half year results 2019/20 - halma plc/media/files/h/halma/corp/... · order intake ahead of revenue...

Half Year Results 2019/2019 November 2019

Andrew Williams – Group Chief ExecutiveMarc Ronchetti – Chief Financial Officer

Introduction

Andrew WilliamsGroup Chief Executive

3Halma Half Year Results 2019/20 – 19 November 2019

Half year 2019/20: Record resultsRecord revenue and

profit and higher

returns

Increased strategic

investment

Solid cash

performance

Revenue

+12%£654m

Profit*

+14%£129m

Return on Sales

19.7%2018/19: 19.3%

R&D spend

+12%£35m

ROW revenue

+10%£164m

Acquisitions

5#

£88m spend

Cash flow

82%of adjusted

operating profit

Dividend

+7%6.54p

Net debt

£310mFY 2019: £232.0m##

* Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations# includes NeoMedix and Infowave completed after the period end

## adjusted to reflect adoption of IFRS16, resulting in an increase of £50.3m over the previously reported number

Financial Review

Marc RonchettiChief Financial Officer

0

100

200

300

400

500

600

700

15/16 16/17 17/18 18/19 19/20

0

20

40

60

80

100

120

140

15/16 16/17 17/18 18/19 19/20

£m £m

£654m £129m

Revenue Profit*

Record results

5

* Profit before amortisation and impairment of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations.

Halma Half Year Results 2019/20 – 19 November 2019

H1, 2019/20

Revenue growth

2017/18 Organic Acquisitions Disposals Currency 2018/19

£585.5m

+5.1%

+4.0% (0.6)%+3.2%

£653.7m+11.7%


+8.5%

16%

Reported Organic constant currency

£654m+12%

UK+9%

7

Revenue by destinationRevenue and revenue growth, H1 2019/20

21% Europe+9%

Asia Pacific+21%

16% 9%

38%

Other(6)%

USA+15%

UK+8%

Europe+4%

Asia Pacific+9%

Other(9)%

USA+7%


Profit* growth

2017/18 Organic Acquisitions Disposals Currency 2018/19

£112.9m

+6.5%

+4.4% (0.5)%+3.7%

£128.8m+14.1%

8

* Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations.


+10.4%

Infrastructure Safety

9

Revenue

£233m: +18%Organic ccy +4%

Profit*


Return on sales

22.5%2017/18: 21.1%

R&D spend

£14.2m: +15%6.1% of revenue

23%

£233m

UK+7%

+5% occy

31% Europe+17%

+8% occy

Asia Pacific+37%

+1% occy

14%

8%

24%

Other(16)%

(21)% occy

USA+40%

+13% occy

Revenue by destination



Expect further progress in H2: continued organic revenue growth and acquisitions benefit

Process Safety

10

Revenue


Profit*


Return on sales

24.5%2017/18: 22.6%

R&D spend

£3.5m: +4%3.5% of revenue

13%

£101m

UK(12)%

(12)% occy

19% Europe(3)%

(3)% occy

Asia Pacific+25%

+23% occy

17% 16%

35%

Other(3)%

(6)% occy

USA+9%

+4% occy




Expect second half progress with improving revenue momentum and a solid full year result

Environmental & Analysis

11

Revenue


Profit*


Return on sales

21.5%2017/18: 20.3%

R&D spend

£9.8m: +2%6.0% of revenue

Other(22)%

(25)% occy

19%


£164m

UK+27%

+25% occy

12%

Asia Pacific+5%

+2% occy

18% 3%

48%

USA+19%

+13% occyEurope+10%

+8% occy



Expect to continue to perform well in second half and achieve a strong full year performance

Medical

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Revenue


Profit*

£36m: +2%Organic ccy (1)%

Return on sales

22.9%2017/18: 23.8%

R&D spend

£7.2m: +30%**

4.6% of revenue

** Excluding the effect of the Accudynamics disposal

4%


£156m

UK+10%

+9% occy

16%

Europe(2)%

(5)% occy

Asia Pacific+22%

+19% occy17%

11%

51%

Other+14%

+11% occy

USA+2%

+1% occy



Expect a stronger performance in the second half to deliver a solid full year performance

£(181.7)mnet debtYE 18/19

(preIFRS16)

IFRS16Effect

£(50.3)m

Lease additions

Capex*

Tax Pensions

Acquisitions

Dividend

Interestand other

incl FX

£(310.4)mnet debtHY 19/20

£(100)m

£(200)m

13

Net debt

Working capital outflow

£25.2mH1 18/19: £10.6m

Capex

£13.7mH1 18/19: £14.9m

Pension deficit

£27.6mFY 2019: £39.2m

Acquisitions

£88.3mH1 18/19: £1.8m

Dividend spend

+7%£36.4m

Net debt

£310.4mFY 2019: £181.7m

(IFRS16 basis FY19: £232.0m)

0

* Includes capitalised development costs of £6.3m


£(250)m

Cash conversion

82%H1 18/19: 86%

Effective tax rate

19.9%FY 2019: 18.6%

EBITDA

£(150)m

£(50)m

£(300)m

Working capital

14

Performance against financial KPIs

* At constant currency** annualised profit of acquisitions made in the last twelve months (net of finance cost) as a percentage of prior year adjusted profit

Organic revenue growth*

Target ≥5%

Organic profit growth*

Target ≥5%

Acquisition profit growth**

Target ≥5%

Revenue growth outside

UK/USA/Europe

Target ≥10%

Return on Sales

Target 18-22%

Return on Total Invested Capital

Target ≥12%

Cash conversion

Target ≥85%

R&D investment (% of revenue)

Target ≥4%

+5% +6% +6% +10%

19.7% 14.8% 82% 5.3%


Strategy update


M&ATalent &Culture

InnovationNetwork

InternationalExpansion

Finance, Legal& Risk

StrategicCommunications

Digital GrowthEngines

Halma Strategy: Our Growth Enablers


Talent &Culture

Executive Board evolution


Ruwan De SoyzaGeneral Counsel and Company Secretary


Marc RonchettiChief Financial Officer

Paul SimmonsSector Chief Executive,

Safety

Laura StoltenbergSector Chief Executive,

Medical & Environmental

Jennifer WardGroup Talent and

Communications Director

Inken BraunschmidtChief Innovation and

Digital Officer

Catherine MichelChief Technology Officer

Adam MeyersExecutive Director

Five acquisitions completed

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M&A


Invenio (July 2019)Max consideration:

£6.0m

Enoveo (July 2019)Max consideration:

€1.3m (£1.2m)

NeoMedix (October 2019)Max consideration:US$25.1m (£20.4m)

Infowave (October 2019)Max consideration:US$12.3m (£10.1m)

Ampac (July 2019)Consideration:

AUS$135.0m (£75.2m)

Sustainability and living our purpose


Our purposeGrowing a safer, cleaner, healthier future for everyone, every day

UN Sustainable Development Goals

Environment Diversity & Inclusion Gift of Sight campaign

Gift of Sight

Summary and Outlook

Good first half progress; record revenue, profit and dividends

Increased investment to support sustained growth and returns

Order intake ahead of revenue and last year

Expect to make further progress in the second half of the year

On track to deliver another good full year performance


Questions?

Appendices

25%

Revenue Profit*

£654m

Medical+6%

24

Sector performances

24%


+14%

15%

36%

ProcessSafety+3%

Infrastructure Safety+18%

xx%

xx%

xx% xx%

xx% 24%

£129m

Medical+2%

24%


+21%

17%

35%

ProcessSafety+12%


* Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs and profit or loss on disposal of operations.


Revenue Profit*

+5%

Medical+4%

25

Sector performances: Organic constant currency


+10%

ProcessSafety+1%


xx%

xx%

xx% xx%

xx%

+6%

Medical(1)%


+16%

ProcessSafety+9%


* Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs and profit or loss on disposal of operations.


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Sector History

* Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and the effect of equalisation of benefits for men and women in the defined benefit pension plans.

£m H1 15/16 H1 16/17 H1 17/18 H1 18/19 H1 19/20

Revenue Process Safety 77.8 76.7 88.8 97.9 101.3

Infrastructure Safety 122.4 148.0 167.9 197.6 232.9

Environmental & Analysis 87.2 98.8 116.5 143.0 163.7

Medical 92.3 118.7 133.3 147.2 155.9

Inter-segment sales - (0.1) (0.2) (0.2) (0.1)

Group revenue 379.7 442.1 506.3 585.5 653.7

Sector profit* Process Safety 19.1 17.4 20.2 22.2 24.9

Infrastructure Safety 24.6 32.0 35.7 41.7 52.3

Environmental & Analysis 14.7 16.0 21.8 29.0 35.1

Medical 24.6 28.9 28.7 35.0 35.6

Segment profit 83.0 94.3 106.4 127.9 147.9

Central & net finance costs (8.3) (10.7) (11.9) (15.0) (19.1)

Profit* 74.7 83.6 94.5 112.9 128.8


Currency Effects

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* Based on H1 2019/20 currency mix

US$ % change Euro % change

H1 19/20 H1 18/19 H1 19/20 H1 18/19

Average rates versus Sterling

1.258 1.333 5.6% 1.126 1.133 0.6%

1% change* US$ (~48% of total) Euro (~12% of total)

Revenue £3.1m £0.8m

Profit £0.7m £0.1m


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Profit Adjustments*

* items charged in arriving at statutory profit** including acquisition costs and adjustment to acquisition contingent consideration

£m H1 19/20 H1 18/19

Intangible amortisation 18.3 17.5

Acquisition items** 4.7 -

Disposal of operations - 0.9

23.0 18.4


Pensions

• Discount rate 1.9% (March 2019: 2.4%).

• Closed DB to future accrual December 2014

• Contributions to pay off deficit : 2019/20: £12.7m

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Defined Benefit Pension Scheme (£m) At 30 September 2019 At 31 March 2019

Assets 325.5 292.2

Liabilities (353.1) (331.4)

Deficit (27.6) (39.2)


IFRS 16 effects

30

The effects of IFRS 16 in the first half of this financial year have been as follows:

• A reduction in net assets (£3.3m), comprising:o An increase in assets of £45.4mo An increase in liabilities of £48.7m, including a deferred tax asset of £1.2m

• A net effect on the Group’s income statemento Operating lease costs of approximately £7.7m replaced by:

o A depreciation charge of £6.3mo A financing expense of £1.0m

• There has been no other effect on tax

• There has been no effect on cash flow


2019/20 Full Year Forecasts

Notes:1. 2019/20 based on expected mix of profit. 2. 2019/20 includes the full year impact of resources added in 2018/19 and further investment to support our growth strategy.3. Assuming no further acquisitions 4. Includes estimated £2m lease financing charge under IFRS 165. Cash contributions to the two UK defined benefit pension plans.

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Notes Current 2019/20 Full Year Forecasts

Previous 2019/20 Full Year Forecasts

Capex £35m £35m

Effective tax rate 1 c.20% c.20%

Central costs 2 £28m £28m

Net finance expense 3, 4 £11.3m £10.5m

Pension contributions 5 £12.7m £12.7m


This document contains statements about Halma plc that are or may be forward-looking statements. Forward-looking statements include statements relating to (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Halma plc’s operations; and (iii) the effects of government regulation on business.

These forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of Halma plc. They involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by such statements. They are based on numerous assumptions regarding the present and future business strategies and the future operating environment . All subsequent oral or written forward-looking statements attributable to Halma plc or any of its shareholders or any persons acting on its behalf are expressly qualified in their entirety by this cautionary statement. All forward-looking statements included in this document speak only as of the date they were made and are based on information then available to Halma plc. Investors should not place undue reliance on such forward-looking statements, and Halma plc does not undertake any obligation to update publicly or revise any forward-looking statements.

No representation or warranty, express or implied, is given regarding the accuracy of the information or opinions contained in this document and no liability is accepted by Halma plc or any of its directors, members, officers, employees, agents or advisers forany such information or opinions.

This information is being supplied to you for information purposes only and not for any other purpose. This document and theinformation contained in it does not constitute or form any part of an offer of, or invitation or inducement to apply for, securities.

The distribution of this document in jurisdictions other than the United Kingdom may be restricted by law and persons into whosepossession this document comes should inform themselves about, and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of laws of any such other jurisdiction.

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half year results 2019/20 - halma plc/media/files/h/halma/corp/... · order intake ahead of revenue...

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