TIDMHLMA
RNS Number : 8279C
Halma PLC
15 June 2023
HALMA plc
FULL YEAR RESULTS 2023
Record profit for 20(th) consecutive year
Halma, the global group of life-saving technology companies
focused on growing a safer, cleaner and healthier future for
everyone, every day, today announces its full year results for the
12 months to 31 March 2023.
Highlights
Change 2023 2022
Revenue +21% GBP1,852.8m GBP1,525.3m
Adjusted Profit before Taxation(1) +14% GBP361.3m GBP316.2m
Adjusted Earnings per Share(2) +17% 76.34p 65.48p
Statutory Profit before Taxation (4)% GBP291.5m GBP304.4m
Statutory Earnings per Share (4)% 62.04p 64.54p
Total Dividend per Share(3) +7% 20.20p 18.88p
Return on Sales(4) 19.5% 20.7%
Return on Total Invested Capital(5) 14.8% 14.6%
Net Debt(6) GBP596.7m GBP274.8m
Record revenue, Adjusted(1) Profit, and strategic investment
-- Record revenue, up 21%, and 10% on an organic constant currency(7) basis.
-- 20(th) consecutive year of record profit: Adjusted(1) Profit
before Taxation up 14%; up 3% on an organic constant currency(7)
basis.
-- Statutory Profit before Taxation down 4%; principally
reflected non-recurrence of a gain on disposal of GBP34.0m in the
prior year; up 8% excluding this gain.
-- Broad-based revenue growth in all sectors and regions,
including on an organic constant currency(7) basis; Adjusted(1)
profit growth in all sectors.
-- Continued high returns: Return on Sales(4) of 19.5% and
ROTIC(5) of 14.8%. Expect FY 2024 Return on Sales(4) to increase to
approximately 20%.
-- Cash conversion of 78% (90% in the second half of the year);
strong balance sheet, with net debt/EBITDA of 1.38x (2022: 0.74x),
underpins investment in organic growth and acquisitions.
-- Record strategic investment of over half a billion pounds to
support our future growth:
o Seven acquisitions completed in the year for a maximum total
consideration of GBP397m; two further acquisitions completed since
the period end for a maximum total consideration of approximately
GBP57m; a healthy acquisition pipeline across all sectors.
o R&D expenditure up by GBP17m to GBP103m, representing 5.5%
of revenue
o Increased investment in technology by GBP7m to GBP18m
-- Total dividend per share for the year up 7%; 44(th)
consecutive year of dividend growth of 5% or more.
Marc Ronchetti, Group Chief Executive of Halma, commented:
"2023 was a successful year for Halma, reflecting the
contributions and continued commitment to our purpose of everyone
at Halma. We delivered record revenue and profit, achieving our
20(th) consecutive year of profit growth and our 44(th) consecutive
year of dividend per share growth of 5% or more. At the same time,
we substantially increased strategic investment to record levels,
increasing our opportunities for future growth through organic
investment and strategic acquisitions, while maintaining a strong
balance sheet.
We have made a positive start to the new financial year. We have
a strong order book, and order intake in the year to date is
broadly in line with revenue and ahead of the comparable period
last year. Based on current market conditions, we expect to deliver
good organic constant currency(7) revenue growth in the year ahead,
and Return on Sales(4) to increase to approximately 20%. We are
well positioned to make further progress this year and in the
longer term."
Notes:
1 Adjusted to remove the amortisation and impairment of acquired
intangible assets, acquisition items and profit or loss on disposal
of operations, totalling GBP69.8m (2021/22: GBP11.8m). See note
1 to the Results for details.
2 Adjusted to remove the amortisation and impairment of acquired
intangible assets, acquisition items, profit or loss on disposal
of operations and the associated taxation thereon and, in 2022,
the increase in the UK's corporation tax rate from 19% to 25%.
See note 2 to the Results for details.
3 Total dividend paid and proposed per share, comprising interim
dividend of 7.86p per share and proposed final dividend of 12.34p
per share.
4 Return on Sales is defined as adjusted(1) profit before taxation
from continuing operations expressed as a percentage of revenue
from continuing operations.
5 Return on Total Invested Capital (ROTIC) is defined as post-tax
Adjusted(1) Profit as a percentage of average Total Invested
Capital.
6 Net debt is defined as Borrowings plus lease liabilities net
of Cash and bank balances.
7 Organic constant currency measures exclude the effect of movements
in foreign exchange rates on the translation of revenue and
profit(1) into Sterling, as well as acquisitions in the year
8 following completion and disposals.
Adjusted(1) profit before taxation, Adjusted(2) Earnings per
9 Share, organic growth rates, Return on Sales(4) , ROTIC(5) and
net debt(6) are alternative performance measures used by management.
See notes 1, 2 and 3 to the Results for details.
Adjusted(1) operating profit before central administration costs
after share of associate.
For further information, please contact:
Halma plc
Marc Ronchetti, Group Chief
Executive
Steve Gunning, Chief Financial +44 (0)1494 721 111
Officer
Charles King, Head of Investor
Relations
Clayton Hirst, Director of +44 (0)7776 685948
Corporate Affairs +44 (0)7834 796 013
MHP
Oliver Hughes/Rachel Farrington/Ollie
Hoare +44 (0)20 3128 8622 / 8613 / 8276
A copy of this announcement, together with other information
about Halma, is available at www.halma.com . The webcast of the
results presentation will be available on the Halma website later
today: www.halma.com
NOTE TO EDITORS
1. Halma is a global group of life-saving technology companies,
focused on growing a safer, cleaner, healthier future for
everyone, every day. Its purpose defines the three broad markets
it operates in:
Protecting people's safety and the environment
* Safety as populations grow, and enhancing worker
safety.
Addressing the impacts of climate change,
* Environment pollution and waste, protecting life-critical
resources and supporting scientific research.
Meeting the increasing demand for better
* Health healthcare as chronic illness rises, driven
by growing and ageing populations and lifestyle
changes.
Halma employs over 7,500 people in more than 20 countries,
with major operations in the UK, Mainland Europe, the USA
and Asia Pacific. Halma is listed on the London Stock Exchange
(LON: HLMA) and is a constituent of the FTSE 100 index.
Halma is named as one of Britain's Most Admired Companies
and has retained its No. 1 ranking in the Engineering sector
over the past four years.
2. You can view or download copies of this announcement and
the latest Half Year and Annual Reports from the website
at www.halma.com or request free printed copies by contacting
halma@halma.com .
3. 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 .
Strategic Report
Record revenue, and record profit for the 20th consecutive
year
In this, my first review as Group Chief Executive, I am pleased
to report record revenue and Adjusted (1) profit, and Halma's 20th
year of consecutive profit growth. We delivered strong revenue
growth, continued high returns, well above our cost of capital, and
solid cash generation, while at the same time investing record
amounts, both organically and in acquisitions, to support our
growth over the medium term.
Our performance in the year reflects the strength of our
Sustainable Growth Model and the hard work and dedication of our
people. I would like to thank everyone at Halma for their
contributions to our success and their commitment to growing a
safer, cleaner, healthier future for everyone, every day.
Driven by our purpose
It is a huge privilege to be leading a business with such a
strong sense of purpose and inclusive culture, and that has a
positive impact on millions of lives every day.
Halma's ability to deliver resilient growth reflects the
strength of our Sustainable Growth Model. Our purpose sits at the
heart of this. It unites and motivates us to help our customers
address many of the key challenges facing society and helps us
attract talented people who share our values. Our Sustainable
Growth Model gives us the agility and entrepreneurialism to respond
rapidly to changes in the markets we serve and the wider world, and
ensures we take a disciplined approach to investing in markets with
long-term, fundamental and highly sustainable growth drivers. It
also provides a clear financial framework, of strong organic growth
and margins, high returns and cash generation, and continuous
reinvestment to expand our opportunities for growth.
Over the last 20 years, our profit before tax (on a statutory
basis) has increased by over six times, at a 10% compound annual
growth rate. This is a substantial achievement given that this
period includes major economic and geopolitical shocks, such as the
Global Financial Crisis and Brexit, and, more recently, the COVID
pandemic and the war in Ukraine.
For most of the last 20 years, Halma was led by Andrew Williams,
who stepped down as Group Chief Executive at the end of March after
18 years. Over that time, he has led the evolution of Halma to
become an organisation with ever greater ambitions, considerable
strengths and substantial growth opportunities. I would like to
thank him for his leadership, the success he has created and for
his investment in me personally as part of the Group Chief
Executive transition, and wish him all the best after retiring from
Halma.
I am excited by the opportunities in front of us and believe
that we are well-positioned to address them. We have a resilient
business model and clear growth strategy, diverse and high quality
leadership teams, and a proven ability to adapt and evolve with
agility to a rapidly changing world. Our robust financial model is
underpinned by significant growth momentum and is enabling us to
invest record amounts to help our customers address some of the
biggest challenges facing the world today, and continue our track
record of long-term growth.
A strong financial performance
We delivered a strong financial performance in the year. Revenue
in the year grew by 21% to GBP1,852.8m, Adjusted1 profit before
taxation increased by 14% to GBP361.3m and Adjusted1 earnings per
share was up 17%, well above our 10% target. The decrease in
Statutory profit before taxation of 4% to GBP291.5m principally
reflected the non-recurrence of a gain on disposal of a Safety
Sector business in the prior year.
Growth was broadly spread across our sectors, regions and
companies. We delivered revenue growth in all our sectors and
regions, including on organic constant currency basis, and
Adjusted1 profit growth in all sectors.
We delivered continued high returns. Return on Sales1 was 19.5%,
within our KPI target range of 18-22%. This compared to an
unusually high level (within our target range) of 20.7% in the
prior year, which had benefited from the cost reduction measures
implemented during the COVID pandemic. Return on Total Invested
Capital1 of 14.8% (2022: 14.6%) remained ahead of our KPI target of
12% and well above our estimated weighted average cost of capital
of 8.9% (2022: 7.1%).
Cash conversion for the year was solid at 78%, compared to our
KPI target of 90%, and was improved and in line with our target at
90% in the second half of the year. Our continued cash generation
allows us to maintain a strong balance sheet, while making
substantial investments to support our future growth. Our gearing
ratio (net debt to EBITDA) at the year end was 1.38 times (2022:
0.74 times), well within our operating range of up to two times.
Together, our cash generation and balance sheet strength underpin
our investment in growth and provide capacity to fund acquisitions
and our progressive dividend policy.
The Board is recommending a 7% increase in the final dividend to
12.34p per share (2022: 11.53p per share). Together with the 7.86p
per share interim dividend, this would result in a total dividend
for the year of 20.20p (2022: 18.88p), also up 7%, making this the
44th consecutive year of dividend per share growth of 5% or
more.
Record strategic investment to support future growth
One of Halma's key strengths is the ability to deliver strong
performance in the shorter-term and maintain a strong balance
sheet, while simultaneously making substantial investments to
support sustainable growth over the longer-term. We invested a
record sum of over half a billion pounds in this financial year, to
support our future growth. This included investment to expand our
growth opportunities through acquisitions and organic investment in
product research and development, technology infrastructure, and
our people and culture so that we can continue to attract, develop,
retain, and engage the high performing teams that are critical to
our success.
Substantially increased investment in organic growth
During the year, we further increased investment supporting
organic growth, for example in new product development. R&D
expenditure increased by GBP17m to a record GBP103m and represented
5.5% of revenue (2022: 5.6%), remaining well ahead of our 4% KPI.
We also increased investment in our technology infrastructure by
GBP7m to GBP18m to improve our security, data and operating
technology, both at the company level and centrally.
The increase in these investments reflects our companies'
confidence in the substantial growth prospects they see in their
markets. Our products and services have never been more relevant
than today, as health, safety and environmental regulations
continue to increase, demand for healthcare grows and the world
addresses ever greater demands on life-critical resources and the
urgent need to tackle climate change, waste, and pollution.
Seven acquisitions completed across all three sectors
We further expanded our opportunities for growth through a
record investment of GBP397m in acquisitions (maximum total
consideration), acquiring the equivalent of 5.5% of our prior year
profit (after interest), ahead of our 5% KPI target. We made seven
acquisitions, each highly aligned to our purpose. Of these seven
acquisitions, four are standalone companies with the Group, and
three are bolt-ons to enhance our companies' technologies and
market reach.
The acquisitions were spread geographically across North
America, Mainland Europe and the UK and across our three sectors,
with four acquisitions in Safety, two in Environmental &
Analysis and one in Healthcare. Details of the individual
acquisitions are contained in the relevant sector reviews and in
the notes to the Accounts.
We are particularly pleased to see this strong momentum in
M&A combined with an overall increase in the scale of
acquisitions, supported by investment in our three sector M&A
teams over the past 18 months. This activity has continued since
the period end, with two further acquisitions completed in the new
financial year for a maximum total consideration of approximately
GBP57m.
Investing in our talent and culture
People are at the heart of the Group's and our individual
companies' growth strategies. We are committed to supporting their
development and ensuring that Halma's culture is highly inclusive.
In this way, we can recruit, develop and retain the very best
talent and have a wide diversity of voices and experience within
our leadership teams.
During the year, we increased investment in the development of
our leaders, introducing three new leadership development
programmes, with over 200 leaders participating in face-to-face
learning events and 750 participating online. We also recognise
that the current environment continues to present challenges and we
therefore invested in support for our people's wellbeing, including
through our Employee Assistance Programme and through flexible
working practices and enhanced benefits.
One measure of inclusion is gender diversity. Last year, we
introduced a stretching goal of achieving 40-60% gender balance on
all company boards by March 2024, equivalent to the balance already
achieved on the Group, Executive and sector boards. While female
representation on our company boards has increased from 22% in 2021
to 29% at 31 March 2023, we recognise that we need to accelerate
the pace of change. We launched a number of initiatives to support
this, including promoting diverse sourcing strategies and inclusive
hiring practices, and incorporating progress towards our target in
the bonus element of remuneration for our senior leaders. Alongside
gender equality, we also want to grow our ethnic diversity relative
to the markets we operate in and remove barriers to leadership for
ethnic minority groups, and launched a number of initiatives to
support this aim.
Our seventh global employee engagement survey reflected the
progress made in the year. Given the pressures our people continued
to face, I was pleased that we continued to have a strong response
rate of 85% and that our overall engagement score remained stable
at 76%, reflecting the ongoing actions taken by our companies to
support their people and nurture inclusive workplace cultures. We
saw our biggest improvement in companies providing opportunities
for our people to learn and grow, and our drive to build inclusive
businesses was reflected in high engagement scores on colleagues
feeling they are treated fairly and respectfully (83%) and can be
their authentic self at work (80%).
I am also proud of the engagement our companies and our people
have with the communities where they operate, and the positive
impact we have through charitable initiatives. This year, for
example, we continued to support the humanitarian relief effort for
Ukraine through raising and matching employee donations and
providing online support for our colleagues. We also completed our
Water for Life campaign, which, together with our partner WaterAid,
has provided access to safe, clean water for over 10,000 villagers
in India and sustainable water infrastructure, supported by Halma
fund raising of over GBP400,000.
Executive Board changes
With Andrew Williams retiring as Group Chief Executive at the
end of the year, and my appointment to that role, we were delighted
to welcome Steve Gunning to Halma as Chief Financial Officer on 16
January 2023. He brings a tremendous breadth of experience as a
FTSE 100 Chief Financial Officer and I look forward to working with
him as part of my leadership team.
Shortly after the year end, we announced internally that, after
five years with Halma, Wendy McMillan, Safety Sector Chief
Executive, had decided to leave Halma to pursue leadership
opportunities elsewhere. Drawing from the strength and depth in our
leadership team, we were delighted to be able to appoint Funmi
Adegoke, currently Group General Counsel and Chief Sustainability
Officer and a member of the Executive Board, to lead the Safety
Sector from early July. Funmi brings strong strategic, commercial
and business acumen and considerable experience across multiple
industries to the Safety Sector Chief Executive role. As a result
of this move, we were also pleased that Constance Baroudel,
Environmental & Analysis Sector Chief Executive, will take on
the additional role of Chief Sustainability Officer.
We also made the decision to restructure the digital growth
support for our companies. As part of this restructure we announced
that we would be disbanding the central Innovation and Digital
team. This reflects its achievement over the last six years in
embedding greater innovation and digital capabilities in our
companies, and the resultant evolution of our companies' needs
towards greater go-to-market support which will now be provided by
our Technology team. As a result, we announced that Inken
Braunschmidt , Chief Innovation and Digital Officer, will leave
Halma at the end of June.
I would like to thank Wendy and Inken for their significant
contribution to Halma and wish them every success in the
future.
Our Executive Board comprises a highly experienced team, drawn
from different backgrounds, with diverse talents and capabilities.
I am excited to be working with them in leading the next stage of
Halma's success.
Increasing sustainability opportunities
Sustainability has always been at the heart of our Sustainable
Growth Model and our purpose. In recent years, the scale and
urgency of global sustainability challenges, for example, in terms
of the changing climate, preserving the environment, or protecting
human health, have grown. We are responding by increasing
investment in products and solutions which help our customers
address these issues, and by ensuring that we operate in a
sustainable way.
We see substantial growth prospects for our companies in
sustainability and are increasing the support we give to them in
understanding sustainability-related trends, and in identifying
opportunities arising from them to grow their businesses. We are
also excited by acquisitions that deliver on our purpose and
long-term growth drivers and additionally have significant,
long-term sustainability opportunities, and it is pleasing that so
many of our standalone acquisitions this year, such as FirePro,
WEETECH and Deep Trekker, fit this profile.
We are also contributing by operating in a sustainable manner,
to ensure that we can continue to grow over the long term. During
the year, we continued to make progress on the two areas identified
in 2021 as the most important in our own value chain: supporting
our people and protecting our environment.
Each of our companies has now set their own bottom-up targets
and action plans to support the Group's goals in these areas. The
goals ensure we are focused on the substantial growth opportunities
for our companies and translate simply into a challenge to "do more
good" and "do less harm". In terms of protecting our environment,
we were pleased to see our operational greenhouse gas emissions
continue to reduce, with a 47% reduction since our FY20 baseline
and renewable electricity reaching 62% of total consumption,
thereby exceeding our targets.
These direct operational emissions are a small part of our
broader emissions footprint. The majority of our environmental
footprint arises within our wider value chain and we have focused
this year on estimating indirect (Scope 3) emissions baselines so
that we can set appropriate reduction targets in the future. It is
encouraging that we are already seeing actions in a number of
companies to reduce Scope 3 emissions, including through supplier
engagement programmes and an increasing focus on sustainable
design.
For the first time this year, our executive remuneration
incorporated annual energy productivity metrics alongside the
gender diversity targets mentioned above. We consider these metrics
aligned to remuneration as a good starting point from which they
will no doubt evolve and it is pleasing to see them driving a focus
on gender balance and energy conservation within our companies.
Summary and Outlook
2023 was a successful year for Halma, reflecting the
contributions and continued commitment to our purpose of everyone
in the Group. We delivered record revenue and Adjusted1 profit,
achieving our 20th consecutive year of profit growth and our 44th
consecutive year of dividend per share growth of 5% or more. At the
same time, we substantially increased strategic investment to
record levels, increasing our opportunities for future growth
through organic investment and acquisitions, while maintaining a
strong balance sheet.
We have made a positive start to the new financial year. We have
a strong order book, and order intake in the year to date is
broadly in line with revenue and ahead of the comparable period
last year. Based on current market conditions, we expect to deliver
good organic constant currency1 revenue growth in the year ahead,
and Return on Sales1 to increase to approximately 20%. We are well
positioned to make further progress this year and in the longer
term.
Marc Ronchetti
Group Chief Executive
(1) See Highlights
Chief Financial Officer's Review
A strong financial performance
I am pleased to report that the Group delivered a strong
financial performance for the year, which included record revenue,
record profit(1) for the 20th consecutive year, and continued high
returns.
This performance was supported by strong and broadly-based
demand for our products and services, and enabled by our
Sustainable Growth Model which gives our companies considerable
autonomy and agility, allowing them to respond quickly to new
growth opportunities and to act rapidly to address operational
challenges when they arise.
At the same time, we were able to make substantial investments,
of over half a billion pounds in aggregate, to support our future
growth. These included record levels of expenditure on research and
development, technology infrastructure, and acquisitions to expand
our market opportunities.
These investments were supported by the strength of our balance
sheet, and by our continued cash generation. We expect our strong
financial position and high levels of cash conversion to underpin
our growth over the longer term as our companies address the
significant opportunities in their markets.
Record revenue and profit
Revenue for the year to 31 March 2023 was GBP1,852.8m (2022:
GBP1,525.3m), up 21.5%, which included a strong organic performance
with organic constant currency(2) revenue growth up by 10.2%. There
was a positive effect from currency translation of 8.1%, due to the
weakness in Sterling, and a benefit from recent acquisitions (net
of disposals) of 3.2%. Investment in our products and services to
ensure they continue to address our customers' needs enabled us to
deliver a resilient price performance, which offset the majority of
cost increases, resulting in only a small decrease in gross margin.
We estimate that price increases accounted for approximately four
percentage points of our revenue growth, broadly evenly spread
across the sectors.
Adjusted(1) profit before taxation grew by 14.2% to GBP361.3m
(2022: GBP316.2m). This reflected the increase in revenue,
partially offset by the reduction in Return on Sales(2) to 19.5%
from the unusually high level of 20.7% in the prior year.
Adjusted(1) profit growth comprised a 3.1% increase in organic
constant currency(2) profit, a 2.1% contribution from acquisitions
(net of disposals), and a positive effect from currency of 9.0% due
to the weakening of Sterling.
Statutory profit before taxation of GBP291.5m (2022: GBP304.4m)
was 4.2% lower; excluding the gain on disposal of a Safety Sector
business in the prior year, Statutory profit before tax would have
increased by 7.8%. There were no disposals made during this
financial year. Statutory profit before taxation is calculated
after charging the amortisation and impairment of acquired
intangible assets of GBP56.5m (2022: GBP42.7m) and other items of a
net GBP13.3m (2022: GBP3.1m). There were no gains on disposals
(2022: GBP34.0m). Further detail on these items is given in note 1
to the Accounts.
Performance broadly based across sectors and regions
Our results reflected high levels of demand for our products and
services, with this demand broadly spread across our sectors and
regions. This resulted in strong revenue growth in all sectors,
both on a reported and organic constant currency(2) basis. While
there was more variability in sector profitability, all sectors
grew Adjusted(1) profit, and only the Safety Sector saw a small
decline on an organic constant currency(2) basis.
Our two largest regions, the USA and Mainland Europe grew
strongly on both a reported and organic constant currency(2) basis.
Growth in the UK was slower, but compared with an exceptionally
strong performance in the prior year, while momentum in Asia
Pacific was affected by lockdowns in China. There was strong growth
in the smaller other regions.
Further information on regional and sector performance is given
in the individual sector reviews later in this announcement.
Organic
growth(2)
at
Total Organic constant
2023 2022 Change growth growth(2) currency
Revenue and profit change GBPm GBPm GBPm % % %
----------------------------------- ------- ------- ------ ------- ---------- ----------
Revenue 1,852.8 1,525.3 327.5 21.5 18.3 10.2
----------------------------------- ------- ------- ------ ------- ---------- ----------
Adjusted(1) profit before taxation 361.3 316.2 45.1 14.2 12.1 3.1
----------------------------------- ------- ------- ------ ------- ---------- ----------
Statutory profit before taxation 291.5 304.4 (12.9) (4.2) - -
----------------------------------- ------- ------- ------ ------- ---------- ----------
1 In addition to those figures reported under IFRS, Halma uses
alternative performance measures as key performance indicators, as
management believe these measures enable them to better assess the
underlying trading performance of the business by removing
non-trading items that are not closely related to the Group's
trading or operating cash flows. Adjusted(1) profit excludes the
amortisation and impairment of acquired intangible assets;
acquisition items; restructuring costs and profit or loss on
disposal of operations. All of these are included in the statutory
figures. Notes 1 and 3 to the Accounts give further details with
the calculation and reconciliation of adjusted figures.
2 See Highlights.
Sector revenue change 2023 2022
------- ---------- ------- ----------
% organic
growth(2)
at
Change % constant
GBPm % of total GBPm % of total GBPm growth currency
------------------------- ------- ---------- ------- ---------- ------ ------- ----------
Safety 745.6 40 641.4 42 104.2 16.2 11.2
------------------------- ------- ---------- ------- ---------- ------ ------- ----------
Environmental & Analysis 552.1 30 442.9 29 109.2 24.7 9.1
------------------------- ------- ---------- ------- ---------- ------ ------- ----------
Healthcare 556.4 30 442.3 29 114.1 25.8 9.8
------------------------- ------- ---------- ------- ---------- ------ ------- ----------
Inter-segment sales (1.3) (1.3)
------------------------- ------- ---------- ------- ---------- ------ ------- ----------
1,852.8 100 1,525.3 100 327.5 21.5 10.2
------------------------- ------- ---------- ------- ---------- ------ ------- ----------
Sector profit (3) change
2023 2022
------ ---------- ------ ----------
% organic
growth(2)
at
Change % constant
GBPm % of total GBPm % of total GBPm growth currency
------------------------- ------ ---------- ------ ---------- ------ ------- ----------
Safety 152.5 37 146.2 41 6.3 4.3 (1.1)
------------------------- ------ ---------- ------ ---------- ------ ------- ----------
Environmental & Analysis 134.2 32 109.8 31 24.4 22.2 7.1
------------------------- ------ ---------- ------ ---------- ------ ------- ----------
Healthcare 130.1 31 99.5 28 30.6 30.8 14.0
------------------------- ------ ---------- ------ ---------- ------ ------- ----------
Sector profit(3) 416.8 100 355.5 100 61.3
------------------------- ------ ---------- ------ ---------- ------ ------- ----------
Central administration
costs (38.6) (30.9) (7.7)
------------------------- ------ ---------- ------ ---------- ------ ------- ----------
Net finance expense (16.9) (8.4) (8.5)
------------------------- ------ ---------- ------ ---------- ------ ------- ----------
Adjusted(4) profit
before tax 361.3 316.2 45.1 14.2 3.1
------------------------- ------ ---------- ------ ---------- ------ ------- ----------
Return on Sales 19.5% 20.7%
------------------------- ------ ---------- ------ ---------- ------ ------- ----------
1 In addition to those figures reported under IFRS, Halma uses
alternative performance measures as key performance indicators, as
management believe these measures enable them to better assess the
underlying trading performance of the business by removing
non-trading items that are not closely related to the Group's
trading or operating cash flows. Adjusted(1) profit excludes the
amortisation and impairment of acquired intangible assets;
acquisition items; restructuring costs and profit or loss on
disposal of operations. All of these are included in the statutory
figures. Notes 1 and 3 to the Accounts give further details with
the calculation and reconciliation of adjusted figures.
2 See Highlights
3 Sector profit before allocation of adjustments. See note 1 to the Accounts.
4 Adjusted(1) profit excludes the amortisation and impairment of
acquired intangible assets; acquisition items; restructuring costs;
and profit or loss on disposal of operations. All of these are
included in the statutory figures. Note 3 to the Accounts gives
further details with the calculation and reconciliation of adjusted
figures.
Continued high returns
Halma's Return on Sales(2) has exceeded 16% for 38 consecutive
years(5) . This year's Return on Sales(2) was 19.5%, within our KPI
target range of 18-22%. This year's performance compared to the
unusually high levels of 20.7% in 2022 and 21.1% in 2021, which had
benefited from lower spend on overheads such as travel and
marketing during the COVID pandemic and the cost reduction measures
we decided to take at the onset of the pandemic.
Our Return on Sales(2) performance in 2023 reflected the impact
of increased finance costs given higher average levels of
indebtedness and rises in interest rates. It also included the
effect, mainly in the second half of the year, of supply chain
disruptions in a number of companies, principally in the Safety
Sector. We currently expect these disruptions to ease during the
2024 financial year and for Return on Sales(2) in the 2024
financial year to be approximately 20%.
We successfully achieved our objective of continuing to invest
in our businesses while delivering growth, with record organic and
inorganic investment in the year to support our future growth. We
maintained a high level of Return on Total Invested Capital
(ROTIC)(2) , the post-tax return on the Group's total assets
including all historical goodwill. This year, ROTIC(2) increased to
14.8% (2022: 14.6%), with the change principally reflecting a
benefit from exchange rate movements, offsetting the effect of a
lower level of constant currency earnings growth than in the prior
year. Our ROTIC remains within our target range of 12% - 17%. It is
also substantially above Halma's Weighted Average Cost of Capital
(WACC), which is estimated to be 8.9% (2022: 7.1%), with the
increase mainly a result of higher interest rates.
Record investment to support future growth
All sectors continue to innovate and invest in new products,
reflecting our companies' confidence in the future growth prospects
of their respective markets. R&D expenditure as a percentage of
revenue remained well above our KPI target of 4% at 5.5% (2022:
5.6%), increasing by 20% to GBP102.8m (2022: GBP85.4m), in line
with revenue growth.
We are also continuing to invest group-wide in automation and
technology upgrades, including enhanced security, improved data and
analytics capabilities and upgrades to operating technology both at
the company level and centrally. Technology spend totalled GBP18m
in the 2023 financial year, reflecting increased investment of
GBP7m.
In the year we made a record investment in acquisitions of
GBP391.5m (net of cash acquired of GBP10.1m and including
acquisition costs). These seven acquisitions were broadly spread by
both sector and geography. The acquisitions completed in the
current and prior year contributed to revenue this year in line
with expectations overall, and we expect a good performance from
them in the future.
Solid cash generation and strong financial position
Cash generation is an important component of the Halma model,
underpinning further investment in organic growth, supporting
value-enhancing acquisitions and funding an increasing dividend to
shareholders.
We have a KPI target for cash conversion of 90%. For the year as
a whole, cash conversion was solid at 78% (2022: 84%), reflecting
continued good underlying working capital control, but also
including strategic investment in inventory by a number of
companies to support supply chain resilience, which resulted in
cash conversion of 63% in the first half of the year. Cash
conversion in the second half of the year was improved at 90%; we
currently expect to deliver a strong cash performance in 2024.
Our financial position remains strong, with gearing (net debt to
EBITDA) of 1.38 times at the year end. This was despite significant
increases in both organic investment and acquisition spend, which
resulted in net debt (on an IFRS 16 basis which includes lease
commitments) increasing by GBP321.9m to GBP596.7m.
We have substantial available liquidity. In the first half of
the year, we refinanced our syndicated credit facility, which
remains at GBP550m. It now matures in May 2028, following the
exercise, after the year end, of one of two options to extend its
maturity for one year. We also completed a new Private Placement of
c.GBP330m with a seven year average life. Further detail on cash
generation and our financial position is given below.
Cash conversion and net debt
2023 2022
------------------- ----------- -----------
Cash conversion 78% 84%
------------------- ----------- -----------
Closing net debt GBP(596.7)m GBP(274.8)m
------------------- ----------- -----------
Net debt to EBITDA 1.38x 0.74x
------------------- ----------- -----------
Conclusion
Halma is a company I have known and admired for many years.
Since I joined in January, I have been impressed by the clear
priority that is given to creating value over the longer term,
guided by our Sustainable Growth Model. Balanced with this is the
determination to deliver a strong financial performance every year.
This year's results are further testimony both to the longer term
decisions that have been made, and that determination.
I am excited by both the opportunities ahead for the Company and
by the strength of the Halma team that will seek to convert them.
The finance team will continue to play an important role in
providing insights to support our sustained delivery of growth and
high returns. I would like to thank all my colleagues for their
warm welcome and support, and congratulate them on another
successful year.
Steve Gunning
Chief Financial Officer
Financial Review
Revenue growth in all regions
Our revenue performance by region reflected broadly-based demand
for the Group's products and services, with all regions delivering
revenue growth on both a reported and an organic constant currency
basis. Reported growth rates in each region were impacted to
differing extents by acquisitions (net of disposals), and, outside
the UK, positive effects from foreign currency translation, given
the relative weakness of Sterling. On an organic constant currency
basis, there was strong growth in our two largest regions, the USA
and Mainland Europe, good growth in the UK against a strong prior
year comparative, and a solid performance in Asia despite weakness
in China as a result of lockdowns. The smaller other regions
performed strongly.
Strong and broadly-based growth in the USA
Revenue in the USA increased by 30.7%, and the USA remains our
largest revenue destination, accounting for 42% of Group revenue,
an increase of three percentage points compared to the prior year.
Reported revenue included a 4.6% contribution from acquisitions
(net of disposals), and a positive effect of 14.0% from foreign
exchange translation. Organic constant currency revenue increased
12.3%, with growth evenly spread across the three sectors,
reflecting good momentum in the vast majority of subsectors.
Strong growth in Mainland Europe, led by Safety and Healthcare
Sectors
Mainland Europe revenue was 22.2% higher, or up 13.5% on an
organic constant currency basis. Reported revenue included a 5.0%
contribution from acquisitions (net of disposals), and a positive
effect of 3.7% from foreign exchange translation.
There was strong growth in the Safety Sector, led by the two
largest subsectors, Fire Safety and Urban Safety, and in the
Healthcare Sector, with a notably strong performance in the
ophthalmology market within Therapeutic Solutions. Growth in the
Environmental & Analysis Sector was more modest, with a strong
performance in Environmental Monitoring partly offset by weaker
trends in Water Analysis and Treatment.
Good organic growth in the UK
UK revenue was 4.4% higher, or up 6.0% on an organic constant
currency basis. There was a negative effect on reported revenue
from the prior year disposal, which was only partly offset by the
benefit from acquisitions. The largest sector, Safety, delivered
good growth, led by its largest subsector, Fire Safety. In the
smaller Safety subsectors, while there was only marginal growth in
Urban Safety following the end of a significant road safety
contract, there was strong momentum in the Industrial Safety
subsector. Healthcare grew strongly, reflecting demand for our
communication technologies within the Healthcare Assessment &
Analytics subsector. There was only modest growth within the
Environmental & Analysis Sector, given lower order intake from
UK utilities in Water Analysis and Treatment, and weaker demand in
Gas Detection.
Strong growth in other regions despite weakness in China
Revenue from territories outside the UK/Mainland Europe/the USA
grew by 18.1%, which was ahead of our 10% KPI growth target.
Asia Pacific revenue increased 12.6%, but by only 3.3% on an
organic constant currency basis. This reflected an organic constant
currency revenue decline in China, our largest market in the region
at approximately 6% of Group revenue, mainly as a result of COVID
lockdowns. This was partly offset by strong growth in India and
Australasia, the second and third largest markets in the region.
Performance by sector was mixed, with good organic constant
currency growth in the Safety Sector and a strong performance by
the Environmental & Analysis Sector. In Healthcare, however,
organic constant currency revenue declined. Reported revenue
included a 2.1% contribution from acquisitions (net of the impact
of disposals), and a positive effect of 7.2% from foreign exchange
translation.
Other regions, which represent 8% of Group revenue, reported
revenue 31.5% higher on a reported basis, and up 15.6% on an
organic constant currency basis reflecting strong growth in all
sectors.
2023 2022
------------------------- --------------- ---------------
% change
organic
at
% of % of Change % constant
GBPm total GBPm total GBPm Change currency
------------------------- ------- ------ ------- ------ ------ ------- ---------
United States of America 780.8 42 597.2 39 183.6 30.7 12.3
------------------------- ------- ------ ------- ------ ------ ------- ---------
Mainland Europe 376.4 20 308.1 20 68.3 22.2 13.5
------------------------- ------- ------ ------- ------ ------ ------- ---------
United Kingdom 278.9 15 267.0 18 11.9 4.4 6.0
------------------------- ------- ------ ------- ------ ------ ------- ---------
Asia Pacific 282.4 15 250.8 16 31.6 12.6 3.3
------------------------- ------- ------ ------- ------ ------ ------- ---------
Africa, Near and Middle
East 63.6 4 53.6 4 10.0 18.6 13.2
------------------------- ------- ------ ------- ------ ------ ------- ---------
Other countries 70.7 4 48.6 3 22.1 45.7 18.1
------------------------- ------- ------ ------- ------ ------ ------- ---------
1,852.8 100 1,525.3 100 327.5 21.5 10.2
------------------------- ------- ------ ------- ------ ------ ------- ---------
First and second half profit performance
Revenue grew by 18.8% in the first half of the year and by 24.0%
in the second half, with second half revenue 11.6% higher than
revenue in the first. Organic constant currency revenue increased
by 10.2%, comprising a 9.5% increase in the first half and growth
of 10.9% in the second half. There was a positive effect of 8.3%
from currency translation in the first half, and of 7.9% in the
second half, giving a positive effect of 8.1% for the year as a
whole. Acquisitions (net of disposals) had a positive effect of
3.2%, comprising a 1.0% positive effect in the first half and 5.2%
in the second half.
Adjusted(1) profit increased by 10.9% in the first half and by
17.5% in the second half. There was a first half/second half split
of Adjusted(1) profit of 48%/52%, compared to our typical 45%/55%
pattern. Organic profit at constant currency increased by 1.9% in
the first half, and by 4.3% in the second half, resulting in growth
of 3.1% for the year.
Central costs, which include our Growth Enabler functions,
increased from GBP30.9m in 2022 to GBP38.6m below our previous
guidance as a result of strong cost control and revisions to the
phasing of technology project spend. The increase reflected
investment in our Growth Enabler teams, technology infrastructure
and talent to support our future growth, and investment in
reconnecting our Halma networks. In 2024, we expect central costs
to be approximately GBP44m, including the revised phasing of
technology spend referred to above.
Currency effects on reported revenue and profit
Halma reports its results in Sterling. Our other key trading
currencies are the US Dollar, Euro and to a lesser extent the Swiss
Franc, the Chinese Renminbi and the Australian Dollar. Almost 50%
of Group revenue is denominated in US Dollars, approximately 26% in
Sterling and approximately 12% in Euros.
The Group has both translational and transactional currency
exposure. Translational exposures are not hedged, except for net
investment hedges. Transactional exposures, after matching currency
of revenue with currency costs wherever practical, are hedged using
forward exchange contracts for 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
forward.
Sterling weakened on average in the year, principally in the
first half. This gave rise to a positive currency translation
impact of 8.1% on revenue and 9.0% on profit for the full year.
Based on the current mix of currency denominated revenue and
profit, a 1% movement in the US Dollar relative to Sterling changes
revenue by approximately GBP9m and profit by approximately GBP2m.
Similarly, a 1% movement in the Euro changes revenue by
approximately GBP2m and profit by approximately GBP0.5m. If
Sterling weakens against foreign currencies, this has a positive
impact on revenue and profit as overseas earnings are translated
into Sterling.
If currency rates for the financial year to the end of March
2024 were US Dollar 1.237/ Euro 1.138 relative to Sterling
respectively, and assuming a constant mix of currency results,
driven by the strengthening of Sterling versus the US Dollar, we
would expect approximately a GBP20m negative revenue and a GBP4m
negative profit impact compared to the financial year to the end of
March 2023, with the majority of the impact in the first half of
the year.
Weighted average Exchange rates
rates used to
used in the income translate the
statement Balance sheet
----- ------------------------ --------------------
2022
First 2023 Full 2023 2022
half Full Year year Year end Year end
----- ----- ---------- ----- --------- ---------
US$ 1.216 1.205 1.367 1.237 1.315
----- ----- ---------- ----- --------- ---------
Euro 1.174 1.158 1.176 1.138 1.183
----- ----- ---------- ----- --------- ---------
Solid cash generation
Halma's operations have continually been cash generative. Cash
generated from operations in the year was GBP325.2m (2022:
GBP293.4m) and adjusted operating cash flow, which excludes
operating cash adjusting items, and includes net cash capital
expenditure, was GBP293.2m (2022: GBP273.2m) which represented a
cash conversion of 78% (2022: 84%) of Adjusted operating profit (1)
.
Cash conversion was 63% in the first half of the year,
reflecting strategic investment in inventory to support supply
chain resilience, but was stronger at 90% in the second half of the
year.
Overall, the strategic investment in inventory had an impact on
working capital, with an outflow of GBP95.7m, comprising changes in
inventory, receivables and creditors (2022: outflow of GBP62.7m),
which also reflected the strong revenue growth in the period. These
effects would have been more significant were it not for the
continued good underlying control of working capital by our
companies. Adjusted operating cash flow is defined in note 3 to the
Accounts.
A summary of the year's cash flow is shown in the tables below.
The largest outflows in the year were in relation to acquisitions,
dividends and taxation paid. Acquisition of businesses including
cash and debt acquired and fees increased to GBP391.5m (2022:
GBP164.4m), reflecting the record M&A investment in the year.
Dividends totalling GBP73.3m (2022: GBP68.7m) were paid to
shareholders in the year. Taxation paid increased to GBP67.2m
(2022: GBP56.0m).
Operating cash flow summary
2023 2022
GBPm GBPm
------------------------------------------------------------ ------ ------
Operating profit 308.4 278.9
------------------------------------------------------------ ------ ------
Acquisition items 13.3 3.1
------------------------------------------------------------ ------ ------
Amortisation and impairment of acquisition-related acquired
intangible assets 56.5 42.7
------------------------------------------------------------ ------ ------
Adjusted operating profit 378.2 324.7
------------------------------------------------------------ ------ ------
Depreciation and other amortisation 53.5 49.1
------------------------------------------------------------ ------ ------
Working capital movements (95.7) (62.7)
------------------------------------------------------------ ------ ------
Capital expenditure net of disposal proceeds (27.1) (25.5)
------------------------------------------------------------ ------ ------
Additional payments to pension plans (15.2) (12.2)
------------------------------------------------------------ ------ ------
Other adjustments (0.5) (0.2)
------------------------------------------------------------ ------ ------
Adjusted operating cash flow 293.2 273.2
------------------------------------------------------------ ------ ------
Cash conversion % 78% 84%
------------------------------------------------------------ ------ ------
Non-operating cash flow and reconciliation to net debt
2023 2022
GBPm GBPm
-------------------------------------------------------- ------- -------
Adjusted operating cash flow 293.2 273.2
-------------------------------------------------------- ------- -------
Tax paid (67.2) (56.0)
-------------------------------------------------------- ------- -------
Acquisition of businesses including cash/debt acquired
and fees (391.5) (164.4)
-------------------------------------------------------- ------- -------
Purchase of equity investments (6.7) (0.7)
-------------------------------------------------------- ------- -------
Disposal of businesses - 57.5
-------------------------------------------------------- ------- -------
Net finance costs and arrangement fees (excluding lease
interest) (18.0) (5.7)
-------------------------------------------------------- ------- -------
Net lease liabilities additions (34.1) (21.5)
-------------------------------------------------------- ------- -------
Dividends paid (73.3) (68.7)
-------------------------------------------------------- ------- -------
Own shares purchased (22.3) (19.3)
-------------------------------------------------------- ------- -------
Adjustment for cash outflow on share awards not settled
by own shares (4.5) (7.1)
-------------------------------------------------------- ------- -------
Effects of foreign exchange 2.5 (5.9)
-------------------------------------------------------- ------- -------
Movement in net debt (321.9) (18.6)
-------------------------------------------------------- ------- -------
Opening net debt (274.8) (256.2)
-------------------------------------------------------- ------- -------
Closing net debt (596.7) (274.8)
-------------------------------------------------------- ------- -------
Substantial funding capacity and liquidity; financing cost well
managed
The Group has access to competitively priced committed debt
finance, providing good liquidity. Group treasury policy remains
conservative and no speculative transactions are undertaken.
We have a strong balance sheet and substantial available
liquidity. At the beginning of the 2023 financial year, we
refinanced our syndicated revolving credit facility. The new
facility remains at GBP550m. It now matures in May 2028, following
the exercise after the year end of one of two one-year extension
options. In addition, we completed a new Private Placement issuance
of c.GBP330m in May 2022. The issuance consists of Sterling, Euro,
US Dollar and Swiss Franc tranches and matures in July 2032, with
an amortisation profile giving it a seven year average life.
The financial covenants on these facilities are for leverage
(net debt /adjusted EBITDA) to not be more than three and a half
times and for adjusted interest cover to be not less than four
times. The Group continues to operate well within its banking
covenants with significant headroom under each financial ratio.
At 31 March 2023, net debt was GBP596.7m, a combination of
GBP677.3m of debt, GBP87.9m of IFRS 16 lease liabilities and
GBP168.5m of cash held around the world to finance local
operations. Net debt at 31 March 2022 was GBP274.8m.
The gearing ratio at the year-end (net debt to EBITDA) was 1.38
times (2022: 0.74 times). Net debt represented 7% (2022: 3%) of the
Group's year-end market capitalisation.
The net financing cost in the Income Statement of GBP16.9m was
higher than the prior year (2022: GBP8.4m). This reflected a higher
weighted average interest rate in the year and a higher average
level of indebtedness due to acquisitions. The Private Placement
issuance has resulted in an increased proportion of fixed coupon
debt on the Group's balance sheet (at 56% at 31 March 2023,
compared to 30% at 31 March 2022, excluding leases), which
positions us well ahead of any increases in interest rates, and
secures debt financing sufficient to meet the Group's likely
medium-term requirements. We would expect the net financing cost
for the 2024 financial year to be approximately GBP29m, if no
further acquisitions were to be made. This reflects higher average
net debt and a forecast higher weighted average interest rate in
the year.
The net pension financing impact under IAS 19 is included in the
net financing costs. This year the Group recognised a gain of
GBP1.1m (2022: charge of GBP0.3m).
Group tax rate decreased
The Group has major operating subsidiaries in a number of
countries and the Group's effective tax rate is a blend of these
national tax rates applied to locally generated profits.
The Group's effective tax rate on adjusted profit was lower than
the prior year at 20.2% (2022: 21.6%) due to one-off credits. Based
on the latest forecast mix of adjusted profits for the year to 31
March 2024 we currently anticipate the Group effective tax rate to
be higher at approximately 22% of adjusted profits, reflecting the
increase in the UK corporation tax rate to 25% from 1 April
2023.
On 2 April 2019, the European Commission (EC) published its
final decision that the UK controlled Finance Company Partial
Exemption (FCPE) constituted State Aid. In common with many other
UK companies, Halma has benefited from the FCPE and had appealed
against the European Commission's decision, as had the UK
Government. The EU General Court delivered its decision on 8 June
2022. The ruling was in favour of the European Commission but in
August 2022 the UK Government and the taxpayer have appealed this
decision. Following receipt of charging notices from HM Revenue
& Customs (HMRC) we made a payment in February 2021 of GBP13.9m
to HMRC in respect of tax, and in May 2021 made a further payment
of approximately GBP0.8m in respect of interest.
Whilst the EU General Court was in favour of the EC, our
assessment is that there are strong grounds for appeal and the
appeal is expected to be successful. As a result, and given the
appeal process is expected to take more than a year, we continue to
recognise a non-current receivable of GBP14.7m in the balance
sheet.
Capital allocation and funding priorities
Halma aims to deliver high returns, measured by ROTIC(2), well
in excess of our cost of capital. We invest to deliver the future
earnings growth and strong cash returns which enable us to achieve
this aim on a sustainable basis, and our capital allocation
priorities remain as follows:
-- Investment for organic growth: Organic growth is our first
priority and is driven by investment in our existing businesses,
including through capital expenditure, innovation in digital growth
and new products, international expansion and the development of
our people.
-- Value-enhancing acquisitions: We supplement organic growth
with acquisitions in current and adjacent market niches, aligned
with our purpose. This brings new technology, intellectual property
and talent into the Group and expands our market reach, keeping
Halma well-positioned in growing markets over the long term.
-- Regular and increasing returns to shareholders: We have
maintained a progressive dividend policy for over 40 years and this
is our preferred route for delivering regular cash returns to
shareholders without impacting on our investment to grow our
business.
Continued investment for organic growth
All sectors continue to innovate and invest in new products,
with R&D spend determined by each individual Halma company.
R&D expenditure as a percentage of revenue remained well above
our KPI target of 4% at 5.5% (2022: 5.6%). In absolute terms, this
meant that R&D expenditure increased by GBP17.4m to GBP102.8m
(2022: GBP85.4m), and grew in line with revenue. This increasing
investment reflects our companies' confidence in the growth
prospects of their respective markets. In the medium term we expect
R&D expenditure to continue to increase broadly in line with
revenue growth.
Under IFRS accounting rules we are required to capitalise
certain development projects and amortise the cost over an
appropriate period, which we determine as three years. This year we
capitalised GBP15.8m (2022: GBP13.4m), impaired GBP0.5m (2022:
GBP2.9m) and amortised GBP8.5m (2022: GBP7.0m). The closing
intangible asset carried on the Consolidated Balance Sheet, after a
GBP1.2m gain (2022: GBP1.3m gain) relating to foreign exchange was
GBP49.6m (2022: GBP41.7m). All R&D projects requiring
capitalisation are subject to rigorous review and approval
processes by the relevant sector board and Group financial
control.
Capital expenditure on property, plant, equipment and vehicles,
computer software and other intangible assets was GBP30.1m (2022:
GBP26.6m), with last year reflecting a lower spend as a result of
pandemic constraints. Expenditure was principally on plant,
equipment and vehicles. We anticipate capital expenditure to
increase to approximately GBP40m in the coming year, reflecting
investment in the expansion of manufacturing facilities and
automation to support future growth.
Lease right-of-use asset additions and remeasurements were
GBP32.2m (2022: GBP23.0m). This included additions of GBP9.3m as a
result of acquisitions made in the year, and the commencement of
new leases and extensions or renewals of existing leases.
Net debt to EBITDA
2023 2022
GBPm GBPm
-------------------------------------------------- ----- -----
Adjusted operating profit 378.2 324.7
-------------------------------------------------- ----- -----
Depreciation and amortisation (excluding acquired
intangible assets) 53.5 49.1
-------------------------------------------------- ----- -----
EBITDA 431.7 373.8
-------------------------------------------------- ----- -----
Net debt to EBITDA 1.38 0.74
-------------------------------------------------- ----- -----
Average debt and interest rates
2023 2022
-------------------------------------------------------- ---- ------
Average gross debt (GBPm) 602.5 426.8
-------------------------------------------------- ---------- ------
Weighted average interest rate on gross debt 2.74% 1.90%
-------------------------------------------------- ---------- ------
Average cash balances (GBPm) 170.3 143.1
-------------------------------------------------- ---------- ------
Weighted average interest rate on cash 0.40% 0.16%
-------------------------------------------------- ---------- ------
Average net debt (GBPm) 432.2 283.7
-------------------------------------------------- ---------- ------
Weighted average interest rate on net debt 3.67% 2.78%
-------------------------------------------------- ---------- ------
Value-enhancing acquisitions and investments
Acquisitions and disposals are a key component of our
Sustainable Growth Model, as they keep our portfolio of companies
focused on markets which have strong growth opportunities over the
medium and long term.
In the year we made seven acquisitions at a cost of GBP386.9m
(net of cash acquired of GBP10.1m and including acquisition costs).
In addition, we paid GBP4.6m in contingent consideration for
acquisitions made in prior years, giving a total spend of
GBP391.5m. We also made two small strategic minority investments
totalling GBP6.7m, including an incremental funding round for a
minority investment in the Safety Sector. We made two further
acquisitions following the year end, for a maximum total
consideration of approximately GBP57m.
Details of the acquisitions and investments made in the year are
given in the sector reviews below.
Regular and increasing returns for shareholders
Adjusted earnings per share increased by 16.6% to 76.34p (2022:
65.48p). Statutory basic earnings per share decreased by 3.9% to
62.04p (2022: 64.54p), as the prior year included a gain on the
disposal of a Safety Sector business.
The Board is recommending a 7.0% increase in the final dividend
to 12.34p per share (2022: 11.53p per share), which together with
the 7.86p per share interim dividend gives a total dividend per
share of 20.20p (2022: 18.88p), up 7.0% in total.
Dividend cover (the ratio of adjusted profit after tax to
dividends paid and proposed) is 3.78 times (2022: 3.47 times).
The final dividend for the financial year ended March 2023 is
subject to approval by shareholders at the Annual General Meeting
on 20 July 2023 and, if approved, will be paid on 18 August 2023 to
shareholders on the register at 14 July 2023.
We aim to increase dividends per share each year, while
maintaining a prudent level of dividend cover, and declare
approximately 35-40% of the anticipated total dividend as an
interim dividend. The Board's determination of the proposed final
dividend increase this year took into account the Group's financial
performance, economic and geopolitical uncertainty, the Group's
continued balance sheet strength and medium-term organic constant
currency growth.
Pensions update
The Group accounts for post-retirement benefits in accordance
with IAS 19 Employee Benefits. The Consolidated Balance Sheet
reflects the net accounting surplus on our pension plans as at 31
March 2023 based on the market value of assets at that date and the
valuation of liabilities using discount rates derived from year end
AA corporate bond yields. Lane Clark & Peacock LLP assist the
Company in setting assumptions, and the valuation work is performed
by Mercer Limited.
We closed the two UK defined benefit (DB) plans to new members
in 2002. In December 2014 we ceased future accrual within these
plans with future pension benefits earned within the Group's
Defined Contribution (DC) pension arrangements. These two plans
represent over 95% of consolidated plan liabilities.
On an IAS 19 basis, before deferred taxes, the Group's DB plans
at 31 March 2023 had a net surplus of GBP37.9m (2022: GBP30.5m
surplus). The value of plan assets decreased to GBP284.7m (2022:
GBP347.6m). Plan liabilities decreased to GBP246.8m (2022:
GBP317.1m) due to the increase in the discount rate (2.80% to
4.75%) being greater than the decrease in the long-term inflation
rate (3.6% to 3.3%). Mortality assumptions include this year an
assumption for post pandemic mortality experience in line with
market practices.
The plans' actuarial valuation reviews, rather than the
accounting basis, are used to evaluate the level of any cash
payments into the plan. This year these contributions amounted to
GBP15.6m. Following a triennial actuarial valuation of the two UK
pension plans in the 2021/22 financial year, the cash contributions
were agreed with the trustees aimed at eliminating the deficit.
During the 2022/23 financial year the aggregate payments made
since the last triennial actuarial valuation, coupled with the
performance of the plan assets and movement in the liabilities
resulted in the Halma Group Pension Plan being funded over the
trustees' secondary funding target and close to the expected
current valuation on a solvency basis. As a result, it has been
agreed with the trustees of the Halma Group Pension Plan that
contributions will be suspended until 1 April 2025, when they will
either fall due or be superseded by cash contributions agreed with
the trustees in respect of the latest triennial actuarial
valuation.
We therefore expect contributions to the schemes in the 2023/24
financial year to be GBP4.2m. In the event that these payments
result in a surplus on winding up of the schemes, the Group has an
unconditional right to a refund under the plan rules.
Steve Gunning
Chief Financial Officer
Safety Sector Review
What the Safety Sector does
Our Safety Sector companies protect people, assets and
infrastructure and enable safe movement. Many of their products
also make the world cleaner and enhance efficiency. Their
technologies are used in public and commercial spaces and in
industrial and logistics operations.
The Safety Sector comprises companies which provide solutions to
a number of fundamental and enduring safety issues. These are: fire
safety, through fire detection and fire suppression solutions; safe
movement in public, commercial and industrial spaces; elevator
safety; communications in emergencies; control of access in
potentially hazardous industrial and commercial environments;
electrical safety; and the safe management of pipelines and storage
assets.
The Safety Sector has diverse end markets and a wide range of
customers. Its products and solutions are used to enhance safety
and efficiency in a broad spectrum of applications and end markets
including in: many different types of commercial buildings, for
example, shops and restaurants, healthcare facilities, offices and
stadiums; industrial and logistics assets; public spaces and
critical infrastructure, including roads, tunnels and
transportation hubs; and aerospace, rail and automotive
applications.
The Safety Sector's long-term growth drivers
The long-term growth of the sector continues to be driven by
increasing safety and environmental regulation , and by growing,
ageing and urbanising populations. Increasing automation and
accelerating demand for connected industrial and infrastructure
systems further underpin the sector's growth prospects, as its
customers have sought to benefit from the greater efficiency and
safety that can be derived from these innovations.
The increasingly urgent need to address the causes and impacts
of climate change continue to further enhance the growth
opportunities available to Safety Sector companies. This includes,
for example, increased demand for automated access solutions to
both increase efficiency, including by minimising heat loss in
commercial and industrial premises. Sector companies are also
supporting the drive towards renewable and cleaner energy sources
and uses, including through fire suppression in renewable energy
facilities, electrical testing of electric vehicles (EVs) and mass
transit systems, and increasing the efficiency of industrial
processes. They are also repurposing technology towards areas such
as carbon capture and hydrogen energy sources in sector businesses
which serve industrial customers.
Safety Sector performance in the year
The Safety Sector delivered a solid performance. Revenue growth
was very strong. Return on sales(1) was however lower than historic
norms as a consequence of supply chain impacts related to
electronic components. Investment in future growth continued,
including through increased R&D spend and acquisitions.
Revenue of GBP745.6m (2022: GBP641.4m) was 16.2% higher than in
the prior year. Year-on-year revenue growth on an organic constant
currency(1) basis was strong at 11.2%, with double digit growth in
both halves of the year. Growth was broadly spread, with all but
two companies delivering organic constant currency(1) revenue
growth. Sector companies continued to be agile in responding to
customer demand while addressing supply chain challenges, although
disruptions in a number of companies contributed to a small decline
in Adjusted(1) profit on an organic constant currency(1) basis.
Revenue growth on an organic constant currency(1) basis was
broadly spread across all four subsectors, with three achieving
double-digit growth. Industrial Safety's performance reflected
strong execution in two subsector companies and Power Safety saw
strong demand for interlock products in the electrical sector.
Growth on a reported basis also benefited from acquisitions
including WEETECH Holding GmbH (WEETECH) during the year. The
largest subsector, Fire Safety continued to grow strongly, having
seen substantial growth in the prior year, supported by organic
constant currency(1) revenue growth in all companies. Urban Safety
organic constant currency(1) revenue growth was good overall,
although performance was mixed with strong demand for automatic
access solutions and elevator systems partially offset by the end
of a significant road safety contract.
The sector's revenue performance by geography reflected these
themes. There was strong growth in the sector's largest two
geographies, the USA and Mainland Europe, both on a reported and
organic constant currency(1) basis. This included strong growth in
Industrial Safety in the USA, with Fire Safety and Urban Safety
performing strongly in Mainland Europe. The UK saw good growth on
an organic constant currency(1) basis led by its largest subsector,
Fire Safety, and there was strong momentum in Industrial Safety.
Urban Safety delivered a more mixed performance with the effect of
the end of the road safety contract mentioned above offsetting good
performance elsewhere. On a reported basis, UK growth was lower,
due to the non-recurrence of revenue from a disposal in the prior
year. Asia Pacific also saw good growth on an organic constant
currency(1) basis, led by a strong performance in Fire Safety,
which more than offset a decline in Urban Safety principally as a
result of lockdowns, and a non-recurring road safety contract in
China.
Profit(1) grew by 4.3% to GBP152.5m (2022: GBP146.2m), and
decreased by 1.1% on an organic constant currency(1) basis. Return
on Sales(1) decreased by 230 basis points to 20.5% (2022: 22.8%).
This reflected a strong comparator, which had benefited from cost
savings made during the pandemic, and supply chain disruptions in a
number of companies. These resulted in higher costs for electronic
components used in devices with current regulatory approvals, and
costs in recertifying devices to use alternative components. We
expect these disruptions to ease over the current financial year.
R&D expenditure of GBP41.0m remained at a good level,
representing 5.5% of revenue (2022: GBP35.6m; 5.6% of revenue).
The sector made four acquisitions in the year for an aggregate
consideration of approximately GBP207m (on a cash and debt free
basis and excluding acquisition costs). These included two new
standalone companies within the sector: WEETECH, which designs and
manufactures critical electrical testing technology, purchased in
October 2022; and FirePro Systems Limited, a designer and
manufacturer of aerosol-based fire suppression systems, which was
acquired shortly before the financial year end. Sector companies
also made two bolt-on acquisitions: Apollo Fire Detectors acquired
Thermocable (Flexible Elements) Ltd, a developer and manufacturer
of linear heat detectors; and Sentric purchased ZoneGreen Limited,
a provider of rail depot protection solutions.
The impact of acquisitions was a positive effect of 2.4% on
revenue and 2.3% on profit. The disposal of Texecom in the first
half of the prior year had a negative effect of 2.6% on revenue and
1.4% on profit. Currency exchange movements had a positive effect
of 5.2% on revenue and 4.5% on profit.
Environmental & Analysis Sector Review
What the Environmental & Analysis Sector does
Our Environmental & Analysis Sector companies provide
high-technology solutions, that monitor the environment and improve
the quality and availability of life-critical natural resources
such as air, water and food, and analyse materials in a wide range
of applications.
Their valuable solutions are technically differentiated through
strong levels of application knowledge in environmental monitoring,
water and waste water analysis and treatment, gas analysis and
detection, and optical analysis. They are supported by high levels
of customer responsiveness and often leverage digital, optical and
optoelectronic expertise.
They serve a wide variety of end markets with applications
across a very broad range of sectors and customers. Their end
markets include: water and waste water management and treatment,
including for water utilities; gas analysis and detection; food,
beverage, medical and bio-medical; communications; aquaculture;
research and science; inspection and maintenance of infrastructure
in water, for example, dams and offshore wind turbines; and a
variety of industrial markets.
The Environmental & Analysis Sector's long-term growth
drivers
The sector's long-term growth is sustained by rising demand for
life-critical resources, the impact of climate change, increasing
environmental regulations and worldwide population growth with
rising standards of living. It is underpinned by our ability to
design, develop and manufacture innovative, high-technology
detection and analysis solutions.
The increasingly urgent need to address climate change is
creating new opportunities in many of the sector's markets. It is
driving new policies globally, including initiatives to meet Net
Zero commitments through energy transition and sectoral
decarbonisation plans, as well as plans to increase adaptation and
resilience. Combined with the biodiversity crisis and an increasing
focus on plastics and waste, it is also driving new regulatory
initiatives to preserve life-critical resources. These include
initiatives such as, in the UK, Ofwat's investigations into waste
water treatment and internal sewer flooding to prevent
environmental degradation.
These and similar initiatives are creating growing long-term
opportunities for our companies to help their customers, for
example, to prevent emissions, detect leaks and analyse air and
water quality, and to support new technologies to address these
issues, such as renewable energy and storage, sustainable food
systems and mobility in cities.
Environmental & Analysis Sector performance in the year
The Environmental & Analysis Sector delivered a good
performance. Revenue of GBP552.1m (2022: GBP442.9m) was 24.7%
higher than in the prior year, and up 9.1% on an organic constant
currency(1) basis. Sector growth was driven by increasing demand
and supported by strong execution, in particular from the sector's
largest companies.
All subsectors grew revenue on an organic constant currency(1)
basis. Organic constant currency(1) growth was led by Environmental
Monitoring, where growth on a reported basis also benefited from
the acquisition of Deep Trekker, Inc. (Deep Trekker) during the
year. Organic constant currency(1) revenue growth was also strong
in our gas detection companies, supported by increasing demand for
products addressing the minimisation of emissions. Both the Optical
Analysis and the Water Analysis & Treatment subsectors saw good
organic constant currency(1) revenue growth, with Photonics within
Optical Analysis continuing to benefit from increasing demand for
technologies that support the building of digital and data
capabilities; and within the Water Analysis & Treatment
subsector, revenue grew more strongly in the second half of the
year following a pick-up in project tenders from UK utilities,
which offset lower order intake in our water testing and
disinfection companies, principally relating to products related to
consumer discretionary end-markets.
By region, the USA accounts for half of the sector's revenue,
and reported the highest organic constant currency(1) growth at
12%. Performance was strong across all four subsectors, supported
by further growth in a continuing large photonics contract within
Optical Analysis, increased demand including larger customer orders
in our gas detection companies, in products supporting the
transition to new sources of energy in Environmental Monitoring,
and international expansion from our water infrastructure companies
within Water Analysis & Treatment. Asia Pacific also grew
strongly, at 10% on an organic constant currency(1) basis, driven
by substantial growth in the flow and pressure control market
within Environmental Monitoring in India and China. Organic
constant currency(1) revenue growth was more modest in the UK and
Mainland Europe, with growth reflecting strengthening UK water
project spend in the second half of the year, and strong demand in
our gas detection companies in Mainland Europe.
In the other regions which represent about 6% of the sector's
revenue, our gas detection companies continued to benefit from a
recovery in the energy sector, which drove strong organic growth in
Africa, Near & Middle East, and there was a good contribution
to reported revenue growth in the other smaller regions from the
acquisition of Deep Trekker.
Profit(1) grew by 22.2% to GBP134.2m (2022: GBP109.8m), or by
7.1% on an organic constant currency(1) basis. Return on Sales(1)
decreased by 50 basis points to 24.3% (2022: 24.8%) . This
reflected a return to a level similar to the years before the
pandemic. Gross margin was marginally higher, driven by business
mix and good management of pricing. R&D expenditure of GBP28.6m
was maintained at a good level at 5.2% of revenue (2022: GBP22.8m;
5.1% of revenue).
The sector made one standalone acquisition during the year for a
consideration of approximately GBP38m: Deep Trekker, which is a
market-leading manufacturer of remotely operated underwater robots
used for inspection, surveying, analysis and maintenance, was
purchased in April 2022. Ocean Insight also made a small bolt-on
acquisition. Since the year end, there have been two further
acquisitions in the sector for a maximum total consideration of
approximately GBP57m: Sewertronics Sp. Z o.o., which designs and
manufactures equipment and associated consumables for wastewater
pipeline rehabilitation, was purchased as a standalone company in
May 2023; and Visual Imaging Resources LLC, which distributes and
services wastewater inspection equipment in North America, was
purchased in April 2023 as a bolt-on to Minicam. This good momentum
reflects the investment made in a dedicated M&A team for the
Environmental & Analysis Sector, and the increasing ability of
our individual companies to make bolt-on acquisitions to enhance
their technological capabilities and market reach.
The impact of acquisitions during the year contributed growth of
6.6% to revenue, and 5.9% to profit. Currency exchange movements
had a positive effect of 9.0% on revenue and 9.2% on profit.
Healthcare Sector Review
What the Healthcare Sector does
Our Healthcare Sector companies' technologies and digital
solutions help providers improve the care they deliver and enhance
the quality of patients' lives. Their products and technologies are
components, devices, systems and therapies critical to delivering
the required standards of care for patients.
Our Healthcare Sector companies deliver advanced technologies
and solutions in high value niches. These include: eye health,
where they support both diagnostics and surgical treatment;
monitoring and support of vital signs, including blood pressure and
respiration; products to assist with interventional radiology and
oncology and image guided surgery; synthetic bone grafts for
clinical applications; and artificial intelligence (AI) based early
warning systems and clinical decision support tools for
childbirth.
Sector companies also supply critical fluidic components for
diagnostic and analytical instruments, and sensor technologies to
track assets, increase efficiency, and support patient and staff
safety.
The Healthcare Sector operates across a wide range of healthcare
segments and settings, including ophthalmology, dentistry,
orthopedics, perinatal care, surgical intervention, diagnostics and
analytics. Its customers range from individual healthcare
professionals to large healthcare systems and medical device
original equipment manufacturers.
The Healthcare Sector's long-term growth drivers
The sector's long-term growth is supported by demographic
trends, technological innovation, and improving the standard of
care and increased efficiency.
Most countries in the world are experiencing growth in both the
size of population and the proportion of older people. By 2050, the
world's population of people aged 60 years and older is estimated
to double to 2.1 billion. The number of people aged 80 years or
older is forecast to triple by 2050 to reach 426 million. This is
expected to lead to an increased prevalence of chronic conditions,
driving demand for diagnostics and treatment. These factors are key
growth drivers for our Therapeutic Solutions businesses, given
their presence in the ophthalmic surgery, respiratory therapy, bone
replacement, interventional radiology, oncology and image-guided
surgery markets.
Technological innovations drive growth, by increasing the
capabilities of healthcare professionals to prevent, diagnose and
treat conditions, including remotely through telemedicine. They
contribute to improving standards of care and increasing efficiency
by enabling better, earlier, faster and more cost-effective
diagnosis and treatment of patients. This in turn leverages the
skills and availability of increasingly scarce healthcare staff.
These factors are strong growth drivers for our Patient Assessment
& Analytics businesses, such as PeriGen, whose AI-powered
algorithms prevent complications during childbirth, or CenTrak,
whose real-time location services improve safety, asset utilisation
and efficiency in healthcare facilities.
Rising patient demand, workforce shortages, and disruptions as a
result of the COVID pandemic have created substantial backlogs of
patients, which are likely to persist for many years. Our
Healthcare companies, through their innovative technologies and
deep application knowledge, are helping to address these global
health challenges.
Healthcare Sector performance in the year
The Healthcare Sector delivered a strong performance. Revenue of
GBP556.4m (2022: GBP442.3m) was 25.8% higher, and up 9.8% on an
organic constant currency(1) basis. Sector growth continued to be
supported by a strong order book, reflecting high patient caseload
levels and order backlogs, and by generally strong execution by
sector companies, with all but three companies delivering organic
constant currency(1) revenue growth, and five achieving organic
constant currency(1) revenue growth of 15% or more.
All subsectors grew revenue on an organic constant currency(1)
basis. Growth was led by Healthcare Assessment & Analytics,
which benefited from demand in vital signs monitoring, clinical
ophthalmology, and communication and software systems for
healthcare facilities. There was good organic constant currency(1)
growth in Therapeutic Solutions, supported by high patient caseload
levels in eye surgery; subsector growth on a reported basis also
benefited from the acquisition of IZI Medical Products, LLC (IZI)
during the year. There was only marginal growth on an organic
constant currency(1) basis in the smaller Life Sciences subsector,
however, principally reflecting the impact of lockdown restrictions
in China.
All regions except Asia Pacific reported double digit increases
in revenue, on both a reported and organic constant currency(1)
basis. On a reported basis, growth was strongest in the USA, which
accounts for more than half of sector revenues. This was led by
strong organic growth in communication and software systems for
healthcare facilities, and the region also benefited from the
positive effect of currency translation and the acquisition of IZI.
There was also strong revenue growth on an organic constant
currency(1) basis in Mainland Europe and the UK, driven by a
substantial backlog of demand for eye surgery products and for
communication systems for healthcare facilities respectively.
However, revenue in Asia Pacific declined on an organic constant
currency(1) basis, reflecting lockdowns in China, which represents
close to half of the region's revenues.
Profit(1) grew by 30.8% to GBP130.1m (2022: GBP99.5m), or by
14.0% on an organic constant currency basis. Return on Sales(1)
improved by 90 basis points to 23.4% (2022: 22.5%). This reflected
a stable gross margin, which included a beneficial product mix and
good management of pricing and material costs, and operational
efficiencies. R&D expenditure increased to GBP33.1m,
representing 5.9% of revenue (2022: GBP26.9m; 6.1% of revenue),
reflecting continued high levels of investment in new product
development.
The sector made one acquisition during the year: IZI was
purchased in September 2022 for a maximum total consideration of
GBP151m. IZI is a US-based designer, manufacturer and distributor
of medical consumable devices which are mainly used by
interventional radiologists and surgeons in a range of acute,
hospital based diagnostic and therapeutic procedures.
Acquisitions had a positive effect of 4.7% on revenue and 4.0%
on profit. Currency exchange movements had a positive effect of
11.3% on revenue and 12.8% on profit.
Principal Risks and Uncertainties
01. Innovation & Digital
Risk Owner: Risk and impact How do we manage the risk?
Chief Innovation Failing to innovate Halma's digital innovation strategy
and Digital Officer to create new high-quality focuses on the education of
Inherent risk products to meet customer our companies around customer
level: Critical needs whilst capturing centricity and the incubation
digital and sustainability and acceleration of innovation
Residual risk growth opportunities, across the companies. This includes
level: High or failure to adequately regular promotion, training
protect intellectual and monitoring of agile or lean
Residual risk property, resulting start-up ways of working in
change: in a loss of market companies. As the I&D team execute
Marginal increase share and poor financial on their strategy over time,
Risk appetite: performance. we expect that the companies
Seeking Risk evolution will develop greater capabilities
The risk score was on innovation and digital as
minimally they drive their product strategies.
adjusted during the The strategy delivery is supported
year based on a new by an innovation champions network
estimate of the missed and partnerships, conferences,
opportunity of failing development programmes and innovation
to innovate. awards which help spread and
reward ideas across the Group.
Sectors also play a key role
in promoting active collaboration
between companies to share ideas
and experiences and reviewing
R&D budgets and projects to
ensure that the spend effectively
supports the growth strategy
in targeted markets. Sector
M&A activity is also targeted
to help address innovation and
R&D gaps, in line with sector-specific
initiatives. Key R&D and innovation
metrics are periodically reviewed
to measure positive impact.
Product development is devolved
to our companies who are closest
to the customer. Companies are
encouraged to develop and protect
intellectual property, and focus
on talent and retention to ensure
there is sufficient expertise
within the business.
--------------------------- -----------------------------------------------------------
02. Talent and Diversity
Risk Owner: Risk and impact How do we manage the risk?
Group Talent, Not having the right We have comprehensive recruitment
Culture and Communications talent and diversity processes to recruit the brightest
Director at all levels of the talent, including the "Future
Inherent risk organisation to deliver Leaders" programme to attract
level: High our strategy, resulting and develop graduates into future
in reduced financial leadership roles.
Residual risk performance. The Senior Management reward
level: High Risk evolution structure is aligned with strategic
During the year, a number priorities of companies, sectors
Residual risk of initiatives started and Group and DEI targets. Periodic
change: in 2022 were finalised review of reward packages to
No change and fully implemented, ensure competitiveness, benchmark
Risk appetite: such as a diversity, with the market and alignment
Open equity and inclusion with high long-term growth.
target for the Managing An Annual Performance and Development
Director level. The Review process is in place for
year saw the Group Chief sector and Executive Board members.
Executive and Chief The Nomination Committee reviews
Financial Officer succession and development plans
transitions, annually. A strategic review
which, although brings of sector board and company
an inherent risk, have leadership talent is performed
been extensively planned, annually to identify and develop
significantly mitigating future leaders.
the risk. Overall the Programmes to develop talent
risk level remains in and enhance skills (including
line with the prior climate and sustainability-related
year. skills) are in place across
our companies.
An annual employee engagement
survey is carried out to provide
insight into employee sentiment,
including alignment between
strategy and objectives and
clarity to employees about their
contribution towards achieving
objectives.
--------------------------- -----------------------------------------------------------
03. Acquisitions and Investments
Risk Owner: Risk and impact How do we manage the risk?
Group Chief Executive Failing to achieve our Acquisitions are a core element
Inherent risk strategic growth target of Halma's sustainable growth
level: Critical for acquisitions and model; hence the Group has a
investments due to clear strategy that allows us
Residual risk insufficient to take advantage of new growth
level: High opportunities being opportunities through the acquisition
identified, poor due of companies in our existing
Residual risk diligence or poor or adjacent markets.
change: integration, Regular reporting of the acquisition
Increased resulting in erosion pipeline to the Executive Board
Risk appetite: of shareholder value. and the Board. All acquisitions
Open Risk evolution are reviewed and approved by
During the year, the the Group Chief Executive, Chief
risk level rose due Financial Officer and Board.
to the increasingly Dedicated M&A Directors who
challenging macroeconomic support the sectors in their
(i.e. increased cost acquisition strategy, from pipeline
of capital and debt) development to the delivery
and geopolitical of the acquisition. A robust
environment. due diligence process is carried
The highly volatile out for all acquisitions by
external environment experienced staff who bring
increases the complexity in specialist expertise as required,
of finding deals that and low-carbon transition risk
are able to deliver and opportunity reviews are
on our inorganic growth built into our standalone M&A
strategy and are at process.
the right level of risk Strategic transformation plans
appetite. Given their and clear processes are in place
role in the acquisition for new acquisitions to enable
strategy, we recognise them to achieve their growth
that the Group Chief potential whilst integrating
Executive and Chief into the Group (including from
Financial Officer combined a control framework and compliance
change might be seen perspective).
as introducing a certain Internal Audit reviews are performed
level of risk. This within 12 months of acquisition
potential risk is to assess the effectiveness
adequately of the required control framework
mitigated by the strength for standalone acquisitions.
of well established Post-acquisition reviews are
end-to-end M&A processes performed for all acquisitions
led by experienced teams. after 12 months to ensure strategic
Furthermore, the Group objectives are being met and
Chief Executive and to identify learnings for future
the Group Financial acquisitions.
Offer have extensive Minority equity investments
M&A experience gained are assessed through the lenses
both internally to Halma of Halma's investment framework
and externally, which and executed in line with an
further mitigates this established acquisition process
risk. which ensures an appropriate
level of assessment and oversight.
Minority investments are regularly
reviewed by the Investment committee,
and "Lessons learnt reviews"
are carried out to improve the
existing processes.
--------------------------- -----------------------------------------------------------
04. Cyber
Risk Owner: Risk and impact How do we manage the risk?
Chief Technology Loss of digital Cyber risk is owned by the CTO
Officer intellectual at an executive level, who periodically
Inherent risk property/ updates the Board and Audit
level: Critical data or ability to Committee.
operate systems or All employees are required to
Residual risk connected comply with the IT Acceptable
level: Medium devices due to internal Use Policy. Regular online IT
failure or external awareness training is provided
Residual risk attack. There is resulting for all employees who use computers.
change: loss of information A group-wide IT framework is
Marginal increase or ability to continue in place, periodically reviewed
Risk appetite: operations, and therefore and includes Cyber risk policies
Averse financial and reputational and procedures. Companies confirm
damage. the effectiveness of their most
Risk evolution critical IT controls (including
The inherent risk level documented and tested disaster
increased during the recovery plans for critical
year due to the systems and infrastructure)
continuously every six months through the
evolving landscape of Internal Control Certification
external cyber threats, process. The Internal Audit
however it is mitigated & Assurance Team periodically
by the delivery of and independently tests these
investments controls.
to upgrade the There are central and local
cybersecurity IT resources maintaining and
defence. The finalisation sharing updated technical knowledge.
of the current initiatives The central technology resources
is crucial to keep the are available to companies to
risk within the risk help them better manage cyber
appetite. risk.
Cyber threats are monitored
and reported upon every two
months for all parts of the
Group.
Group-wide Incident Management
Policy and Crisis communications
plans are in place. Access to
cyber expertise is available
should a cyberattack occur.
--------------------------- -----------------------------------------------------------
05. Economic and Geopolitical Uncertainty
Risk Owner: Risk and impact How do we manage the risk?
Group Chief Executive Failure to anticipate The diverse portfolio of companies
Inherent risk or adapt to macroeconomic across the sectors, in multiple
level: Critical and geopolitical changes, countries and in relatively
resulting in a decline non-cyclical global niche markets
Residual risk in financial performance with secular long-term growth
level: Medium and an impact on the drivers helps to minimise the
carrying value of goodwill impact of any single event.
Residual risk and other assets. This Monitoring mechanisms are established
change: risk remains elevated at Group, sector and company
Increased in certain geographies levels, including:
Risk appetite: due to geopolitical * Regular monitoring and assessment of emerging trends
Cautious events such as the and potential risks and opportunities relating to
conflict economic or geopolitical uncertainties.
in Ukraine and US/ China
trade relations .
Risk evolution * Monitoring of end market exposure and changes in key
During the year, the end markets due to macroeconomic factors.
overall risk level
increased,
triggered by the higher * Financial warning signs KPIs give earlier indications
level of inherent risk of potential problems, and half-yearly assessments of
due to the macroeconomic the carrying value of goodwill and other assets are
situation and increasing performed.
geopolitical complexities.
During the year, a deep
dive risk assessment In line with Halma's model,
was carried out to assess the risk is managed at the local
the Group's exposure company level through decentralised
to key macroeconomic decision-making and autonomy
and geopolitical risks, to rapidly adjust to changing
which resulted in an circumstances. The companies
enhanced monitoring have robust credit management
process for relevant processes in place and operations,
geopolitical risk factors. cash deposits and sources of
Halma remains resilient funding in uncertain regions
to macroeconomic are kept to a minimum.
volatility The Group provides continuous
due to growth drivers support to company boards and
linked to highly regulated DCEs to navigate geopolitical
markets, demand for changes (including when these
healthcare and changes are triggered by disorderly
life-critical low-carbon transition scenarios).
resources, and growing Halma's financial strength and
efforts to address climate availability of pooled resources
change, waste and in the Group can be deployed,
pollution. if needed, to further mitigate
the risk.
--------------------------- -----------------------------------------------------------
06. Non-compliance with Laws and Regulations
Risk Owner: Risk and impact How do we manage the risk?
Group General We are not fully compliant Legal compliance is owned by
Counsel & Chief with relevant laws and the Group General Counsel &
Sustainability regulations, resulting Chief Sustainability Officer
Officer in fines, reputational at an executive level, who periodically
Inherent risk damage and possible updates the Board and Audit
level: Critical criminal liability for Committee. Group policies, procedures
Halma senior management. and guidance are in place, setting
Residual risk Risk evolution out the Group's requirements
level: Low The marginal increase from a compliance and regulatory
in the risk likelihood perspective. Companies confirm
Residual risk is primarily driven the effectiveness of their most
change: by the increasing critical legal compliance controls
Marginal increase complexity every six months through the
Risk appetite: of the regulatory Internal Control Certification
Averse environment process. The Internal Audit
and the growth of our & Assurance Team periodically
companies and the Group. and independently tests these
Effective mitigating controls. Group Legal, Sustainability
controls are in place & Governance (LSG) Team advises
to mitigate the current on legislative and regulatory
risk and take a proactive changes relevant to the Group
approach to this as a listed company. All employees
increasingly are required to sign to confirm
challenging context. that they have read and understood
the Halma Code of Conduct. An
ongoing compliance training
programme is in place for Group
and its companies. A whistleblowing
hotline is available to all
employees and third parties
to raise concerns over the lack
of compliance and misconduct.
These are independently followed
up and investigated. The Group
LSG Team resources, including
the Deputy General Counsels,
who sit on the sector boards,
and a panel of high-quality
external legal advisors, are
available to sectors and companies
to help them better manage legal
compliance risks, including
during due diligence processes.
The board of each company is
accountable for identifying
and monitoring what laws are
relevant to their business,
including any emerging or changing
legislation, and for ensuring
commercial legal risks are appropriately
managed. Claims and litigation
risks are reported to Group
by all companies every six months.
Material legal issues and risks
are reported to and discussed
by the Board every quarter.
Appropriate levels of Group
insurance cover are maintained.
A crisis management plan exists
to manage communications and
the reputational risk for Halma
and/or its companies.
--------------------------- -----------------------------------------------------------
07. Natural Hazards, including Climate Change
Risk Owner: Risk and impact How do we manage the risk?
Group General There is a risk we are Halma operates in end markets
Counsel & Chief unable to respond to with strong long-term growth
Sustainability large scale disasters drivers contributing to a low-carbon
Officer or natural catastrophes economy and lower risks of disruptions
Inherent risk such as hurricanes, due to natural hazards. Our
level: Medium floods, fires or business model is expected to
pandemics, be resilient to climate-related
Residual risk as well as longer term risks, due to Halma's highly
level: Low changes to the climate diversified portfolio of companies
such as increasing water and agile business model, which
Residual risk scarcity and temperatures, enable our companies to quickly
change: resulting in the inability address challenges caused by
No change of one or more of our natural hazards and climate
Risk appetite: businesses to operate, change.
Averse causing financial loss The geographical diversity of
and reputational damage. Halma's companies reduces the
This risk includes impact of any single event,
potential and the companies' manufacturing
impacts from physical capabilities can be leveraged,
climate change on our in case of need, to provide
supply chains. flexibility to support the companies
Risk evolution affected.
The reassessment of All companies are required to
the climate-related have business continuity and
risks and opportunities disaster recovery plans in place
confirmed the risk level which are tested periodically
to be in line with the and tailored to manage the specific
prior year. More risks they are most likely to
information face. The Group has a crisis
is available in our management plan to manage communications
TCFD Statement in the and the reputational risk for
Annual Report & Accounts. Halma and/or its companies.
Business interruption insurance
is in place to mitigate any
financial loss that may occur
from natural hazards. Climate
risk and opportunity review
processes and governance are
in place, and we continue to
work with our companies to help
them manage disruption risks
within their supply chains.
More information on climate-related
risks is available in the TCFD
Statement in the Annual Report
& Accounts.
--------------------------- -----------------------------------------------------------
08. Organic Growth
Risk Owner: Risk and impact How do we manage the risk?
Group Chief Executive Failing to deliver desired Halma has a clear Group strategy
Inherent risk organic growth, resulting to achieve growth targets through
level: Critical in missed expected the organic growth of Halma's
strategic companies, which is accelerated
Residual risk growth targets and erosion by the Halma Growth Enablers
level: Low of shareholder value. and the Halma DNA. The remuneration
This risk includes of companies' executives and
Residual risk potential above is based on profit growth.
change: impacts from the Net Companies achieve organic growth
No change Zero transition on our through the continuous focus
Risk appetite: supply chain. on the development of an agile
Open Risk evolution business model and a culture
During the year, the of innovation to take advantage
delivery of the organic of new growth opportunities
growth targets has been as they arise.
continuously challenged Company strategies are reviewed
by the economic and and challenged by the sector
geopolitical environment, to ensure they are aligned with
however the ability the Group strategy and organic
to fulfil strategic growth targets. Sector management
growth targets remains ensures that the Group strategy
strong. is fulfilled through ongoing
review and chairing of companies.
Regional hubs, for example those
located in China and India,
support local strategic growth
initiatives for all companies.
Potential new partnerships and
investments are comprehensively
assessed for future organic
growth prospects.
Companies continuously focus
on attracting and developing
the best talent to deliver Halma's
organic growth strategy effectively.
At a Group level, the annual
strategic planning process,
the annual budget and the monthly
12-month rolling forecast enable
a review of the effectiveness
of the delivery of the organic
growth strategy through control
over the Balance Sheet and the
Profit & Loss.
Climate risk and opportunity
review processes and governance
are in place, and we continue
to work with our companies to
help them manage transition
risks within their supply chains.
--------------------------- -----------------------------------------------------------
09. Business Model and its Communication
Risk Owner: Risk and impact How do we manage the risk?
Group Chief Executive Failing to clearly The Halma Sustainable Growth
Inherent risk articulate Model is at the core of the
level: High or adapt our business Group strategy and a key success
model as Halma grows factor underpinning the Group's
Residual risk through exploring and ability to deliver returns for
level: Low implementing additional its stakeholders.
or new business models, The sector and Executive Boards
Residual risk resulting in missed perform periodic reviews to
change: growth opportunities identify opportunities which
No change and erosion of shareholder may require a new organisational
Risk appetite: value. approach or evolutions of the
Cautious This risk includes meeting existing approach.
increasing or shifting The current model is challenged
shareholder expectations through the lenses of the learnings
around climate change from past experience and through
and sustainability. the continuous search and exploration
Risk evolution of innovative ideas and opportunities
During the year, the to grow and scale the Group
risk appetite has been as the global economic environment
reassessed and reduced evolves.
from "Open" to "Cautious" The Board performs strategic
to capture the fact reviews of the business model
that although Halma's to consider the strengths and
sustainable growth model weaknesses of the existing model
is constantly challenged and the need to make changes.
and fine-tuned to ensure The Group has a clear strategy
that it enables the to communicate its business
companies to grow, these model to internal and external
evolutions are carefully stakeholders, which is crucial
thought through, and to the successful execution
a low level of risk of the Group's sustainable growth
is sought. strategy.
The inherent and residual Regular communications and updates
risk level remains in on the business model underpin
line with the prior the delivery of the communication
year. strategy. These target Group,
sector and company boards throughout
the year and are integral to
the recruiting and onboarding
process.
Sustainability, including climate
change, is integral to Halma's
strategy at all levels. Sustainability
strategies are regularly reviewed
and discussed in the companies,
sectors and, Executive Board
as well as at the Board.
Sustainability networks are
in place to share learnings
and promote awareness in our
companies. There are central
growth-enabling resources with
sustainability-related knowledge
which are available to sectors
and companies to help them better
manage sustainability risks
and opportunities.
--------------------------- -----------------------------------------------------------
10. Product Failure or Non-compliance
Risk Owner: Risk and impact How do we manage the risk?
Group Chief Executive A failure in one of Our companies manufacture and
Inherent risk our products, including assemble a wide variety of product
level: High due to non-compliance types across different geographies
with product regulations, and end markets. They are, therefore,
Residual risk may result in severe experts in their trade and carry
level: Low injuries, death, financial the responsibility for complying
loss and reputational with relevant product safety
Residual risk damage, which might and quality requirements, obtaining
change: be amplified in cases relevant accreditations and
Marginal increase of large contracts. all necessary product certifications.
Risk appetite: Risk evolution Halma's companies have adopted
Averse During the year, the customised sets of controls
risk likelihood saw to achieve high-quality standards
a marginal increase - these might include but are
to reflect the not limited to:
current/historical * Strict product development and rigorous testing
cases' frequency and procedures.
the potential challenge
posed by the Medical
Device Regulation (MDR) * Clear requirements for suppliers to ensure safety and
to achieve regulatory quality.
compliance for some
of the products of our
Healthcare Sector * Quality checks on products received from suppliers.
companies
produced for the European
market. MDR is a key * Monitoring of defects and warranty returns.
focus within the
Healthcare
Sector which is * Traceability of product.
coordinating
several risk-mitigating
initiatives (e.g. * Obtaining ISO 9001 certification, where relevant.
regulatory
monitoring, knowledge
sharing amongst * Product compliance with regulations is checked as
companies). part of due diligence for any new acquisition.
* Ensuring employees have appropriate quality-related
skills.
Furthermore, potential liabilities
are limited as much as possible
through terms and conditions
of sale and liability insurance
cover.
--------------------------- -----------------------------------------------------------
11. Liquidity
Risk Owner: Risk and impact How do we manage the risk?
Chief Financial There is a risk that A clear liquidity management
Officer the Group's cash/funding strategy is a core pillar of
Inherent risk resources are inadequate the Halma financial model.
level: Critical to support its activities The strong cash flow generated
or there is a breach by the Group provides financial
Residual risk of funding terms. flexibility, together with a
level: Low Risk evolution revolving credit facility.
Due to the strength Treasury policy and procedures
Residual risk of Halma's cash-generation provide comprehensive guidance
change: model and the tight to the Group and companies on
No change controls over liquidity, banking and transactions, including
Risk appetite: the residual risk remains required approvals for drawdowns
Averse low, in line with the and all new or renewed sources
prior year. We renewed of funding.
our syndicated credit Cash needs and the Group cash
facility during the position are monitored regularly
year, which remains through the review of the 12-month
at GBP550m, and now rolling forecast, of the three-years
matures in May 2028 liquidity forecast and of current
and completed a new and forecast covenant compliance.
Private Placement of The currency mix of debt is
GBP330m with a seven reviewed annually, and on acquiring
year average life. or disposing of a business.
--------------------------- -----------------------------------------------------------
12. Financial Controls
Risk Owner: Risk and impact How do we manage the risk?
Chief Financial Failure in financial Group policies, procedures and
Officer controls either on its guidance are in place, setting
Inherent risk own or via a fraud which out the Group's requirements
level: High takes advantage of a for financial controls. Companies
weakness, resulting confirm the effectiveness of
Residual risk in financial loss and/or their most critical financial
level: Very low misstated reported controls (including segregation
financial of duties, delegation of authorities
Residual risk results. and financial accounts reconciliations)
change: Risk evolution every six months through the
No change No significant risk Internal Control Certification
Risk appetite: factors have been process. The Internal Audit
Averse identified & Assurance Team periodically
at both inherent and and independently tests these
residual risk levels controls.
during the year. Sector and Group finance teams
We continuously challenge, perform regular reviews of financial
review and enhance our reporting and indicators. Six-monthly
financial controls and peer reviews of reported results
the processes across for each company are performed
the Group, which ensure to provide an independent challenge.
these are effective Ongoing training of finance
whilst we continue to personnel (including finance
closely monitor the teams of newly acquired companies)
developments of the on Halma's policies and financial
UK Corporate Governance control framework.
Code. Companies' directors have legal
and operational responsibilities
as they are statutory directors
of their companies. This fits
with Halma's decentralised model
and contributes to ensuring
an effective financial control
environment is in place.
--------------------------- -----------------------------------------------------------
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 as at 31
March 2023, its cash flows, liquidity position and borrowing
facilities are set out in the Strategic Report. In addition, the
Annual Report and Accounts 2023 contains further information
concerning the security, currency, interest rates and maturity of
the Group's borrowings.
The financial statements have been prepared on a going concern
basis. In adopting the going concern basis the Directors have
considered all of the above factors, including potential scenarios
and its principal risks set out above. Under the potential
scenarios considered, which includes a severe but plausible
downside scenario, the Group remains within its debt facilities and
the attached financial covenants for the foreseeable future and the
Directors therefore believe, at the time of approving the financial
statements, that the Company is well placed to manage its business
risks successfully and remains a going concern. The key facts and
assumptions in reaching this determination are summarised
below.
The base case scenario has been prepared using forecasts from
each operating company as well as cash outflows on acquisitions in
line with pre Covid pandemic levels. In addition, a severe but
plausible downside scenario has been modelled showing a decline in
trading for the year ending 31 March 2024. This reduction in
trading could be caused by events such as a significant resurgence
in COVID-19 lockdowns beyond China or continued macroeconomic
volatility leading to further inflation and interest rate
increases. In mitigating the impacts of the downside scenario there
are actions that can be taken which are entirely discretionary to
the business such as reducing acquisition spend and dividend growth
rates. In addition, the Group has demonstrated strong resilience
and flexibility to manage its overheads and adapt its supply chains
during the COVID pandemic and more recent global economic
uncertainty.
Neither the base case nor severe but plausible downside
scenarios result in a breach of the Group's available debt
facilities or the attached covenants and, accordingly, the
Directors believe there is no material uncertainty in the use of
the going concern assumption and, therefore, deem it appropriate to
continue to adopt the going concern basis of accounting for at
least the next 12-month period.
Our financial position remains robust with committed facilities
at the balance sheet date totalling approximately GBP931m which
includes a GBP550m Revolving Credit Facility (RCF). The undrawn
committed facilities as at 31st March 2023 amounted to GBP255.7m.
In May 2022, the RCF was refinanced and now matures in May 2028,
the first of two one-year extension options having been exercised
post year-end. During May 2022, the Group also entered into a new
Note Purchase Agreement which provided access to loan notes
totalling GBP330m, which were drawn in various currencies in July
2022. The financial covenants across the facilities are for
leverage (net debt/adjusted EBITDA) of not more than three and a
half times and for adjusted interest cover of not less than four
times.
Viability Statement
During the year, the Board carried out a robust assessment of
the principal risks affecting the Group, including those that would
threaten its business model, future performance, solvency or
liquidity. The principal risks and uncertainties, including an
analysis of the potential impact and mitigating actions are set out
above.
The Board has assessed the viability of the Group over a
three-year period, taking into account the Group's current position
and the potential impact of the principal risks and uncertainties.
While the Board has no reason to believe that the Group will not be
viable over a longer period, it has determined that three years is
an appropriate period. In drawing its conclusion, the Board has
aligned the period of viability assessment with the Group's
strategic planning process (a three-year period). The Board
believes that this approach provides greater certainty over
forecasting and, therefore, increases reliability in the modelling
and stress testing of the Company's viability. In addition, a
three-year horizon is typically the period over which we review our
external bank facilities and is also the performance-based period
over which awards granted under Halma's share-based incentive plan
are measured.
In reviewing the Company's viability, the Board has identified
the following factors which they believe support their assessment:
-------------------------------------------------------------------------------------------------------------
1 2 3 4 5
------------------ ---------------------- --------------------- ------------------------- ---------------
The Group operates There is considerable The decentralised There is a An ethical
in diverse financial capacity nature of our strong culture approach to
and relatively under current Group ensures of local responsibility business is
non-cyclical facilities that risk is and accountability set from the
markets with and the ability spread across within a robust top and flows
long term growth to raise further our businesses governance throughout
drivers. funds if required. and sectors, and control our business.
with limited framework.
exposure to
any particular
industry, market,
geography, customer
or supplier.
In making their assessment, the Board carried out a
comprehensive exercise of financial modelling and stress-tested the
model with a downside scenario based on the principal risks
identified in the Group's annual risk assessment process. The
scenarios modelled used the same assumptions as for the going
concern review, as set out above, for the years ending 31 March
2024 and 31 March 2025 with further assumptions applied for the
year ending 31 March 2026. The base case reflects the latest
forecasts and strategic plans of the business. The downside
scenario included a reduction in trading for the year to 31 March
2024 which could be caused by a significant downside event with the
addition of impacts from other of the Group's principal risks such
as litigation or product failure.
For the years ending 31 March 2025 and 31 March 2026 the
downside scenario reflects growth at half the rate modelled in the
base case. In both scenarios, the effect on the Group's KPls and
borrowing covenants was considered, along with any mitigating
factors. Based on this assessment, the Board confirms that they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the three-year period to 31 March 2026.
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 year to 31 March 2023. Certain parts thereof are not included
within these Results.
Each of the Directors, whose names and functions are listed in
the Annual Report and Accounts 2023, confirm that, to the best of
their knowledge:
-- the Group financial statements, which have been prepared in
accordance with UK-adopted international accounting standards, give
a true and fair view of the assets, liabilities, financial position
and profit of the Group;
-- the company financial statements, which have been prepared in
accordance with United Kingdom Accounting Standards, comprising FRS
101, give a true and fair view of the assets, liabilities and
financial position of the company; and
-- the Strategic Report and the Directors' Report includes a
fair review of the development and performance of the business and
the position of the Group and company, together with a description
of the principal risks and uncertainties that it faces.
This responsibility statement was approved by the Board of
Directors on 15 June 2023.
Marc Ronchetti Steve Gunning
Group Chief Executive Chief Financial Officer
Results for the year to 31 March 2023
Consolidated Income Statement
Year ended 31 March Year ended 31 March
2023 2022
--------------------------- ----- -------------------------------- ---------------------------------
Adjustments*
Adjustments* Adjusted (note
Adjusted* (note 1) Total * 1) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ----- --------- ------------ ------- ---------- ------------ -------
Continuing operations
Revenue 1 1,852.8 - 1,852.8 1,525.3 - 1,525.3
--------------------------- ----- --------- ------------ ------- ---------- ------------ -------
Operating profit 378.2 (69.8) 308.4 324.7 (45.8) 278.9
Share of loss of associate - - - (0.1) - (0.1)
Profit on disposal of
operations 9 - - - - 34.0 34.0
Finance income 4 1.8 - 1.8 0.6 - 0.6
Finance expense 5 (18.7) - (18.7) (9.0) - (9.0)
--------------------------- ----- --------- ------------ ------- ---------- ------------ -------
Profit before taxation 361.3 (69.8) 291.5 316.2 (11.8) 304.4
Taxation 6 (72.9) 15.7 (57.2) (68.3) 8.1 (60.2)
--------------------------- ----- --------- ------------ ------- ---------- ------------ -------
Profit for the year 1 288.4 (54.1) 234.3 247.9 (3.7) 244.2
--------------------------- ----- --------- ------------ ------- ---------- ------------ -------
Attributable to:
Owners of the parent 234.5 244.4
Non-controlling interests (0.2) (0.2)
--------------------------- ----- --------- ------------ ------- ---------- ------------ -------
Earnings per share 2
From continuing operations
Basic 76.34p 62.04p 65.48p 64.54p
Diluted 61.86p 64.42p
Dividends in respect
of the year 7
Paid and proposed (GBPm) 76.3 71.5
Paid and proposed per
share 20.20p 18.88p
--------------------------- ----- --------- ------------ ------- ---------- ------------ -------
* Adjustments include the amortisation and impairment of
acquired intangible assets; acquisition items; significant
restructuring costs, and profit or loss on disposal of operations;
and the associated taxation thereon. Note 3 provides more
information on alternative performance measures.
Consolidated Statement of Comprehensive Income and
Expenditure
Year
ended Year ended
31 March 31 March
2023 2022
Notes GBPm GBPm
------------------------------------------------------- ----- --------- ----------
Profit for the year 234.3 244.2
Items that will not be reclassified subsequently
to the Consolidated Income Statement:
Actuarial (losses)/gains on defined benefit pension
plans (8.8) 41.6
Tax relating to components of other comprehensive
income that will not be reclassified 6 1.2 (9.6)
Unrealised changes in the fair value of equity
investments at fair value through other comprehensive
income 6.1 (1.7)
Items that may be reclassified subsequently
to the Consolidated Income Statement:
Effective portion of changes in fair value of
cash flow hedges 1.3 (1.5)
Deferred tax in respect of cash flow hedges accounted
for in the hedging reserve 6 (0.3) 0.4
Exchange gains on translation of foreign operations
and net investment hedge 45.1 43.9
------------------------------------------------------- ----- --------- ----------
Other comprehensive income for the year 44.6 73.1
------------------------------------------------------- ----- --------- ----------
Total comprehensive income for the year 278.9 317.3
------------------------------------------------------- ----- --------- ----------
Attributable to
Owners of the parent 279.2 317.5
Non-controlling interests (0.3) (0.2)
------------------------------------------------------- ----- --------- ----------
The exchange gains of GBP45.1m (2022: gains of GBP43.9m)
includes losses of GBP7.4m (2022: losses of GBP8.6m) which relate
to net investment hedges.
Consolidated Balance Sheet
31 March 31 March
2023 2022
GBPm GBPm
--------------------------------------------- -------- --------
Non-current assets
Goodwill 1,120.5 908.7
Other intangible assets 472.3 325.2
Property, plant and equipment 222.9 194.0
Interest in associates and other investments 21.0 8.2
Retirement benefit asset 38.4 31.1
Tax receivable 14.7 14.7
Deferred tax asset 3.0 2.4
--------------------------------------------- -------- --------
1,892.8 1,484.3
--------------------------------------------- -------- --------
Current assets
Inventories 312.4 228.8
Trade and other receivables 410.7 325.1
Tax receivable 1.5 0.7
Cash and bank balances 169.5 157.4
Derivative financial instruments 1.5 0.7
--------------------------------------------- -------- --------
895.6 712.7
--------------------------------------------- -------- --------
Total assets 2,788.4 2,197.0
--------------------------------------------- -------- --------
Current liabilities
Trade and other payables 280.7 242.7
Borrowings 1.0 72.5
Lease liabilities 19.2 15.5
Provisions 21.0 20.7
Tax liabilities 18.4 11.6
Derivative financial instruments 0.9 0.9
--------------------------------------------- -------- --------
341.2 363.9
--------------------------------------------- -------- --------
Net current assets 554.4 348.8
--------------------------------------------- -------- --------
Non-current liabilities
Borrowings 677.3 287.6
Lease liabilities 68.7 56.6
Retirement benefit obligations 0.5 0.6
Trade and other payables 21.9 19.0
Provisions 9.7 7.7
Deferred tax liabilities 70.2 58.5
--------------------------------------------- -------- --------
848.3 430.0
--------------------------------------------- -------- --------
Total liabilities 1,189.5 793.9
--------------------------------------------- -------- --------
Net assets 1,598.9 1,403.1
--------------------------------------------- -------- --------
Equity
Share capital 38.0 38.0
Share premium account 23.6 23.6
Own shares (46.1) (30.7)
Capital redemption reserve 0.2 0.2
Hedging reserve 0.6 (0.4)
Translation reserve 162.3 117.1
Other reserves* 4.4 (1.7)
Retained earnings* 1,415.8 1,256.6
--------------------------------------------- -------- --------
Equity attributable to owners of the parent 1,598.8 1,402.7
--------------------------------------------- -------- --------
Non-controlling interests 0.1 0.4
--------------------------------------------- -------- --------
Total equity 1,598.9 1,403.1
--------------------------------------------- -------- --------
*See footnote to the Consolidated Statement of Changes in Equity
below.
The financial statements of Halma plc, company number 00040932,
were approved by the Board of Directors on 15 June 2023.
Marc Ronchetti Steve Gunning
Director Director
Consolidated Statement of Changes in Equity
Share Capital Non-
Share premium Own redemption Hedging Translation Other Retained controlling
capital account shares reserve reserve reserve reserves earnings interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------- ------- ------- ---------- -------- ----------- -------- -------- ----------- -------
At 1 April
2022 38.0 23.6 (30.7) 0.2 (0.4) 117.1 (1.7) 1,256.6 0.4 1,403.1
Profit for the
year - - - - - - - 234.5 (0.2) 234.3
Other
comprehensive
income and
expense - - - - 1.0 45.2 6.1 (7.6) (0.1) 44.6
-------------- ------- ------- ------- ---------- -------- ----------- -------- -------- ----------- -------
Total
comprehensive
income and
expense - - - - 1.0 45.2 6.1 226.9 (0.3) 278.9
Dividends paid - - - - - - - (73.3) - (73.3)
Share-based
payment
charge - - - - - - - 17.7 - 17.7
Deferred tax
on
share-based
payment
transactions - - - - - - - (0.7) - (0.7)
Excess tax
deductions
related to
share-based
payments on
vested
awards - - - - - - - - - -
Purchase of
own
shares - - (22.3) - - - - - - (22.3)
Performance
share
plan awards
vested - - 6.9 - - - - (11.4) - (4.5)
At 31 March
2023 38.0 23.6 (46.1) 0.2 0.6 162.3 4.4 1,415.8 0.1 1,598.9
-------------- ------- ------- ------- ---------- -------- ----------- -------- -------- ----------- -------
Share Capital Non-
Share premium Own redemption Hedging Translation Other Retained controlling
capital account shares reserve reserve reserve reserves earnings interest Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------- ------- ------- ---------- -------- ----------- -------- -------- ----------- -------
At 1 April
2021 38.0 23.6 (20.9) 0.2 0.7 73.2 (13.6) 1,065.8 0.6 1,167.6
Transfer
between
reserves* - - - - - - 13.6 (13.6) - -
-------------- ------- ------- ------- ---------- -------- ----------- -------- -------- ----------- -------
Restated at 1
April
2021 38.0 23.6 (20.9) 0.2 0.7 73.2 - 1,052.2 0.6 1,167.6
Profit for the
year - - - - - - - 244.4 (0.2) 244.2
Other
comprehensive
income and
expense - - - - (1.1) 43.9 (1.7) 32.0 - 73.1
-------------- ------- ------- ------- ---------- -------- ----------- -------- -------- ----------- -------
Total
comprehensive
income and
expense - - - - (1.1) 43.9 (1.7) 276.4 (0.2) 317.3
Dividends paid - - - - - - - (68.7) - (68.7)
Share-based
payment
charge - - - - - - - 12.2 - 12.2
Deferred tax
on
share-based
payment
transactions - - - - - - - (0.2) - (0.2)
Excess tax
deductions
related to
share-based
payments on
vested
awards - - - - - - - 1.3 - 1.3
Purchase of
own
shares - - (19.3) - - - - - - (19.3)
Performance
share
plan awards
vested - - 9.5 - - - - (16.6) - (7.1)
-------------- ------- ------- ------- ---------- -------- ----------- -------- -------- ----------- -------
At 31 March
2022 38.0 23.6 (30.7) 0.2 (0.4) 117.1 (1.7) 1,256.6 0.4 1,403.1
-------------- ------- ------- ------- ---------- -------- ----------- -------- -------- ----------- -------
Own shares are ordinary shares in Halma plc purchased by the
Company and held to fulfil the Company's obligations under the
Group's share plans.
The market value of own shares was GBP42.4m (2022:
GBP29.5m).
The Capital redemption reserve was created on repurchase and
cancellation of the Company's own shares. The Hedging reserve is
used to record the portion of the cumulative net change in fair
value of cash flow hedging instruments that are deemed to be an
effective hedge.
The Translation reserve is used to record the difference arising
from the retranslation of the financial statements of foreign
operations, offset by net investment hedges with a carrying value
of GBP33.9m (2022: GBP26.5m). The Other reserves represent the
cumulative fair value adjustments on equity instruments held at
fair value through other comprehensive income.
* Effective for the year ended 31 March 2022, the share-based
payment reserve, which was previously presented in Other reserves
has been amalgamated with Retained earnings, in the Consolidated
Statement of Changes in Equity and the Consolidated Balance Sheet
as permitted by IFRS 2. This resulted in the GBP13.6m debit in
brought forward Other reserves at 1 April 2021 being transferred to
Retained earnings. There is no change in Total equity from this
change, nor the amounts charged or credited to the reserves during
the period, which represents a change in presentational accounting
policy only.
Consolidated Cash Flow Statement
Year ended Year ended
31 March 31 March
2023 2022
Notes GBPm GBPm
---------------------------------------------------- ----- ---------- ----------
Net cash inflow from operating activities 10 258.0 237.4
---------------------------------------------------- ----- ---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment - owned
assets (29.0) (25.2)
Purchase of computer software (0.8) (0.9)
Purchase of other intangibles (0.3) (0.5)
Proceeds from sale of property, plant and equipment
and capitalised development costs 3.1 1.1
Development costs capitalised (15.8) (13.4)
Interest received 0.7 0.2
Acquisition of businesses, net of cash acquired 8 (320.1) (152.8)
Disposal of business, net of cash disposed 9 - 57.5
Purchase of equity investments (6.7) (0.7)
---------------------------------------------------- ----- ---------- ----------
Net cash used in investing activities (368.9) (134.7)
---------------------------------------------------- ----- ---------- ----------
Cash flows from financing activities
Dividends paid (73.3) (68.7)
Purchase of own shares (22.3) (19.3)
Interest paid (17.5) (8.2)
Loan arrangement fees (4.1) -
Proceeds from bank borrowings 10 451.8 161.4
Repayment of bank borrowings 10 (394.2) (132.5)
Repayment of acquired debt on acquisition 10 (65.1) -
Drawdown of loan notes 10 338.1 -
Repayment of loan notes 10 (74.4) -
Repayment of lease liabilities, net of interest (18.0) (14.6)
---------------------------------------------------- ----- ---------- ----------
Net cash from/(used in) financing activities 121.0 (81.9)
---------------------------------------------------- ----- ---------- ----------
Increase in cash and cash equivalents 10 10.1 20.8
Cash and cash equivalents brought forward 156.7 131.1
Exchange adjustments 1.7 4.8
---------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents carried forward 10 168.5 156.7
---------------------------------------------------- ----- ---------- ----------
Year ended Year ended
31 March 31 March
2023 2022
Notes GBPm GBPm
------------------------------------------------------ ----- ---------- ----------
Reconciliation of net cash flow to movement in
net debt
Increase in cash and cash equivalents 10.1 20.8
Net cash inflow from bank borrowings and loan
notes 10 (256.1) (28.9)
Net debt acquired 10 (65.1) -
Lease liabilities additions and accretion of interest (24.9) (19.0)
Lease liabilities acquired (9.3) (4.6)
Lease liabilities disposed of - 2.1
Lease liabilities and interest repaid 20.9 16.8
Exchange adjustments 2.5 (5.8)
------------------------------------------------------ ----- ---------- ----------
Increase in net debt (321.9) (18.6)
------------------------------------------------------ ----- ---------- ----------
Net debt brought forward (274.8) (256.2)
------------------------------------------------------ ----- ---------- ----------
Net debt carried forward (596.7) (274.8)
------------------------------------------------------ ----- ---------- ----------
Accounting Policies
Basis of presentation
The consolidated financial statements of Halma are prepared in
accordance with UK-adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
The principal Group accounting policies are explained below and
have been applied consistently throughout the years ended 31 March
2023 and 31 March 2022, other than those noted below.
The Group accounts have been prepared under the historical cost
convention, except as described below under the headings
'Derivative financial instruments and hedge accounting', 'Financial
assets at fair value through other comprehensive income (FVOCI)',
'Pensions' and 'Business combinations and goodwill'.
New Standards and Interpretations applied for the first time in
the year ended 31 March 2023
The following Standards with an effective date of 1 January
2022, have been adopted without any significant impact on the
amounts reported in these financial statements:
-- Reference to the Conceptual Framework - Amendments to IFRS 3
-- Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16
-- Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37
-- Annual Improvements to IFRS 2018- 2020
New Standards and Interpretations not yet applied
At the date of authorisation of these financial statements, the
following Standards and Interpretations that are potentially
relevant to the Group, and which have not been applied in these
financial statements, were in issue but not yet effective (and in
some cases had not yet been adopted by the UK):
-- IFRS 17 Insurance Contracts
-- Classification of Liabilities as Current or Non-current -
Amendments to IAS 1 - Not yet endorsed by the UK
-- Definition of Accounting Estimates - Amendments to IAS 8
-- Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
-- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
-- Lease Liability in a Sale and Leaseback - Amendments to IFRS 16
-- Classification of Liabilities as Current or Non-current and
Non-current Liabilities with Covenants - Amendments to IAS 1 - Not
yet endorsed by the UK
-- Amendments to IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments: Disclosures - Not yet endorsed by the UK
-- Amendments to IAS 12 International Tax Reform Pillar Two
Model Rule - Not yet endorsed by the UK
The Directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material impact
on the financial statements of the Group.
Use of Alternative performance measures (APMs)
In the reporting of the financial information, the Group uses
certain measures that are not required under IFRS, the Generally
Accepted Accounting Principles (GAAP) under which the Group
reports. The Directors believe that Return on Total Invested
Capital (ROTIC), Return on Capital Employed (ROCE), Organic growth
at constant currency, Adjusted profit and earnings per share
measures, net debt, cash conversion and Adjusted operating cash
flow provide additional and more consistent measures of underlying
performance to shareholders by removing items that are not closely
related to the Group's trading or operating cash flows. These and
other alternative performance measures are used by the Directors
for internal performance analysis and incentive compensation
arrangements for employees. The terms ROTIC, ROCE, organic growth
at constant currency and 'adjusted' are not defined terms under
IFRS and may therefore not be comparable with similarly titled
measures reported by other companies. They are not intended to be a
substitute for, or superior to, GAAP measures.
The principal items which are included in adjusting items are
set out below in the Group's accounting policy and in note 1. The
term 'adjusted' refers to the relevant measure being reported for
continuing operations excluding adjusting items.
Definitions of the Group's material alternative performance
measures along with reconciliation to their IFRS equivalent measure
are included in note 3.
Key accounting policies
Below we set out our key accounting policies, with a list of all
other accounting policies thereafter.
Going concern
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 as at 31
March 2023, its cash flows, liquidity position and borrowing
facilities are set out in the Strategic Report. In addition, the
Annual Report and Accounts 2023 contains further information
concerning the security, currency, interest rates and maturity of
the Group's borrowings.
The financial statements have been prepared on a going concern
basis. In adopting the going concern basis the Directors have
considered all of the above factors, including potential scenarios
and its principal risks set out above. Under the potential
scenarios considered, which includes a severe but plausible
downside scenario, the Group remains within its debt facilities and
the attached financial covenants for the foreseeable future and the
Directors therefore believe, at the time of approving the financial
statements, that the Company is well placed to manage its business
risks successfully and remains a going concern. The key facts and
assumptions in reaching this determination are summarised
below.
The base case scenario has been prepared using forecasts from
each Operating Company as well as cash outflows on acquisitions in
line with pre Covid pandemic levels. In addition, a severe but
plausible downside scenario has been modelled showing a decline in
trading for the year ending 31 March 2024. This reduction in
trading could be caused by events such as a significant resurgence
in the Covid pandemic lockdowns beyond China or continued
macroeconomic volatility leading to further inflation and interest
rate increases. In mitigating the impacts of the downside scenario
there are actions that can be taken which are entirely
discretionary to the business such as reducing acquisition spend
and dividend growth rates. In addition, the Group has demonstrated
strong resilience and flexibility to manage its overheads and adapt
its supply chains during the COVID pandemic and more recent global
economic uncertainty.
Neither the base case nor severe but plausible downside
scenarios result in a breach of the Group's available debt
facilities or the attached covenants and, accordingly, the
Directors believe there is no material uncertainty in the use of
the going concern assumption and, therefore, deem it appropriate to
continue to adopt the going concern basis of accounting for at
least the next 12-month period.
Our financial position remains robust with committed facilities
at the balance sheet date totalling approximately GBP931m which
includes a GBP550m Revolving Credit Facility (RCF). The undrawn
committed facilities as at 31 March 2023 amounted to GBP255.7m. In
May 2022, the RCF was refinanced and now matures in May 2028, the
first of two one-year extension options having been exercised post
year-end. During May 2022, the Group also entered into a new Note
Purchase Agreement which provided access to loan notes totalling
GBP330m, which were drawn in various currencies in July 2022. The
financial covenants across the facilities are for leverage (net
debt/adjusted EBITDA) of not more than three and a half times and
for adjusted interest cover of not less than four times.
Business combinations and goodwill
Business combinations are accounted for using the acquisition
method as at the acquisition date, which is the date on which
control is transferred to the Group. The Group measures goodwill at
the acquisition date as:
-- the fair value of the consideration transferred; plus
-- the recognised amount of any non-controlling interests in the
acquiree measured at the proportionate share of the value of net
identifiable assets acquired; plus
-- the fair value of the existing equity interest in the acquiree; less
-- the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed.
Costs related to the acquisition, other than those associated
with the issue of debt or equity securities, are expensed as
incurred. Any contingent consideration payable may be accounted for
as either:
a) Consideration transferred, which is recognised at fair value
at the acquisition date. If the contingent purchase consideration
is classified as equity, it is not remeasured and settlement is
accounted for within equity. Otherwise, subsequent changes to the
fair value of the contingent purchase consideration are recognised
in the Consolidated Income Statement; or
b) Remuneration, which is expensed in the Consolidated Income
Statement over the associated period of service. An indicator of
such treatment includes when payments to employees of the acquired
company are contingent on a post-acquisition event, but may be
automatically forfeited on termination of employment.
For acquisitions between 4 April 2004 (the date from which the
financial statements were reported under IFRS) and 2 April 2010,
goodwill represents the difference between the cost of the
acquisition, including acquisition costs and the fair value of the
net identifiable assets acquired. Goodwill has an indefinite
expected useful life and is not amortised, but is tested annually
for impairment.
Goodwill is recognised as an intangible asset in the
Consolidated Balance Sheet. Goodwill therefore includes
non-identified intangible assets including business processes,
buyer-specific synergies, know-how and workforce-related
industry-specific knowledge and technical skills. Negative goodwill
arising on acquisitions would be recognised directly in the
Consolidated Income Statement.
On closure or disposal of an acquired business, goodwill would
be taken into account in determining the profit or loss on closure
or disposal.
As permitted by IFRS 1, the Group elected not to apply IFRS 3
'Business Combinations' to acquisitions prior to 4 April 2004 in
its consolidated accounts. As a result, the net book value of
goodwill recognised as an intangible asset under UK GAAP at 3 April
2004 was brought forward unadjusted as the cost of goodwill
recognised under IFRS at 4 April 2004 subject to impairment testing
on that date; and goodwill that was written off to reserves prior
to 28 March 1998 under UK GAAP will not be taken into account in
determining the profit or loss on disposal or closure of previously
acquired businesses from 4 April 2004 onwards.
Payments for contingent consideration are classified as
investing activities within the Consolidated Cash Flow Statement,
except for amounts paid in excess of that estimated in the
acquisition balance sheets which are recognised in the net cash
inflow from operating activities in the year together with
movements in contingent consideration provisions charged/credited
to the Consolidated Income Statement which is included as a
reconciling item between operating profit and cash inflow from
operating activities.
Intangible assets
(a) Acquired intangible assets
An intangible resource acquired with a subsidiary undertaking is
recognised as an intangible asset if it is separable from the
acquired business or arises from contractual or legal rights, is
expected to generate future economic benefits and its fair value
can be measured reliably. Acquired intangible assets, comprising
trademarks, technology and know-how and customer relationships, are
amortised through the Consolidated Income Statement on a
straight-line basis over their estimated economic lives of between
three and 20 years. The carrying value of intangible assets is
reviewed for impairment if events or changes in circumstances
indicate the carrying value may not be recoverable.
(b) Product development costs
Research expenditure is charged to the Consolidated Income
Statement in the financial year in which it is incurred.
Development expenditure is expensed in the financial year in
which it is incurred, unless it relates to the development of a new
or substantially improved product, is incurred after the technical
feasibility and economic viability of the product has been proven
and the decision to complete the development has been taken, and
can be measured reliably. Such expenditure, meeting the recognition
criteria of IAS 38 'Intangible Assets', is capitalised as an
intangible asset in the Consolidated Balance Sheet at cost and is
amortised through the Consolidated Income Statement on a
straight-line basis over its estimated economic life of three
years.
Pensions
The Group makes contributions to various pension plans.
For defined benefit plans, the asset or liability recorded in
the Consolidated Balance Sheet is the difference between the fair
value of the plan's assets and the present value of the defined
obligation at that date. The defined benefit obligation is
calculated separately for each plan on an annual basis by
independent actuaries using the projected unit credit method.
Actuarial gains and losses are recognised in full in the period
in which they occur and are taken to other comprehensive
income.
Current and past service costs, along with the impact of any
settlements or curtailments, are charged to the Consolidated Income
Statement. The net interest expense on pension plans' liabilities
and the expected return on the plans' assets is recognised within
finance expense in the Consolidated Income Statement.
Contributions to defined contribution plans are charged to the
Consolidated Income Statement in the period the expense relates
to.
Impairment of trade and other receivables
The Group assesses on a forward-looking basis the expected
credit losses associated with its trade and other receivables
carried at amortised cost. The impairment methodology applied
depends on whether there has been a significant increase in credit
risk.
The Group applies the simplified approach permitted by IFRS 9,
which requires expected lifetime losses to be recognised from
initial recognition of the receivables. In order to estimate the
expected lifetime losses, the Group categorises its customers into
groups with similar risk profiles and determines the historic rates
of impairment for each of those categories of customer. The Group
then adjusts the risk profile for each group of customers by using
forward looking information, such as the government risk of default
for the country in which those customers are located, and
determines an overall probability of impairment for the total trade
and other receivables at the balance sheet date.
Critical accounting judgements and key sources of estimation
uncertainty
The preparation of Group accounts in conformity with IFRS
requires the Directors to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experiences and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
In preparing the Consolidated Financial Statements management
has considered the impact of climate change, particularly in the
context of the disclosures included in the Strategic Report and the
stated Net Zero ambitions. These considerations did not have a
material impact on the financial reporting judgements and estimates
in the current year. Climate change is not expected to have a
significant impact on the Group's going concern assessment as at
March 2023 nor the viability of the Group over the next three
years.
The following areas of critical accounting judgement and key
estimation uncertainty have been identified as having significant
risk of causing a material adjustment to the carrying amounts of
assets and liabilities:
Critical accounting judgements
Goodwill impairment CGU groups
Determining whether goodwill is impaired requires management's
judgement in assessing cash generating unit (CGU) groups to which
goodwill should be allocated. Management allocates a new
acquisition to a CGU group based on which one is expected to
benefit most from that business combination. The allocation of
goodwill to existing CGU groups is generally straightforward and
factual, however over time as new businesses are acquired and
management reporting structures change, management reviews the CGU
groups to ensure they are still appropriate. There have been no
changes to the CGU groups in the current year.
Recoverability of non-current taxation assets
In the current year, determining the recoverability of tax
assets requires management's judgement in assessing the amounts
paid in relation to group financing partial exemption applicable to
UK controlled foreign companies as a result of the decision by the
European Commission that this constitutes state aid. Management's
assessment is that this represents a contingent liability and that
the GBP14.7m paid to HM Revenue & Customs (HMRC) in previous
years, included within non-current assets on the Consolidated
Balance Sheet, will ultimately be recovered.
Key sources of estimation uncertainty
Contingent consideration changes in estimates
Determining the value of contingent consideration recognised as
part of the acquisition of a business requires management to
estimate the expected performance of the acquired business and the
amount of contingent consideration that will therefore become
payable. Initial estimates of expected performance are made by the
management responsible for completing the acquisition and form a
key component of the financial due diligence that takes place prior
to completion. Subsequent measurement of contingent consideration
is based on the Directors' appraisal of the acquired business's
performance in the post-acquisition period and the agreement of
final payments.
Intangible assets
Intangible assets IFRS 3 (revised) 'Business Combinations'
requires that goodwill arising on the acquisition of subsidiaries
is capitalised and included in intangible assets. IFRS 3 (revised)
also requires the identification and valuation of other separable
intangible assets at acquisition. The assumptions involved in
valuing these intangible assets require the use of management
estimates.
IAS 38 'Intangible Assets' requires that development costs,
arising from the application of research findings or other
technical knowledge to a plan or design of a new or substantially
improved product, are capitalised, subject to certain criteria
being met. Determining the technical feasibility and estimating the
future cash flows generated by the products in development requires
the use of management estimates.
The estimates made in relation to both acquired intangible
assets and capitalised development costs include identification of
relevant assets, future growth rates, expected inflation rates and
the discount rate used. Management also make estimates of the
useful economic lives of the intangible assets. Management engages
third party specialists to assist with the valuation of acquired
intangible assets for significant acquisitions. Depending on the
nature of the assets the Group uses different valuation
methodologies to arrive at the fair value including the excess
earnings method, the relief from royalty method and the cost
savings method. Financial projections are based on market
participants' expectations and are discounted to their present
value using rates of return which reflects the risk of the
investment and the time value of money.
Goodwill and acquired intangibles impairment future cash
flows
The 'value in use' calculation used to test for impairment of
goodwill and acquired intangibles involves an estimation of the
present value of future cash flows. For annual impairment testing
of goodwill, the future cash flows of the CGU Group are based on
annual budgets and forecasts of each relevant CGU, as approved by
the Board, to which management's expectation of market-share and
long-term growth rates are applied. The present value is then
calculated based on management's estimate of future discount and
growth rates. The Board reviews these key assumptions (operating
assumptions, long-term growth rates, and discount rates) and the
sensitivity analysis around these. Management believes that there
is no reasonably possible change in any of the key assumptions that
would cause the carrying value of any CGU group to exceed its
recoverable amount.
Acquired intangibles are assessed each reporting period for any
indicators of impairment, both qualitative and quantitative,
including as a result of our assessments of climate-related risks.
If there are deemed to be any indicators of impairment a 'value in
use' calculation is performed over the remaining useful life of the
asset to identify if any impairment is needed. Where required, in
calculating the 'value in use', future cash flows are based on
annual budgets and forecasts for the relevant business. The present
value is then calculated based on management's estimate of future
discount and growth rates. The Board and management reviews these
key assumptions (operating assumptions, growth rates, and discount
rates) and the sensitivity analysis around these.
Defined benefit pension plan liabilities
Determining the value of the future defined benefit
asset/obligation requires estimation in respect of the assumptions
used to calculate present values of plan liabilities. The
significant assumptions utilised in the calculations are future
mortality, discount rate and inflation. Management determines these
assumptions in consultation with an independent actuary.
Other accounting policies
Basis of consolidation
The Group accounts include the accounts of Halma plc and all of
its subsidiary companies made up to 31 March 2023, adjusted to
eliminate intra-Group transactions, balances, income and expenses.
The results of subsidiary companies acquired or disposed are
included from the month of their acquisition or to the month of
their disposal.
Segmental reporting
An operating segment is a distinguishable component of the Group
that is engaged in business activities from which it may earn
revenues and incur expenses, and whose operating results are
reviewed regularly by the Chief Operating Decision Maker (the Group
Chief Executive) to make decisions about resources to be allocated
to the segment and assess its performance, and for which discrete
financial information is available.
Reportable segments are operating segments that either meet the
thresholds and conditions set out in IFRS 8 or are considered by
the Board to be appropriately designated as reportable segments.
Segment result represents operating profits and includes an
allocation of Head Office expenses. Segment result excludes tax and
financing items. Segment assets comprise goodwill, other intangible
assets, property, plant and equipment and Right-of-Use assets
(excluding land and buildings), inventories, trade and other
receivables.
Segment liabilities comprise trade and other payables,
provisions and other payables. Unallocated items represent land and
buildings (including Right-of-Use assets), corporate and deferred
taxation balances, defined benefit plan asset/obligation,
contingent purchase consideration, all components of net
cash/borrowings, lease liabilities and derivative financial
instruments.
From 1 April 2022, the Group aligned its organisational
structure and financial reporting with its purpose and focus on
safety, environmental and health markets. The Group now has three
main operating and reportable segments (Safety, Environmental &
Analysis and Healthcare), which are defined by markets rather than
product type. Each segment includes businesses with similar
operating and market characteristics and are consistent with the
internal reporting as reviewed by the Group Chief Executive.
Revenue
The Group's revenue streams are the sale of goods and services
in the specialist safety, environmental technologies and health
markets. The revenue streams are disaggregated into three sectors,
that serve like markets. Those sectors are Safety, Environmental
& Analysis and Healthcare.
Revenue is recognised at the point of the transfer of control
over promised goods or services to customers in an amount that
reflects the amount of consideration specified in a contract with a
customer, to which the Group expects to be entitled in exchange for
those goods or services.
It is the Group's judgement that in the majority of sales there
is no contract until such time as the Operating Company satisfies
its performance obligation, at which point the contract becomes the
Operating Company's terms and conditions resulting from the
supplier's purchase order. Where there are Master Supply
Arrangements, these are typically framework agreements and do not
contain clauses that would result in a contract forming under IFRS
15 until a Purchase Order is issued by the customer.
Revenue represents sales, net of estimates for variable
consideration, including rights to returns, and discounts, and
excluding value added tax and other sales related taxes. The amount
of variable consideration is not considered to be material to the
Group as a whole. The transaction price is allocated to each
performance obligation on a relative standalone selling price
basis.
Performance obligations are unbundled in each contractual
arrangement if they are distinct from one another. There is
judgement in identifying distinct performance obligations where the
product could be determined to be a system, or where a combination
of products and services are provided together. For the majority of
the Group's activities the performance obligation is judged to be
the component product or service rather than the system or combined
products and services. The contract price is allocated to the
distinct performance obligations based on the relative standalone
selling prices of the goods or services.
The way in which the Group satisfies its performance obligations
varies by business and may be on shipment, delivery, as services
are rendered or on completion of services depending on the nature
of product and service and terms of the contract which govern how
control passes to the customer. Revenue is recognised at a point in
time or over time as appropriate.
Where the Group offers warranties that are of a service nature,
revenue is recognised in relation to these performance obligations
over time as the services are rendered. In our judgement we believe
the associated performance obligations accrue evenly across the
contractual term and therefore revenue is recognised on a pro-rated
basis over the length of the service period.
In a small number of instances across the Group, products have
been determined to be bespoke in nature, with no alternative use.
Where there is also an enforceable right to payment for work
completed, the criteria for recognising revenue over time have been
deemed to have been met. Revenue is recognised on an input basis as
work progresses. Progress is measured with reference to the actual
cost incurred as a proportion of the total costs expected to be
incurred under the contract. This is not a significant part of the
Group's business as for the most part, where goods are bespoke in
nature, it is the Group's judgement that the product can be broken
down to standard component parts with little additional cost and
therefore has an alternate use, or there is no enforceable right to
payment for work performed. In these cases, the judgement is made
that the requirements for recognising revenue over time are not met
and revenue is recognised when control of the finished product
passes to the customer.
The Group applies the practical expedient in IFRS 15 (paragraph
63) and does not adjust the promised amount of consideration for
the effects of a significant financing component if the Group
expects, at contract inception, that the period between the
transfer of a promised good or service to a customer and when the
customer pays for that good or service will be one year or
less.
Operating profit
Operating profit is presented net of direct production costs,
production overheads, selling costs, distribution costs and
administrative expenditure. Operating profit is stated after
charging restructuring costs but before the share of results of
associates, profit or loss on disposal of operations, finance
income and finance costs.
Adjusting items
When items of income or expense are material and they are
relevant to an understanding of the entity's financial performance,
they are disclosed separately within the financial statements. This
provides additional and more consistent measures of underlying
performance to shareholders by removing items that are not closely
related to the Group's trading or operating cash flows. Such
adjusting items include costs or reversals arising from
acquisitions or disposals of businesses, including acquisition
costs, creation or reversals of provisions related to changes in
estimates for contingent consideration on acquisition, amortisation
and impairment of acquired intangible assets, and other significant
one-off items that may arise.
Deferred government grant income
Government grant income that is linked to capital expenditure is
deferred to the Consolidated Balance Sheet and credited to the
Consolidated Income Statement over the life of the related asset.
In addition, the Group claims research and development expenditure
credits arising on qualifying expenditure and shows these 'above
the line' in operating profit. Where the credits arise on
expenditure that is capitalised as part of internally generated
capitalised development costs, the income is deferred to the
Consolidated Balance Sheet and credited to the Consolidated Income
Statement over the life of the related asset in line with the
policy stated above.
Finance income and expenses
The Group recognises interest income or expense using the
effective interest rate method. Finance income and finance costs
include:
-- Interest payable on loans, borrowings and lease obligations.
-- Net interest charge on pension plan liabilities.
-- Amortisation of finance costs.
-- Interest receivable in respect of cash and cash equivalents.
-- Unwinding of the discount on provisions.
-- Fair value movements on derivative financial instruments.
The Group has classified interest income and expenses within
financing activities in the Consolidated Cash Flow Statement.
Taxation
Taxation comprises current and deferred tax. Tax is recognised
in the Consolidated Income Statement except to the extent that it
relates to items recognised directly in Total equity, in which case
it too is recognised in Total equity. Current tax is the expected
tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at the balance sheet date, along
with any adjustment to tax payable in respect of previous years.
Taxable profit differs from net profit as reported in the
Consolidated Income Statement because it excludes items that are
never taxable or deductible.
Deferred tax is provided on temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes and is
accounted for using the balance sheet liability method, apart from
the following differences which are not provided for: goodwill not
deductible for tax purposes; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit; and
differences relating to investments in subsidiaries to the extent
they will probably not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amounts of assets and
liabilities, using tax rates and laws, which are expected to apply
in the year when the liability is settled, or the asset is
realised. Deferred tax assets are only recognised to the extent
that recovery is probable.
Foreign currencies
The Group presents its accounts in Sterling. Transactions in
foreign currencies are recorded at the rate of exchange at the date
of the transaction. Monetary assets and liabilities denominated in
foreign currencies at the balance sheet date are reported at the
rates prevailing at that date. Non-monetary assets and liabilities
denominated in foreign currencies are measured in terms of
historical costs using the exchange rate at the date of the initial
transaction. Any gain or loss arising on monetary assets and
liabilities from subsequent exchange rate movements is included as
an exchange gain or loss in the Consolidated Income Statement.
Net assets of overseas subsidiary companies are expressed in
Sterling at the rates of exchange ruling at the end of the
financial year, and trading results and cash flows at the average
rates of exchange for the financial year. Goodwill arising on the
acquisition of a foreign business is treated as an asset of the
foreign entity and is translated at the rate of exchange ruling at
the end of the financial year. Exchange gains or losses arising on
these translations are taken to the Translation reserve within
Total equity.
In the event that an overseas subsidiary is disposed of or
closed, the profit or loss on disposal or closure will be
determined after taking into account the cumulative translation
difference held within the Translation reserve attributable to that
subsidiary. As permitted by IFRS 1, the Group has elected to deem
the translation to be GBPnil at 4 April 2004. Accordingly, the
profit or loss on disposal or closure of foreign subsidiaries will
not include any currency translation differences which arose before
4 April 2004.
Other intangible assets
(a) Computer software
Computer software that is not integral to an item of property,
plant or equipment is recognised separately as an intangible asset
and is amortised through the Consolidated Income Statement on a
straight-line basis from the point at which the asset is ready to
use over its estimated economic life of between three and five
years.
Development costs that are directly attributable to the design
and testing of identifiable and unique software products controlled
by the Group are recognised as intangible assets where the
following criteria are met:
-- it is technically feasible to complete the software so that it will be available for use;
-- management intends to complete the software and use or sell it;
-- there is an ability to use or sell the software;
-- it can be demonstrated how the software will generate probable future economic benefits;
-- adequate technical, financial and other resources to complete
the development and to use or sell the software are available;
and
-- the expenditure attributable to the software during its
development can be reliably measured.
Where the Group enters into a SaaS cloud computing arrangement
to access software, there are limited cases for capitalisation of
attributable implementation costs. If the arrangement contains a
lease as defined by IFRS 16, lease accounting rules apply including
capitalisation of directly attributable costs. Alternatively,
directly attributable software costs can create an intangible asset
if the software can be controlled by the entity, either through the
option to be run on the entity's or a third-party's infrastructure
or where the development of the software creates customised
software that the entity has exclusive rights to.
(b) Other intangibles
Other intangibles are amortised through the Consolidated Income
Statement on a straight-line basis over their estimated economic
lives of between three and ten years.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less
provisions for accumulated impairment and accumulated depreciation
which, with the exception of freehold land which is not
depreciated, is provided on a straight-line basis over each asset's
estimated economic life. The principal annual rates used for this
purpose are:
Freehold property 2%
------------------------------------- -----------------------
Shorter of 2% or period
Leasehold buildings and improvements of lease
------------------------------------- -----------------------
Plant, equipment and vehicles 8% to 33.3%
------------------------------------- -----------------------
Investments in associates
An associate is an entity over which the Group is in a position
to exercise significant influence, but not control or joint
control, through participation in the financial and operating
policy decisions of the investee. Significant influence is the
power to participate in the financial and operating policy
decisions of the investee but without control or joint control over
those policies.
The results and assets and liabilities of associates are
incorporated in these financial statements using the equity method
of accounting. Investments in associates are carried in the
Consolidated Balance Sheet at cost as adjusted by post-acquisition
changes in the Group's share of the net assets of the associate,
less any impairment in the value of individual investments. Losses
of an associate in excess of the Group's interest in that associate
(which includes any long-term interests that, in substance, form
part of the Group's net investment in the associate) are recognised
only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the
associate.
Any excess of the cost of acquisition over the Group's share of
the fair values of the identifiable net assets of the associate at
the date of acquisition is recognised as goodwill. The goodwill is
included within the carrying amount of the investment and is
assessed for impairment as part of that investment. Any deficiency
of the cost of acquisition below the Group's share of the fair
values of the identifiable net assets of the associate at the date
of acquisition (i.e. discount on acquisition) is credited in profit
or loss in the year of acquisition.
Where a Group company transacts with an associate of the Group,
profits and losses are eliminated to the extent of the Group's
interest in the relevant associate. Losses may provide evidence of
an impairment of the asset transferred in which case appropriate
provisioning is made for impairment.
Where the Group disposes of its entire interest in an associate
a gain or loss is recognised in the income statement on the
difference between the amount received on the sale of the associate
less the carrying value and costs of disposal.
Financial assets at fair value through other comprehensive
income
Financial assets at fair value through other comprehensive
income (FVOCI) comprise equity securities which are not held for
trading, and which the Group has irrevocably elected at initial
recognition to recognise as FVOCI. The Group considers this
classification relevant as these are strategic investments.
Financial assets at FVOCI are adjusted to the fair value of the
asset at the balance sheet date with any gain or loss being
recognised in other comprehensive income and held as part of other
reserves. On disposal any gain or loss is recognised in other
comprehensive income and the cumulative gains or losses are
transferred from other reserves to retained earnings.
Impairment of non-current assets
All non-current assets are tested for impairment whenever events
or circumstances indicate that their carrying value may be
impaired. Additionally, goodwill and capitalised development
expenditure relating to a product that is not yet in full
production are subject to an annual impairment test.
An impairment loss is recognised in the Consolidated Income
Statement to the extent that an asset's carrying value exceeds its
recoverable amount, which represents the higher of the asset's
'fair value less costs to dispose' and its 'value in use'. An
asset's 'value in use' represents the present value of the future
cash flows expected to be derived from the asset or from the cash
generating unit to which it relates. The present value is
calculated using a pre-tax discount rate that reflects the current
market assessment of the time value of money and the risks specific
to the asset concerned.
Impairment losses recognised in previous periods for an asset
other than goodwill are reversed if there has been a change in the
estimates used to determine the asset's recoverable amount, but
only to the extent that the carrying amount of the asset does not
exceed its carrying amount had no impairment loss been recognised
in previous periods. Such reversals are recognised in the
Consolidated Income Statement. Impairment losses in respect of
goodwill are not reversed.
Inventories
Inventories and work in progress are included at the lower of
cost and net realisable value. Cost is calculated either on a
'first in, first out' or an average cost basis and includes direct
materials and the appropriate proportion of production and other
overheads considered by the Directors to be attributable to
bringing the inventories to their location and condition at the
year end. Net realisable value represents the estimated selling
price less all estimated costs to complete and costs to be incurred
in marketing, selling and distribution.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, deposits with
an initial maturity of less than three months, and bank overdrafts
that are repayable on demand.
Contract assets and liabilities
A contract asset is recognised when the Group's right to
consideration is conditional on something other than the passage of
time, for example the completion of future performance obligations
under the terms of the contract with the customer.
In some instances, the Group receives payments from customers
based on a billing schedule, as established in the contract, which
may not match with the pattern of performance under the contract. A
contract liability is only recognised on non-cancellable contracts
that provide unconditional rights to payment from the customer for
products and services that the Group has not yet completed
providing or that it will provide in the near future. Where
performance obligations are satisfied ahead of billing then a
contract asset will be recognised.
Contract assets are recognised within Trade and other
receivables and are assessed for impairment on a forward-looking
basis using the expected lifetime losses approach, as required by
IFRS 9 ('Financial Instruments').
Costs to obtain or fulfil a contract
The incremental costs of obtaining a contract with a customer
are capitalised as an asset if the Group expects to recover them.
Costs such as sales commissions may be incurred when the Group
enters into a new contract. Costs to obtain or fulfil a contract
are presented in the Consolidated Balance Sheet as assets until the
performance obligation to which they relate has been met. These
assets are amortised on a consistent basis with how the related
revenue is recognised.
The Group applies the practical expedient in IFRS 15 (paragraph
94) and recognises incremental costs of obtaining a contract as an
expense when incurred if the amortisation period of the asset that
the Group would otherwise have recognised is one year or less.
Trade payables
Trade payables are non-interest bearing and are stated at
amortised cost.
Interest bearing loans and borrowings
Interest bearing loans and borrowings are initially recognised
in the Consolidated Balance Sheet at fair value less directly
attributable transaction costs and are subsequently measured at
amortised cost using the effective interest rate method.
Provisions and contingent liabilities
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle that
obligation and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
balance sheet date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation, its carrying
amount is the present value of the cash flows.
When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, a
receivable is recognised as an asset if it is virtually certain
that reimbursement will be received, and the amount of the
receivable can be measured reliably.
Contingent liabilities are disclosed where a possible obligation
dependent on uncertain future events exists as at the end of the
reporting period or a present obligation for which payment either
cannot be measured or is not considered to be probable is noted.
Contingent liabilities are not accrued for and no contingent
liability is disclosed where the possibility of payment is
considered to be remote.
Derivative financial instruments and hedge accounting
The Group enters into derivative financial instruments to manage
its exposure to foreign exchange rate risk using forward exchange
contracts. The Group continues to apply the requirements of IAS 39
for hedge accounting.
Derivative financial instruments are classified as fair value
through profit and loss (held for trading) unless they are in a
designated hedge relationship.
Derivatives are initially recognised at fair value at the date a
derivative contract is entered into and are subsequently remeasured
to their fair value at each balance sheet date. The resulting gain
or loss is recognised in the Consolidated Income Statement, unless
the derivative is designated and effective as a hedging instrument,
in which event the timing of the recognition in the Consolidated
Income Statement depends on the nature of the hedge relationship.
The Group designates certain derivatives as hedges of highly
probable forecast transactions or hedges of foreign currency risk
of firm commitments (cash flow hedges), or hedges of net
investments in foreign operations.
A derivative with a positive fair value is recognised as a
financial asset whereas a derivative with a negative fair value is
recognised as a financial liability. A derivative is presented as a
non-current asset or a non-current liability if the remaining
maturity of the instrument is more than 12 months and it is not
expected to be realised or settled within 12 months. Other
derivatives are presented as current assets or current
liabilities.
Cash flow hedge accounting
The Group designates certain hedging instruments as cash flow
hedges.
At the inception of the hedge relationship, the entity documents
the relationship between the hedging instrument and the hedged
item, along with its risk management objectives and its strategy
for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents
whether the hedging instrument has been or is expected to be highly
effective in offsetting changes in fair values or cash flows of the
hedged item.
The effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income. The gain or loss relating
to the ineffective portion as a result of being over hedged is
recognised immediately in the Consolidated Income Statement.
Amounts previously recognised in other comprehensive income and
accumulated in equity are reclassified to the Consolidated Income
Statement in the periods when the hedged item is recognised in the
Consolidated Income Statement. However, when the forecast
transaction that is hedged results in the recognition of a
non-financial asset or a non-financial liability, the gains and
losses previously accumulated in equity are transferred from equity
and included in the initial measurement of the cost of the
non-financial asset or non-financial liability.
Hedge accounting is discontinued when the Group revokes the
hedging relationship, the hedging instrument expires or is sold,
terminated or exercised, or no longer qualifies for hedge
accounting. Any gain or loss recognised in other comprehensive
income at that time is accumulated in equity and is recognised,
when the forecast transaction is ultimately recognised, in the
Consolidated Income Statement. When a forecast transaction is no
longer expected to occur, the gain or loss accumulated in equity is
recognised immediately in the Consolidated Income Statement.
Net investment hedge accounting
The Group uses foreign currency denominated borrowings as a
hedge against the translation exposure on the Group's net
investment in overseas companies. Where the hedge is fully
effective at hedging, the variability in the net assets of such
companies caused by changes in exchange rates and the changes in
value of the borrowings are recognised in the Consolidated
Statement of Comprehensive Income and accumulated in the
Translation reserve. The ineffective part of any change in value
caused by changes in exchange rates is recognised in the
Consolidated Income Statement.
Leases
The Group assesses at contract inception whether a contract is,
or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in
exchange for consideration. Where the Group determines the contract
is, or contains a lease, a right-of-use asset and a lease liability
is recognised at the lease commencement date.
The lease term is determined from the commencement date of the
lease and covers the non-cancellable term. If the Group has an
extension option, which it considers reasonably certain to
exercise, then the lease term will be considered to extend beyond
that non-cancellable period. If the Group has a termination option,
which it considers reasonably certain to exercise, then the lease
term will be considered to be until the point the termination
option will take effect. The Group deem that it is not reasonably
certain to exercise an extension option or a termination option
with an exercise date past the planning horizon of five years.
The right-of-use asset is initially measured at cost, comprising
the initial amount of the lease liability plus any initial direct
costs incurred and an estimate of costs to restore the underlying
asset, less any lease incentives received. The right-of-use asset
is subsequently depreciated using the straight-line method from the
commencement date to the end of the lease term unless the
right-of-use asset is deemed to have a useful life shorter than the
lease term. The Group has taken the practical expedient to not
separate lease and non-lease components and so account for both as
a single lease component.
The right-of-use assets are also subject to impairment testing
under IAS 36. Refer to the previous section on Impairment of
non-current assets for further details.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the incremental borrowing rate. The lease payments
include fixed payments (including in-substance fixed payments) less
any lease incentives receivable, variable lease payments that
depend on an index or a rate, and amounts expected to be paid under
residual value guarantees. Variable lease payments that depend on
an index or a rate, and amounts expected to be paid under residual
value guarantees are not material to the Group. The lease payments
also include the exercise price of a purchase option reasonably
certain to be exercised by the Group and payments of penalties for
terminating the lease, if the lease term reflects the Group
exercising the option to terminate. Variable lease payments that do
not depend on an index or a rate are recognised as expenses (unless
they are incurred to produce inventories) in the period in which
the event or condition that triggers the payment occurs. The lease
liability is measured at amortised cost using the effective
interest method by increasing the carrying amount to reflect
interest on the lease liability and by reducing the carrying amount
to reflect the lease payments made. The lease liability is
remeasured when there is a change in future lease payments arising
from a change in an index or a rate or a change in the Group's
assessment of whether it will exercise an extension or termination
option. When the lease liability is remeasured, a corresponding
adjustment is made to the right-of-use asset.
Payments associated with short-term leases or low-value assets
are recognised on a straight-line basis as an expense in the
Consolidated Income Statement. Short-term leases are leases with a
lease term of 12 months or less. Low-value assets mostly comprise
of IT equipment and small items of office furniture. Lease payments
for short-term leases, low-value assets and variable lease payments
not included in the measurement of the lease liability are
classified as cash flows from operating activities within the
Consolidated Cash Flow Statement. The Group has classified the
principal and interest portions of lease payments within financing
activities.
Employee share plans
Share-based incentives are provided to employees under the
Group's share incentive plan, the performance share plan and the
executive share plan.
(a) Share incentive plan
Awards of shares under the share incentive plan are made to
qualifying employees depending on salary and service criteria. The
shares awarded under this plan are purchased in the market by the
plan's trustees at the time of the award, and are then held in
trust for a minimum of three years. The costs of this plan are
recognised in the Consolidated Income Statement over the three-year
vesting period of the awards.
(b) Executive share plan
Under the Executive share plan, awards of shares are made to
Executive Directors and certain senior employees. Grants under this
plan are in the form of Performance Awards or Deferred Share
Awards.
Performance Awards are subject to non-market-based vesting
criteria, and Deferred Share Awards are subject only to continuing
service of the employee. Share awards are equity-settled. The fair
value of the awards at the date of grant, which is estimated to be
equal to the market value, is charged to the Consolidated Income
Statement on a straight-line basis over the vesting period, with
appropriate adjustments being made during this period to reflect
expected and actual forfeitures. The corresponding credit is to
Retained earnings within Total equity. Effective for the year ended
31 March 2022, the share-based payment reserve, which was
previously presented as Other reserves has been amalgamated with
Retained earnings, in the Consolidated Statement of Changes in
Equity and the Consolidated Balance Sheet as permitted by IFRS 2.
This resulted in the GBP13.6m debit in brought forward Other
reserves at 1 April 2021 being transferred to Retained earnings.
There is no change in Total equity from this change, nor the
amounts charged or credited to the reserves during the period,
which represents a change in presentational accounting policy
only.
(c) Cash-settled
For cash-settled awards, a liability equal to the portion of the
services received is recognised at the current fair value
determined at each balance sheet date.
Dividends
Dividends payable to the Company's shareholders are recognised
as a liability in the period in which the distribution is approved
by the Company's shareholders.
Notes to the Accounts
1 Segmental analysis and revenue from contracts with
customers
Sector analysis and disaggregation of revenue
The Group has three main operating and reportable segments
(Safety, Environmental & Analysis and Healthcare), which are
defined by markets rather than product type. Each segment includes
businesses with similar operating and market characteristics. These
segments are consistent with the internal reporting as reviewed by
the Group Chief Executive.
Nature of goods and services
The following is a description of the principal activities -
separated by reportable segments, which are defined by markets
rather than product type - from which the Group generates its
revenue.
Further disaggregation of sector revenue by geography and by the
pattern of revenue recognition depicts how economic factors affect
the timing and uncertainty of the Group's revenues.
Safety sector generates revenue by providing products that
protect people, assets and infrastructure, enabling safe movement
and enhancing efficiency. The technologies are used in public and
commercial spaces and in industrial and logistics operations.
Markets include: Fire Safety Technologies that protect people and
assets from fire; Power Safety Technologies that increase the
integrity and safety of electrical systems in a range of
industries; Industrial Safety Technologies that protect people and
assets in industrial environments; and Urban Safety Technologies
that protect people and assets in urban environments. Products are
generally sold separately, with contracts typically less than one
year in length. Warranties are typically of an assurance nature.
Revenue is recognised as control passes on delivery or
despatch.
Payment is typically due within 60 days of invoice, except where
a retention is held for documentation.
Environmental & Analysis generates revenue by providing
products and technologies that monitor the environment, that ensure
the quality and availability of life-critical resources, and
analyse materials in a wide range of applications. Markets include:
Optical Analysis Technologies that provide world-class optical,
optoelectronic and spectral imaging systems that use light to
analyse materials in a wide range of applications; Water Analysis
and Treatment Systems to sustainably improve water quality and
availability; and Environmental Monitoring Technologies that detect
hazardous gases and analyse air quality, gases and water to monitor
the quality of our environment. Products and services are generally
sold separately. Warranties are typically of an assurance nature,
but some companies within the Group offer extended warranties.
Depending on the nature of the performance obligation, revenue may
be recognised as control passes on delivery, despatch or as the
service is delivered. Contracts are typically less than one year in
length, but some companies have contracts where certain
service-related performance obligations are delivered over a number
of years; this can result in contract liabilities where those
performance obligations are invoiced ahead of performance.
Payment is typically due within 60 days of invoice.
Healthcare sector generates revenue by providing products and
services that help providers improve the care they deliver and
enhance the quality of patients' lives. Markets include: Life
Sciences technologies and solutions to enable in-vitro diagnostic
systems and accelerate life-science discoveries and development;
Healthcare Assessment & Analytics components, devices and
systems that provide valuable information and analytics so
providers can better understand patient health and make decisions
across the continuum of care; and Therapeutic Solutions
Technologies, materials and solutions that enable treatment across
key clinical specialties. Products are generally sold separately,
and warranties are typically of an assurance nature. Depending on
the nature of the performance obligation, revenue is recognised as
control passes on delivery or despatch or as the service is
delivered. Contracts are typically less than one year in length,
but a limited number of companies have contracts where certain
service-related performance obligations are delivered over a number
of years; this can result in contract liabilities where those
performance obligations are invoiced ahead of performance.
Payment is typically due within 60 days of invoice.
Year ended 31 March 2023
Revenue by sector and destination (all continuing
operations)
-----------------------------------------------------------------------
Africa,
Near
United and
States Mainland United Asia Middle Other
of America Europe Kingdom Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- -------- ------- ---------- -------
Safety 205.1 217.1 151.4 112.7 33.2 26.1 745.6
Environmental & Analysis 277.0 67.3 79.5 96.7 15.5 16.1 552.1
Healthcare 298.8 92.0 49.2 73.0 14.9 28.5 556.4
Inter-segmental sales (0.1) - (1.2) - - - (1.3)
------------------------- ----------- -------- -------- -------- ------- ---------- -------
Revenue for the year 780.8 376.4 278.9 282.4 63.6 70.7 1,852.8
------------------------- ----------- -------- -------- -------- ------- ---------- -------
Year ended 31 March 2022
Revenue by sector and destination (all continuing
operations)
-----------------------------------------------------------------------------
Africa,
United Near and
States Mainland United Middle Other
of America Europe Kingdom Asia Pacific East countries Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ----------- -------- -------- ------------ --------- ---------- -------
Safety 164.6 180.0 147.0 101.8 29.4 18.6 641.4
Environmental & Analysis 209.6 56.7 77.6 78.4 12.3 8.3 442.9
Healthcare 224.3 71.4 42.4 70.6 11.9 21.7 442.3
Inter-segmental sales (1.3) - - - - - (1.3)
------------------------- ----------- -------- -------- ------------ --------- ---------- -------
Revenue for the year 597.2 308.1 267.0 250.8 53.6 48.6 1,525.3
------------------------- ----------- -------- -------- ------------ --------- ---------- -------
Inter-segmental sales are charged at prevailing market prices
and have not been disclosed separately by segment as they are not
considered material. Revenue derived from the rendering of services
was GBP105.4m (2022 represented: GBP81.1m). The 2022 comparative
has been represented to reflect GBP11.2m of service revenue
previously classified as product revenue. All revenue was otherwise
derived from the sale of products.
Year ended 31 March
2023
----------------------------------
Revenue
Revenue recognised
recognised at a
over point Total
time in time Revenue
GBPm GBPm GBPm
------------------------- ----------- ----------- --------
Safety 7.1 738.5 745.6
Environmental & Analysis 121.5 430.6 552.1
Healthcare 67.1 489.3 556.4
Inter-segmental sales - (1.3) (1.3)
------------------------- ----------- ----------- --------
Revenue for the year 195.7 1,657.1 1,852.8
------------------------- ----------- ----------- --------
Year ended 31 March
2022
----------------------------------
Revenue
Revenue recognised
recognised at a point Total
over time in time Revenue
GBPm GBPm GBPm
------------------------- ----------- ----------- --------
Safety 8.2 633.2 641.4
Environmental & Analysis 99.8 343.1 442.9
Healthcare 49.6 392.7 442.3
Inter-segmental sales - (1.3) (1.3)
------------------------- ----------- ----------- --------
Revenue for the year 157.6 1,367.7 1,525.3
------------------------- ----------- ----------- --------
Year ended 31 March 2023
----------------------------------------------------
Revenue
from Revenue
performance from
obligations Revenue performance
entered previously obligations
into included satisfied
and satisfied as in
in the contract previous Total
year liabilities periods Revenue
GBPm GBPm GBPm GBPm
------------------------- -------------- ------------ ------------ --------
Safety 741.7 3.9 - 745.6
Environmental & Analysis 545.0 7.1 - 552.1
Healthcare 542.8 13.4 0.2 556.4
Inter-segmental sales (1.3) - - (1.3)
------------------------- -------------- ------------ ------------ --------
Revenue for the year 1,828.2 24.4 0.2 1,852.8
------------------------- -------------- ------------ ------------ --------
Year ended 31 March 2022
----------------------------------------------------
Revenue
from Revenue
performance from
obligations Revenue performance
entered previously obligations
into included satisfied
and satisfied as in
in the contract previous Total
year liabilities periods Revenue
GBPm GBPm GBPm GBPm
------------------------- -------------- ------------ ------------ --------
Safety 638.1 3.3 - 641.4
Environmental & Analysis 436.3 6.6 - 442.9
Healthcare 432.8 5.6 3.9 442.3
Inter-segmental sales (1.3) - - (1.3)
------------------------- -------------- ------------ ------------ --------
Revenue for the year 1,505.9 15.5 3.9 1,525.3
------------------------- -------------- ------------ ------------ --------
The Group has unsatisfied (or partially satisfied) performance
obligations at the balance sheet date with an aggregate amount of
transaction price as follows. The time bands represented present
the expected timing of when the remaining transaction price will be
recognised as revenue.
Aggregate transaction price
allocated
to unsatisfied performance
obligations
--------------------------------------------
31 March
2023 Recognised Recognised Recognised
Total < 1 year 1-2 years > 2 years
GBPm GBPm GBPm GBPm
------------------------- -------- ---------- ---------- ----------
Safety 19.7 9.6 2.8 7.3
Environmental & Analysis 16.9 8.5 3.5 4.9
Healthcare 21.6 20.8 0.8 -
Inter-segmental sales - - - -
------------------------- -------- ---------- ---------- ----------
Total 58.2 38.9 7.1 12.2
------------------------- -------- ---------- ---------- ----------
Aggregate transaction price
allocated
to unsatisfied performance
obligations
--------------------------------------------
31 March
2022 Recognised Recognised Recognised
Total < 1 year 1-2 years > 2 years
GBPm GBPm GBPm GBPm
------------------------- -------- ---------- ---------- ----------
Safety 27.0 15.2 4.5 7.3
Environmental & Analysis 15.3 7.0 3.4 4.9
Healthcare 14.4 12.9 1.5 -
Inter-segmental sales - - - -
------------------------- -------- ---------- ---------- ----------
Total 56.7 35.1 9.4 12.2
------------------------- -------- ---------- ---------- ----------
Segment results
Profit (all continuing
operations)
------------------------
Year
ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
------------------------------------------------- ----------- -----------
Segment profit before allocation of adjustments*
Safety 152.5 146.2
Environmental & Analysis 134.2 109.8
Healthcare 130.1 99.5
------------------------------------------------- ----------- -----------
416.8 355.5
------------------------------------------------- ----------- -----------
Segment profit after allocation of adjustments*
Safety 123.9 163.5
Environmental & Analysis 121.5 96.9
Healthcare 101.6 83.3
------------------------------------------------- ----------- -----------
Segment profit 347.0 343.7
Central administration costs (38.6) (30.9)
Net finance expense (16.9) (8.4)
------------------------------------------------- ----------- -----------
Group profit before taxation 291.5 304.4
Taxation (57.2) (60.2)
------------------------------------------------- ----------- -----------
Profit for the year 234.3 244.2
------------------------------------------------- ----------- -----------
* Adjustments include the amortisation and impairment of
acquired intangible assets; acquisition items; significant
restructuring costs and profit or loss on disposal of operations.
Note 3 provides more information on alternative performance
measures.
Acquisition transaction costs, adjustments to contingent
consideration and release of fair value adjustments to inventory
(collectively 'acquisition items'), amortisation and impairment of
acquired intangible assets and profit on disposal of operations are
recognised in the Consolidated Income Statement. Segment profit,
before these acquisition items and the other adjustments, is
disclosed separately on the previous page as this is the measure
reported to the Group Chief Executive for the purpose of allocation
of resources and assessment of segment performance. These
adjustments are analysed as follows:
Year ended 31 March 2023
-----------------------------------------------------------------------------------------------------
Acquisition items
------------------------------------------
Total Disposal
Release amortisation of
Amortisation of and impairment operations
and impairment fair charge and
of acquired Adjustments value and restructuring
intangible Transaction to contingent adjustments acquisition (note
assets costs consideration to inventory items 9) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- --------------- ----------- -------------- ------------- --------------- --------------- ------
Safety (25.1) (3.1) - (0.4) (28.6) - (28.6)
Environmental &
Analysis (11.4) (0.9) 0.2 (0.6) (12.7) - (12.7)
Healthcare (20.0) (1.9) (3.9) (2.7) (28.5) - (28.5)
--------------- --------------- ----------- -------------- ------------- --------------- --------------- ------
Total Segment &
Group (56.5) (5.9) (3.7) (3.7) (69.8) - (69.8)
--------------- --------------- ----------- -------------- ------------- --------------- --------------- ------
The transaction costs arose mainly on the acquisitions during
the year. In Safety, they related to the acquisition of FirePro
(GBP1.6m), WEETECH (GBP1.0m), Thermocable (GBP0.4m) and Zonegreen
(GBP0.1m). In Environmental & Analysis, they related to the
acquisition of Deep Trekker (GBP0.5m) in the current year and
Sewertronics (GBP0.4m) that was acquired in May 2023. In
Healthcare, they related to the acquisition of IZI (GBP1.6m) in the
current year, and the acquisition of Visiometrics in a previous
year (GBP0.3m).
The GBP3.7m adjustment to contingent consideration comprised of
a credit of GBP0.2m in Environmental & Analysis arising from a
decrease in the estimate of the payables for Orca (GBP0.2m) and a
debit of GBP3.9m in Healthcare arising from an increase in
estimates of the payables for Infinite Leap (GBP2.7m), IZI
(GBP1.4m) and Meditech (GBP0.3m), partially offset by a decrease in
the estimate of the payable for Clayborn Lab (GBP0.3m) and Spreo
(GBP0.2m).
The GBP3.7m release of fair value adjustments to inventory
related to WEETECH (GBP0.3m) and Thermocable (GBP0.1m) in Safety;
Deep Trekker (GBP0.3m) and International Light Technologies
(GBP0.3m) in Environmental & Analysis; and IZI (GBP2.7m) in
Healthcare. All amounts have been released in relation to
International Light Technologies and Deep Trekker.
Year ended 31 March 2022
-----------------------------------------------------------------------------------------------
Acquisition items
------------------------------------------
Disposal
of
Total operations
Amortisation Release of amortisation and
of acquired Adjustments fair value charge and restructuring
intangible Transaction to contingent adjustments acquisition (note
assets costs consideration to inventory items 9) Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------- ------------ ----------- -------------- ------------- ------------- -------------- ------
Safety (14.9) (0.5) - (1.3) (16.7) 34.0 17.3
Environmental &
Analysis (10.3) (1.6) 0.1 (1.1) (12.9) - (12.9)
Healthcare (17.5) (2.1) 4.4 (1.0) (16.2) - (16.2)
--------------------- ------------ ----------- -------------- ------------- ------------- -------------- ------
Total Segment & Group (42.7) (4.2) 4.5 (3.4) (45.8) 34.0 (11.8)
--------------------- ------------ ----------- -------------- ------------- ------------- -------------- ------
The transaction costs arose on the acquisitions made in the
prior year. In Safety, they related to the acquisition of Ramtech
(GBP0.4m) and IBIT (GBP0.1m). In Environmental & Analysis, they
related to the acquisition of Dancutter (GBP0.3m), Sensitron
(GBP0.4m), Orca (GBP0.1m), Anton (GBP0.1m), International Light
Technologies (GBP0.2m) in the year and Deep Trekker (GBP0.5m) that
was acquired in April 2022. In Healthcare, they related to the
acquisition of PeriGen (GBP1.4m), Infinite Leap (GBP0.3m), Clayborn
Lab (GBP0.1m), Meditech (GBP0.1m) and RNK (GBP0.1m) in the year,
and the acquisition of Visiometrics in a previous year
(GBP0.1m).
The GBP4.5m adjustment to contingent consideration comprised of
a credit of GBP0.1m in Environmental & Analysis arising from a
decrease in the estimate of the payables for Invenio (GBP0.3m)
offset by an increase in the estimate of the payable for Orca
(GBP0.2m) and a credit of GBP4.4m in Healthcare arising from a
decrease in estimates of the payables for NovaBone (GBP1.3m),
NeoMedix (GBP3.0m) and Spreo (GBP0.1m) partially offset by an
increase in the estimate of the payable for Infowave (GBP0.3m) and
a credit of GBP0.3m arising from exchange differences on balances
denominated in Euros.
The GBP3.4m release of fair value adjustments to inventory
related to Ramtech (GBP1.3m) in Safety; Dancutter (GBP0.1m), Orca
(GBP0.6m), Sensitron (GBP0.2m) and International Light Technologies
(GBP0.2m) in Environmental & Analysis; and Meditech (GBP1.0m)
in Healthcare. All amounts have been released in relation to
Dancutter, Ramtech, Orca and Sensitron.
Other segment information
Depreciation,
amortisation
and impairment
------------------
31 March 31 March
2023 2022
GBPm GBPm
-------------------------------------------------------- -------- --------
Safety 39.6 29.0
Environmental & Analysis 19.3 19.3
Healthcare 28.2 24.7
-------------------------------------------------------- -------- --------
Total segment depreciation, amortisation and impairment 87.1 73.0
Unallocated 22.8 18.8
-------------------------------------------------------- -------- --------
Total Group 109.9 91.8
-------------------------------------------------------- -------- --------
During the year impairment losses of GBP8.4m were recognised on
Property, plant and equipment and other intangible assets, of which
GBP8.0m was recognised in Safety, GBP0.1m was recognised in
Environmental & Analysis and GBP0.3m was recognised in
Healthcare (2022: GBP3.2m comprising GBP1.0m in Safety, GBP1.7m in
Environmental & Analysis, GBP0.5m in Healthcare). Impairment
losses mainly related to acquired intangible assets, due to changes
in expected future cash flows, and to capitalised development costs
recorded as a result of changes in the expected outcome of
projects.
Information about major customers
No single customer accounts for more than 10% (2022: 10%) of the
Group's revenue.
2 Earnings per share
Basic earnings per share amounts are calculated by dividing the
net profit for the year attributable to the equity shareholders of
the parent by the weighted average number of shares outstanding
during the year.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to the equity shareholders of the
parent by the weighted average number of shares outstanding during
the year plus the weighted average number of shares that would be
in issue on the conversion of all the dilutive potential
shares.
The weighted average number of shares used to calculate both
basic and diluted earnings per share exclude shares held in the
employee benefit trust.
Adjusted earnings are calculated as earnings from continuing
operations excluding the amortisation and impairment of acquired
intangible assets; acquisition items; significant restructuring
costs, profit or loss on disposal of operations and the associated
taxation thereon and in the prior year the increase in the UK's
corporation tax rate from 19% to 25%. The Directors consider that
adjusted earnings, which constitute an alternative performance
measure, represent a more consistent measure of underlying
performance as it excludes amounts not directly linked with
trading. A reconciliation of earnings and the effect on basic and
diluted earnings per share figures is as follows:
Basic earnings per share
Per share
---------------------
Year Year
ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
GBPm GBPm pence pence
------------------------------------------------- --------- ---------- --------- ----------
Earnings from continuing operations attributable
to owners of the parent 234.5 244.4 62.04 64.54
Amortisation and impairment of acquired
intangible assets (after tax) 42.3 33.1 11.19 8.73
Acquisition transaction costs (after tax) 5.3 3.8 1.41 0.99
Adjustments to contingent consideration
(after tax) 3.8 (4.5) 1.00 (1.19)
Release of fair value adjustments to inventory
(after tax) 2.7 2.6 0.70 0.70
Disposal of operations and restructuring
(after tax) - (34.0) - (8.98)
Impact of UK tax rate change - 2.6 - 0.69
------------------------------------------------- --------- ---------- --------- ----------
Adjusted earnings attributable to owners
of the parent 288.6 248.0 76.34 65.48
------------------------------------------------- --------- ---------- --------- ----------
Weighted average number of shares in issue
for basic earnings per share, million 378.0 378.7
------------------------------------------------- --------- ----------
Diluted earnings per share
Per share
---------------------
Year Year
ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
GBPm GBPm pence pence
------------------------------------------------- --------- ---------- --------- ----------
Earnings from continuing operations attributable
to owners of the parent 234.5 244.4 61.86 64.42
------------------------------------------------- --------- ---------- --------- ----------
Adjusted earnings attributable to owners
of the parent 288.6 248.0
------------------------------------------------- --------- ----------
Weighted average number of shares in issue
for basic earnings per share, million 378.0 378.7
------------------------------------------------- --------- ----------
Dilutive potential shares - share awards,
million 1.1 0.7
------------------------------------------------- --------- ----------
Weighted average number of shares in issue
for diluted earnings per share, million 379.1 379.4
------------------------------------------------- --------- ----------
3 Alternative performance measures
The Board uses certain alternative performance measures to help
it effectively monitor the performance of the Group. The Directors
consider that these represent a more consistent measure of
underlying performance by removing items that are not closely
related to the Group's trading or operating cash flows. These
measures include Return on Total Invested Capital (ROTIC), Return
on Capital Employed (ROCE), Organic growth at constant currency,
net debt, Adjusted operating profit, cash conversion and Adjusted
operating cash flow.
Note 1 provides further analysis of the adjusting items in
reaching adjusted profit measures. Net debt is defined as
Borrowings plus Lease liabilities net of Cash and bank balances,
note 10 provides an analysis of net debt for the year.
Return on Total Invested Capital
31 March 31 March
2023 2022
GBPm GBPm
-------------------------------------------------------------- -------- --------
Profit after tax 234.3 244.2
Adjustments(1) 54.1 3.7
-------------------------------------------------------------- -------- --------
Adjusted profit after tax(1) 288.4 247.9
-------------------------------------------------------------- -------- --------
Total equity 1,598.9 1,403.1
Less net retirement benefit assets (37.9) (30.5)
Deferred tax liabilities on retirement benefits 9.6 7.7
Cumulative fair value adjustments on equity investments
through other comprehensive income (4.4) 1.7
Cumulative amortisation and impairment of acquired intangible
assets 418.1 345.7
Historical adjustments to goodwill(2) 89.5 89.5
-------------------------------------------------------------- -------- --------
Total Invested Capital 2,073.8 1,817.2
-------------------------------------------------------------- -------- --------
Average Total Invested Capital(3) 1,945.5 1,695.0
-------------------------------------------------------------- -------- --------
Return on Total Invested Capital (ROTIC)(4) 14.8% 14.6%
-------------------------------------------------------------- -------- --------
Return on Capital Employed
31 March 31 March
2023 2022
GBPm GBPm
------------------------------------------------------- -------- --------
Profit before tax 291.5 304.4
Adjustments(1) 69.8 11.8
Net finance costs 16.9 8.4
Lease interest (2.9) (2.3)
------------------------------------------------------- -------- --------
Adjusted operating profit(1) after share of results of
associates and lease interest 375.3 322.3
------------------------------------------------------- -------- --------
Computer software costs within other intangible assets 3.2 4.2
Capitalised development costs within other intangible
assets 49.6 41.7
Other intangibles within other intangible assets 3.4 3.6
Property, plant and equipment 222.9 194.0
Inventories 312.4 228.8
Trade and other receivables 410.7 325.1
Current trade and other payables (280.7) (242.7)
Current lease liabilities (19.2) (15.5)
Current provisions (21.0) (20.7)
Net tax (payable)/receivable (2.2) 3.8
Non-current trade and other payables (21.9) (19.0)
Non-current provisions (9.7) (7.7)
Non-current lease liabilities (68.7) (56.6)
Add back contingent purchase consideration 16.4 15.2
------------------------------------------------------- -------- --------
Capital Employed 595.2 454.2
------------------------------------------------------- -------- --------
Average Capital Employed(3) 524.7 421.9
------------------------------------------------------- -------- --------
Return on Capital Employed (ROCE)(4) 71.5% 76.4%
------------------------------------------------------- -------- --------
1 Adjustments include the amortisation and impairment of
acquired intangible assets; acquisition items; and significant
restructuring costs and profit or loss on disposal of operations.
Where after-tax measures, these also include the associated
taxation on adjusting items. Note 1 provides more information on
these items.
2 Includes goodwill amortised prior to 3 April 2004 and goodwill
taken to reserves.
3 The ROTIC and ROCE measures are expressed as a percentage of
the average of the current and prior year's Total Invested Capital
and Capital Employed respectively. Using an average as the
denominator is considered to be more representative. The 1 April
2021 Total Invested Capital and Capital Employed balances were
GBP1,572.8m and GBP389.5m respectively.
4 The ROTIC and ROCE measures are calculated as Adjusted profit
after tax divided by Average Total Invested Capital and Adjusted
operating profit after share of results of associates and lease
interest divided by Average Capital Employed, respectively.
Organic growth at constant currency
Organic growth measures the change in revenue and profit from
continuing Group operations. This measure equalises the effect of
acquisitions by:
a) removing from the year of acquisition their entire revenue and profit before taxation;
b) in the following year, removing the revenue and profit for
the number of months equivalent to the pre-acquisition period in
the prior year; and
c) removing from the year prior to acquisition, any revenue
generated by sales to the acquired company which would have been
eliminated on consolidation had the acquired company been owned for
that period.
The results of disposals are removed from the prior period
reported revenue and profit before taxation.
Constant currency measures the change in revenue and profit
excluding the effects of currency movements. The measure restates
the current year's revenue and profit at last year's exchange
rates.
Organic growth at constant currency has been calculated for the
Group as follows:
Group
Adjusted* profit before
Revenue taxation
--------- ---------- -------- -------------------------------
Year Year
ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- --------- ---------- -------- --------- ---------- --------
Continuing operations 1,852.8 1,525.3 21.5% 361.3 316.2 14.2%
Acquired and disposed revenue/profit (65.6) (14.9) (9.0) (2.0)
------------------------------------- --------- ---------- -------- --------- ---------- --------
Organic growth 1,787.2 1,510.4 18.3% 352.3 314.2 12.1%
Constant currency adjustment (122.9) (28.3)
------------------------------------- --------- ---------- -------- --------- ---------- --------
Organic growth at constant
currency 1,664.3 1,510.4 10.2% 324.0 314.2 3.1%
------------------------------------- --------- ---------- -------- --------- ---------- --------
Sector Organic growth at constant currency
Organic growth at constant currency is calculated for each
segment using the same method as described above.
Safety
Revenue Adjusted* segment profit
--------- ---------- -------- -------------------------------
Year Year
ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- --------- ---------- -------- --------- ---------- --------
Continuing operations 745.6 641.4 16.2% 152.5 146.2 4.3%
Acquisition and currency adjustments (48.6) (14.6) (9.9) (2.0)
------------------------------------- --------- ---------- -------- --------- ---------- --------
Organic growth at constant
currency 697.0 626.8 11.2% 142.6 144.2 (1.1)%
------------------------------------- --------- ---------- -------- --------- ---------- --------
Environmental & Analysis
Revenue Adjusted* segment profit
--------- ---------- -------- -------------------------------
Year Year
ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- --------- ---------- -------- --------- ---------- --------
Continuing operations 552.1 442.9 24.7% 134.2 109.8 22.2%
Acquisition and currency adjustments (69.3) (0.4) (16.6) -
------------------------------------- --------- ---------- -------- --------- ---------- --------
Organic growth at constant
currency 482.8 442.5 9.1% 117.6 109.8 7.1%
------------------------------------- --------- ---------- -------- --------- ---------- --------
Healthcare
Revenue Adjusted* segment profit
--------- ---------- -------- -------------------------------
Year Year
ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
GBPm GBPm % growth GBPm GBPm % growth
------------------------------------- --------- ---------- -------- --------- ---------- --------
Continuing operations 556.4 442.3 25.8% 130.1 99.5 30.8%
Acquisition and currency adjustments (70.7) - (16.7) -
------------------------------------- --------- ---------- -------- --------- ---------- --------
Organic growth at constant
currency 485.7 442.3 9.8% 113.4 99.5 14.0%
------------------------------------- --------- ---------- -------- --------- ---------- --------
* Adjustments include in the current and prior year the
amortisation and impairment of acquired intangible assets;
acquisition items; significant restructuring costs and profit or
loss on disposal of operations.
Adjusted operating profit
Year ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
------------------------------------------------------- ---------- ----------
Operating profit 308.4 278.9
Add back:
Acquisition items (note 1) 13.3 3.1
Amortisation and impairment of acquired intangible
assets (note 1) 56.5 42.7
------------------------------------------------------- ---------- ----------
Adjusted operating profit 378.2 324.7
------------------------------------------------------- ---------- ----------
Adjusted operating cash flow
Year ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
--------------------------------------------------------- ---------- ----------
Net cash from operating activities (note 10) 258.0 237.4
Add:
Net acquisition costs paid 4.6 4.1
Taxes paid 67.2 56.0
Proceeds from sale of property, plant and equipment
and capitalised development costs 3.1 1.1
Share awards vested not settled by own shares 4.5 7.1
Deferred consideration paid in excess of payable
estimated on acquisition 1.7 7.5
Less:
Purchase of property, plant and equipment (excluding
Right of use assets) (29.0) (25.2)
Purchase of computer software and other intangibles (1.1) (1.4)
Development costs capitalised (15.8) (13.4)
--------------------------------------------------------- ---------- ----------
Adjusted operating cash flow 293.2 273.2
--------------------------------------------------------- ---------- ----------
Cash conversion % (adjusted operating cash flow/adjusted
operating profit) 78% 84%
--------------------------------------------------------- ---------- ----------
4 Finance income
Year ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
-------------------------------------------------------- ---------- ----------
Interest receivable 0.7 0.2
Net interest credit on pension plan assets 1.1 -
Fair value movement on derivative financial instruments - 0.4
-------------------------------------------------------- ---------- ----------
1.8 0.6
-------------------------------------------------------- ---------- ----------
5 Finance expense
Year ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
-------------------------------------------------------- ---------- ----------
Interest payable on borrowings 14.5 5.6
Interest payable on lease obligations 2.9 2.3
Amortisation of finance costs 0.8 0.7
Net interest charge on pension plan liabilities - 0.3
Other interest payable 0.1 0.1
Fair value movement on derivative financial instruments 0.4 -
-------------------------------------------------------- ---------- ----------
18.7 9.0
-------------------------------------------------------- ---------- ----------
6 Taxation
Recognised in the Consolidated Income Statement
Year ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
-------------------------------------------------- ---------- ----------
Current tax
UK corporation tax at 19% (2022: 19%) 14.8 16.7
Overseas taxation 61.9 46.0
Adjustments in respect of prior years (3.0) 0.5
-------------------------------------------------- ---------- ----------
Total current tax charge 73.7 63.2
-------------------------------------------------- ---------- ----------
Deferred tax
Origination and reversal of timing differences (17.5) (5.7)
Adjustments in respect of prior years 1.0 0.1
Changes in tax rates - UK - 2.6
-------------------------------------------------- ---------- ----------
Total deferred tax credit (16.5) (3.0)
-------------------------------------------------- ---------- ----------
Total tax charge recognised in the Consolidated
Income Statement 57.2 60.2
-------------------------------------------------- ---------- ----------
Reconciliation of the effective tax rate:
Profit before tax 291.5 304.4
Tax at the UK corporation tax rate of 19% (2022:
19%) 55.4 57.8
Profit on disposal of business - (6.5)
Overseas tax rate differences 9.0 6.2
Tax incentives, exemptions and credits (including
patent box, R&D and High-Tech status) (6.8) (4.2)
Changes in tax rates - UK - 2.6
Permanent differences 1.6 3.7
Adjustments in respect of prior years (2.0) 0.6
-------------------------------------------------- ---------- ----------
Total tax charge recognised in the Consolidated
Income Statement 57.2 60.2
-------------------------------------------------- ---------- ----------
Effective tax rate 19.6% 19.8%
-------------------------------------------------- ---------- ----------
Year ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
------------------------------------- ---------- ----------
Adjusted* profit before tax 361.3 316.2
Total tax charge on adjusted* profit 72.9 68.3
------------------------------------- ---------- ----------
Effective tax rate 20.2% 21.6%
------------------------------------- ---------- ----------
* Adjustments include the amortisation and impairment of
acquired intangible assets, acquisition items, significant
restructuring costs and profit or loss on disposal of operations.
Note 3 provides more information on alternative performance
measures.
The Group's future Effective Tax Rate (ETR) will mainly depend
on the geographic mix of profits and whether there are any changes
to tax legislation in the Group's most significant countries of
operations. The Finance Bill 2021 received Royal Assent on 10 June
2021 and included the increase in the UK corporation tax rate from
19% to 25% from 1 April 2023.
On 23 March 2023, the UK Government issued further draft
legislation applicable to large multinational groups in relation to
a new tax framework (part of the Organisation for Economic
Co-operation and Development (OECD) BEPS initiative), which
introduces a global minimum effective tax rate of 15% effective for
accounting periods beginning on or after 31 December 2023. The
Group monitors income tax developments in the territories in which
it operates, as well as the applicable accounting standards, to
understand their potential future impacts.
Recognised in the Consolidated Statement of Comprehensive Income
and Expenditure
In addition to the amount charged to the Consolidated Income
Statement, the following amounts relating to tax have been
recognised directly in the Consolidated Statement of Comprehensive
Income and Expenditure:
Year ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
--------------------------------------------------- ---------- ----------
Current tax
Retirement benefit obligations (1.8) (2.3)
Deferred tax
Retirement benefit obligations 0.6 11.9
Effective portion of changes in fair value of cash
flow hedges 0.3 (0.4)
--------------------------------------------------- ---------- ----------
(0.9) 9.2
--------------------------------------------------- ---------- ----------
Recognised directly in equity
In addition to the amounts charged to the Consolidated Income
Statement and the Consolidated Statement of Comprehensive Income
and Expenditure, the following amounts relating to tax have been
recognised directly in equity:
Year ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
------------------------------------------------------ ---------- ----------
Current tax
Excess tax deductions related to share-based payments
on vested awards - (1.3)
Deferred tax
Change in estimated excess tax deductions related
to share-based payments 0.7 0.2
------------------------------------------------------ ---------- ----------
0.7 (1.1)
------------------------------------------------------ ---------- ----------
7 Dividends
Per ordinary
share
----------------------
Year
Year ended Year ended ended Year ended
31 March 31 March 31 March 31 March
2023 2022 2023 2022
pence pence GBPm GBPm
------------------------------------- ---------- ---------- --------- ----------
Amounts recognised as distributions
to shareholders in the year
Final dividend for the year ended 31
March 2022 (31 March 2021) 11.53 10.78 43.6 40.8
Interim dividend for the year ended
31 March 2023 (31 March 2022) 7.86 7.35 29.7 27.9
------------------------------------- ---------- ---------- --------- ----------
19.39 18.13 73.3 68.7
------------------------------------- ---------- ---------- --------- ----------
Dividends declared in respect of the
year
Interim dividend for the year ended
31 March 2023 (31 March 2022) 7.86 7.35 29.7 27.9
Proposed final dividend for the year
ended 31 March 2023 (31 March 2022) 12.34 11.53 46.6 43.6
------------------------------------- ---------- ---------- --------- ----------
20.20 18.88 76.3 71.5
------------------------------------- ---------- ---------- --------- ----------
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting on 20 July 2023 and has
not been included as a liability in these financial statements.
8 Acquisitions
In accounting for acquisitions, adjustments are made to the book
values of the net assets of the companies acquired to reflect their
fair values to the Group. Other previously unrecognised assets and
liabilities at acquisition are included and accounting policies are
aligned with those of the Group where appropriate.
During the year ended 31 March 2023, the Group made seven
acquisitions namely:
-- Deep Trekker Inc.;
-- IZI Healthcare Products, LLC;
-- WEETECH Holdings GmbH;
-- Certain trade and assets of Rigaku Corporation;
-- Thermocable (Flexible Elements) Limited;
-- Zone Green 2013 Ltd; and
-- FirePro Group.
Set out on the following pages are summaries of the assets
acquired and liabilities assumed and the purchase consideration
of:
a) the total of acquisitions;
b) Deep Trekker Inc.;
c) IZI Healthcare Products, LLC;
d) WEETECH Holding GmbH;
e) Thermocable (Flexible Elements) Limited;
f) FirePro Group;
g) Other acquisitions; and
h) adjustments arising on prior year acquisitions.
Due to their contractual dates, the fair value of receivables
acquired approximate to the gross contractual amounts receivable.
The amount of gross contractual receivables not expected to be
recovered is immaterial.
There are no material contingent liabilities recognised in
accordance with paragraph 23 of IFRS 3 (revised). The acquisitions
contributed GBP41.0m of revenue and GBP7.9m of profit after tax for
year ended 31 March 2023.
If these acquisitions had been held since the start of the
financial year, it is estimated that the Group's reported revenue
and profit after tax would have been GBP51.6m and GBP14.9m higher
respectively.
As at the date of approval of the financial statements, with the
exception of Deep Trekker, the accounting for all other current
year acquisitions is provisional; relating to the finalisation of
the valuation of acquired intangible assets, the initial
consideration, which is subject to agreement of certain contractual
adjustments, and certain other provisional balances.
a) Total of acquisitions
Total
GBPm
----------------------------------------------------------------- -------
Non-current assets
Intangible assets 192.4
Property, plant and equipment 14.4
Deferred tax 1.1
Current assets
Inventories 23.1
Trade and other receivables 19.9
Cash and cash equivalents 10.1
----------------------------------------------------------------- -------
Total assets 261.0
----------------------------------------------------------------- -------
Current liabilities
Payables (10.4)
Borrowings (65.1)
Lease liabilities (1.5)
Tax liabilities (1.9)
Non-current liabilities
Lease liabilities (7.8)
Provisions (0.4)
Deferred tax liabilities (25.4)
----------------------------------------------------------------- -------
Total liabilities (112.5)
----------------------------------------------------------------- -------
Net assets of businesses acquired 148.5
----------------------------------------------------------------- -------
Initial cash consideration paid 321.0
Other adjustments to consideration 6.3
Contingent purchase consideration including retentions estimated
to be paid 1.5
----------------------------------------------------------------- -------
Total consideration 328.8
----------------------------------------------------------------- -------
Total goodwill 180.3
----------------------------------------------------------------- -------
Total goodwill of GBP180.3m comprises GBP180.0m relating to
current year acquisitions and GBP0.3m relating to the prior year
acquisition of International Light Technologies Inc..
Analysis of cash outflow in the Consolidated Cash Flow
Statement
Year Year
ended ended
31 March 31 March
2023 2022
GBPm GBPm
-------------------------------------------------- --------- ---------
Initial cash consideration paid 321.0 151.2
Cash acquired on acquisitions (10.1) (18.2)
Initial cash consideration adjustments on current
year acquisitions 6.3 13.1
Contingent consideration paid 4.6 14.2
-------------------------------------------------- --------- ---------
Net cash outflow relating to acquisitions 321.8 160.3
-------------------------------------------------- --------- ---------
Included in cash flows from operating activities 1.7 7.5
Included in cash flows from investing activities 320.1 152.8
-------------------------------------------------- --------- ---------
Other adjustments are primarily adjustments for acquired working
capital once balances are fully reconciled, forming part of the
contractual payment mechanisms.
Contingent consideration included in cash flows from operating
activities reflect amounts paid in excess of that estimated in the
acquisition balance sheets.
b) Deep Trekker Inc.
GBPm
----------------------------------- ------
Non-current assets
Intangible assets 14.9
Property, plant and equipment 2.2
Deferred tax 0.6
Current assets
Inventories 3.3
Trade and other receivables 1.1
Cash and cash equivalents 2.7
----------------------------------- ------
Total assets 24.8
----------------------------------- ------
Current liabilities
Payables (2.1)
Borrowings (4.7)
Lease liabilities (0.4)
Tax liabilities (0.2)
Non-current liabilities
Lease liabilities (1.2)
Deferred tax liabilities (3.9)
----------------------------------- ------
Total liabilities (12.5)
----------------------------------- ------
Net assets of business acquired 12.3
----------------------------------- ------
Initial cash consideration paid 31.9
Other adjustments to consideration 1.9
----------------------------------- ------
Total consideration 33.8
----------------------------------- ------
Total goodwill 21.5
----------------------------------- ------
On 13 April 2022, the Group acquired the entire share capital of
Deep Trekker Inc. (Deep Trekker) for total consideration GBP33.8m
(C$55.5m), which comprised initial cash consideration of GBP31.9m
(C$52.4m) and net cash/debt adjustments and working capital
adjustments of GBP1.9m (C$3.1m). The initial consideration reflects
a gross purchase price of GBP36.6m (C$60.0m) less debt acquired of
GBP4.7m (C$7.6m) which was settled immediately post-acquisition.
There is no contingent consideration payable.
Deep Trekker, based in Ontario, Canada, is a market-leading
manufacturer of remotely operated underwater robots used for
inspection, surveying, analysis and maintenance. Deep Trekker
continues to run under its own management team and has joined the
Environmental & Analysis sector.
On acquisition, acquired intangibles were recognised relating to
customer related intangibles (GBP2.8m); trade name (GBP3.5m) and
technology related intangibles (GBP8.6m). The residual goodwill of
GBP21.5m represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer
base.
Deep Trekker contributed GBP15.1m of revenue and GBP2.1m of
profit after tax for the year ended 31 March 2023. If this
acquisition had been held since the start of the financial year, it
is estimated that the Group's reported revenue and profit after tax
would have been GBP0.3m higher and GBP0.0m higher respectively.
Acquisition costs totalling GBP0.5m were recorded in the
Consolidated Income Statement.
The goodwill arising on this acquisition is not expected to be
deductible for tax purposes.
c) IZI Healthcare Products, LLC
GBPm
------------------------------------------- ------
Non-current assets
Intangible assets 64.4
Property, plant and equipment 5.6
Deferred tax 0.4
Current assets
Inventories 9.9
Trade and other receivables 5.3
Cash and cash equivalents 1.3
------------------------------------------- ------
Total assets 86.9
------------------------------------------- ------
Current liabilities
Payables (2.9)
Borrowings (53.8)
Lease liabilities (0.6)
Tax liabilities (0.1)
Non-current liabilities
Lease liabilities (3.9)
Deferred tax liabilities (2.4)
------------------------------------------- ------
Total liabilities (63.7)
------------------------------------------- ------
Net assets of business acquired 23.2
------------------------------------------- ------
Initial cash consideration paid 84.1
Other adjustments to consideration 1.9
Deferred contingent purchase consideration 1.5
------------------------------------------- ------
Total consideration 87.5
------------------------------------------- ------
Total goodwill 64.3
------------------------------------------- ------
On 30 September 2022, the Group acquired the entire share
capital of IZI Medical Products, LLC (IZI), for total consideration
of GBP87.5m (US$97.4m). The initial consideration of GBP84.1m
comprised a gross price of GBP137.9m (US$153.5m) less debt acquired
of GBP53.8m (US$59.9m) which was settled immediately on
acquisition. Other adjustments to consideration reflected
adjustments for acquired working capital of GBP1.9m (US$2.1m). For
the acquisition the maximum contingent consideration payable was
GBP13.0m (US$14.5m) based on profit-based targets for the year
ending 31 March 2023, of which GBP1.5m (US$1.8m) was estimated as
the payable at the acquisition date.
IZI, based in Baltimore, Maryland, USA, is a leading designer,
manufacturer and distributor of medical devices used across a range
of diagnostic and therapeutic procedures. IZI continues to run
under its own management team and has joined the Healthcare
sector.
On acquisition, acquired intangibles were recognised relating to
customer related intangibles (GBP19.9m); trade names (GBP2.6m) and
technology related intangibles (GBP41.9m).
The residual goodwill of GBP64.3m represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer
base.
IZI contributed GBP15.1m of revenue and GBP3.2m of profit after
tax for the year ended 31 March 2023. If this acquisition had been
held since the start of the financial year, it is estimated that
the Group's reported revenue and profit after tax would have been
GBP14.2m and GBP2.5m higher respectively.
Acquisition costs totalling GBP1.6m were recorded in the
Consolidated Income Statement.
The goodwill arising on the IZI acquisition is expected to be
deductible for tax purposes.
d) WEETECH Holding GmbH
GBPm
----------------------------------- ------
Non-current assets
Intangible assets 17.8
Property, plant and equipment 2.2
Deferred tax 0.1
Current assets
Inventories 3.0
Trade and other receivables 6.4
Cash and cash equivalents 2.3
----------------------------------- ------
Total assets 31.8
----------------------------------- ------
Current liabilities
Payables (2.4)
Borrowings (6.6)
Lease liabilities (0.1)
Tax liabilities (1.1)
Non-current liabilities
Lease liabilities (1.1)
Deferred tax liabilities (5.1)
----------------------------------- ------
Total liabilities (16.4)
----------------------------------- ------
Net assets of business acquired 15.4
----------------------------------- ------
Initial cash consideration paid 46.1
Other adjustments to consideration 0.9
----------------------------------- ------
Total consideration 47.0
----------------------------------- ------
Total goodwill 31.6
----------------------------------- ------
On 4 October 2022, the Group acquired the entire share capital
of WEETECH Holding GmbH (WEETECH), for total consideration of
GBP47.0m (EUR53.8m), which comprised initial cash consideration of
GBP46.1m (EUR52.8m) and subsequent working capital adjustments of
GBP0.9m (EUR1.0m). The initial consideration of GBP46.1m reflects a
gross purchase price of GBP50.2m (EUR57.5m) less debt acquired of
GBP6.6m (EUR7.6m) which was settled immediately post-acquisition
plus other debt-like adjustments of GBP2.5m (EUR2.9m). There is no
contingent consideration payable.
WEETECH, headquartered in Wertheim, Germany, designs and
manufactures safety-critical electrical testing technology for the
aviation, rail, automotive and engineering sectors. Its products
ensure high and low voltage electric systems remain compliant with
increasing safety regulation. WEETECH continues to run under its
own management team and has joined the Safety sector.
On acquisition, acquired intangibles were recognised relating to
customer related intangibles (GBP10.9m); trade names (GBP2.1m) and
technology related intangibles (GBP4.6m).
The residual goodwill of GBP31.6m represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer
base.
WEETECH contributed GBP8.7m of revenue and GBP1.8m of profit
after tax for the year ended 31 March 2023. If this acquisition had
been held since the start of the financial year, it is estimated
that the Group's reported revenue and profit after tax would have
been GBP9.3m and GBP1.4m higher respectively.
Acquisition costs totalling GBP1.0m were recorded in the
Consolidated Income Statement.
The goodwill arising on the WEETECH acquisition is not expected
to be deductible for tax purposes.
e) Thermocable (Flexible Elements) Limited
GBPm
----------------------------------- -----
Non-current assets
Intangible assets 13.0
Property, plant and equipment 1.2
Current assets
Inventories 1.8
Trade and other receivables 0.7
Cash and cash equivalents 0.8
----------------------------------- -----
Total assets 17.5
----------------------------------- -----
Current liabilities
Payables (0.6)
Tax liabilities (0.2)
Non-current liabilities
Deferred tax liabilities (3.6)
----------------------------------- -----
Total liabilities (4.4)
----------------------------------- -----
Net assets of business acquired 13.1
----------------------------------- -----
Initial cash consideration paid 22.0
Other adjustments to consideration 0.5
----------------------------------- -----
Total consideration 22.5
----------------------------------- -----
Total goodwill 9.4
----------------------------------- -----
On 31 January 2023, the Group acquired the entire share capital
of Thermocable (Flexible Elements) Limited (Thermocable) for
GBP22.5m, which comprised the purchase price of GBP22.0m and net
cash/debt adjustments of GBP0.5m. There is no contingent
consideration payable.
Thermocable, based in Bradford, UK, is a leading developer and
manufacturer of Linear Heat Detectors (LHDs). LHDs are temperature
sensitive cables, installed in areas at risk of overheating and
fire, which trigger an alert when they detect a change of
temperature. Thermocable has joined the Group as part of the Safety
sector fire detection business, Apollo.
On acquisition, acquired intangibles were recognised relating to
customer related intangibles (GBP8.7m); trade name (GBP1.6m) and
technology related intangibles (GBP2.7m). The residual goodwill of
GBP9.4m represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer
base.
Thermocable contributed GBP1.3m of revenue and GBP0.5m of profit
after tax for the year ended 31 March 2023. If this acquisition had
been held since the start of the financial year, it is estimated
that the Group's reported revenue and profit after tax would have
been GBP5.3m higher and GBP1.5m higher respectively.
Acquisition costs totalling GBP0.4m were recorded in the
Consolidated Income Statement.
The goodwill arising on this acquisition is not expected to be
deductible for tax purposes.
f) FirePro Group
GBPm
----------------------------------- ------
Non-current assets
Intangible assets 81.0
Property, plant and equipment 2.9
Current assets
Inventories 4.3
Trade and other receivables 6.0
Cash and cash equivalents 1.9
----------------------------------- ------
Total assets 96.1
----------------------------------- ------
Current liabilities
Payables (1.8)
Lease liabilities (0.4)
Tax liabilities (0.3)
Non-current liabilities
Lease liabilities (1.5)
Deferred tax liabilities (10.1)
----------------------------------- ------
Total liabilities (14.1)
----------------------------------- ------
Net assets of business acquired 82.0
----------------------------------- ------
Initial cash consideration paid 132.0
Other adjustments to consideration 1.2
----------------------------------- ------
Total consideration 133.2
----------------------------------- ------
Total goodwill 51.2
----------------------------------- ------
On 27 March 2023, the Group acquired the FirePro Group (FirePro)
for total consideration of GBP133.2m (EUR151.3m), which comprised
the cash and debt-free purchase price of GBP132.0m (EUR150.0m) and
other adjustments of GBP1.2m (EUR1.3m). There is no contingent
consideration payable. Directly or through another company
acquired, the acquisition comprised the entire share capital of
Skyterra Investments Ltd, Nisolio Investments Ltd, P.J.K.A
Investments Ltd, FirePro Systems Ltd, Celanova Limited and I.D.
Infinity Developments Cyprus Ltd.
FirePro, based in Cyprus, is a leading designer and manufacturer
of aerosol-based fire suppression systems. FirePro continues to run
under its own management team and has joined the Safety sector.
On acquisition, acquired intangibles were recognised relating to
customer related intangibles (GBP44.9m); trade name (GBP7.1m) and
technology related intangibles (GBP29.0m). The residual goodwill of
GBP51.2m represents:
a) the technical expertise of the acquired workforce;
b) the opportunity to leverage this expertise across some of
Halma's businesses through future technologies; and
c) the ability to exploit the Group's existing customer
base.
FirePro contributed GBP0.4m of revenue and GBP0.1m of profit
after tax for the year ended 31 March 2023. If this acquisition had
been held since the start of the financial year, it is estimated
that the Group's reported revenue and profit after tax would have
been GBP19.8m higher and GBP9.2m higher respectively.
Acquisition costs totalling GBP1.6m were recorded in the
Consolidated Income Statement.
The goodwill arising on this acquisition is not expected to be
deductible for tax purposes.
g) Other acquisitions
GBPm
----------------------------------- -----
Non-current assets
Intangible assets 1.3
Property, plant and equipment 0.3
Current assets
Inventories 0.8
Trade and other receivables 0.4
Cash and cash equivalents 1.1
----------------------------------- -----
Total assets 3.9
----------------------------------- -----
Current liabilities
Payables (0.6)
Lease liabilities -
Non-current liabilities
Lease liabilities (0.1)
Provisions (0.1)
Deferred tax liabilities (0.3)
----------------------------------- -----
Total liabilities (1.1)
----------------------------------- -----
Net assets of businesses acquired 2.8
----------------------------------- -----
Initial cash consideration paid 4.9
Other adjustments to consideration (0.1)
----------------------------------- -----
Total consideration 4.8
----------------------------------- -----
Total goodwill 2.0
----------------------------------- -----
On 21 November 2022, Ocean Optics Inc., a photonics technology
company in the Group's Environment and Analysis sector, bought the
assets and IP associated with laser-induced breakdown spectroscopy
from Rigaku Analytical Devices Inc., and Rigaku Americas Holding
Inc., in the United States for consideration of GBP1.0m
(US$1.1m).
On 8 March 2023, the Group acquired the entire share capital of
Zonegreen 2013 Ltd and its subsidiary company, Zone Green Ltd, for
total cash consideration of GBP3.8m. Zonegreen, based in Sheffield,
is renowned for its Rail Depot Personnel Protection System
(DPPS(TM)) and has joined the Group company Sentric, within the
Safety sector.
In respect of these acquisitions, the excess of the fair value
of the consideration paid over the fair value of the assets
acquired is represented by customer related intangibles of GBP0.3m;
trade name of GBP0.3m and technology related intangibles of
GBP0.7m; with residual goodwill arising of GBP2.0m.
These acquisitions contributed GBP0.4m of revenue and GBP0.2m of
profit after tax cumulatively for the year ended 31 March 2023. If
these acquisitions had been held since the start of the financial
year, it is estimated that the Group's reported revenue and profit
after tax would have been GBP2.7m and GBP0.3m higher
respectively.
Acquisition costs totalling GBP0.2m were recorded in
administrative expenses in the Consolidated Income Statement. The
goodwill arising on these acquisitions is not expected to be
deductible for tax purposes.
h) Adjustments arising on prior year acquisitions
GBPm
------------------------------------------------------------- -----
Non-current liabilities
Provisions (0.3)
------------------------------------------------------------- -----
Total liabilities (0.3)
------------------------------------------------------------- -----
Net adjustment to assets of business acquired in prior years (0.3)
------------------------------------------------------------- -----
Adjustment to goodwill 0.3
------------------------------------------------------------- -----
In finalising the acquisition accounting for the prior year
acquisition of International Light Technologies Inc., an adjustment
of GBP0.3m was made to include a provision for sales tax on
pre-acquisition sales. This resulted in an increase in goodwill of
GBP0.3m.
The adjustment is not material and as such the comparative
balance sheet was not restated; instead, the adjustments have been
made through the current year.
9 Disposal of operations
In the prior year, in August 2021, the Group disposed of its
entire interest in Texecom Limited. Cash received on disposal of
operations in the prior year of GBP57.5m comprised proceeds from
the sale of GBP64.8m, less GBP4.5m of cash disposed and GBP2.8m of
disposal costs. The Group recognised a profit on disposal of
operations of GBP34.0m.
10 Notes to the Consolidated Cash Flow Statement
Year
ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
----------------------------------------------------------- --------- ----------
Reconciliation of profit from operations to net cash
inflow from operating activities:
Profit on continuing operations before finance income
and expense, share of results of associate and profit
on disposal of operations 308.4 278.9
Non-cash movement on hedging instruments 0.1 -
Depreciation and impairment of property, plant and
equipment 41.5 36.1
Amortisation and impairment of computer software 2.2 2.5
Amortisation of capitalised development costs and
other intangibles 9.2 7.6
Impairment of capitalised development costs 0.5 2.9
Amortisation of acquired intangible assets 48.7 42.7
Impairment of acquired intangible assets 7.8 -
Share-based payment expense in excess of amounts paid 12.9 5.0
Payments to defined benefit pension plans net of service
costs (15.1) (11.7)
(Profit)/loss on sale of property, plant and equipment,
capitalised development costs and computer software (0.8) 0.8
----------------------------------------------------------- --------- ----------
Operating cash flows before movement in working capital 415.4 364.8
Increase in inventories (54.9) (51.9)
Increase in receivables (52.4) (43.6)
Increase in payables and provisions 15.1 36.1
Revision to estimate and exchange difference on contingent
consideration payable less amounts paid in excess
of payable estimated on acquisition 2.0 (12.0)
----------------------------------------------------------- --------- ----------
Cash generated from operations 325.2 293.4
Taxation paid (67.2) (56.0)
----------------------------------------------------------- --------- ----------
Net cash inflow from operating activities 258.0 237.4
----------------------------------------------------------- --------- ----------
Year
ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
-------------------------------------------- --------- ----------
Analysis of cash and cash equivalents
Cash and bank balances 169.5 157.4
Overdrafts (included in current borrowings) (1.0) (0.7)
-------------------------------------------- --------- ----------
Cash and cash equivalents 168.5 156.7
-------------------------------------------- --------- ----------
Net
31 March Cash cash/(debt) Additions Exchange 31 March
2022 flow acquired and reclassifications adjustments 2023
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- ------- ------------ ---------------------- ------------ --------
Analysis of net debt
Cash and bank balances 157.4 0.3 10.1 - 1.7 169.5
Overdrafts (0.7) (0.3) - - - (1.0)
-------------------------- -------- ------- ------------ ---------------------- ------------ --------
Cash and cash equivalents 156.7 _ 10.1 - 1.7 168.5
Loan notes falling due
within one year (71.2) 74.4 - - (3.2) -
Loan notes falling due
after more than one year (35.0) (338.1) - - (3.8) (376.9)
Bank loans falling due
within one year (0.6) 65.7 (65.1) - - -
Bank loans falling due
after more than one year (252.6) (58.1) - - 10.3 (300.4)
Lease liabilities (72.1) 20.9 (9.3) (24.9) (2.5) (87.9)
-------------------------- -------- ------- ------------ ---------------------- ------------ --------
Total net debt (274.8) (235.2) (64.3) (24.9) 2.5 (596.7)
-------------------------- -------- ------- ------------ ---------------------- ------------ --------
The net increase in cash and cash equivalents of GBP10.1m
comprised net cash inflow of GBPnil and cash acquired of
GBP10.1m.
The movement in bank loans in the year represents the proceeds
and repayments of bank borrowings and the borrowings acquired as a
result of acquisition.
Reconciliation of movements of the Group's liabilities from
financing activities
Liabilities from financing activities are those for which cash
flows were, or will be, classified as cash flows from financing
activities in the Consolidated Cash Flow Statement.
Trade
and other
payables
Total liabilities falling
from financing due within
Borrowings* Leases Overdraft activities one year
GBPm GBPm GBPm GBPm GBPm
-------------------------- ----------- ------ --------- ----------------- -----------
At 1 April 2021 322.3 65.0 3.0 390.3 186.7
Cash flows from financing
activities 28.9 (16.8) - 12.1 (5.9)
Acquisition/disposal of
subsidiaries - 2.5 - 2.5 11.7
Exchange adjustments 8.2 2.4 - 10.6 7.3
Other changes** - 19.0 (2.3) 16.7 42.9
-------------------------- ----------- ------ --------- ----------------- -----------
At 31 March 2022 359.4 72.1 0.7 432.2 242.7
-------------------------- ----------- ------ --------- ----------------- -----------
Cash flows from financing
activities 256.1 (20.9) - 235.2 (14.4)
Acquisition/disposal of
subsidiaries 65.1 9.3 - 74.4 8.7
Exchange adjustments (3.3) 2.5 - (0.8) 12.7
Other changes** - 24.9 0.3 25.2 31.0
-------------------------- ----------- ------ --------- ----------------- -----------
At 31 March 2023 677.3 87.9 1.0 766.2 280.7
-------------------------- ----------- ------ --------- ----------------- -----------
* Excluding overdrafts
** Other changes include movements in overdraft which is treated
as cash, interest accruals, reclassifications from non-current to
current liabilities, lease additions and other movements in working
capital balances.
11 Contingent liabilities
Group financing exemptions applicable to UK controlled foreign
companies
On 2 April 2019, the European Commission (EC) published its
final decision that the United Kingdom controlled Foreign Company
Partial Exemption (FCPE) constitutes State Aid. As previously
reported, the Group has benefited from the FCPE, which amounts to
GBP15.4m of tax for the period from 1 April 2013 to 31 December
2018.
Appeals had been made by the UK Government, the Group and other
UK-based groups to annul the EC decision. On 8 June 2022, the EU
General Court delivered its decision in favour of the EC. In August
2022, the UK Government appealed this decision.
Notwithstanding this appeal, under EU law, the UK Government is
required to commence collection proceedings. In January 2021, the
Group received a Charging Notice from HM Revenue & Customs
(HMRC) for GBP13.9m assessed for the period from 1 April 2016 to 31
December 2018. The Group appealed against the notice but, as there
is no right of postponement, the amount charged was paid in full in
February 2021 with a further GBP0.8m of interest paid in May 2021.
In February 2021, the Group received confirmation from HMRC that it
was not a beneficiary of State Aid for the period from 1 April 2013
to 31 March 2016.
Whilst the EU General Court was in favour of the EC, the Group's
assessment is that there are strong grounds for appeal and the
appeal is expected to be successful. As the amounts paid are
expected to be fully recovered, and given the appeal process is
expected to take more than a year, the Group continues to recognise
a receivable of GBP14.7m (31 March 2022: GBP14.7m) on the
Consolidated Balance Sheet within non-current assets.
Other contingent liabilities
The Group has widespread global operations and is consequently a
defendant in legal, tax and customs proceedings incidental to those
operations. In addition, there are contingent liabilities arising
in the normal course of business in respect of indemnities,
warranties and guarantees. These contingent liabilities are not
considered to be unusual or material in the context of the normal
operating activities of the Group. Provisions have been recognised
in accordance with the Group accounting policies where required.
None of these claims are expected to result in a material gain or
loss to the Group.
12 Events subsequent to end of reporting period
On 24 April 2023, Minicam Inc., a company in the Group's
Environmental & Analysis sector purchased its US service and
distribution partner, Visual Imaging Resources LLC, for initial
consideration of c.GBP2.3m (US$2.8m), and an earnout based on gross
margin of a maximum of GBP1.0m (US$1.2m) per year for three
years.
On 4 May 2023, completing on 11 May 2023, the Group acquired the
entire share capital of Sewertronics Sp. Z o.o. (Sewertronics),
based in Rzeszów, Poland for a cash consideration of c.GBP36m
(EUR41m) on a cash and debt-free basis. Additional consideration of
up to c.GBP16m (EUR18m) may be payable in cash, based on the
fulfilment of certain conditions. Sewertronics' technology repairs
and rehabilitates wastewater pipelines without the need to dig a
trench, by inserting a lining into the pipe, which is then cured
using its innovative and patented ultraviolet (UV) LED technology.
Sewertronics will be part of Halma's Environmental & Analysis
sector. As part of the acquisition a drawdown was made from the
Group's Revolving Credit Facility of GBP26.7m (EUR30.3m).
A detailed purchase price allocation exercise is currently being
performed to calculate the goodwill arising on these
acquisitions.
There were no other known material non-adjusting events which
occurred between the end of the reporting period and prior to the
authorisation of these financial statements on 15 June 2023.
13 Remuneration of key management personnel
The remuneration of the Directors and Executive Board members,
who are the key management personnel of the Group, is set out below
in aggregate for each of the categories specified in IAS 24
'Related Party Disclosures'. Further information about the
remuneration of individual Directors is provided in the audited
part of the Annual Remuneration Report in the Annual Report and
Accounts 2023.
Year ended Year ended
31 March 31 March
2023 2022
GBPm GBPm
--------------------------- ---------- ----------
Wages and salaries 10.8 11.9
Pension costs - 0.1
Share-based payment charge 6.7 5.0
--------------------------- ---------- ----------
17.5 17.0
--------------------------- ---------- ----------
Cautionary note
These Results contain 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.
LEI number: 2138007FRGLUR9KGBT40
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END
FR GUGDLUUBDGXU
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June 15, 2023 02:00 ET (06:00 GMT)
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