Halma Regulatory News (HLMA)

HALMA plc

HalF YEAR RESULTS 2018/19

Record first half results and continued dividend growth

Halma, the global group of life-saving technology companies focused on safety, health and the environment, today announces its half year results for the 6 months to 30 September 2018.

Highlights

Change

2018

2017

Continuing Operations

Revenue

+16%

£585.5m

£506.3m

Adjusted Profit before Taxation1,4

+19%

£112.9m

£94.5m

Adjusted Earnings per Share2,4

+22%

23.67p

19.37p

Statutory Profit before Taxation

+23%

£94.5m

£76.8m

Statutory Earnings per Share

+21%

19.67p

16.27p

Interim Dividend per Share

+7%

6.11p

5.71p

Return on Sales3

19.3%

18.7%

Return on Total Invested Capital4

14.9%

13.4%

Net Debt

£194.6m

£181.0m

●

Strong first half growth: Revenue up 16% with Adjusted1 pre-tax profit up 19% and statutory profit before tax up 23%.

●

Organic constant currency revenue growth4 up 14%, reflecting continued robust performances in all four sectors, as well as benefits from phasing of some major orders.

●

Organic constant currency profit growth4 of 16%, driven by revenue growth and significantly improved profitability in Medical. Continued strength in Environmental & Analysis.

●

Revenue growth in all major regions. Very strong performance in the USA, good growth in the UK and continued progress in Mainland Europe and Asia-Pacific.

●

Sustained high returns with Return on Sales3 of 19.3% and ROTIC5 of 14.9%. R&D expenditure up 14%, representing 5.3% of revenue.

●

Good cash generation, with cash conversion of 86%; strong balance sheet with net debt to EBITDA of 0.7x, supporting sustained investment in organic growth, acquisitions and talent.

●

Healthy acquisition pipeline with three acquisitions completed in the first half and two further acquisitions completed since the period end.

●

Interim dividend increased by 7%.

Andrew Williams, Group Chief Executive of Halma, commented:

"Halma made excellent progress in the first half, delivering record revenue, profit and dividends for shareholders, while continuing to invest in our strategic growth enablers for the longer term. Although the pace of technological and geopolitical changes is impacting economies and industries worldwide, we continue to benefit from the agility and resilience of our business model, as well as our geographic diversity, financial strength and focus on global niche markets.

Following a very strong first half, order intake continues to be ahead of both revenue and order intake for the comparable period last year. We remain on track to deliver more typical rates of constant currency organic growth in the second half, resulting in a strong full year performance."

Notes:

1

Adjusted to remove the amortisation and impairment of acquired intangible assets, acquisition items, significant restructuring costs and profit or loss on disposal of operations, totalling £18.4m (2017/18: £17.7m). See note 2 to the Condensed Interim Financial Statements.

2

Adjusted to remove 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. See note 6 to the Condensed Interim Financial Statements.

3

Return on Sales is defined as Adjusted1 profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations.

4

Adjusted1 Profit before Taxation, Adjusted1 Earnings per Share, organic growth rates and Return on Total Invested Capital (ROTIC) are alternative performance measures used by management. See notes 2, 6 and 9 to the Condensed Interim Financial Statements for details.

For further information, please contact:

Halma plcAndrew Williams, Group Chief ExecutiveMarc Ronchetti, Chief Financial Officer

Charles King, Head of Investor Relations

+44 (0)1494 721 111

+44 (0)7776 685948

MHP CommunicationsRachel Hirst/Andrew Jaques

+44 (0)20 3128 8100

A copy of this announcement, together with other information about Halma, may be viewed on its website: www.halma.com.

NOTE TO EDITORS

1.

Halma is a global group of companies, focused on creating a safer, cleaner and healthier future for people worldwide. Our innovative products and solutions address many of the key issues facing the world today. The Group comprises four business sectors:

· Process Safety

Products which protect assets and people at work.

· Infrastructure Safety

Products and services that improve the safety and mobility of people and protect commercially and publicly owned infrastructure.

· Medical

Products which enhance the quality of life for patients and improve the quality of care delivered by providers.

· Environmental & Analysis

Products and technologies for analysis in environmental safety and life sciences markets.

The key characteristics of Halma's businesses are specialist technology and application knowledge for markets offering strong long-term growth potential. Many Group businesses are market leaders in their specialist field.

2.

High resolution photos of Halma senior management, including Group Chief Executive Andrew Williams, and images illustrating Halma business activities can be downloaded from its website: www.halma.com. Click on the 'News & Media' link, then 'Media Gallery'.

3.

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.

4.

This announcement contains certain forward-looking statements which have been made by the Directors in good faith using information available up until the date they approved the announcement. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events.

Review of Operations

Record half year results

Halma made strong progress during the first half of the year. Revenue increased by 16% to £585.5m (2017/18: £506.3m) including a negative currency translation effect of 2%. Organic revenue growth at constant currency was 14%, and there was a 4% contribution from acquisitions completed in the prior year.

Adjusted1 profit before taxation increased by 19% to £112.9m (2017/18: £94.5m), also including a negative currency translation effect of 2%. Organic profit growth at constant currency was 16% with a 5% contribution from prior year acquisitions. Statutory profit before taxation increased by 23% to £94.5m (2017/18: £76.8m).

Return on Sales1 improved to 19.3% (2017/18: 18.7%) even though, as planned, there was increased investment to drive strategic growth. Our companies increased R&D expenditure by 14% to £31.1m (2017/18: £27.3m) representing 5.3% of Group revenue (2017/18: 5.4%).

The Board has declared an increase of 7% in the interim dividend to 6.11p per share (2017/18: 5.71p per share). The interim dividend will be paid on 6 February 2019 to shareholders on the register on 28 December 2018.

Widespread revenue growth

We achieved organic revenue growth at constant currency in every major region, which reflected good performances across all four of our business sectors.

The USA remains our largest sales destination contributing 37% of total revenue. It grew 19% in the half year (23% at organic constant currency), driven by increases in all sectors, as well as a benefit from the phasing of the delivery of some large orders received in the second half of last year.

Revenue in the UK increased by 21%, including 13% at organic constant currency, with good growth in Environmental & Analysis and Infrastructure Safety. Mainland Europe revenue increased by 14% and by 8% at organic constant currency, with Medical and Environmental & Analysis contributing strongly. Good progress in the Near and Middle East in Infrastructure Safety underpinned strong growth of 17% in Other regions (14% at organic constant currency).

Asia Pacific's revenue growth of 5% on a reported and an organic constant currency basis reflected a good underlying performance against a tough comparative, with large projects having been delivered in China and Korea in the first half of last year. China grew revenue 8% on an organic constant currency basis.

The tables below summarise revenue growth by destination and by sector, including the rates of organic growth at constant currency. Organic constant currency rates exclude the effect of currency translation, as well as acquisitions and disposals from the time of completion.

Strong revenue and profit growth in all sectors

Infrastructure Safety revenue increased by 18% to £197.6m (2017/18: £167.9m). This included 13% organic constant currency growth, a 1% negative effect from currency translation and 6% growth from acquisitions completed in the prior year. There was growth in all major market segments. Strong growth in our Fire businesses contributed to high rates of organic constant currency growth in the USA, the UK and Other regions. Although Asia Pacific saw slower growth overall, there were good increases in China and Australasia.

Profit2 grew by 17% to £41.7m (2017/18: £35.8m) including 12% organic constant currency growth, a 1% negative effect from currency translation and 6% growth from acquisitions completed in the prior year. Return on Sales was a healthy 21.1% (2017/18: 21.3%). R&D expenditure increased by 31% to £12.4m (2017/18: £9.4m). The sector is expected to make continued progress in the second half, in line with historical trends, with solid organic growth and recent acquisitions contributing to a strong full year performance.

In the first half, we acquired LAN Control Systems Limited, to strengthen our cloud-based system capabilities and to support tighter integration between fire, security and other building systems. After the period end, we announced two further acquisitions: in October, we announced the acquisition of Limotec bvba, a leading fire control panel designer and fire system seller in the Belgian market, to strengthen our continental European presence; and in November, we purchased Navtech Radar Limited, a UK-based designer and manufacturer of innovative radar surveillance solutions. Navtech builds on our existing capabilities in sensing vehicles, people and assets for safety and control applications, and provides new opportunities in the highway and critical infrastructure safety markets.

Process Safety revenue increased by 10% to £97.9m (2017/18: £88.8m). There was organic constant currency growth of 12% and a 2% negative effect from currency translation. The Safety Interlocks and Gas Sensors segments grew most strongly, with the former benefiting from a large contract for logistics safety from a major retailer in the USA. Pressure Relief and Pipeline Management grew at a slower rate.

All major regions delivered organic constant currency growth, with particularly high growth in the USA. The UK, Asia Pacific and Other regions saw good growth, while there was more modest growth in Mainland Europe.

Profit2 increased by 9% to £22.2m (2017/18: £20.2m) including 11% organic constant currency growth and a 2% negative effect from currency translation. Profit in the half year included some reorganisation costs in our Safety Interlocks and Pipeline Management businesses in order to improve performance in the longer-term. These will total between £1.5m - £2.0m for the full year with £0.7m in the first half. Return on Sales was consistent with the first half of last year at 22.6% (2017/18: 22.8%). R&D spend was up 11% to £3.4m (2017/18: £3.1m).

With the planned reorganisation costs, the sector is expected to have a lower profit growth rate in the second half, albeit with solid organic revenue growth, to deliver a good full year performance.

Medical revenue was up by 10% to £147.2m (2017/18: £133.3m). There was 14% organic constant currency growth, a 2% benefit from acquisitions in the last year and negative effects of 2% and 3% respectively from disposals and currency translation. The Diagnostics device business progressed very well and there was also good progress in the Ophthalmology, Sensor Technology and Patient Assessment segments, with the latter benefiting from last year's acquisitions.

There was organic constant currency revenue growth in all major regions, led by a strong increase in the USA, which represents over half of the sector's revenue. There was also healthy revenue growth in Mainland Europe and good progress in Asia Pacific and Other regions.

Profit2 was £35.0m (2017/18: £28.7m), a 22% increase over a relatively weak performance in the first half of last year. This comprised a 22% organic constant currency increase, a 2% uplift from last year's acquisitions, a 1% contribution from disposals this year, and a 3% negative impact from currency translation. Return on Sales increased to 23.8%, up from 21.6% in 2017/18. R&D spend was £5.5m (2017/18: £5.9m), although in-line with the comparative period after excluding disposals.

In the first half, we made two small acquisitions for our Sensor Technology business, CenTrak, expanding its technology and distribution capabilities in the USA and Mainland Europe. We also sold one of our Diagnostic businesses, Accudynamics.

We expect more normal rates of organic growth from our Medical sector in the second half of the year, against a tougher second half comparative, to deliver a strong full year performance.

Environmental & Analysis revenue rose by 23% to £143.0m (2017/18: £116.5m) including 19% organic constant currency growth, a 6% benefit from acquisitions and a 2% negative effect from currency translation. There was growth in all main business segments with a particularly strong performance in Environmental Monitoring. Organic constant currency revenue from the USA, UK and Mainland Europe increased significantly, with the USA benefitting from large projects in the Photonics businesses. Asia Pacific and Other regions grew more steadily, with the former reflecting a tough comparative against a strong performance in the first half of last year.

Profit2 improved by an impressive 33% to £29.0m (2017/18: £21.8m). Organic constant currency profit growth was 21% and there was a 15% benefit from the Mini-Cam acquisition completed last year. Currency translation had a 3% negative effect. Return on Sales saw a further significant improvement from 18.7% to 20.3%, which continues the positive trend of margin improvement over recent years. There was continued increased strategic investment, with R&D spend rising by 9% to £9.6m, representing 6.8% of revenue (2017/18: £8.9m).

After an exceptional first half, the sector is expected to deliver more typical rates of growth in the second half of the year and achieve a strong full year performance.

Five acquisitions and one disposal completed this financial year

Our sector M&A teams have been strengthened significantly over the past year and this has contributed to us developing a more robust acquisition pipeline. Three acquisitions were completed during the period, with a further two early in the second half of the year.

The three acquisitions in the first half were relatively small technologically-driven bolt-on acquisitions, for a total consideration of £3m. These included the Infrastructure Safety sector's acquisition of LAN Control Systems Limited and, in our Medical division, the purchase of the trade and assets of Awarepoint and Elpas to expand CenTrak's technology and market reach.

In October 2018, we acquired Limotec bvba for a cash consideration of €9.3m (£8.2m), on a cash and debt free basis. Limotec's revenue in its last financial year to the end of December 2017 was €6.7m (£5.9m).

In November 2018, we acquired Navtech Radar Limited for an initial cash consideration of £21m on a cash and debt free basis. Further earn-out considerations, capped at a total of £18m in cash, are payable dependent on profit growth in each of the three financial years to the end of March 2021. Navtech's revenue in the year to 31 March 2018 was £6.2m.

There was one disposal in the period. In June 2018, our Medical sector sold the Accudynamics Fluid Technology business for US$5.4m, resulting in a small loss on disposal of US$1.2m. The original US$31.8m consideration on acquisition in December 2010 primarily related to goodwill and customer intangibles, which have now been successfully transferred to strengthen the product offering and market positions of other Halma Fluid Technology businesses.

These transactions demonstrate Halma's ability to find attractive, high quality businesses both in and adjacent to our existing sectors as well as to maintain a portfolio of growing, high return companies through disposals.

Good progress on the Halma 4.0 growth strategy

Halma's commitment to making a positive difference to people's lives, is encompassed in our purpose of 'Growing a safer, cleaner and healthier future for everyone, every day'.

This central purpose has helped us to build a group of businesses with common values and strong competitive positions in market niches with long-term growth drivers. Over many years, these fundamentals have been strengthened further by a relentless determination to increase investment in our strategic Growth Enablers, both centrally and within each sector. These include M&A, Innovation Network, Talent & Culture, Finance & Risk and International Expansion, together with the two recent additions of Strategic Communications and Digital Growth Engines.

As well as helping us to continue to grow our Core business, these Growth Enablers support exploration of new ways to grow, for example in growth opportunities which require a Convergence of technologies and capabilities between two or more businesses and/or new business models. In addition, we are building a stronger network of internal and external partnerships to provide us with a greater insight into new digital growth strategies and technologies at the Edge of our current business horizons.

Recent examples of this include our Medical sector company, Bio-Chem Fluidics' development of condition monitoring and data collection capabilities to improve the reliability of their miniature valves and pumps used in analytical instruments. In the Environmental & Analysis sector, Ocean Optics has created a spin-off business, called WAVE, which has developed a cloud-based lighting solution to improve wellbeing and commercial outcomes in public infrastructure.

As we continuously evolve our growth strategy, we are increasingly building a network of internal and external partnerships to leverage our access to diverse skills and assets to create even more value for the Group.

Currency impacts

We report our results in Sterling with 46% of Group revenue denominated in US Dollars and 12% in Euros during the period. Average exchange rates are used to translate results in the Income Statement. Sterling strengthened against the US Dollar during the first half of 2018/19, but was broadly unchanged against the Euro. This resulted in a 2% negative currency translation impact on Group revenue and profit in the first half of 2018/19 relative to 2017/18. In the second half of 2018/19, if exchange rates remain at current forecast levels, we expect the currency effect seen in the first half to reverse, resulting in a broadly neutral effect on the year as a whole.

Pension deficit

On an IAS19 basis the deficit on the Group's defined benefit plans at the half year end reduced to £20.7m (31 March 2018: £53.9m) before the related deferred tax asset. The values of the plans' liabilities reduced due to an increase in the discount rate used to value those liabilities, while further employer contributions also reduced the plans' deficit. The plans' actuarial valuation reviews, rather than the accounting basis, determine any cash payments by Halma to eliminate the deficit. The triennial actuarial valuation of the main Halma Group Pension Plan is now complete and a cash contribution of £8.6m has been agreed with the trustees for the 2018/19 financial year (2017/18: £8.2m), which will increase by 7% per annum. We expect the Apollo scheme triennial valuation to be finalised during the second half of the year, and for overall contributions across both schemes in the 2018/19 financial year to be consistent with our previous guidance of £12m.

On 26 October 2018, the High Court reached a judgment in relation to Lloyds Banking Group's defined benefit pension schemes which concluded that the schemes should equalise pension benefits for men and women as regards guaranteed minimum pension benefits. The issues arising from the judgment will apply to most other UK defined benefit pension schemes. We are working with the trustees of our pension schemes, and our actuarial and legal advisers, to understand the extent to which the judgment will crystallise additional liabilities for Halma's pension schemes. Current industry estimates are for incremental liabilities of affected pension schemes to be in the range of zero to three per cent of total liabilities, and we currently expect any liability for Halma's schemes to be in the lower end of that range.

Cash flow and funding

Cash conversion (adjusted operating cash flow as a percentage of adjusted operating profit - see note 9) was 86% (2017/18: 84%), ahead of our cash conversion target of 85%. The increase in working capital of £10.6m was lower than the first half of the prior year, despite the strong growth in the business. As well as greater organic investment, dividend and tax payments also increased this half year. Capital expenditure of £14.9m (2017/18: £10.1m) was 47% higher than the comparative period due to increased investment in facility and site expansion, manufacturing capabilities, and IT and system upgrades.

Net debt at the end of the period was £194.6m (31 March 2018: £220.3m). Gearing (the ratio of net debt to EBITDA) at half year end was 0.7 times (31 March 2018: 0.9 times), which is within our typical operating range of up to 2 times gearing.

In October 2018 we extended the £550m Revolving Credit Facility, put in place in November 2016, by a further year to 2023. The combination of good cash generation, a healthy balance sheet and committed external financial resources provides us with the capacity we need to invest in organic growth and acquisitions to meet our growth objectives as well as to sustain our progressive dividend policy.

Principal risks and uncertainties

A number of potential risks and uncertainties exist which could have a material impact on the Group's performance over the second half of the financial year and could cause actual results to differ materially from expected and historical results. The Group has processes in place for identifying, evaluating and managing key risks. These risks, together with a description of our approach to mitigating them, are set out on pages 52 to 57 of the Annual Report and Accounts 2018, which is available on the Group's website at www.halma.com. See note 15 to the Condensed Financial Statements for further details.

The UK referendum decision in June 2016 and the subsequent triggering of Article 50 in March 2017 mean that the UK is now scheduled to leave the European Union on 29 March 2019 ('Brexit'). This decision has created a new dimension to the uncertainties surrounding global economic growth and trading conditions between the UK and the EU during the transition process.

Halma has an executive working group to assess and monitor the potential impact on the Group of Brexit, to communicate updates and support our businesses in preparing for the range of possible outcomes.

In 2017/18, approximately 9% of Group revenue came from direct sales between the UK and the EU.

To date, the following Brexit risks have been identified as having an actual and/or potential impact on our business:

- Economic conditions: increased overall uncertainty including the specific impacts on growth, inflation, interest and currency rates

- Defined benefit pension liability: movements in bond yields affecting discount rates which may increase the liability

- Laws and regulations: potential changes to UK and EU-based law and regulation including product approvals, patents and import/export tariffs

- Talent: mobility of the workforce and availability of talent

Depending on the nature of Brexit, our business could also experience shorter-term disruption around the time of Brexit in its supply chain, including disruption associated with customer buying patterns, customs and border clearances and uncertainty over UK and EU product approvals.

Halma also continues to monitor closely, through working groups in the USA and China, the effects of changes to US trade policy, including the imposition of tariffs on imported goods, and related trade measures taken by China and other countries. In 2017/18, approximately 5% of Group revenue came from direct sales between the USA and China. The following key risks have been identified as having an actual and/or potential impact on our business:

- Volatility of order flow from customers

- Increased costs, which could in turn make the pricing of our products uncompetitive, resulting in a loss of market share

- Effects from changes in economic activity in the countries concerned, and more globally

While Brexit and US trade policy changes could adversely affect our business, we consider that our decentralised model, with businesses in diverse markets and locations, will enable each Halma company to adapt quickly to changing trading conditions. This agility, together with the regulation-driven demand for many of our products and services, will help us to mitigate any adverse impact and also take advantage of any opportunities presented.

The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report and Accounts 2018 and confirm that they remain relevant for the second half of the financial year. As part of their ongoing assessment of risk throughout the period, the Directors have considered the above risks in the context of the Group's delivery of its financial objectives.

Going concern

After conducting a review of the Group's financial resources, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the Condensed Interim Financial Statements.

Outlook

Halma made excellent progress in the first half, delivering record revenue, profit and dividends for shareholders, while continuing to invest in our strategic growth enablers for the longer term. Although the pace of technological and geopolitical changes is impacting economies and industries worldwide, we continue to benefit from the agility and resilience of our business model, as well as our geographic diversity, financial strength and focus on global niche markets.

Following a very strong first half, order intake continues to be ahead of both revenue and order intake for the comparable period last year. We remain on track to deliver more typical rates of constant currency organic growth in the second half, resulting in a strong full year performance.

Andrew Williams

Group Chief Executive

Marc RonchettiChief Financial Officer

1 See Highlights.

2 See note 2 to the Condensed Interim Financial Statements.

Independent review report to Halma plc

Report on the Condensed Interim Financial Statements

Our conclusion

We have reviewed Halma plc's half year financial information (the "interim financial statements") in the Half Year Report of Halma plc for the six-month period ended 30 September 2018. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

- the Consolidated Balance Sheet as at 30 September 2018;

- the Consolidated Income Statement and Consolidated Statement of Comprehensive Income and Expenditure for the period then ended;

- the Consolidated Cash Flow Statement for the period then ended;

- the Consolidated Statement of Changes in Equity for the period then ended; and

- the explanatory notes to the interim financial statements.

The interim financial statements included in the Half Year Report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 in the notes to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Half Year Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half Year Report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Half Year Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Half Year Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

St. Albans

20 November 2018

Half year results 2018/19

Condensed INTERIM Financial Statements

Consolidated Income Statement

Unaudited

Six months to 30 September 2018

Unaudited

Six months to 30 September 2017

Audited Year to 31 March 2018

Notes

Before adjustments*£m 

Adjustments*(note 2)£m 

Total £m 

Before adjustments*£m 

Adjustments*(note 2)£m 

Total £m

Total £m

Continuing operations

Revenue

2

585.5

-

585.5 

506.3

-

506.3

1,076.2

Operating profit

117.9

(17.5)

100.4 

99.5

(17.7)

81.8

181.2

Share of results of associates

(0.1)

-

(0.1)

(0.1)

-

(0.1) 

(0.3)

(Loss)/profit on disposal of operations

2

-

(0.9)

(0.9)

-

-

-

0.7

Finance income

3

0.1

-

0.1 

0.1

-

0.1

0.3

Finance expense

4

(5.0)

-

(5.0)

(5.0)

-

(5.0) 

(10.0)

Profit before taxation

112.9

(18.4)

94.5 

94.5

(17.7)

76.8

171.9

Taxation

5

(23.1)

3.2

(19.9)

(21.1)

6.0

(15.1) 

(17.7)

Profit for the period attributable to equity shareholders

89.8

(15.2)

74.6 

73.4

(11.7)

61.7

154.2

Earnings per share

from continuing operations

6

Basic and diluted

23.67p

19.67p 

19.37p

16.27p

40.69p

Dividends in respect of the period

7

Dividends paid and proposed (£m)

23.2 

21.7

55.7

Per share

6.11p 

5.71p

14.68p

*

Adjustments include 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. Note 9 provides more information on alternative performance measures.

Consolidated Statement of Comprehensive Income and Expenditure

Unaudited

Six months to

30 September

2018

£m

Unaudited

Six months to

 30 September 2017

£m

Audited

Year to

31 March

2018

£m

Profit for the period

74.6

61.7

154.2

Items that will not be reclassified subsequently to the Income Statement:

Actuarial gains on defined benefit pension plans

28.2

3.5

11.8

Tax relating to components of other comprehensive income that will not be reclassified

(5.2)

(0.7)

(2.4)

Items that may be reclassified subsequently to the Income Statement:

Effective portion of changes in fair value of cash flow hedges

(0.6)

(0.3)

(0.1)

Exchange gains/(losses) on translation of foreign operations and net investment hedge

36.9

(36.7)

(62.9)

Tax relating to components of other comprehensive income that may be reclassified

-

0.1

-

Other comprehensive income/(expense) for the period

59.3

(34.1)

(53.6)

Total comprehensive income for the period attributable to equity shareholders

133.9

27.6

100.6

The exchange gains of £36.9m (six months to 30 September 2017: £36.7m loss; year to 31 March 2018: £62.9m loss) include losses of £10.7m (six months to 30 September 2017: £6.9m gains; year to 31 March 2018: £13.3m losses), which relate to net investment hedges.

Consolidated Balance Sheet

Notes

Unaudited

30 September

2018

£m

Unaudited

30 September

2017

£m

Audited

31 March

2018

£m

Non-current assets

Goodwill

655.6

586.8

632.1

Other intangible assets

229.9

216.4

234.6

Property, plant and equipment

109.6

102.6

103.7

Interests in associates

3.9

3.4

4.0

Deferred tax asset

30.9

55.3

37.0

1,029.9

964.5

1,011.4

Current assets

Inventories

141.2

124.2

128.0

Trade and other receivables

241.8

203.4

235.2

Tax receivable

0.7

0.4

0.8

Cash and bank balances

66.4

71.7

70.7

Derivative financial instruments

11

0.3

0.6

0.7

450.4

400.3

435.4

Total assets

1,480.3

1,364.8

1,446.8

Current liabilities

Trade and other payables

154.5

125.7

149.6

Borrowings

3.0

0.2

1.1

Provisions

18.2

4.7

8.8

Tax liabilities

13.3

14.9

12.2

Derivative financial instruments

11

0.5

0.4

0.2

189.5

145.9

171.9

Net current assets

260.9

254.4

263.5

Non-current liabilities

Borrowings

258.0

252.5

289.9

Retirement benefit obligations

10

20.7

66.8

53.9

Trade and other payables

9.7

11.4

12.6

Provisions

4.7

16.9

23.1

Deferred tax liabilities

70.4

96.0

67.0

363.5

443.6

446.5

Total liabilities

553.0

589.5

618.4

Net assets

927.3

775.3

828.4

Equity

Share capital

38.0

38.0

38.0

Share premium account

23.6

23.6

23.6

Own shares

(3.5)

(3.7)

(6.3)

Capital redemption reserve

0.2

0.2

0.2

Hedging reserve

(0.3)

0.1

0.3

Translation reserve

124.2

113.5

87.3

Other reserves

(10.9)

(10.3)

(5.9)

Retained earnings

756.0

613.9

691.2

Shareholders' funds

927.3

775.3

828.4

Consolidated Statement of Changes in Equity

For the Six months to 30 September 2018

Share

capital

£m

Share

premium

account

£m

Own

shares

£m

Capital

redemption

reserve

£m

Hedging

reserve

£m

Translation

reserve

£m

Other

reserves

£m

Retained

earnings

£m

Total

£m

At 31 March 2018 (audited)

38.0

23.6

(6.3)

0.2

0.3

87.3

(5.9)

691.2

828.4

Impact of changes in accounting policies

IFRS 9

-

-

-

-

-

-

-

0.1

0.1

IFRS 15

-

-

-

-

-

-

-

(0.2)

(0.2)

Restated balance at 31 March 2018

38.0

23.6

(6.3)

0.2

0.3

87.3

(5.9)

691.1

828.3

Profit for the period

-

-

-

-

-

-

-

74.6

74.6

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

-

-

-

-

-

37.3

-

-

37.3

Recycling of exchange reserves on disposal of business

-

-

-

-

-

(0.4)

-

-

(0.4)

Actuarial gains on defined benefit pension plans

-

-

-

-

-

-

-

28.2

28.2

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

(0.6)

-

-

-

(0.6)

Tax relating to components of other comprehensive income and expense

-

-

-

-

-

-

-

(5.2)

(5.2)

Total other comprehensive income and expense

-

-

-

-

(0.6)

36.9

-

23.0

59.3

Dividends paid

-

-

-

-

-

-

-

(34.0)

(34.0)

Share-based payments charge

-

-

-

-

-

-

4.9

-

4.9

Deferred tax on share-basedpayment transactions

-

-

-

-

-

-

0.5

-

0.5

Excess tax deductions related to share-based payments on exercised awards

-

-

-

-

-

-

-

1.3

1.3

Purchase of own shares

-

-

(2.7)

-

-

-

-

-

(2.7)

Performance share plan awards vested

-

-

5.5

-

-

-

(10.4)

-

(4.9)

At 30 September 2018 (unaudited)

38.0

23.6

(3.5)

0.2

(0.3)

124.2

(10.9)

756.0

927.3

Own shares are ordinary shares in Halma plc purchased by the Company and held to fulfil the Company's obligations under the Company's share plans. As at 30 September 2018 the number of treasury shares held was Nil (30 September 2017: 3,990; 31 March 2018: 3,990) and the number of shares held by the Employee Benefit Trust was 289,966 (30 September 2017: 421,991 and 31 March 2018: 631,991).

For the Six months to 30 September 2017

Share

capital

£m

Share

premium

account

£m

Own

shares

£m

Capital

redemption

reserve

£m

Hedging

reserve

£m

Translation

reserve

£m

Other

reserves

£m

Retained

earnings

£m

Total

£m

At 1 April 2017 (audited)

38.0

23.6

(7.3)

0.2

0.4

150.2

(6.4)

579.9

778.6

Profit for the period

-

-

-

-

-

-

-

61.7

61.7

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

-

-

-

-

-

(36.7)

-

-

(36.7)

Actuarial gains on defined benefit pension plans

-

-

-

-

-

-

-

3.5

3.5

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

(0.3)

-

-

-

(0.3)

Tax relating to components of other comprehensive income and expense

-

-

-

-

-

-

-

(0.6)

(0.6)

Total other comprehensive income and expense

-

-

-

-

(0.3)

(36.7)

-

2.9

 (34.1)

Dividends paid

-

-

-

-

-

-

-

 (31.7)

(31.7)

Share-based payments charge

-

-

-

-

-

-

3.5

-

3.5

Deferred tax on share-based payment transactions

-

-

-

-

-

-

(0.5)

-

 (0.5)

Excess tax deductions related to share-based payments on exercised awards

-

-

-

-

-

-

-

1.1

1.1

Performance share plan awards vested

-

-

3.6

-

-

-

(6.9)

-

(3.3)

At 30 September 2017 (unaudited)

38.0

23.6

(3.7)

0.2

0.1

113.5

(10.3)

613.9

775.3

For the Year to 31 March 2018

Share

capital

£m

Share

premium

account

£m

Own

shares

£m

Capital

redemption

reserve

£m

Hedging

reserve

£m

Translation

reserve

£m

Other

reserves

£m

Retained

earnings

£m

Total

£m

At 1 April 2017 (audited)

38.0

23.6

(7.3)

0.2

0.4

150.2

(6.4)

579.9

778.6

Profit for the period

-

-

-

-

-

-

-

154.2

154.2

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

-

-

-

-

-

(62.9)

-

-

(62.9)

Actuarial gains on defined benefit pension plans

-

-

-

-

-

-

-

11.8

11.8

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

(0.1)

-

-

-

(0.1)

Tax relating to components of other comprehensive income and expense

-

-

-

-

-

-

-

(2.4)

(2.4)

Total other comprehensive income and expense

-

-

-

-

(0.1)

(62.9)

-

9.4

(53.6)

Dividends paid

-

-

-

-

-

-

-

(53.4)

(53.4)

Share-based payments charge

-

-

-

-

-

-

7.9

-

7.9

Deferred tax on share-based payment transactions

-

-

-

-

-

-

(0.5)

-

(0.5)

Excess tax deductions related to share-based payments on exercised awards

-

-

-

-

-

-

-

1.1

1.1

Purchase of own shares

-

-

(2.6)

-

-

-

-

-

(2.6)

Performance share plan awards vested

-

-

3.6

-

-

-

(6.9)

-

(3.3)

At 31 March 2018 (audited)

38.0

23.6

(6.3)

0.2

0.3

87.3

(5.9)

691.2

828.4

Consolidated Cash Flow Statement

Notes

Unaudited

Six months to

 30 September

2018

£m

Unaudited

Six months to

 30 September

2017

£m

Audited

Year to

31 March

2018

£m

Net cash inflow from operating activities

8

96.8

76.0

173.3

Cash flows from investing activities

Purchase of property, plant and equipment

(13.7)

(9.1)

(20.2)

Purchase of computer software

(1.2)

(1.0)

(1.9)

Purchase of other intangibles

(0.8)

(0.1)

(0.1)

Proceeds from sale of property, plant and equipment

0.4

1.2

1.7

Development costs capitalised

(4.3)

(5.0)

(9.4)

Interest received

0.1

0.1

0.2

Acquisitions of businesses

(4.7)

(17.1)

(111.7)

Disposal of business

3.0

-

-

Net cash used in investing activities

(21.2)

(31.0)

(141.4)

Cash flows from financing activities

Dividends paid

(34.0)

(31.7)

(53.4)

Purchase of own shares

(2.6)

-

(2.6)

Interest paid

(4.0)

(3.5)

(7.2)

Loan arrangement fee paid

-

-

(0.4)

Proceeds from bank borrowings

28.0

30.7

119.2

Repayment of bank borrowings

(70.4)

(33.3)

(81.4)

Net cash used in financing activities

(83.0)

(37.8)

(25.8)

(Decrease)/increase in cash and cash equivalents

(7.4)

7.2

6.1

Cash and cash equivalents brought forward

69.7

65.6

65.6

Exchange adjustments

1.2

(1.1)

(2.0)

Cash and cash equivalents carried forward

63.5

71.7

69.7

UnauditedSix months to

30 September 2018

£m

UnauditedSix months to

 30 September 2017

£m

Audited

Year to

31 March 2018

£m

Reconciliation of net cash flow to movement in net debt

(Decrease)/increase in cash and cash equivalents

(7.4)

7.2

6.1

Net cash outflow/(inflow) from repayment/(drawdown) of bank borrowings

42.4

2.6

(37.8)

Net debt acquired

-

-

(3.1)

Loan notes repaid in respect of acquisitions

0.1

0.1

0.2

Exchange adjustments

(9.4)

5.5

10.7

25.7

15.4

(23.9)

Net debt brought forward

(220.3)

(196.4)

(196.4)

Net debt carried forward

(194.6)

(181.0)

(220.3)

Notes to the Condensed Interim Financial Statements

1 Basis of preparation

General information

The Half Year Report, which includes the Interim Management Report and Condensed Interim Financial Statements for the six months to 30 September 2018, was approved by the Directors on 20 November 2018.

Basis of preparation

The Report has been prepared solely to provide additional information to shareholders as a body to assess the Board's strategies and the potential for those strategies to succeed. It should not be relied on by any other party or for any other purpose.

The Report contains certain forward-looking statements which have been made by the Directors in good faith using information available up until the date they approved the Report. Forward-looking statements should be regarded with caution as by their nature such statements involve 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.

The Report has been prepared in accordance with International Accounting Standard 34, applying the accounting policies and presentation that were applied in the preparation of the Group's statutory accounts for the Year to 31 March 2018, with the exception of the policy for taxes on income, which in the interim period is accrued using the effective tax rate that would be applicable to expected total income for the financial year, and except for the adoption of new accounting standards described below.

The figures shown for the Year to 31 March 2018 are based on the Group's statutory accounts for that period and do not constitute the Group's statutory accounts for that period as defined in Section 434 of the Companies Act 2006. These statutory accounts, which were prepared under International Financial Reporting Standards, have been filed with the Registrar of Companies. The audit report on those accounts was not qualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying the report, and did not contain statements under Sections 498 (2) or (3) of the Companies Act 2006.

New accounting standards

With effect from 1 April 2018 the Group has adopted the following new accounting standards:

(a) IFRS 15 'Revenue from Contracts with Customers'

IFRS 15 sets out the requirements for recognising revenue from contracts with customers. The standard requires entities to apportion revenue earned from contracts to individual promises, or performance obligations, on a stand-alone selling price basis, based on a five-step model.

The Group completed a transition exercise which was described in the Annual Report and Accounts 2018. Based on the work undertaken, most of the Group's companies are unaffected, but have implemented process changes to comply with IFRS 15 now and in the future. A small number of the Group's companies have individually material adjustments to their balance sheets through acceleration or deferral of revenue on the opening balance sheet. However, these are not material to the Group as a whole.

As stated in the Annual Report and Accounts 2018, the Group originally intended to apply a fully retrospective approach to transition. However, as the impact on the Group's results is not material, a modified retrospective approach has been taken on transition and so the comparatives for the six months to 30 September 2017 and the year to 31 March 2018 have not been restated. The impact of transition has been reflected in the restatement of retained earnings, as at 31 March 2018, as shown in the Consolidated Statement of Changes in Equity.

Given the impact of implementing the new accounting policy under IFRS 15 is not materially different to the financial performance and position under the IFRS that previously applied, there has been no presentation of the current year financial statements under the previous IFRS. There is also no significant impact on any earnings per share measures disclosed.

(b) IFRS 9 'Financial Instruments'

IFRS 9 provides a new expected losses impairment model for financial assets, including trade receivables, and includes amendments to classification and measurement of financial instruments. An accounting policy choice is available with regards to applying the new hedge accounting requirements or retaining IAS 39. The Group has elected to retain IAS 39.

The Group completed a transition exercise which was described in the Annual Report and Accounts 2018.

The Group's use of financial instruments is limited to short-term trading balances such as receivables and payables, borrowings and derivatives used for hedging foreign exchange risks. Therefore, the standard impacts the Group's classification of financial instruments and the measurement of impairment of short-term financial assets.

The Group has applied the new standard in accordance with the transition rules. As the impact on the Group's results is not material, the Group has elected to apply the limited exemption in IFRS 9 paragraph 7.2.15, relating to transition for classification, measurement and impairment. As a result, the comparatives for the six months to 30 September 2017 and the year to 31 March 2018 have not been restated. The impact of transition has been reflected in the restatement of retained earnings, as at 31 March 2018, as shown in the Consolidated Statement of Changes in Equity.

Standards and interpretations not yet applied

At the date of approval of this Half Year Report, 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 EU):

- IFRS 16 'Leases' - effective for accounting periods beginning on or after 1 January 2019.

- Amendments to IAS 19: Plan Amendment, Curtailment of Settlement - effective for accounting periods beginning on or after 1 January 2019.

- Annual Improvements 2015-2017 Cycle - effective for accounting periods beginning on or after 1 January 2019.

- IFRIC Interpretation 23: Uncertainty over Income Tax Treatments - effective for accounting periods beginning on or after 1 January 2019.

- Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures - effective for accounting periods beginning on or after 1 January 2019.

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 with the exception of IFRS 16 'Leases' where our review of the impact is ongoing as described below.

IFRS 16 'Leases'

For the Group, transition to IFRS 16 will take effect from 1 April 2019. The half year results for the six months ending 30 September 2019 will be IFRS 16 compliant with the first Annual Report published in accordance with IFRS 16 being for the year ending 31 March 2020.

IFRS 16 provides a single model for lessees which recognises a right of use asset and lease liability for all leases which are longer than one year, or which are not classified as low value. The distinction between finance and operating leases for lessees is removed.

The Group is currently assessing the impact of the new standard. The most significant impact currently identified will be that the Group's land and buildings leases will be brought on to the balance sheet. Further assessment of other leases is currently ongoing. The Group's future lease commitments for land and buildings as at 31 March 2018, which provides an indicator of the value to be brought on to the balance sheet, was £43m.

New accounting standards and interpretations applied for the first time

The following Standards with an effective date of 1 January 2018 have been adopted without any significant impact on the amounts reported in these financial statements:

- Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions.

- Annual Improvements 2014-2017 Cycle.

- IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration.

Going concern

The Directors believe the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities, which includes a £550m five-year Revolving Credit Facility (RCF) completed in November 2016 of which £473m remains undrawn at the date of this report. The RCF was extended to November 2023 following the period end.

With this in mind, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the half year Condensed Financial Statements.

New accounting policies with effect from 1 April 2018

(a) IFRS 15 'Revenue from Contracts with Customers'

Significant accounting policy

Revenue is recognised to depict 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.

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.

Performance obligations are unbundled in each contractual arrangement if they are distinct from one another.

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 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.

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. 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'.

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. For more detailed information about reportable segments, see Note 2.

Infrastructure Safety sector generates revenue from providing products that improve the safety and mobility of people and protects infrastructure. Products are generally sold separately, with contracts less than one year. 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.

Process Safety sector generates revenue from providing products that protect assets and people at work. Products are generally sold separately, with contracts less than one year. Warranties are typically of an assurance nature. Revenue is recognised as control typically passes on delivery or despatch.

Payment is typically due within 60 days of invoice, except where a retention is held for documentation.

Medical sector generates revenue providing products and services that enhance quality of life and improve quality of care. 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. A limited number of companies have contracts where certain performance obligations are delivered over a number of years.

Payment is typically due within 60 days of invoice.

Environmental & Analysis generates revenue providing products and technologies that improve quality and efficient use of critical resources. Products and services are generally sold separately. Warranties are typically of an assurance nature, but some companies offer extended warranties. Depending on the nature of the performance obligation, revenue is recognised as control passes on delivery, despatch or as the service is delivered. Some companies have contracts where certain performance obligations are delivered over a number of years.

Payment is typically due within 60 days of invoice.

(b) IFRS 9 'Financial Instruments'

(i) Classification

From 1 April 2018, the Group classifies its financial assets in the following measurement categories:

- those that are measured subsequently at fair value (either through other comprehensive income or through profit or loss); and

- those that are measured at amortised cost.

The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows.

In respect of financial hedges, on initial application of IFRS 9, an entity may choose, as its accounting policy, to continue to apply the hedge accounting requirements of IAS 39 instead of the hedge accounting requirements of IFRS 9. The Group has elected to apply the IAS 39 hedge accounting requirements, and therefore hedging instruments are not considered under IFRS 9.

As a result of the above, at 1 April 2018, and throughout the current accounting period, the only financial assets held by the Group were cash and bank balances (held at fair value, with any gains or losses arising from currency rate changes reported through profit or loss); trade and other receivables (held at amortised cost); and derivative financial instruments (initially recognised at fair value and subsequently remeasured to fair value at each balance sheet date, the resulting gain or loss being reported through profit or loss, unless in a designated hedge relationship).

(ii) Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

(iii) Impairment

From 1 April 2018, 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 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.

The Group has applied IFRS 9 retrospectively but has elected not to restate comparative information. As a result, the comparative information provided continues to be accounted for in accordance with the group's previous accounting policies, which can be found in the Annual Report and Accounts for the year ended 31 March 2018. The impact of the transition to IFRS 9 is immaterial with an adjustment to opening retained earnings of £0.1m.

2 Segmental analysis

Sector analysis

The Group has four main reportable segments (Process Safety, Infrastructure Safety, Medical and Environmental & Analysis), 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.

Segment revenue and results

Unaudited Six months to 30 September 2018

Revenue by sector and destination (all continuing operations)

United States of America

£m

Mainland Europe

£m

United Kingdom

£m

Asia Pacific

£m

Africa, Near and Middle East

£m

Other countries

£m

Total

£m

Process Safety

32.5

19.8

15.4

13.9

12.0

4.3

97.9

Infrastructure Safety

39.8

61.2

50.2

24.4

16.2

5.8

197.6

Medical

78.2

25.6

6.0

21.7

6.6

9.1

147.2

Environmental & Analysis

65.6

17.7

24.7

28.1

3.7

3.2

143.0

Inter-segmental sales

(0.1)

-

(0.1)

-

-

-

(0.2)

Revenue for the period

216.0

124.3

96.2

88.1

38.5

22.4

585.5

Unaudited Six months to 30 September 2017

Revenue by sector and destination (all continuing operations)

United States of America

£m

Mainland Europe

£m

United Kingdom

£m

Asia Pacific

£m

Africa, Near and Middle East

£m

Other countries

£m

Total

£m

Process Safety

26.4

19.3

14.5

13.0

10.3

5.3

88.8

Infrastructure Safety

33.1

52.6

41.6

24.3

10.7

5.6

167.9

Medical

70.6

23.1

5.9

20.6

5.7

7.4

133.3

Environmental & Analysis

51.9

14.0

17.7

26.1

4.0

2.8

116.5

Inter-segmental sales

(0.2)

-

-

-

-

-

(0.2)

Revenue for the period

181.8

109.0

79.7

84.0

30.7

21.1

506.3

Unaudited year end 31 March 2018

Revenue by sector and destination (all continuing operations)

United States of America

£m

Mainland Europe

£m

United Kingdom

£m

Asia Pacific

£m

Africa, Near and Middle East

£m

Other countries

£m

Total

£m

Process Safety

52.1

40.6

29.5

28.1

24.8

9.4

184.5

Infrastructure Safety

66.4

112.2

87.8

46.1

23.9

12.4

348.8

Medical

145.3

51.3

13.0

42.7

13.2

18.3

283.8

Environmental & Analysis

110.4

33.6

43.1

58.0

7.8

6.5

259.4

Inter-segmental sales

(0.2)

-

(0.1)

-

-

-

(0.3)

Revenue for the period

374.0

237.7

173.3

174.9

69.7

46.6

1,076.2

Inter-segmental sales are charged at prevailing market prices and have not been disclosed separately by segment as they are not considered material. The Group does not analyse revenue by product group. Revenue derived from the rendering of services was £33.4m (six months to 30 September 2017: £23.4m; year to 31 March 2018: £49.6m). All revenue was otherwise derived from the sale of products.

Profit (all continuing operations)

Unaudited

Six months to

 30 September

2018

£m

Unaudited

Six months to

 30 September

2017

£m

Audited

Year to

31 March

2018

£m

Segment profit before allocation of adjustments*

Process Safety

22.2

20.2

43.3

Infrastructure Safety

41.7

35.8

73.3

Medical

35.0

28.7

67.0

Environmental & Analysis

29.0

21.8

55.0

127.9

106.5

238.6

Segment profit after allocation of adjustments*

Process Safety

20.2

18.2

39.4

Infrastructure Safety

37.3

33.2

65.1

Medical

26.5

17.5

44.7

Environmental & Analysis

25.5

19.9

47.7

Segment profit

109.5

88.8

196.9

Central administration costs

(10.1)

(7.1)

(15.3)

Net finance expense

(4.9)

(4.9)

(9.7)

Group profit before taxation

94.5

76.8

171.9

Taxation

(19.9)

(15.1)

(17.7)

Profit for the period

74.6

61.7

154.2

* Adjustments include the amortisation and impairment of acquired intangible assets; acquisition items; significant restructuring costs; and profit or loss on disposal of operations. Note 9 provides more information on alternative performance measures.

The accounting policies of the reportable segments are the same as the Group's accounting policies. Acquisition transaction costs, adjustments to contingent consideration and release of fair value adjustments to inventory (collectively 'acquisition items') are recognised in the Consolidated Income Statement. Segment profit before these acquisition items and other adjustments, is disclosed separately above 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:

Unaudited for the Six months to 30 September 2018

Amortisation

and impairment

of acquired

intangibles

£m

Acquisition items

Total

amortisation

charge and

acquisition

items

£m

Disposal of

operations and significant restructuring

£m

Total

£m

Transaction

costs

£m

Adjustments

to contingent

consideration

£m

Release of

 fair value

adjustments

to inventory

£m

Process Safety

(2.0)

-

-

-

(2.0)

-

(2.0)

Infrastructure Safety

(3.0)

-

-

(1.4)

(4.4)

-

(4.4)

Medical

(8.0)

-

0.4

-

(7.6)

(0.9)

(8.5)

Environmental & Analysis

(4.5)

-

1.1

(0.1)

(3.5)

-

(3.5)

Total Segment & Group

(17.5)

-

1.5

(1.5)

(17.5)

(0.9)

(18.4)

The £1.5m adjustment to contingent consideration comprises a credit of £1.1m in Environmental & Analysis arising from a change in estimate of the payable for FluxData, Inc. (FluxData), and a credit of £0.4m in Medical arising from exchange differences on the payables for Visiometrics S.L. (Visiometrics) which is denominated in Euros.

The £1.5m charge relates to the release of the remaining fair value adjustment on revaluing the inventory of Firetrace Limited (£1.4m) and Mini-Cam Enterprises Limited and subsidiaries (Mini-Cam) (£0.1m).

The loss on disposal of operations of £0.9m arose on the sale of the trade and assets of Accudynamics Inc, for sale proceeds of £4.1m. The net assets on disposal were £4.3m, which together with the disposal of related goodwill of £0.8m and disposal costs of £0.3m, offset by the recycling of foreign exchange gains of £0.4m, resulted in a net loss on disposal (before taxation) of £0.9m.

Unaudited for the Six months to 30 September 2017

Amortisation and impairment

of acquired

intangibles

£m

Acquisition items

Total

amortisation

charge and

acquisition

items

£m

Disposal of

operations and significant restructuring

£m

Total

£m

Transaction

costs

£m

Adjustments

to contingent

consideration

£m

Release of

 fair value

adjustments

to inventory

£m

Process Safety

(2.0)

-

-

-

(2.0)

-

(2.0)

Infrastructure Safety

(2.5)

(0.1)

-

-

(2.6)

-

(2.6)

Medical

(9.9)

(0.8)

(0.5)

-

(11.2)

-

(11.2)

Environmental & Analysis

(2.9)

-

1.1

(0.1)

(1.9)

-

(1.9)

Total Segment & Group

(17.3)

(0.9)

0.6

(0.1)

(17.7)

-

(17.7)

The transaction costs arose mainly on the acquisitions of CasMed NIBP and Cardios during the period.

The £0.6m adjustment to contingent consideration comprises a credit of £1.1m in Environmental & Analysis arising from a change in estimate of the payable for FluxData, a prior year acquisition, offset by £0.5m in Medical arising from exchange differences on the payables for Visiometrics which is denominated in Euros and for Cardios Sistemas Comercial e Industrial Ltda and Cardio Dinamica Ltda (together Cardios) which is denominated in Brazilian Reals.

The £0.1m charge relates to the release of the remaining fair value adjustment on revaluing the inventory of FluxData on acquisition in the prior year.

Audited for the year to 31 March 2018

Amortisation and impairment

of acquired

intangibles

£m

Acquisition items

Total

amortisation

charge and

acquisition

items

£m

Disposal of

operations and significant restructuring

£m

Total

£m

Transaction

costs

£m

Adjustments

to contingent

consideration

£m

Release of

 fair value

adjustments

to inventory

£m

Process Safety

(3.9)

-

-

-

(3.9)

-

(3.9)

Infrastructure Safety

(5.2)

(0.8)

-

(2.1)

(8.1)

-

(8.1)

Medical

(18.5)

(1.0)

(3.2)

(0.3)

(23.0)

0.7

(22.3)

Environmental & Analysis

(7.1)

(0.8)

1.5

(1.0)

(7.4)

-

(7.4)

Total Segment & Group

(34.7)

(2.6)

(1.7)

(3.4)

(42.4)

0.7

(41.7)

The transaction costs arose mainly on the acquisitions during the period of Setco, S.A. (Setco) (£0.1m) and Argus Security S.r.l. and Sterling Safety Systems Limited (together Argus) (£0.7m) within Infrastructure Safety, Cas Medical Systems Inc's Non-Invasive Blood Pressure Monitoring product line (CasMed NIBP) (£0.5m) and Cardios (£0.5m) within Medical, and Mini-Cam (£0.8m) within Environmental & Analysis.

The £1.7m adjustment to contingent consideration comprises: a debit of £2.5m in Medical arising from a change in estimate of the payable for CasMed NIBP (£0.7m) and Visiometrics (£1.8m), offset by a credit of £1.5m in Environmental & Analysis arising from a change in estimate of the payable for FluxData. Exchange differences on the payable for Visiometrics which is denominated in Euros, and for Cardios which is denominated in Brazilian Reals, contributes a further debit of £0.7m in Medical.

The £3.4m release of fair value adjustments to inventory relates to Firetrace (£1.4m), Argus (£0.6m) and Setco (£0.1m) within Infrastructure Safety, Cardios (£0.3m) within Medical, and Mini-Cam (£0.8m) and FluxData (£0.2m) within Environmental & Analysis. All amounts have now been released in relation to Argus, Setco, Cardios and FluxData.

The total assets and liabilities of all four segments have not been disclosed as there have been no material changes to those disclosed in the Annual Report and Accounts 2018.

3 Finance income

Unaudited

 Six months to

30 September

2018

£m

Unaudited

Six months to

 30 September

2017

£m

Audited

Year to

31 March

2018

£m

Interest receivable

0.1

0.1

0.2

Fair value movement on derivative financial instruments

-

-

0.1

0.1

0.1

0.3

4 Finance expense

Unaudited

Six months to

30 September

2018

£m

Unaudited

Six months to

 30 September

2017

£m

Audited

Year to

31 March

2018

£m

Interest payable on loans and overdrafts

3.9

3.4

7.0

Amortisation of finance costs

0.4

0.5

1.0

Net interest charge on pension plan liabilities

0.6

0.9

1.7

Other interest payable

0.1

0.1

0.2

5.0

4.9

9.9

Fair value movement on derivative financial instruments

-

0.1

-

Unwinding of discount on provisions

-

-

0.1

5.0

5.0

10.0

5 Taxation

The total Group tax charge for the six months to 30 September 2018 of £19.9m (six months to 30 September 2017: £15.1m; year to 31 March 2018: £17.7m) comprises a current tax charge of £21.2m (six months to 30 September 2017: £18.0m; year to 31 March 2018: £38.6m) and a deferred tax credit of £1.3m (six months to 30 September 2017: £2.9m; year to 31 March 2018: £20.9m). The tax charge is based on the estimated effective tax rate for the year, for profit before tax before adjustments. The tax rates applied to the adjustments are established on an individual basis for each adjustment.

The tax charge includes £17.3m (six months to 30 September 2017: £14.9m; year to 31 March 2018: £29.1m) in respect of overseas tax.

6 Earnings per ordinary share

Basic and diluted earnings per ordinary share are calculated using the weighted average of 379,043,693 (30 September 2017: 379,219,351; 31 March 2018: 378,987,354) shares in issue during the period (net of shares purchased by the Company and held as treasury and Employee Benefit Trust shares). There are no dilutive or potentially dilutive ordinary shares.

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.

The Directors consider that adjusted earnings represent a more consistent measure of underlying performance. A reconciliation of earnings and the effect on basic earnings per share figures is as follows:

Unaudited

Six months to

 30 September

2018

£m

Unaudited

Six months to

 30 September

2017

£m

Audited

Year to

31 March

2018

£m

Earnings from continuing operations

74.6

61.7

154.2

Amortisation of acquired intangible assets (after tax)

14.9

11.8

26.0

Acquisition transaction costs (after tax)

-

0.6

2.4

Adjustments to contingent consideration (after tax)

(1.5)

(0.7)

1.9

Release of fair value adjustments to inventory (after tax)

1.1

0.1

2.6

Disposal of operations and restructuring (after tax)

0.7

-

(0.7)

Impact of US tax reform measures

-

-

(14.9)

Adjusted earnings

89.8

73.5

171.5

Per ordinary share

Unaudited

Six months to

 30 September

2018

pence

Unaudited

Six months to

 30 September

2017

Pence

Audited

Year to

31 March

2018

pence