to operate with net debt of up to 1.25x EBITDA giving flexibility should suitable investment opportunities arise. Healthy acquisition pipeline Following the six acquisitions completed in 2012/13, the first half of 2013/14 was quieter with one small bolt-on deal completed. In April 2013, we acquired Talentum Developments Limited for an initial consideration of £2.6m. Talentum, based in the UK, manufactures flame detectors and is being merged with our fire beam detector business, Fire Fighting Enterprises. This adds a new product line to our Fire business which forms part of the Infrastructure Safety sector. Our search effort for new additions to the Group has been maintained and, as targeted, we are finding more opportunities in our Safety sectors and in Asia. Our pipeline is good in both quality and quantity, providing sufficient opportunities for further acquisitions to meet our medium-term growth objectives. Investment for organic growth Within our financial and business model, organic growth is the factor which determines our sustainable rate of shareholder return over the long term. Although from year to year the relative rates of revenue and profit growth might fluctuate, our goal is to increase profits by growing revenue while maintaining our already high rate of return. This requires a sustained investment in people, products and markets. Highlights of this investment during the half year included: Investment in innovation grew across all four sectors with total R&D expenditure up by 10% to £16.4m (2012/13: £14.9m). HITE 2013, held in Orlando, was attended by over 250 subsidiary company employees and demonstrated clearly the increased technical, commercial and operational collaboration embedded within Halma’s culture. Notable areas of significant technical collaboration included wireless technology and optical sensing. Following a successful launch in October 2012, the second intake of nine graduates for the Halma Graduate Development Programme has joined us and commenced their two-year programme of six-month placements in Halma businesses across the world. Our first graduate intake has made a very positive impact on our organisation and they are starting to set their sights on potential permanent opportunities within our business starting in the second half of 2014. The new Medical sector and Process Safety sector hubs in Brazil are operational while in China, subsidiaries are recruiting new engineers under the Halma China R&D subsidy programme launched in April 2013. Here, Halma supports the cost of companies employing additional engineers for two years to work on developing new products targeted specifically at local customers. Risks and uncertainties A number of potential risks and uncertainties exist which could have a material impact on the Group’s performance over the second half of the financial year and could cause actual results to differ materially from expected and historical results. The Group has in place processes for identifying, evaluating and managing key risks. These risks, together with a description of the approach to mitigating them, are set out on pages 53 to 55 in the 2013 Annual Report and Accounts, which is available on the Group’s website at www.halma.com. The principal risks and uncertainties relate to operational, strategic, legal, financial and economic issues. See note 14 to the Condensed Financial Statements for further details. The Directors do not consider that the principal risks and uncertainties have changed since the publication of the 2013 Annual Report and Accounts and that they remain relevant for the second half of the financial year. However macro-economic uncertainty and movements in foreign exchange rates remain a risk to financial performance. Going concern After conducting a review of the Group's financial resources, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the Condensed Financial Statements. Board changes In April 2013, we welcomed Paul Walker to the Board and he assumed the role of Chairman following Geoff Unwin’s retirement after the AGM in July 2013. Paul’s induction has proceeded very well including his attendance at HITE 2013, Halma subsidiary site visits and supporting our People Development programmes. Outlook We operate in markets which offer us the opportunity to sustain growth and high returns providing we implement our strategy effectively. To do so requires us to maintain a balance between growth and investment and, as such, we have made good progress during the first half of the year. Order intake since the period end has continued to be slightly ahead of revenue and in line with our expectations. Halma remains on track to make further progress in the second half of the year. Responsibility statement We confirm that to the best of our knowledge: these Condensed Financial Statements have been prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’ as adopted by the European Union; 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  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 Andrew Williams, Chief Executive Kevin Thompson, Finance Director 1 see Financial Highlights File Download Half Year Report for the 26 weeks to 28 September 2013 (1.9 MB, PDF)
Fri, 26 Jul 2013 14:52:00 GMT

Annual General Meeting held on 25 July 2013

Annual General Meeting held on 25 July 2013 26 July 2013 Proxy votes Issued share capital excluding treasury shares: 377,520,389 Proxy votes received from shareholders 274,472,750 Total proxy votes as % of issued share capital 73% The 2013 Annual General Meeting of Halma plc took place on Thursday 25 July 2013 at the Berkeley Hotel, Wilton Place, London SW1X 7RL. All resolutions were passed on a show of hands. The table below shows the number of proxy votes received prior to the meeting instructing the Chairman to vote as indicated: Resolution   Votes   Total For and Discretion % of total proxies lodged by resolution Poll Yes/No 1 Report and Accounts For 271,087,538 ) 272,585,266 99.00 No Discretion 1,497,728 ) Against 98,360 0.04 Withheld 2,654,156 0.96 Total 275,337,728   2 Declaration of final dividend For 272,967,470 ) 274,465,106 99.68 No Discretion 1,497,636 ) Against 144 0.00 Withheld 872,533 0.32 Total 275,337,783   3 Remuneration Report For 268,698,234 ) 270,191,620 98.13 No Discretion 1,493,386 ) Against 2,081,758 0.76 Withheld 3,063,744 1.11 Total 275,337,122   4 Re-election: Andrew Williams For 263,135,322 ) 264,639,575 96.11 No Discretion 1,504,253 ) Against 9,823,695 3.57 Withheld 874,513 0.32 Total 275,337,783   5 Re-election: Kevin Thompson For 272,216,834 ) 273,738,735 99.42 No Discretion 1,521,901 ) Against 731,043 0.27 Withheld 868,005 0.31 Total 275,337,783   6 Re-election: Stephen Pettit For 270,015,470 ) 271,541,875 98.62 No Discretion 1,526,405 ) Against 2,902,075 1.05 Withheld 893,832 0.33 Total 275,337,782   7 Re-election: Neil Quinn For 272,205,173 ) 273,743,641 99.42 No Discretion 1,538,468 ) Against 707,071 0.26 Withheld 887,071 0.32 Total 275,337,783   8 Re-election: Jane Aikman For 272,528,661 ) 274,054,873 99.53 No Discretion 1,526,212 ) Against 358,050 0.13 Withheld 924,860 0.34 Total 275,337,783   9 Re-election: Adam Meyers For 272,199,231 ) 273,728,753 99.42 No Discretion 1,529,522 ) Against 732,517 0.26 Withheld 876,513 0.32 Total 275,337,783   10 Re-election: Lord Blackwell For 272,398,793 ) 273,930,687 99.49 No Discretion 1,531,894 ) Against 517,444 0.19 Withheld 889,658 0.32 Total 275,337,783   11 Re-election: Steven Marshall For 272,475,463 ) 274,007,139 99.52 No Discretion 1,531,676 ) Against 454,248 0.16 Withheld 872,842 0.32 Total 275,334,229   12 Re-election: Daniela Barone Soares For 272,536,877 ) 274,073,046 99.54 No Discretion 1,536,169 ) Against 399,704 0.15 Withheld 865,033 0.31 Total 275,337,783   13 Election: Paul Walker For 268,577,866 ) 270,110,273 98.10 No Discretion 1,532,407 ) Against 4,345,835 1.58 Withheld 881,674 0.32 Total 275,337,782   14 Re-appointment of Auditor For 269,663,627 ) 271,163,917 98.49 No Discretion 1,500,290 ) Against 1,484,879 0.54 Withheld 2,684,756 0.97 Total 275,333,552   15 Remuneration of Auditor For 271,362,094 ) 272,864,764 99.10 No Discretion 1,502,670 ) Against 1,586,046 0.58 Withheld 886,970 0.32 Total 275,337,780   16 Authority to allot shares For 270,636,912 ) 272,182,998 98.86 No Discretion 1,546,076 ) Against 2,240,610 0.81 Withheld 906,754 0.33 Total 275,330,352   17 Disapplication of pre-emption rights For 272,592,476 ) 274,125,343 99.56 No Discretion 1,532,867 ) Against 319,676 0.12 Withheld 892,764 0.32 Total 275,337,783   18 Authority to purchase own shares For 272,788,543 ) 274,290,950 99.62 No Discretion 1,502,407 ) Against 157,598 0.06 Withheld 889,235 0.32 Total 275,337,783   19 Notice of general meetings For 253,379,043 ) 254,884,796 92.57 No Discretion 1,505,753 ) Against 19,573,999 7.11 Withheld 878,988 0.32 Total 275,337,783  
Thu, 25 Jul 2013 07:00:00 GMT

AGM / Interim Management Statement

AGM / Interim Management Statement 25 July 2013 Halma, the leading safety, health and environmental technology group is holding its 119th AGM later today and makes the following Interim Management Statement relating to the period 31 March 2013 to date, with the figures below relating to the first quarter’s trading. Trading since the start of the financial year has been in line with the Board’s expectations. Revenue during the first quarter was 13% ahead of last year including 6% organic growth at constant currency. Order intake was 103% of revenue. We continue to increase investment in R&D resources, people development and the expansion of our global footprint to support organic growth.  Revenue growth was achieved in all major regions, with good organic growth in Mainland Europe and Asia Pacific, the latter supported by a continued strong performance in China. Organic growth rates were lower in the UK and the USA. Our Process Safety and Medical sectors performed well whilst Infrastructure Safety has continued to grow steadily. Environmental & Analysis has traded in line with expectations. The reorganisation of certain Photonics and Water businesses in this sector is progressing well. This will be completed by the end of 2013 and reorganisation costs will be in line with our previous estimate of £1m. There have been no material events or transactions during the period impacting the Group’s financial position, which remains strong. We continue to identify potential acquisition opportunities which meet our strategic and financial criteria.  The half yearly results for the period ending 28 September 2013 are expected to be released on 19 November 2013. For further information please contact: Halma plc Tel: +44 (0)1494 721111 Andrew Williams, Chief Executive Kevin Thompson, Finance Director MHP Communications Tel: +44 (0)20 3128 8100 Rachel Hirst / Andrew Jaques Note to editors Halma develops and markets products used worldwide to protect life and improve the quality of life. The Group comprises four business sectors: Process Safety Products which protect assets and people at work. Infrastructure Safety Products which detect hazards to protect assets and people in public spaces and commercial buildings. Medical Products used to improve personal and public health. Environmental & Analysis Products and technologies for analysis in safety, life sciences and environmental markets. The key characteristics of Halma's businesses are that they are based on specialist technology and application knowledge, offering strong growth potential. Many Group businesses are market leaders in their specialist field. This Interim Management Statement has been prepared solely to provide additional information to the shareholders of Halma plc, in order to meet the requirements of the UK Listing Authority’s Disclosure and Transparency Rules. It should not be relied on by any other party for other purposes. Forward-looking statements have been made by the Directors in good faith using information available up until the date that they approved this statement. Forward-looking statements should be regarded with caution because of the inherent uncertainties in economic trends and business risks.
Thu, 13 Jun 2013 07:17:00 GMT

Final Results for the 52 Weeks to 30 March 2013

Preliminary statement for the 52 weeks to 30 March 2013 13 June 2013 Record results and continued dividend growth Halma, the leading safety, health and environmental technology group, today announces its preliminary statement for the 52 weeks to 30 March 2013. Financial Highlights         2013 2012 Change Continuing Operations: Revenue £619.2m £579.9m +7% Adjusted Profit before Taxation 1 £130.7m £120.5m +8% Statutory Profit before Taxation £122.3m £112.0m +9%         Adjusted Earnings per Share 2 26.22p 24.46p +7% Statutory Earnings per Share 25.22p 23.01p +10% Total Dividend per Share 3 10.43p 9.74p +7%         Return on Sales 4 21.1% 20.8% Return on Total Invested Capital 5 15.8% 16.8% Return on Capital Employed 5 71.3% 74.7% Adjusted pre-tax profit from continuing operations1 up 8% to £130.7m (2012: £120.5m) on revenue up 7% at £619.2m (2012: £579.9m). Return on Sales4 of 21.1% (2012: 20.8%). Organic growth5 at constant currency: Profit up 5%, Revenue up 3%. US and China revenue up strongly; UK and Mainland Europe revenue lower. Strong performances in Medical and Process Safety sectors; solid progress in Infrastructure Safety; slightly lower profit in Environmental & Analysis. Order intake ahead of revenue in the second half and order books increased across all sectors. Adjusted earnings per share from continuing operations2 up 7% to 26.22p (2012: 24.46p). Statutory earnings per share up 10% to 25.22p (2012: 23.01p). Six acquisitions and one disposal completed. Acquisition pipeline remains healthy. Good cash flow maintained. Net debt of £110.3m at period end (2012: £18.7m). Borrowing facilities of £260m in place until 2016, providing significant financial capacity for investment in organic growth and value adding acquisitions. Final dividend of 6.37p per share, representing a 7% increase in total dividend to 10.43p per share for the year (2012: 9.74p) marking the Group’s 34th consecutive year of dividend increases of 5% or more. Andrew Williams, Chief Executive of Halma, commented: “During the past year, we have continued to strengthen our business by further increasing investment in our drivers of organic growth - innovation, people development and international expansion.  We have significantly improved the fundamental quality of our portfolio through six acquisitions and one disposal. Order intake since the start of 2013 has been consistent with our expectations of sustaining year-on-year organic growth and high returns.  We remain confident that Halma will make further progress in the year ahead.” Notes: Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration and profit on disposal of operations of £8.4m (2012: £8.5m). See note 2 to the Preliminary Statement. Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration, profit on disposal of operations and the associated tax. See note 6 to the Preliminary Statement. Total dividend paid and proposed per share. Return on Sales is defined as adjusted1 profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations. Organic growth rates, Return on Total Invested Capital and Return on Capital Employed are non-GAAP performance measures used by management in measuring the returns achieved from the Group’s asset base. See note 11 to the Preliminary Statement. For further information, please contact: Halma plc Andrew Williams, Chief Executive, Tel: +44 (0)1494 721111 Kevin Thompson, Finance Director, Tel: +44 (0)1494 721111 MHP Communications Rachel Hirst/Andrew Jaques, Tel: +44 (0)20 3128 8100 Note to editors Halma develops and markets products used worldwide to protect life and improve the quality of life. The Group comprises four business sectors: Process Safety Products which protect assets and people at work. Infrastructure Safety Products which detect hazards to protect assets and people in public spaces and commercial buildings. Medical  Products used to improve personal and public health. Environmental & Analysis Products and technologies for analysis in safety, life sciences and environmental markets.   The key characteristics of Halma's businesses are that they are based on specialist technology and application knowledge, offering strong growth potential. Many Group businesses are market leaders in their specialist field. High resolution photos of Halma senior management, including Chief Executive Andrew Williams, and images illustrating Halma business activities can be downloaded from the Image library on this website. Photo queries: David Waller +44 (0)1494 721111, e-mail: dwaller@halmapr.com. You can view or download copies of this announcement and our latest Half Year and Annual Reports from this website or request free printed copies by contacting halma@halma.com. A copy of the Annual Report and Accounts will be made available to shareholders on 25 June 2013 either by post or online at www.halma.com and will be available to the general public online or on written request to the Company's registered office at Misbourne Court, Rectory Way, Amersham, Bucks HP7 0DE, UK. 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. Chairman's Statement A glance backwards and a glimpse forwards As previously announced, I will be stepping down from the Board immediately after the AGM on 25 July 2013. Halma has only had two Chairmen in the past 40 years, the founder, David Barber, and myself. When David stepped down in July 2003 he departed from the annual reporting format of commenting on the year’s results and instead reflected on some of Halma’s achievements over the years. I thought I would do the same, as the results are reported fully elsewhere in this report, save to say that 2012/13 was another record year and we are recommending a dividend increase of 7%, the 34th year of increases of 5% or more. “Welcome to Halma Mr Unwin” My first AGM was in July 2003 and what immediately struck me was the number of private shareholders who were there – all passionate Halma followers. One gentleman came up to me and said, “I have been a loyal shareholder for many years and thanks to the progressive dividends from Halma, have been able to educate my children. So thank you, welcome to Halma Mr Unwin”. He then fixed me with a look that said “and don’t mess it up” (it may have been stronger!). It then really struck home what a privileged and onerous responsibility I had taken on. Glancing back So what has changed over the ten years? Firstly, what has not changed is the fundamental business model: our companies operate in niche markets where demand is underpinned by strong growth drivers. They produce high returns on sales and capital, and those returns go to pay taxes, dividends and re-investment in the business, including buying more companies with similar characteristics. All this is embraced by strong reporting and controls. One significant change was the appointment of Andrew Williams as CEO in February 2005, only the third CEO in Halma’s history. Andrew provides clear, calm, insightful leadership and the Group’s performance under his tenure speaks for itself. He is a pleasure to work with. Our strategy has been sharpened, and the framework under which we operate more clearly defined (as set out in the Annual Report). Delegation and strong autonomy has been re-enforced at the subsidiary company level. Our Managing Directors have huge freedom to operate and to innovate in response to what their customers are telling them. This freedom also generates high job satisfaction. The necessary financial and management resources have been put in place to support our strategy. Two examples illustrate this. Acquisitions: our Divisional Chief Executives (DCEs) are tasked with identifying suitable acquisitions. The pressure on their time was such that we found we were not seeing sufficient opportunities and when we decided ‘to put money to work’ we could not always reach our goals. So, we strengthened our acquisition sourcing efforts with a few highly experienced executives to support the DCEs. Our recent acquisition history illustrates that this is working effectively but, there will continue to be times when we decide that the economic climate or prices are not favourable and therefore we will stand aside for a while. Geographic expansion: we recognised that we were underweight in the faster growing economies and unless addressed, our growth would suffer. The problem was how to make it easier for our companies to enter those markets? Our solution was to create hubs in China and India (with other sector-based hubs now following) staffed by people with the remit to do whatever was necessary to make it easier for our companies to start operating there. One can see a logical progression of our business in, say, China. We start with a hub, then increase local sales through our regional offices, then local product assembly, then local R&D. As a result more MDs are resident in the region and finally we start to acquire companies, e.g. Longer Pump acquired this year in China. In 2003 under 10% of our business came from Asia Pacific, this year it is over 16% and in China our headcount has moved from 70 to 770. We have made a significant investment and the foundations are strong for growth in the future. Incentives. At the beginning of the period, bonuses were rarely achieved and options were under-water. We refreshed the total remuneration framework based around Economic Value Added (EVA) together with introducing new long-term incentives all aligned with our strategy and adding shareholder value. Shareholders can see very clearly that in very good years bonuses will hit their maximum and in poor years may well be zero. They correlate. No surprises there, they are based on EVA. It was also flattering to hear that one of our major shareholders cites the Halma remuneration scheme as a model for others! Much emphasis has also been placed on the quality of our company boards, particularly against the ever-increasing demands of global markets. Formal management training has been introduced tailored to our needs. This started with the Halma Executive Development Programme and now runs right through to our own graduate development programme. This has also encouraged our companies to develop training programmes of their own. We have taken steps on gender diversity at the Board level, although at the company level it is much more difficult unless more female talent is encouraged throughout our operations. Pleasingly, in 2013, the majority of our graduate programme recruits are female.  A number of promotions have come from within so that people can see career opportunities across the Group – not just their own company. There has been a major shift in sharing and co-operation, helped by our training programmes and using technology (intranets and social media) to enable it. We introduced a Halma Innovation and Technology Exposition four years ago, which is now held every two years to enable all the companies to share their innovation and technology with other Halma companies. This event has become more and more powerful and effective; there is a palpable buzz in the air. In the period since March 2003 we have increased our dividend per share by 79% declaring £300m of dividends for shareholders. Halma’s market capitalisation has increased nearly five-fold and we have become one of the top 150 companies on the London Stock Exchange.  A glimpse forwards The basic model is sound and our strategy, which is kept under challenging review, will evolve, just as it has done over the years. More and more of our subsidiary boards will have to deal with the challenge of moving from domestic, single continent operations to global, multi-continent operations. As we know, this is not a trivial matter and the model that works best for each company will largely be dictated by the structure of their customers. To compete we have to have the best teams, so training, development and talent spotting will continue to increase in importance. 2016 or thereabouts will be a key year; the year when China is forecast to overtake the USA as the world’s biggest economy (according to the OECD after accounting for price differences). This will have a profound effect. For Halma, it means that the centre of gravity of R&D will change, and that’s only three years ahead! These changes will test our structures, but I know Halma will rise to these challenges. Progress up the FTSE also brings new pressures. More and more people will be aware of Halma. Finally, for sure, the pace of business and innovation will not get any slower. I used to say in a previous life, that what used to take us nine months to achieve would shortly be required in nine weeks and then, who knows, nine days! I hope this gives some insight into the way Halma has evolved over the last ten years and gives a glimpse to the future. What is certain is that these changes, and the performance over these years is due to a truly dedicated team of people across the Group. It is their focus on our customers and the markets they serve that make the difference. To everyone in Halma, I say a sincere thank you for all that you have achieved, you have made my role a pleasure. I should also like to thank my predecessor, David Barber, for making my induction into the Company he founded so smooth; to all my colleagues on the Board, they have been terrific, both challenging and supportive as needed. Finally, in Paul Walker, we have a highly successful international businessman with the relevant experience and the right personal attributes to chair Halma to even greater heights. I look forward to you welcoming him at the AGM. It has been a privilege. Geoff Unwin, Chairman Strategic Review Halma made good progress during the year delivering a strong trading performance, significant M&A activity and further increases in investment in geographic expansion, innovation and people development. Our four new reporting sectors, announced earlier this year, are clearly aligned with our long-term market growth drivers yet offer the potential for Halma to enter new, adjacent market niches within each sector. Halma’s record of sustaining short-term financial success while investing to develop opportunities for the longer term gives us confidence for the future. Record revenue and profit for the tenth consecutive year Full year revenue increased by 7% to £619.2m (2012: £579.9m). Organic growth was 2% and 3% at constant currency. Full year adjusted1 profit increased by 8% to £130.7m (2012: £120.5m) with organic growth of 4% which was 5% at constant currency.  Excluding businesses sold during the current and prior years, revenue grew by 9% and profit was up by 10%. We maintained steady growth momentum throughout the year. Order intake in the second half remained slightly ahead of revenue enabling us to make a positive start to the 2013/14 financial year. Excellent returns and cash generation We continued to achieve high returns with Return on Sales improving further to 21.1% (2012: 20.8%). Return on Capital Employed at the operating level remained high at 71.3% (2012: 74.7%) while our post-tax Return on Total Invested Capital was 15.8% (2012: 16.8%). Cash generation was in line with expectations and we ended the period with net debt of £110m (2012: £19m) having spent £148m (2012: £20m) on acquisitions, £15.5m on capital expenditure (2012: £16.5m) and paid out £37.8m and £25.5m on dividends and tax respectively. Strong growth in Asia, steady progress in USA and Europe The relative trading patterns across the major global regions were consistent through the year. Growth from Asia Pacific of 15% was strong, with revenue exceeding £100m for the first time (2012: £87m). In aggregate, revenue from outside our traditional ‘home’ markets of the UK, Mainland Europe and USA grew by 14% to £157m (2012: £138m), now representing 25% of the Group and maintaining progress towards our target of 30% by 2015. In total, revenue from the UK, Mainland Europe and USA increased by 5%. Revenue from the USA increased 20% to £195m (2012: £162m) boosted by recent acquisitions and organic growth (constant currency) of 4%. Trading conditions were tougher in the UK and Mainland Europe. In the UK, revenue decreased by 8% to £116m (2012: £126m) although excluding the impact of disposals, the organic decline at constant currency was only 3%. Revenue from Mainland Europe was 2% lower at £152m (2012: £154m) although, here again, the organic decline in constant currency terms was lower, at just 0.5%.   New reporting sectors For the first time Halma’s results are reported under four sectors which are clearly aligned with our core markets of safety, health and environmental. Full details of the background to this change were released in our announcement on 14 February 2013 and can be seen on this website. Process Safety performed strongly with revenue up by 3% to £125.7m (2012: £122.2m) and profit2 increasing by 11% to £32.3m (2012: £29.2m). Excluding the contribution of Tritech, which was sold in August 2012, continuing operations revenue grew by 10% and profit by 16%. Organic revenue growth at constant currency was 10% with continued strong demand from energy and resources markets. Together with process industries these markets contribute around 60% of sector revenue and benefit from increasing Health and Safety regulation. Return on Sales increased from 23.9% to 25.7% through a combination of strong revenue growth and gross margins supported by continuous improvement in new product innovation.  Organic revenue growth at constant currency for markets outside the UK, Mainland Europe and USA was an impressive 29% resulting in these fast developing markets now representing 28% of the sector. Encouragingly, the performance in our traditional ‘home’ markets was robust with mid-single digit organic revenue growth at constant currency in Mainland Europe and USA and flat UK organic growth. Infrastructure Safety delivered another solid year. Revenue increased 1% to £205.3m (2012: £204.3m) and profit2 grew by 7% to £41.8m (2012: £39.1m). Return on Sales improved from 19.1% to 20.3% with a significant factor being the improved profitability following the reorganisation of our companies selling elevator products. Organic revenue growth at constant currency was 1% which, following a flat first half, reflected a slight improvement during the second half. This resilience in demand comes from our focus on safety-critical product niches for regulated non-residential applications. Approximately two-thirds of sector revenue is installed in existing infrastructure rather than new construction. New product introductions and increased investment in sales resources contributed to strong growth in the USA where organic revenue growth (constant currency) was 18%.  Elsewhere we saw modest rates of growth in the UK and Asia Pacific while, unsurprisingly, almost every business in this sector experienced difficult conditions in Mainland Europe, resulting in organic revenue decline there of 8%. Medical had an outstanding year, increasing revenue by 36% to £136.1m (2012: £100.4m) and profit2 by 37% to £35.9m (2012: £26.3m). Return on Sales increased further from 26.2% to 26.4%. The underlying organic revenue growth (constant currency) was 12%. As expected, slowly improving demand for fluid control components from major medical OEM customers, steady growth in ophthalmology markets and our increased product innovation were the significant contributory factors to this excellent result. Our strategic focus on small medical devices and components rather than high value capital equipment, enabled us to mitigate the negative impact from government austerity spending cuts in certain markets. The fundamental market drivers of an ageing population in the West and a growing and wealthier population in the East, give us continued confidence for the future. Both the USA and Mainland Europe performed well with organic revenue growth (constant currency) of 12% and 17% respectively, whilst the UK saw organic revenue decline of 3%. Revenue from outside these three major territories increased organically by 12%, to now represent 25% of the sector. Our real exposure to these faster growing markets is greater, as a sizeable proportion of our revenue from the USA and Mainland Europe is to global OEMs who subsequently export their finished systems to other global regions.  Environmental & Analysis had a relatively disappointing year as revenue declined by 1% to £152.4m (2012: £153.4m) and profit2 reduced by 4% to £30.4m (2012: £31.6m). Return on Sales was 19.9% (2012: 20.6%). Organic revenue at constant currency was down 6%. Reduced government research spending in the USA and lower investment by water utilities in the UK were the two major adverse market factors.  These market factors are clearly reflected in the regional trends with organic revenue (constant currency) declines of 14% in the UK and 10% in the USA. Organic revenue from Mainland Europe fell by 4%. Our companies continue to invest in growth in markets outside the UK, Mainland Europe and USA with revenue from these developing markets being 27% of the total sector, contributing organic growth of 6%.  Despite the challenges faced by Environmental & Analysis in the past year, we are confident that the management and organisational changes currently being made will improve performance in the future. These include simplifying global sales channels and manufacturing operations together with increasing senior management resources to focus on accelerating growth in Asia and from recent new technology innovation. It is expected that the total cost of this reorganisation will be around £1m in 2013/14. Six acquisitions and one disposal completed During the year we spent £136.8m (2012: £13.3m) on acquisitions plus £15.8m (2012: £5.4m) contingent consideration on acquisitions made in previous years but excluding £4.6m (2012: (£1.1m)) of net cash/(debt) acquired. We acquired Accutome, Sensorex and SunTech Medical Group in the first quarter of the financial year for a total initial consideration of US$108.6m (£68.7m). Full details of these transactions were included in our Annual Report and Accounts 2012. Since acquisition, these companies have continued to trade in line with our expectations with the vendors of SunTech receiving an earn-out payment of US$6m and Accutome’s vendors expected to receive an estimated earn-out of US$5m for profit growth since joining Halma. In December 2012, we acquired MicroSurgical Technologies (MST) for US$57.4m (£35.5m) plus an earn-out of up to US$43m (£26.6m) based on future profit growth. Based in Redmond, Washington, USA, the company designs and manufactures ophthalmic surgical products with a focus on single-use devices used in cataract surgery. MST’s results are reported as part of Halma’s Medical sector. In January 2013, we acquired Baoding Longer Precision Pump Co (Longer Pump) for RMB242m (£24.3m). Longer Pump designs and manufactures its own range of precision pumps which are used in medical, laboratory and industrial applications, and is also part of Halma’s Medical sector. The business is based in Baoding, close to Beijing and is Halma’s largest ever stand-alone acquisition in China. In March 2013, we acquired ASL Holdings for £6.4m and contingent consideration of up to £3.5m based on growth over the next two years. ASL designs and manufactures remote data monitoring solutions for a range of markets including utilities. It has become part of HWM-Water which is a global leader in datalogging and leak detection products for the water industry within Halma’s Environmental & Analysis sector. Following the year end, in April 2013, we acquired a small technology bolt-on for one of our Infrastructure Safety businesses, Fire Fighting Enterprises (FFE). Talentum, based in Oldham, UK was acquired for £2.6m and adds new flame detection products to FFE’s existing range of fire optical beam smoke detectors. We made one disposal during the year. In August 2012, we sold our single Asset Monitoring business, Tritech International, for £22m to Moog Components Group (Moog). We concluded that, despite the attractive aspects of Tritech’s end markets, we could create greater shareholder value by reallocating resources to other Halma sector niches and that Moog’s presence in the marine energy markets would enable Tritech to make stronger progress under their ownership. This disposal, along with the sale of Volumatic in March 2012, demonstrates the importance of Halma’s ability to manage our portfolio in order to sustain financial success over the long term. We are continuing to add new opportunities to our acquisition pipeline process in all four of our new reporting sectors. Although the past year has been productive, we are working to both integrate these newly acquired businesses and progress further opportunities into the later stages of our acquisition process. We remain confident in our ability to find and acquire high quality businesses within our chosen markets over the medium term. Strategic growth priorities We have a clear strategy to generate sustained organic growth, actively manage our portfolio and deliver increased dividends. The average medium-term rate of organic growth determines the rate at which we can acquire companies and increase dividends. Our management reward structures are clearly aligned with this objective of delivering sustained growth and high returns. We actively manage our business portfolio through acquiring in (or adjacent to) our existing markets, merging companies as market needs change and selling businesses where we do not see the medium-term prospects for sustaining high returns or growth.  We drive organic growth through a focus on investing in the three areas of: Innovation, People Development and International Expansion.  Innovation Our businesses build market leadership, gain market share or create new market opportunities through innovation in products and processes. Within Halma, companies have great opportunities to collaborate and share know-how with their sister companies. We have created a culture and environment to encourage this behaviour in a variety of ways including ensuring a diverse mix of representation at Halma training programmes and holding a biennial Halma Innovation and Technology Exposition (HITE). Network groups and forums focused on specific functional areas such as manufacturing and IT have also been established to foster regular benchmarking and continuous improvement. In early May 2013, we held our third HITE event in Florida, USA which included a two-day Halma ‘trade-show’ where all the Group’s companies showcased their innovation and technologies to one another. HITE is a catalyst for collaboration between our businesses and is a visible example of how Halma’s culture has changed, and continues to evolve. Collaboration and learning from each other is increasing the rate of innovation and, consequently, building competitive advantage in our chosen markets. We invited institutional investors and analysts to join us at HITE 2013 and, following their positive feedback, it is something that we will be keen to repeat at HITE 2015. Innovation is formally recognised in Halma through the annual Halma Innovation Awards where the first prize for the winning employee(s) is £20,000. The Halma Innovation Award 2013, was won by a team from Hanovia in Slough, UK who developed a new UV treatment system for ensuring water in the ballast tanks of ships can be discharged without the risk of invasive species contamination, in compliance with impending global regulations. The runners up were a team from Oseco in Oklahoma, USA who developed a bursting disk which gives market-leading performance for both gas and liquid applications. In third place was a team from BEA who developed the new IXIO dual technology door sensor which combines BEA’s usual market-leading sensor performance with a multilingual LED graphical display, making it the ‘easiest to install’ product on the market. Increased innovation in Halma is reflected in the greater investment which our companies are making in R&D. This year, R&D expenditure grew by over 13% to £31.1m (2012: £27.4m) with all four Halma sectors increasing R&D spend as a proportion of revenue. Our M&A activity over the past year has been supportive of this trend as has been our ability to increase R&D spend in those businesses we acquired in 2011/12. People development Halma’s decentralised operating structure is successful on a sustainable basis because we continue to improve the quality of management across our business. We build and develop local management teams who thrive on the opportunity to make timely decisions for their business as customer needs dictate. R&D, manufacturing, sales and marketing, and financial control resources are managed by our subsidiary boards who have an intimate knowledge of their markets and are, therefore, best placed to make local resource allocation decisions quickly. Subsidiary company strategic objectives, annual performance goals and management incentives are aligned with Halma’s and are underpinned with a relentless commitment to attract and develop high quality talent. In support of local employee development initiatives, Halma offers a range of training for employees including the Halma Executive Development Programmes (HEDP and HEDP+), Halma Management Development Programmes (HMDP and HMDP+) and Halma Certificate in Applied Technology (HCAT) programmes. During 2012/13, 179 employees attended these Halma run programmes. In addition, senior executives are encouraged to attend external training programmes at top international business schools. In the last year, one of our Divisional Chief Executives completed the Global CEO Programme run by IESE Business School whilst another has just completed the Advanced Management Program at Harvard. A highlight of the year was the successful launch of the first ever Halma Graduate Development Programme (HGDP). The initial group of nine graduates came from a mix of technical and geographic backgrounds and have done a fantastic job of making the most of the opportunities given to them as well as teaching us new ways to innovate and grow our business. The 2013 intake is another impressive group from top universities. Through HGDP, we aim to increase the depth of talent coming through our management ranks and also expect it to contribute to an increase in management diversity in the medium term. During HGDP, graduates work at Group companies in different global regions and attend residential training modules. Halma is an attractive employer for new graduates offering them the chance to work in diverse markets and to gain international experience in an organisation which is able to offer opportunities for significant early career progression. International expansion We choose to operate in niches within markets with robust, long-term growth drivers on a global scale. This gives our businesses the opportunity to sustain growth in all regions of the world. Our strategic objective is for at least 30% of revenue to come from outside the UK, Mainland Europe and the USA by 2015 and this year we increased this proportion from 23.8% to 25.4%. The significant growth we have achieved since setting up the first Halma hubs in China (2006) and in India (2008) has almost all been organic so the recent acquisition of Longer Pump in China will add further momentum during 2013/14. Progress in China was excellent with revenue up 25% to £37m (2012: £29.5m) compared with just £6.6m when our Halma hubs were established in 2006. Today, almost 800 of our 4,995 employees are based in China. Although revenue of £12.7m from South America was in line with the prior year, it was very encouraging to see two separate groups of Halma companies from our Medical and Process Safety sectors creating shared trading companies in Brazil. This is a great example of how Halma companies are now collaborating to accelerate their expansion into new territories where, in this case, the local healthcare and energy markets offer exciting opportunities for growth. Macro-economics, regulatory and competitive environment With our focus on the supply of safety, health and environmental related products, Halma businesses are positioned in relatively non-cyclical markets that have clear, long-term growth prospects. Most of our markets are underpinned by regulatory drivers where most customer spending is non-discretionary. Our businesses benefit from strong market positions providing upgrade and replacement sales opportunities. These factors combine to create genuine resilience in tough economic conditions and enable us to achieve organic growth above prevailing market growth rates. Against this backdrop, we can invest for the longer term with confidence. Our competitive environment is heavily influenced by global, regional and national product approvals or technical validations. Compliance with product regulations is a steadily increasing cost and technical challenge but our focus on this area enables us to build competitive advantage.  We are exposed to a very diverse range of niche markets, each with its own unique market dynamic. Our approach is to empower local management to respond to changing market conditions by developing their own strategy. More details are given in the sector reviews in this Preliminary Statement.  In the current macro-economic environment each of our businesses is experiencing very different challenges and opportunities according to their particular market and geographic exposure. In 2013/14, we expect the macro-economic and political circumstances in Europe to remain challenging whilst we expect the US economy to maintain a relatively low rate of steady growth. We believe that the broader socio-economic development of developing regions such as Asia and South America will continue to increase demand for a safer environment and greater access to healthcare and energy/water resources. Our primary market growth drivers Halma’s strategy is to develop market positions with a horizon of ten years or more. Growth strategies within our individual operating businesses have three to five-year horizons. The markets we select must have robust growth drivers with potential for organic growth above the underlying market or GDP growth. All of our businesses are positioned in markets that are underpinned by at least one of the following growth drivers:  Increasing health and safety regulation Throughout the world, governments are requiring employers to comply with increasingly strict laws and regulations to protect workers from workplace hazards. In parallel with government regulation, many multinational employers based in the developed world are extending health and safety practice to developing regions. This combination of increasing safety regulation and globalisation drives demand for our Process Safety and Infrastructure Safety products. The human cost of workplace accidents is enormous. The economic impact of poor occupational safety and health practice is lost working time, compensation, interruption of production and medical expenses. These costs are estimated to be about 4% of annual world Gross Domestic Product. The International Labour Organisation estimates that every day around 6,300 people die as a result of occupational accidents or work-related diseases – more than 2.3 million deaths per year. 317 million work accidents occur annually; many of these resulting in extended absences from work.  Occupational deaths and injuries occur disproportionately in developing countries, where a large proportion of the population work in hazardous industries. However, significant advances have been made in occupational safety over the past decade and the number of fatal accidents has fallen.  Increasing demand for healthcare Three demographic trends support increasing worldwide demand for healthcare:  global population ageing global population growth rising incomes in the developing world Demand for healthcare services and health-related products drives growth in our Medical markets. An increase in focus on preventive medicine and rising rates of chronic diseases such as cancer, diabetes and hypertension are key trends. Advances in medical technology and new medical procedures also stimulate demand for new equipment. The number of people aged 60 and over is increasing dramatically. In 2010 there were 759 million people in the world aged 60 and over; this is projected to rise to 2 billion by 2050. While the older population is growing worldwide, most of the increase is in the developing regions. The proportion of the world’s older population living in less developed regions is forecast to rise from 65% in 2010 to about 80% by 2050.  The global healthcare market is estimated to be over 10% of global GDP and rose by 43% over the period 2005 to 2010. Spending on healthcare continues to grow rapidly throughout the developed world, particularly in the USA (which accounts for 40% of total global medical expenditure) where spending is projected to rise by over a third between 2011 and 2016. Population growth and rising incomes in the developing world are also strong drivers of healthcare demand. China’s healthcare spending, for example, is forecast to grow from $357 billion in 2011 to $1 trillion in 2020. Increasing demand for life critical resources Rising energy consumption and water usage, the inevitable consequences of social and economic development, are driven by three key trends: population growth rising living standards changing patterns of food consumption and agriculture Several of our Environmental & Analysis businesses are positioned to benefit from the global trend of rising demand for energy and water. In both developed and developing regions we see increasing competition for water resources between industries and economic sectors, and between national governments. The increasing value placed on water resources drives demand for our water conservation, treatment, monitoring and testing products.  Global water demand rises relentlessly, predicted to increase by 50% by 2025 in developing countries, and by 18% in developed countries. Both the quality and availability of clean water continues to decline. Eighty per cent of the world’s population lives in areas with high levels of threat to water security. Water is essential to oil, gas and coal production but, increasingly, also in irrigation of biofuel crops. Water needs for energy production are forecast to grow at twice the rate of energy demand. Global energy demand is expected to grow by more than one-third over the period to 2035; China, India and the Middle East will account for 60% of this increase.  Continued increases in global oil and gas capital expenditure, predicted to rise by about 16% from 2012 to 2013, drives demand for our Process Safety products. Delivering corporate responsibility and sustainability Our primary market growth drivers mean that Halma companies operate in markets in which their products contribute positively to the wider community. These market characteristics and our commitment to health and safety, the environment and people development are reflected in the values held by our employees and our operating culture. Legislative changes, particularly concerning the environment and bribery and corruption, have provided an opportunity to review and ensure that our procedures in these important areas are accessible, compliant and firmly embedded within our business. We review our responsibility and sustainability reporting in accordance with best practice. A detailed report on Corporate Responsibility is set out in the Annual Report and Accounts.  Change of Chairman In July 2013, Geoff Unwin will step down as Chairman of Halma and I would like to take this opportunity to thank Geoff for the tremendous contribution he has made to Halma’s success over the past decade. Geoff had the unenviable task of taking over from Halma’s founder, David Barber, who had created a business with an impressive 30-year track record. Under Geoff’s chairmanship, the Group has not only maintained that track record but, as a result of sustained focused investment, is now better placed to continue that success in the future. Thanks Geoff. During the year, we welcomed Paul Walker to Halma’s Board.  HITE 2013 provided a great chance for Paul to see the whole Group and start to appreciate some of the opportunities and challenges ahead. I look forward to working closely with Paul when he takes up the Chairman’s role after this year’s AGM.  Welcome, Paul. Outlook During the past year, we have continued to strengthen our business by further increasing investment in our drivers of organic growth - innovation, people development and international expansion. We have significantly improved the fundamental quality of our portfolio through six acquisitions and one disposal. Order intake since the start of 2013 has been consistent with our expectations of sustaining year-on-year organic growth and high returns. We remain confident that Halma will make further progress in the year ahead. Andrew Williams, Chief Executive See Financial Highlights. See Note 2 to the Preliminary Statement. Financial Review Halma’s financial model sustaining success Once again Halma delivered record results, achieving growth coupled with high returns. Strong cash generation funded the continuation of our long-term record of dividend increases. International expansion continues to be a key part of our story as does M&A, with considerable success in the year in making six acquisitions and one disposal. Our financial position remains strong.  Record revenue and profit Revenue increased by 6.8% to £619.2m (2012: £579.9m), up £39.3m. Of this increase, acquisitions in 2012/13 and the prior year, net of disposals, contributed £26.5m so organic revenue was up 2.2%. There was a small adverse impact from currency translation and consequently organic revenue growth at constant currency was 2.9%. Revenue and profit growth        Percentage change   2013 £m 2012 £m Increase £m Total Organic growth* Organic growth* at constant currency Revenue 619.2 579.9 39.3 6.8% 2.2% 2.9% Adjusted1 profit 130.7 120.5 10.2 8.5% 4.1% 5.3% * Organic growth2 is calculated excluding the results of acquisitions and disposals. This is the tenth consecutive year of record results with adjusted1 profit before taxation growing by 8.5% to £130.7m (2012: £120.5m). Organic profit growth was 4.1% and adjusting for adverse currency translation impacts, organic profit growth at constant currency was 5.3%. Statutory profit before taxation grew by 9.2% to £122.3m. Statutory profit is after charging the amortisation of acquired intangible assets of £14.2m (2012: £10.4m), acquisition transaction costs and movements on acquisition contingent consideration including related foreign exchange movements of £2.3m (2012: £1.6m) and after crediting the profit on disposal of Tritech of £8.1m.  Revenue growth was 7% in the second half of the year following a 6% increase in the first half. Adjusted1 profit grew by 11% in the second half, following a 6% increase in the first half, so the first half/second half split of profit was 47%/53%, with the revenue split at 48%/52%. This is consistent with previous years, with higher revenue and profitability in the second half of the year.  Sector reporting changes As announced on 14 February 2013 we are reporting Group performance under four market based sectors. This evolution in our reporting follows significant growth in the former Health & Analysis sector. Comparative figures have been restated (see Note 2 to the Preliminary Statement). We saw the highest growth this year in the Medical sector. There was a small decline in the Environmental & Analysis sector where we anticipate reorganisation costs of approximately £1m in the first half of 2013/14 to underpin improved future performance. In 2012/13 costs of £0.8m were charged in the Group Income Statement, mainly in the first half of the year, in relation to the successful reorganisation of certain Infrastructure Safety businesses.  Central administration costs increased in the year predominantly to finance continued global expansion and people development activity including our new Halma Graduate Development Programme. Geographic revenue growth 2013   2012 £m % of total £m % of total Change £m % growth United States of America 195.0 31% 162.0 28% 33.0 20% Mainland Europe 151.6 25% 154.4 27% (2.8) (2%) United Kingdom 115.6 19% 125.6 21% (10.0) (8%) Asia Pacific 100.5 16% 87.3 15% 13.2 15% Other countries 56.5 9% 50.6 9% 5.9 12% 619.2 100% 579.9 100% 39.3 7% Strong growth in USA and Asia Pacific The geographic revenue growth pattern was very consistent between the first and second half. The USA continues to be our largest sales destination growing by 20% this year and accounting for 31% (2012: 28%) of Group revenue. Acquisitions boosted the US growth and there was 4% organic growth at constant currency. Mainland Europe revenue was only 2% below the prior year despite the tough economic environment, with the Medical sector achieving more than 20% growth there. UK revenue declined by 8%, although excluding the impact of disposals in the current and prior year the revenue decline was only 3%. Asia Pacific grew strongly at 15% with all four sectors growing in this region. China revenue was up 25% and is now almost 6% of Group revenue. We are targeting to have 30% of Group revenue coming from outside the UK/Mainland Europe/USA by 2015 and this percentage increased from 23.8% last year to 25.4% this year. This shows good progress and compares with a figure of 19% five years ago. Half of our revenue growth this year came from outside the UK/Mainland Europe/USA. Increased Return on Sales Group Return on Sales has been above 16% for the last 28 consecutive years. Our current target is to operate in the 18% to 22% range. We believe that a consistently high Return on Sales is a key indicator of the value our customers place on our products and of good cost management. In 2012/13 Return on Sales increased once again to 21.1% (2012: 20.8%) due to M&A activity and the mix of strong business performances. In the second half of the year Return on Sales was 21.8%. A high Gross Margin (revenue less direct material and direct labour costs) remains a stable element of our profitability and this year increased to 64.0% (2012: 63.5%), a good achievement against the background of cost and price pressures, reflecting the value of our increasing investment in customer-led innovation. Currency Rates         Weighted average rates used in Income Statement   Year end exchange rates used to translate Balance Sheet   2013 2012   2013 2012 US Dollar 1.58 1.60 1.52 1.60 Euro 1.23 1.16   1.19 1.20 Currency impacts Halma reports its results in Sterling. The most important other trading currencies are the US Dollar, Euro, and to a lesser extent the Swiss Franc. Approximately 40% of Group revenue is denominated in US Dollars and 14% in Euros.  The Group has both translational and transactional currency exposure. Translational exposures arise on the consolidation of overseas company results into Sterling. Transactional exposures arise where the currency of sale or purchase transactions differs from the functional currency in which each company prepares its local accounts. We take a neutral view of the future movements of currencies. After matching currency of revenue with currency costs wherever practical, forward exchange contracts are used to hedge a proportion (up to 75%) of the remaining forecast net transaction flows where there is a reasonable certainty of an exposure. We hedge up to 12 months and in certain specific circumstances 24 months, forward. At 30 March 2013 over 50% of our next 12 months currency trading transactions were hedged. There is a good degree of natural hedging within the Group in US Dollars but we typically buy fewer products in Euros than we sell and so have a net exposure of approximately €30m at any time. There was a small negative net currency translational impact on the 2012/13 results. Relative to Sterling the US Dollar strengthened by 1% and the Euro weakened by 6% on average in the year and the net currency translation impact was 0.7% adverse on revenue and 1.2% adverse on profit.  Based on the current mix of currency denominated revenue and profit, a 1% movement in the US Dollar relative to Sterling changes revenue by £2.4m and profit by £0.5m. Similarly, a 1% movement in the Euro changes revenue by £0.9m and profit by £0.2m.  Increased finance cost Net financing cost in the Income Statement increased to £3.8m (2012: £1.4m). Net bank interest and funding costs increased due to higher average levels of debt and slightly higher average interest rates (see table ‘Average debt and interest rates’ below) as well as the higher costs of funding our increased bank facility from October 2011. The net pension financing charge is also part of our financing cost and this year it increased from £0.2m to £0.5m. This charge is dependent on the level of pension scheme liabilities and assets at the start of the year as well as the discount rate/rates of return applied to them. In 2012/13 the cost of higher liabilities exceeded the return on increased assets. In 2013/14 the pension accounting rules under IAS19 (Employee benefits) will change and this change will affect the Group Income Statement. The principal change relates to the requirement to use the schemes’ discount rate to calculate the return on assets rather than using a rate of return appropriate to the various asset classes. At current discount rates, the change is expected to reduce the adjusted profit by approximately £2m for 2013/14 onwards. Comparative figures will be similarly restated, so overall Group reported growth rates will be largely unaffected.  Higher Group tax rate The Group has its main operating subsidiaries in 14 countries so the Group’s effective tax rate is a blend of these different national rates applied to locally generated profits. Our approach to taxation is to manage the tax burden in a responsible manner, keeping good relationships with tax authorities based on legal compliance, transparency and cooperation. Intercompany trading is set on a commercial arm’s length basis. The effective tax rate on adjusted1 profit increased to 24.2% (2012: 23.5%). Approximately one-third of Group profit is generated and taxed in the UK and the UK Corporation Tax rate fell from 26% to 24% this year, with it forecast to fall to 20% in 2016. Offsetting this was the tax on increased profits generated in higher tax rate jurisdictions, in particular the USA. We anticipate that the effective tax rate in 2013/14 will be similar to that in 2012/13. Increasing earnings per share and dividends We have consistently delivered value to shareholders through growth in earnings per share and dividend increases. Adjusted2 earnings per share increased by 7.2% to 26.22p below the rate of increase in adjusted2 profit due to the higher effective tax rate compared with the prior year. Statutory earnings per share increased by 9.6% with the higher acquisition related expense being more than offset by the £8.1m profit on disposal of Tritech.  An increase in the final dividend of 7.1% to 6.37p per share (2012: 5.95p) is recommended which, together with the 7.1% increase in the interim dividend, gives a total dividend of 10.43p per share (2012: 9.74p). Halma has a long record of growing its dividend, and with this latest rise, will have increased the dividend by 5% or more for every one of the last 34 years, paying out £300m to shareholders in the last decade. The final dividend for 2012/13 is subject to approval by shareholders at the AGM on 25 July 2013 and will be paid on 21 August 2013 to shareholders on the register at 19 July 2013.  We have maintained a progressive dividend policy that balances dividend increases with organic growth rates achieved, taking into account current and potential acquisition spend and the maintenance of moderate debt levels. Dividend cover (the ratio of adjusted profit after tax to dividends paid and proposed) remains the same as 2012 at 2.5 times. Our policy is to maintain dividend cover, based on adjusted profit, above two times and we will continue to monitor dividend payout each year as dividend cover rises. Good cash generation Strong cash generation is critical to the long-term health of the Group. Our cash performance in 2012/13 was good. Adjusted operating cash flow was £113.7m (2012: £105.4m) and represents 84% (2012: 86%) of adjusted operating profit. This new cash conversion KPI is in keeping with best practice amongst our peers and this year’s result is in line with our newly revised KPI target of 85% cash conversion. Operating cash flow summary 2013 £m 2012 £m       Operating profit 118.4  109.9 Net acquisition costs and contingent consideration fair value adjustments 2.2 1.7 Amortisation of acquisition-related acquired intangibles 14.2 10.4       Adjusted operating profit 134.8 122.0 Depreciation and other amortisation 17.7 17.3 Working capital movements (10.9) (7.6) Capital expenditure net of disposal proceeds (14.6) (15.3) Additional payments to pension schemes (8.3) (6.4) Other adjustments (5.0) (4.6)       Adjusted operating cash flow 113.7 105.4 Cash conversion % 84% 86% Non-operating cash flow and reconciliation to net debt 2013 £m 2012 £m       Adjusted operating cash flow 113.7  105.4 Tax paid (25.5) (27.8) Acquisition of businesses and shares of associates including cash/debt acquired (153.7) (19.8) Net finance costs and arrangement fees (2.3) (3.2) Dividends paid (37.8) (35.2) Issue of shares/treasury shares purchased (5.1) (3.5) Disposal of businesses 19.6 3.6 Effects of foreign exchange (0.5) (1.1)       Movement in net debt (91.6) 18.4 Opening net debt (18.7) (37.1) Closing net debt (110.3) (18.7) Net debt to EBITDA 2013 £m 2012 £m       Operating profit 118.4  109.9 Depreciation and amortisation 31.9 27.7 EBITDA 150.3 137.6   Net debt to EBITDA % 73% 14% A summary of the year’s cash flow is shown in the table above. Working capital movements, comprising changes in inventory, debtors and creditors, totalled £10.9m (2012: £7.6m). Working capital management is the responsibility of each individual subsidiary board and therefore receives close attention. This year’s increase in debtors reflects the growth in our business and receives continued focus to ensure cash generation remains strong. Expenditure on property, plant and computer software this year was £15.5m (2012: £16.5m) slightly below the prior year when there were some larger capital investment projects. This year’s spend represents 110% of depreciation, falling within the 100% to 125% range we expect.  Taxation paid was £25.5m (2012: £27.8m) a little below the relatively high prior year figure with a lower UK Corporation Tax rate and higher pension contributions contributing to the change.  Strong financial position Halma is highly cash generative and has substantial bank facilities. We have access to competitively priced finance at short notice and spread our risks to provide good liquidity for the Group. Group treasury policy is conservative and no speculative transactions are allowed.  In October 2011 we refinanced our revolving credit facility. We have in place a £260m facility for five years to 2016 with five international banks. The Group continues to operate well within its banking covenants. We use debt to accelerate the Group’s development and review our funding needs regularly to ensure we have ample headroom.  At the year end net debt was £110.3m (2012: £18.7m), a combination of £160.0m of debt and £49.7m of cash held around the world to finance local operations. The increased net debt is a result of our success in securing high quality acquisitions during the year offset by good cash generation and disposal proceeds. The ratio of net debt to EBITDA was 0.73 times (2012: 0.14 times), well below the level of 1.25 times within which we feel comfortable operating. Net debt represents 5.6% (2012: 1.3%) of the Group’s year-end market capitalisation. Average debt and interest rates 2013 2012       Average gross debt (£m) 133.7  88.4 Weighted average interest rates on gross debt 1.34% 1.16% Average cash balances (£m) 45.2 37.3 Weighted average interest rate on cash 0.43% 0.57% Average net debt (£m) 88.5 51.1 Weighted average interest rate on net debt 1.80% 1.59% Record acquisition spend Acquisitions and disposals are an important part of our growth model. We buy already successful businesses in, or adjacent to, niches in our chosen areas of operation.  During the year we spent £137m on six acquisitions (excluding net cash/(debt) acquired of £5m) plus £16m in payment of contingent consideration on acquisitions made in previous years. A provision has been made for £23m of contingent consideration on current year acquisitions, being our best estimate of the amounts likely to be payable. Goodwill of £82m and intangible assets of £69m were recognised on the acquisitions made in the year and the weighted average acquisition multiple was 9.2x EBIT, based on the initial acquisition consideration.  In August 2012 we sold Tritech for £22m. A gain of £8.1m has been recognised in the Group Income Statement after accounting for the assets sold, including the associated goodwill. In April 2013 we made a further small acquisition for an initial consideration of £2.6m. The businesses acquired in 2012/13 and in early 2013/14, together with the one disposal in 2012/13, are expected to add a net amount of £21.7m to revenue and £4.9m (after financing costs) to profit in 2013/14 based on their run rates at the time of acquisition/disposal. Pension commitments The Group primarily provides either defined benefit (DB) or defined contribution pension arrangements for its employees. The DB sections of the Group’s pension plans were closed to new entrants in January 2003. There are now fewer than 400 employees retaining access to future accrual under the DB plans so our key focus is on mitigating the impact of the past service deficit.  On an IAS 19 basis the deficit on the DB plans at March 2013 was £47.2m (2012: £33.0m) before the related deferred tax asset. Plan assets increased to £176.3m (2012: £153.0m) with some further recovery in equity values and our additional cash contributions. In total, 57% of plan assets are invested in return-seeking assets; 35% in equities and 22% in diversified growth funds providing a higher expected level of return over the longer term. Plan liabilities increased to £223.5m (2012: £186.0m) mainly due to the reduction in the discount rate used to value these liabilities.  We continue to make extra contributions to the plans at a rate agreed with the trustees and expect this to be at the rate of £7m per year for the immediate future with the objective of eliminating the deficit over the next six years. We continue to develop and implement plans to reduce the risk in the future cost of our DB pension plans. R&D investment Expenditure on R&D increased to £31.1m (2012: £27.4m) an increase of 13% and representing 5.0% (2012: 4.7%) of revenue. All four sectors increased both the absolute spend and their percentage of revenue spent on R&D in the year. Environmental & Analysis has the highest spend per £ of revenue at 6.8%.  We are required under IFRS to capitalise certain development expenditure and amortise it over an appropriate period, for us three years. R&D by its nature carries risk and all R&D projects, particularly those requiring capitalisation, are subject to close scrutiny and a rigorous approval and review process. In 2012/13 we capitalised £5.4m (2012: £4.7m) and amortised £3.5m (2012: £3.7m). This results in an asset carried on the Consolidated Balance Sheet, after £0.4m of foreign exchange movements and disposals, of £12.0m (2012: £10.5m). Managing risks and going concern considerations and the year ahead The main risks facing the Group and how we address them are reviewed in the Principal Risks and Uncertainties section of this Preliminary Statement. The key operating risks are covered in the Chief Executive’s Strategic Review and Sector Reviews.  A key risk mitigation is that we spread risk across the Group via well-resourced independent operating units. There are extensive and regular reviews of operations at local and Divisional levels. These reviews are supplemented by Internal Audit. As we expand our business internationally, we continue to focus on maintaining the quality of people and the controls operating across each country.  Our policies and processes to mitigate Bribery & Corruption together with our Code of Conduct have been rolled out across the Group including newly acquired businesses. This supports our long-standing ethical approach to business. In 2013/14 we will be supporting increased growth in subsidiary companies by further developing the strategic use of Information Technology having this year rolled out a centralised IT disaster recovery solution. The Board considers all of the above factors in its review of ‘Going Concern’ as described in this Preliminary Statement and has been able to conclude its review satisfactorily.  Halma takes a disciplined approach to managing risk, to sustain high returns and deliver growth over the long term. In the year ahead we will continue to focus on strong cash generation to enable investment in existing and new businesses, finance dividends and deliver significant value to shareholders. Kevin Thompson, Finance Director In addition to those figures reported under IFRS Halma uses adjusted figures as key performance indicators. The Directors believe the adjusted figures give a more representative view of underlying performance. Adjusted profit figures exclude the amortisation of acquired intangible assets, acquisition and disposal costs, fair value adjustments on acquisition contingent consideration and profit on disposal of operations, all of which are included in statutory figures. More details are given in Note11. See Financial Highlights. Process Safety Sector Review Products which protect assets and people at work Specialised interlocks which safely control critical processes. Instruments which detect flammable and hazardous gases. Explosion protection devices. Market trends Rising expectations of workplace safety and increasingly stringent environmental and safety legislation continue to be strong demand drivers in both developed and developing Process Safety markets. We are also benefiting from improving enforcement of safety regulations. These positive market pressures ensure that our investment in quality, customer service, and enhanced-technology products maintains competitive advantage and underpins our significant growth in this sector.  Increased investment in new methods of oil and gas exploration has been a major boost to sales, particularly in hydraulic fracturing in shale oil and gas exploration, deep sea drilling, and LNG production and storage. Geographic trends Despite a challenging political and macro-economic environment, worldwide growth in demand for energy, food, chemicals and metals is set to continue. In particular, Asia Pacific and the Middle East are seeing increasing economic growth ahead of developed western economies. North American conditions continue to improve while Western Europe, due to recessionary pressures, is relatively flat. Strategy Our strategy focuses on driving organic growth through geographic diversification and investment in new product development to meet local market needs. Our companies in this sector now have 18 manufacturing sites across four continents. These are backed by 22 regional sales and service centres together with localised R&D to ensure that our products meet the diverse requirements of our customers. We continue to develop strategic alliances between companies in this sector to optimise customer service. Internal collaboration delivers consistent product performance, service and applications advice worldwide. More partnerships with customers remain a key strategic goal. Performance Process Safety performed strongly with revenue up by 3% to £125.7m (2012: £122.2m) and profit1 increasing by 11% to £32.3m (2012: £29.2m). Excluding the contribution of Tritech, which was sold in August 2012, continuing operations revenue grew by 10% and profit by 16%. Organic revenue growth at constant currency was 10% with continued strong demand from energy and resources markets. Together with process industries these markets contribute around 60% of sector revenue and benefit from increasing Health and Safety regulation. Return on Sales increased from 23.9% to 25.7% through a combination of strong revenue growth and gross margins supported by continuous improvement in new product innovation.  Organic revenue growth at constant currency for markets outside the UK, Mainland Europe and the USA was an impressive 29% resulting in these fast developing markets now representing 28% of the sector. Encouragingly, the performance in our traditional ‘home’ markets was robust with mid-single digit organic revenue growth in Mainland Europe and the USA and flat UK organic growth.  R&D investment rose to 4% of revenue. New products accounted for 34% of total sales reflecting an increased emphasis on new product development. Outlook Prospects for continued growth in the Process Safety sector are positive supported by forecasts of rising investment in oil, gas and energy markets. Food and pharmaceutical markets have regained resilience in the last year and planned safety legislation will continue to drive demand.  Automotive manufacturing has been flat or declining in the last two years but, based on industry sources, we anticipate increased investment, particularly in emerging markets.  We expect the strong growth trend in the Process Safety sector to continue, supported by rising R&D spend and expansion of regional operations. We continue to search for Process Safety acquisition prospects, particularly in complementary markets to expand our product portfolio. See Note 2 to the Preliminary Statement Infrastructure Safety Sector Review Products which detect hazards to protect assets and people in public spaces and commercial buildings Fire and smoke detectors, security sensors and audible/visual warning devices. Sensors used on automatic doors and elevators in buildings and transportation Market trends Increasing health and safety legislation is the main growth driver in our Infrastructure Safety sector. Fire regulations are being tightened up throughout Asia and in Europe new Construction Products Regulations (CPR) come into force in 2013.  The principal technology trend in fire detection is the packaging of multiple sensor technologies within a single detector to provide greater life safety protection and lower installation costs.  Fire detection system complexity is increasing and demand for voice alarms is growing faster than traditional audio-visual devices. Customers increasingly specify products with internationally recognised, rather than local, approvals. In 2013 new European standards for visual alarm devices for fire systems will take effect. New harmonised European construction products regulations will also be implemented during 2013. We have developed new visual signalling products that meet the new regulations. Competitive pressure is rising in our traditional pedestrian door markets; we continue to diversify into industrial and transportation automatic door control niches. New regulations are driving growth. In China, door sensor demand has stabilised, due to the construction slow down, but demand is strong in the Asia Pacific region.  New UK and European intruder detection system standards have created rising demand for our security sensors certified to meet the new regulations.  Geographic trends In our largest regional sector, EMEA, we are seeing tough trading conditions continuing. Trading in Southern Europe has required enhanced credit risk control. Middle East demand remains strong but competitive pressure is increasing. Sales in China, SE Asia and Australia continued to grow. Opportunities exist across ASEAN countries which have a strong preference for ‘branded systems’ with UL or EN approvals, although there is also demand for lower cost products approved to less well-known standards.  In the USA the fast-growing ‘home automation’ market is providing opportunities. This market, which is the bundling of security, life safety, internet services, healthcare monitoring, energy management etc., is focused on existing homeowners and does not depend on ‘new build’ for growth.  Strategy We are developing our presence in higher growth areas such as Russia and Eastern Europe, ASEAN nations and Brazil. We have also entered adjacent markets, such as life-safety carbon monoxide detectors and home automation. We are achieving cost savings in our Chinese plants which feed our European and American operations. In some undeveloped territories, we are forging new partnerships by offering IP-protected, UL-approved technology to enable fire market entry by building management and security companies. Our door sensor business is focused on new product development for targeted industrial and transport niches to diversify our customer base and reduce dependence on the pedestrian doors sector. In keeping with other Halma sectors, R&D has also been decentralised from headquarters with increased spending on product development at our US and Chinese facilities. New sensors developed in China and in the USA will contribute significantly to sales revenues in the future.  Our technology strategy is to maintain competitive advantage in wireless security products designed for commercial environments. We are positioning our security business to offer more integrated building monitoring solutions via technology partnerships with other manufacturers, including those within Halma.  Performance  Infrastructure Safety delivered another solid year. Revenue increased 1% to £205.3m (2012: £204.3m) and profit1 grew by 7% to £41.8m (2012: £39.1m). Return on Sales improved from 19.1% to 20.3% with a significant factor being the improved profitability following the reorganisation of our companies selling elevator products. Organic revenue growth at constant currency was 1% which, following a flat first half, reflected a slight improvement during the second half. This resilience in demand comes from our focus on safety-critical product niches for regulated non-residential applications. Approximately two-thirds of sector revenue is installed in existing infrastructure rather than new construction. New product introductions and increased investment in sales resources contributed to strong growth in the USA where organic revenue growth (constant currency) was 18%. Elsewhere we saw modest rates of growth in the UK and Asia Pacific while, unsurprisingly, almost every business in this sector experienced difficult conditions in Mainland Europe, resulting in organic revenue decline there of 8%. Outlook We anticipate continued Infrastructure Safety growth due to technology advances, regulatory pressure and new localised products. European demand for certified products will be a principal driver and we are well-placed to benefit from wider adoption of integrated building monitoring systems and intruder alarms based on wireless communication. Growth in mature markets will be modest, while developing economies will grow strongly. Russia, Eastern Europe, Middle East, Latin America, ASEAN nations and China all offer good growth potential. In the USA and Western Europe legislation-driven adjacent markets offer good growth prospects. See Note 2 to the Preliminary Statement Medical Sector Review Products used to improve personal and public health Devices used to assess eye health, assist with eye surgery and primary care applications. Fluidic components such as pumps, probes, valves and connectors used by medical diagnostic OEMs. Market trends Medical market growth drivers are principally worldwide population ageing, increasing life expectancy, increasing access to healthcare in developing economies, new technologies and improved or new surgical or pharmaceutical therapies.  The proportion of people aged over 60 continues to rise and drives demand for healthcare both in developed and developing geographies. Population ageing is a key driver for our ophthalmology and hypertension management businesses since these health issues are age-related.  A key medical niche, the ophthalmic diagnostic equipment market, will grow at 2.5% from 2009 to 2016 as new technologies, population ageing and rising healthcare expectations and affordability in developing economies continue to underpin demand.  The global market for cataract surgery devices is forecast to grow at a compound annual growth rate of 3% between 2010 and 2017. Growth drivers include rising demand for surgery due to population ageing and technological advances such as micro-incision eye surgery.  Regulatory compliance and medical product approvals, particularly in China and Brazil, continue to get tougher and more costly. This delays returns from new products, increases development costs and puts pressures on margins. On the plus side, rigorous regulatory regimes create higher barriers to entry for new competitors. The in-vitro medical diagnostic market, our largest fluidic components niche, is largely concentrated in the US. In recent years uncertainty over healthcare reforms has dampened demand. The USA healthcare market has returned to growth with rising sales for existing platforms and higher activity in customers’ new product development pipelines. Growth in Asia is expected to outpace other geographies, with a forecast market growth rate to 2016 of 11.8% for the region, and 18.8% in China.  Geographical trends The US Government is seeking healthcare budget cuts but the Patient Protection and Affordable Care Act (PPACA) will increase spending. In 2013 US health costs are projected to rise by 3.8%. The situation changes dramatically in 2014 when twenty-two million more Americans gain healthcare insurance and spending is predicted to rise by 7.4%. The PPACA also introduces a 2.3% Medical Device Tax on medical products.  Financial austerity in Europe continued to depress demand. Despite recessionary pressure, a return to growth is forecast in the medium term. Industry analysts predict average European medical device market growth of 1.6% per year between 2014 and 2018. We continued to invest in sales resources and new medical distribution channels in Asia and South America. Brazil, with a population of over 190 million and a well-developed, expanding healthcare system, is the largest South American medical equipment market and forecast to grow by 12.6% CAGR between 2011 and 2015. Our São Paulo facility has now achieved ANVISA2 registration from the Brazilian government which lets us gain approvals for healthcare products in our own name.  Economic development across Asia is rapidly increasing access to healthcare. In China, where healthcare is a key social priority, medical spending is forecast to rise by almost three times between 2011 and 2020. Demographic drivers are producing a rapid increase in chronic conditions like diabetes and hypertension (high blood pressure) as populations age, people move to cities and lifestyles change. About 130 million Chinese between the ages of 35 and 74 suffer from hypertension. Increased awareness of this health issue, and programmes to combat it, will increase demand for hypertension diagnosis devices. In China we established an R&D unit to drive localised product development. Our recently acquired US-headquartered blood pressure monitoring business adds an 80 person manufacturing and R&D centre in Shenzhen.  Strategy Our Medical sector strategy is to increase organic growth through: innovative new products penetration of new geographical markets  expansion into adjacent market niches Acquisition of additional value-enhancing healthcare businesses will also add significant further growth. We aim to increase R&D investment, particularly in ophthalmology and hypertension management. Focusing on Asia and South America, market extension will be achieved through additional sales resources, sales intelligence sharing and cooperative marketing between Group companies, and new channel partnerships. Our focus on relatively low-cost medical devices avoided the impact of government austerity budget cutbacks which mainly affected capital equipment. Local manufacture in emerging markets, to better satisfy local customer needs and strengthen competitiveness by avoiding import tariffs, is a key strategic medical sector goal. From 2013, we plan to assemble health optics products in Brazil. Our fluidic components businesses aim for increased customer diversification, focusing on laboratory and health-care markets. They now have joint product development teams and sell into the Chinese medical diagnostics sector jointly via a new Halma Fluid Technology business unit. Performance Medical had an outstanding year, increasing revenue by 36% to £136.1m (2012: £100.4m) and profit1 by 37% to £35.9m (2012: £26.3m). Return on Sales increased further from 26.2% to 26.4%. The underlying organic revenue growth (constant currency) was 12%. As expected, slowly improving demand for fluid control components from major medical OEM customers, steady growth in ophthalmology markets and our increased product innovation were the significant contributory factors to this excellent result. Our strategic focus on small medical devices and components rather than high value capital equipment, enabled us to mitigate the negative impact from government austerity spending cuts in certain markets. The fundamental market drivers of an ageing population in the West and a growing and wealthier population in the East, give us continued confidence for the future. Both the USA and Mainland Europe performed well with organic revenue growth (constant currency) of 12% and 17% respectively, whilst the UK saw organic revenue decline of 3%. Revenue from outside these three major territories increased organically by 12%, to now represent 25% of the sector. Our real exposure to these faster growing markets is greater, as a sizeable proportion of our revenue from the USA and Mainland Europe is to global OEMs who subsequently export their finished systems to other global regions. Three new US-based businesses acquired in 2012 expanded our healthcare technology portfolio and extended our geographic reach. We added ultrasound technology to our ophthalmic diagnostic instrumentation, new hypertension management technology and new single-use surgical devices. Outlook Ageing populations in developed economies and rising populations with access to affordable healthcare in the developing world should create continued favourable conditions for growth. We anticipate consistently rising sales into the healthcare and medical diagnostics markets driven by enhanced distribution in export markets, new products and further acquisitions. Growth in South East Asia should remain strong as governments continue to improve their healthcare systems. China will build thousands of new hospitals in the next few years. Investment in Chinese product registrations should deliver rising sales. Growth in Brazil should accelerate based on our new regulatory status. See Note 2 to the Preliminary Statement ANVISA - Brazilian National Health Surveillance Agency responsible for regulation of medical devices. Environmental & Analysis Sector Review Products and technologies for analysis in safety, life sciences and environmental markets Market-leading opto-electronic technology and gas conditioning products. Products to monitor water networks; UV technology for disinfecting water; and water quality testing products. Market trends In the Environmental & Analysis sector our businesses serve a very diverse range of end-user markets. The underlying growth drivers are rising demand for basic resources such as energy and water, increasing environmental monitoring and regulation and demand for healthcare. Water quality, water scarcity and the need to reduce water treatment energy costs are the key drivers behind increasingly strict regulation and growth in demand for our water analysis and water and wastewater treatment systems. These drivers are assuming ever greater importance due to population growth, urbanisation and climate change. The market for water disinfection systems is estimated to be growing annually by 10% to 12% and water monitoring demand is growing by 5% per year.  Independent product validations are becoming increasingly important in water treatment. We expect continued investment by industrial customers, driven by legislation, but difficult market conditions in the municipal segment. We anticipate significant sales growth in the marine Ballast Water Treatment (BWT) market. The BWT market is forecast to grow by over 50% a year between 2009 and 2020.  We anticipate continued steady growth from three core end-user markets: environmental monitoring, biotechnology and chemical analysis. Worldwide growth in these markets is driven by increasing environmental legislation and healthcare initiatives. Rising concern over food safety, adulteration and contamination is creating growing sales opportunities in both developed and developing economies. The global environmental monitoring market is predicted to grow by 6.5% per year between 2011 and 2016. Strong annual growth of 6% is also forecast for the laboratory analytical market over the same period. Concern over climate change is another driver of demand for our analytical instruments, water conservation and energy management technology. Throughout the world governments are continually introducing new legislation and initiatives designed to improve energy efficiency and reduce carbon dioxide output.  Geographic trends With such diverse end-markets, the geographic trends are diverse too. However, we see opportunities for growth in all global regions although the ratio of growth in Asia, and China in particular, is expected to be higher. For example, China now has over 30 laws and 1,000 separate regulations to prevent pollution and protect natural resources. China recently introduced stricter air pollution monitoring standards which should increase demand for our products that monitor sources of pollution and measure air quality. Like many countries, China faces the challenge of rising water demand while available water resources are actually falling. The market for water treatment products in China is forecast to grow at 10% annually to 2015 with the industrial market offering the largest growth opportunities.  Strategy We will maintain world leadership in systems which reduce loss of treated water in distribution networks via technological leadership. This will be supported by newly acquired ‘machine-to-machine’ communication technology which is in increasing demand for environmental data collection and is built into smart meters for remote data recording. Our strategy for opto-electronic analytical products is to grow organic profit by extending our offering in the life sciences and environmental monitoring sectors. To reduce the cyclical impact of US federal spending programmes, we are repositioning these businesses to service a higher proportion of end users in non-government funded markets. We work closely with both academic and commercial researchers to develop innovative new technologies and solutions. In China, for example, we are involved with 12 university science labs. This basic science strategy reveals new product niches and revenue streams when research is commercialised.  Performance Environmental & Analysis had a relatively disappointing year as revenue declined by 1% to £152.4m (2012: £153.4m) and profit1 reduced by 4% to £30.4m (2012: £31.6m). Return on Sales was 19.9% (2012: 20.6%). Organic revenue at constant currency was down 6%. Reduced government research spending in the USA and lower investment by water utilities in the UK were the two major adverse market factors.  These market factors are clearly reflected in the regional trends with organic revenue (constant currency) declines of 14% in the UK and 10% in the USA. Organic revenue from Mainland Europe fell by 4%. Our companies continue to invest in growth in markets outside the UK, Mainland Europe and the USA with revenue from these developing markets being 27% of the total sector, contributing organic growth of 6%.  Outlook Despite the challenges faced by Environmental & Analysis in the past year, we are confident that the management and organisational changes currently being made will improve performance in future. These include simplifying global sales channels and manufacturing operations together with increasing senior management resources to focus on accelerating growth in Asia and from recent new technology innovation. It is expected that the total cost of this reorganisation will be around £1m in 2013/14.   See Note 2 to the Preliminary Statement Principal Risks and Uncertainties Risk description Potential impact Mitigation Operational Risk Remoteness of operations and globalisation A key operational risk emanates from remoteness of operations from Head Office and the increasing global spread of our businesses. • Weakening of financial control and divergence from overall Group strategy in remote operations, leading to unexpected financial outcomes • Failure to comply with local laws and regulations in unfamiliar territories, leading to legal or regulatory disputes • Control is exercised locally in accordance with the Group’s policy of autonomous management. We seek to employ local high quality experts. • The Group’s acquisition model ensures retention of management and staff in acquired businesses meaning that local expertise is maintained. • Divisional Chief Executives (DCEs) ensure that overall Group strategy is fulfilled through on-going review of the businesses. The right balance between autonomy and adherence to the overall objectives of the Group is a key function of the DCEs and Divisional Finance Directors. • Regular visits by senior management, finance staff and Internal Audit support local control. Key KPIs: International expansion; Values alignment; Development programmes Operational Risk Staff quality The actions and quality of our employees affect the growth of, and level of innovation in, the business. • Failure to retain key staff could lead to reduced innovation and progress in the business • Unethical actions of staff could cause reputational damage to the Group • Group Development Programmes enhance the skills of executives and middle managers needed in their current and future roles. • Comprehensive recruitment and ongoing evaluation processes assist high quality hiring and development. • The Group regularly surveys staff to assess the alignment of individuals with Group values. Key KPIs: Development programmes; R&D investment; Values alignment; Organic revenue growth Operational Risk Competition The Group faces competition in the form of pricing, service, reliability and substitution. • Loss of market share due to price pressure and changing markets • Reduced financial performance arising from competitive threats • By empowering and resourcing innovation in local operations to respond to changing market needs, the potential adverse impact of downward price pressure and competition can be mitigated and growth maintained. • We recognise the competitive threat coming from emerging economies and by operating within these economies, typically using local staff, we are better placed to make fast progress ourselves. • The Group operates in specialised global niche markets offering high barriers to entry. Key KPIs: R&D investment; Return on Sales; Organic revenue growth; Development programmes Operational Risk Pressure-point Exposures including: Large customer risk - individual operating companies are at some risk of over-reliance on larger customers Key supplier risk - we rely on high quality service from our supply partners. • Loss of market share and reduced financial performance due to loss or failure of a major customer • Disruption of service to customers through supply chain interruption • We do not place undue reliance on any one Group company nor does the Group rely heavily on one customer, supplier or transaction. • We address customer concentration at Company level through active diversification of the customer base. No customer represents more than 2% of Group revenue. • We aim to manage the risk of timing and quality of component supply by dual sourcing and through longstanding working relationships. Key KPIs: Organic revenue growth Operational Risk Research & Development New products are critical to our organic growth and underpin our ability to earn high margins and high returns over the long term. • Loss of market share resulting from product obsolescence and failure to innovate to meet customer needs • By devolving control of product development into the autonomous operating businesses, we both spread risk and ensure that the people best placed to service the customer’s needs are driving innovation. • New product development ‘best practice’ is shared between Group companies and return on investment of past and future innovation projects is tracked monthly. This ensures that the collective experience and expertise of the Group can be utilised to maximum effect. • Large R&D projects, especially those which are capitalised, require Head Office approval, ensuring that the Group’s significant projects are aligned to overall strategy. Key KPIs: R&D investment; Development programmes Operational Risk Intangible resources Protection of our intellectual property builds competitive advantage by strengthening barriers to entry. Our intangible resources include patents, product approvals, technological know-how, branding and our workforce. • Loss of market share resulting from a failure to protect key intellectual property • Workforce quality and retention is a central objective. This focus ensures that intangible resources stay and grow within the business. • Operating businesses are actively encouraged to develop and protect know-how in local jurisdictions. • Innovation is encouraged and fostered throughout the Group via the Halma Innovation Awards. Key KPIs: Organic revenue growth; R&D investment; Development programmes Operational Risk Information Technology/Business Interruption Group and operational management depend on timely and reliable information from our software systems. We seek to ensure continuous availability, security and operation of those systems. • Delay or impact on decision making through lack of availability of sound data • Reduced service to customers due to poor information handling or interruption of business • There is substantial redundancy and back up built into Groupwide systems and the spread of business offers good protection from individual events. • We have a small central resource, Halma IT Services, to assist Group companies with strategic IT needs and to ensure adequate IT security policies are used across the Group. • We carry out regular IT audits. • We utilise external penetration testing and have completed the rollout of a centralised IT disaster recovery solution to supplement local processes. Business Continuity plans are well advanced in each business unit. Strategic Risk Acquisitions The identification and purchase of businesses which meet our demanding financial and growth criteria is an important part of our strategy for developing the Group, as is ensuring the new businesses are rapidly integrated into the Group. • Failure to deliver expected results resulting from poor acquisition selection • Reduced financial performance arising from failure to integrate acquisitions into the Group • Unforeseen liabilities arising from a failure to understand acquisition targets fully • We acquire businesses whose technology and markets we know well. Divisional Chief Executives are responsible for finding and completing acquisitions in their business sectors subject to Board approval supported by central resources to search for opportunities. We employ detailed post-acquisition integration plans. • Thorough due diligence is performed by a combination of in-house and external experts to ensure that a comprehensive appraisal of the financial position of every target is obtained. • Incentives are aligned to encourage acquisitions which are value-enhancing from day one. Key KPIs: Acquisition spend; ROTIC Legal Risk Laws and regulations Group operations are subject to wide-ranging laws and regulations including business conduct, employment, environmental and health and safety legislation. There is also exposure to product litigation and contractual risk. The laws and regulations we are exposed to as our businesses expand around the world increase each year. • Reputational damage leading to customer loss and brand damage • Diversion of management resources creating opportunity costs • Penalties arising from breach of laws and regulations • The Group’s emphasis on excellent financial control, high ethical standards, the deployment of high quality management resource and the strong focus on quality control over products and processes in each operating business help to protect us from product failure, litigation and contractual issues. • Each operating company has a health and safety manager responsible for compliance and our performance in this area is good. Updated Health and Safety policies and guidance were issued recently, with enhanced monthly reporting. Our well established policies on bribery and corruption have been maintained during the year to ensure continued compliance with best practice internally, via the Group Code of Conduct and externally, via appropriate clauses included in third party agreements. • We carry comprehensive insurance against all standard categories of insurable risk. Contract review and approval processes mitigate exposure to contractual liability. Key KPIs: Values alignment Financial Risk Cash A key risk is that the Group may run out of cash or not have access to adequate cash. In addition, cash deposits need to be held in a secure form and location. • Constraints on, or inability to, trade • Inability to deliver on growth strategies • Permanent loss of shareholder funds • The strong cash flow generated by the Group provides financial flexibility. • Cash needs are monitored regularly. In addition to short-term overdraft facilities the Group renewed and increased to £260m its five-year revolving credit facility during the prior year providing security of funding and sufficient headroom for its needs. Debt levels increased this year but the Group has adequate funding available to it. • Cash deposits are monitored centrally and spread amongst a number of high credit rated banks. Subsidiaries report their cash status to Head Office every week. Key KPIs: Cash generation Financial Risk Treasury Risks Foreign currency risk is the most significant treasury related risk for the Group. In times of increased volatility this can have a significant impact on performance. The Group is exposed to a lesser extent to other treasury risks such as interest rate risk and liquidity risk. • Reduced or volatile financial performance arising from translation of profit from overseas operations or poorly managed foreign exchange exposures • Deviation from core strategy through the use of speculative or overly complex financial instruments • Financial penalties and reputational damage arising from breach of banking covenants • The risk has increased because more of the Group’s profits are derived from non-Sterling currencies. Currency profits are not hedged. Currency hedging must fit with the commercial needs of the business and we have in place a hedging strategy to manage Group exposures. This requires the hedging of a substantial proportion of expected future transactions up to 12 months (and in exceptional cases 24 months) ahead. Longer term currency trends can only be covered through a wide geographic spread of operations. • The Group does not use overly complex derivative financial instruments and no speculative treasury transactions are undertaken. • We closely monitor performance against the financial covenants on our revolving credit facility and are operating well within these covenants. Financial Risk Pension Deficit Monitoring the funding needs of the Group’s pension plans is essential to meeting our pension obligations effectively. Our UK defined benefit pension plans are closed to new members. • Excessive consumption of cash, limiting investment • Unexpected variability in company results • There is regular dialogue with pension fund trustees and pension strategy is a regular Halma Board agenda item. The Group’s strong cash flows and access to adequate borrowing facilities mean that the pensions risk can be adequately managed. • The Group has maintained additional pension contributions with the overall objective of paying off the deficit in line with the Actuary’s recommendations. We monitor and consider alternative means of reducing our pension risk in light of the best long-term interest of shareholders. Economic Risk Economic Conditions In times of uncertain economic conditions businesses face additional or elevated levels of risk. These include market and customer risk, customer default, fraud, supply chain risk and liquidity risk. Uncertainty in the Eurozone in particular adds to current uncertainty. • Reduced financial performance • Loss of market share • Unforeseen liabilities • Disruption of service to customers • Risks are primarily managed at the operating company level where local knowledge is situated. The financial strength and availability of pooled finance within the Group mitigates local risks faced by operating companies as does the robust credit management processes in place across the Group. • The Halma Executive Board identifies any wider trends which require action. Other than potential exposure to the current macro-economic uncertainty in the Eurozone, none have been noted. • The Group’s diversity limits its exposure to economic risk arising in any one territory. Group sales to Mainland Europe represent 25% of overall sales and sales to southern Eurozone economies and Ireland represent fewer than 5% of total Group sales. The Group does not have significant operations, cash deposits or sources of funding in these areas. Key KPIs: International expansion; Cash generation; Development programmes Going Concern Statement The Group’s business activities, together with the main trends and factors likely to affect its future development, performance and position, and the financial position of the Group, its cash flows, liquidity position and borrowing facilities, are set out herein. The Group has considerable financial resources (including a £260m five-year revolving credit facility, of which £105m was undrawn at 30 March 2013) together with contracts with a diverse range of customers and suppliers across different geographic areas and industries. No one customer accounts for more than 2% of Group turnover. The Directors have considered the Group’s potential exposure to the Eurozone crisis and have concluded that this is minimal due to the fact that less than 5% of sales arise in areas experiencing macro-economic uncertainty and the Group does not maintain significant banking or other business relationships in these areas. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. After conducting a formal review of the Group’s financial resources, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Annual Report and Accounts. Responsibility Statement of the Directors on the Annual Report and Accounts The responsibility statement below has been prepared in connection with the Company’s full Annual Report and Accounts for the 52 weeks to 30 March 2013. Certain parts thereof are not included within this Preliminary Statement. We confirm that to the best of our knowledge: the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and the management report, which is incorporated into the Directors’ Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. This responsibility statement was approved by the Board of Directors on 13 June 2013 and is signed on its behalf by: A J Williams Chief Executive K J Thompson Finance Director Cautionary note: This Preliminary Statement 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. Full details of Halma's Preliminary results for the 52 weeks to 30 March 2013 are available as a PDF document. To download the full announcement in PDF format, right click on the link below, select 'Save Target As', and then choose a folder to save the file in. Preliminary results for the 52 weeks to 30 March 2013 (1.0MB PDF)
Thu, 25 Apr 2013 07:00:00 GMT

Investor site visit and Trading Update

Investor Site Visit and Trading Update Investor Site Visit Halma will next week hold its third Halma Innovation and Technology Exposition (‘HITE’) in Orlando, Florida. As part of this event, Halma will host a dinner for investors and analysts on Monday 29 April, followed by a tour of the HITE exposition and a visit to its nearby Ocean Optics facility on Tuesday 30 April. No new material information will be disclosed during the event. Trading update The regional and sector trading patterns reported in the 14 February 2013 IMS have been maintained.  Order intake in the fourth quarter of 2012/13 remained on track and the Board expects adjusted profit (see note 1) for the full year to be in line with market expectations. For further information please contact: Halma plc Tel: +44 (0)1494 721111 Andrew Williams, Chief Executive Kevin Thompson, Finance Director MHP Communications Tel: +44 (0)20 3128 8100 Rachel Hirst / Andrew Jaques Note to editors Adjusted profit is before amortisation of intangible assets, acquisitions costs, movement on contingent consideration and profit on disposal of operations. Halma develops and markets products used worldwide to protect life and improve the quality of life. The Group comprises four business sectors: Process Safety Products which protect assets and people at work. Infrastructure Safety Products which detect hazards to protect assets and people in public spaces and commercial buildings. Medical Products used to improve personal and public health. Environmental & Analysis Products and technologies for analysis in safety, life sciences and environmental markets. The key characteristics of Halma's businesses are that they are based on specialist technology and application knowledge, offering strong growth potential. Many Group businesses are market leaders in their specialist field. Halma’s Final Results for the year ended 30 March 2013 will be issued on 13 June 2013.
Thu, 11 Apr 2013 09:00:00 GMT

Appointment of Non-Executive Director and Chairman Designate

Appointment of Non-Executive Director and Chairman Designate 11 April 2013 Halma plc, the leading safety, health and environmental technology group, today announces the appointment of Paul Walker as a non-executive Director and Chairman Designate. He will join the Board with effect from 12 April 2013 and will be appointed Chairman following the proposed retirement of Geoff Unwin, Halma's current Chairman, who has indicated that he intends to step down immediately following the Annual General Meeting on 25 July 2013. Paul was part of the original team at The Sage Group plc, a leading global provider of business software to small and medium-sized enterprises. Sage has a global footprint, a devolved management structure and an entrepreneurial culture. During his time as CEO, from 1994 to 2010, Sage's revenue increased from £51m to £1,278m.  Paul has wide-ranging non-executive director experience. He is currently a non-executive Director of Experian plc and WANdisco plc, and Chairman of Perform Group PLC. He has previously served on the Boards of Diageo plc and MyTravel Group plc. Paul is a Chartered Accountant and has a BA in economics from York University. Stephen Pettit, Senior Independent Director and Chairman of the Nomination Committee appointed to lead the succession process, said: "We are delighted to welcome Paul to the Board of Halma and to be our next Chairman. He brings significant and relevant experience which will be extremely valuable as Halma continues to develop and grow globally. "I would like to thank Geoff Unwin for his outstanding leadership of the Board over the past 11 years. His wisdom, high standards, determination and humour have been really significant to the growth and success of the Group. Since Geoff joined the Board in 2002, Halma's market capitalisation has increased from approximately £500 million to nearly £2 billion today without recourse to shareholders. He leaves us strongly positioned to continue the Group’s value creation strategy." For further information, please contact: Halma plc Tel: +44 (0)1494 721111 Andrew Williams, Chief Executive MHP Communications Tel: +44 (0)20 3128 8100 Rachel Hirst/Andrew Jaques Notes The nomination committee appointed for the chairman succession search comprised four non-executive Directors, led by the Senior Independent Director.  A global search firm was appointed. A wide range of high calibre candidates was considered for the role. The Board confirmed Paul Walker’s independence upon appointment and was unanimous in its decision to appoint Paul Walker. Paul will be a member of the Nomination and Remuneration Committees and will succeed Geoff Unwin as Chairman of the Nomination Committee upon Geoff’s retirement. There are no further details to disclose pursuant to Listing Rule 9.6.13. Halma's business is about protecting life and improving the quality of life for people worldwide. We are an international group with businesses in 23 countries and major operations in Europe, USA and Asia. Our businesses are highly cash generative and able to deliver world class returns on a sustainable basis. Our four specialist business sectors are: Process Safety We make products which protect assets and people at work. Infrastructure Safety We make products which detect hazards to protect assets and people in public and commercial buildings. Medical We make products used to improve personal and public health. Environmental & Analysis We make products and technologies for analysis in safety, life sciences and environmental markets.
Fri, 15 Mar 2013 07:00:00 GMT

Acquisition of ASL Holdings

Acquisition of ASL Holdings 15 March 2013 Halma, the leading safety, health and environmental technology group, announces the acquisition of ASL Holdings Limited ('ASL') on 14 March 2013. ASL, based in Northampton, UK, designs and manufactures machine-to-machine (M2M) communication products which are incorporated into SMART meters for remote data monitoring and a range of other applications in the utility, transport and retail sectors. Unaudited accounts for the year to 31 December 2012 report revenue of £7.1 million. The cash consideration is £6.5 million with contingent consideration of up to £3.5 million payable if revenues for the two years to 31 March 2015 exceed a pre-determined target. The acquisition, which is expected to be earnings enhancing, was funded from Halma’s existing cash and debt facilities. ASL will become part of UK-based HWM-Water Limited ('HWM'), which is a global leader in the manufacture of dataloggers and leak detection products for the water industry, within Halma's Environmental & Analysis sector. Existing management will remain in place. Andrew Williams, Halma's Chief Executive, commented: "The transaction announced today demonstrates our ability to find and acquire businesses which are complementary with existing Group companies in terms of technologies, markets and growth drivers.  ASL will further strengthen HWM's market position within the water industry as well as adding new opportunities to diversify into other markets." For further information please contact: Halma plc Tel: +44 (0)1494 721111 Andrew Williams, Chief Executive Kevin Thompson, Finance Director MHP Communications Tel: +44 (0)20 3128 8100 Rachel Hirst / Andrew Jaques Notes Halma buys successful businesses in safety, health and environmental markets and helps them grow further through investment targeted towards increasing innovation, management development and international expansion. In the past 10 years Halma has spent approximately £400m acquiring 30 businesses with deal sizes ranging from £70m down to below £1m. Although businesses have been acquired in all areas of our activity, the majority of recent acquisitions has been in the Medical and Environmental & Analysis Sectors. This statement is not intended to constitute a profit forecast for the current financial period or for any future period.  In addition, this statement should not be taken to mean that the earnings per share of Halma will necessarily match or exceed the historic reported earnings per share of Halma. Halma's Preliminary Announcement for the year ended 30 March 2013 will be issued on 13 June 2013.


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