Halma Regulatory News (HLMA)

HALMA plc

HalF YEAR RESULTS 2016/17

Record first half results and continued dividend growth

Halma, the leading safety, health and environmental technology group, today announces its half year results for the 26 weeks to 1 October 2016.

Financial Highlights

Change

2016

2015

Continuing Operations

Revenue

+ 16%

£442.1m

£379.7m

Adjusted Profit before Taxation1

+ 12%

£83.6m

£74.7m

Adjusted Earnings per Share2

+ 13%

17.23p

15.19p

Statutory Profit before Taxation

+ 2%

£65.2m

£64.2m

Statutory Earnings per Share

+ 4%

13.79p

13.27p

Interim Dividend per Share3

+ 7%

5.33p

4.98p

Return on Sales4

18.9%

19.7%

Return on Total Invested Capital5

13.8%

14.7%

Net Debt

£237.3m

£93.4m

●

Revenue increased 16%, with Adjusted1 pre-tax profit up 12%. Organic constant currency growth5: revenue up 2%, profit up 2%; both increasing to 6% on a weekly average basis when adjusted for 27 weeks in the prior period6.

●

Revenue growth in all major regions. Good organic constant currency growth in Asia Pacific with solid progress in the USA, Mainland Europe and the UK.

●

Strong revenue and profit growth in the Infrastructure Safety and Medical sectors. Solid progress in Environmental & Analysis and Process Safety on track for improvement in the second half.

●

Good cash generation supports investment in organic growth and acquisitions.

●

Interim dividend up 7%.

●

Revolving Credit Facility increased to £550m, for five years to 2021. Net debt of £237m (Year end 2015/16: £247m).

●

Acquisition pipeline healthy, benefitting from additional M&A resources across all four sectors.

Andrew Williams, Chief Executive of Halma, commented:

"Halma has continued to make good progress, delivering record revenue, profit and dividends for shareholders. The diversity of our business and the evolution of our organisational model through our four sectors is enabling us to sustain growth in varied market conditions. Since the period end, order intake has continued to be ahead of revenue and order intake last year and we are benefitting from the currency tailwind due to the weakening of Sterling since June. Halma remains on track to make progress in the second half of the year in line with the Board's expectations."

Notes:

1

Adjusted to remove the amortisation of acquired intangible assets, acquisition items and profit or loss on disposal of operations and restructuring, totalling £18.4m (2015/16: £10.4m). See note 2 to the Condensed Financial Statements for details.

2

Adjusted to remove the amortisation of acquired intangible assets, acquisition items, profit or loss on disposal of operations and restructuring, and the associated taxation thereon. See note 6 to the Condensed Financial Statements for details.

3

Interim dividend declared per share.

4

Return on Sales is defined as adjusted1 profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations.

5

Organic growth rates and Return on Total Invested Capital (ROTIC) are additional performance measures used by management. See note 9 to the Condensed Financial Statements for details.

6

The first half's trading in the current 2016/17 financial year included 26 weeks from 3 April to 1 October 2016. The first half's trading in the 2015/16 financial year included 27 weeks from 29 March to 3 October 2015.

7

The next Trading update is expected to be on 23 March 2017. We also intend to revise the timing of our mid-year Trading update from our AGM in July to the end of September 2017.

For further information, please contact:

Halma plcAndrew Williams, Chief ExecutiveKevin Thompson, Finance Director

+44 (0)1494 721 111

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 develops and markets products used worldwide to protect life and improve the quality of life. The Group comprises four business sectors:

· Process Safety

Products which protect assets and people at work.

· Infrastructure Safety

Products which detect hazards to protect assets and people in public spaces, transportation and commercial buildings.

· 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 safety, life sciences and environmental markets.

The key characteristics of Halma's businesses are that they are based on specialist technology and application knowledge, offering strong growth potential. Many Group businesses are market leaders in their specialist field.

2.

High resolution photos of Halma senior management, including 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'. Photo queries: David Waller +44 (0)1494 721111, e-mail: dwaller@halmapr.com.

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 good progress during the first half of the year. Revenue increased by 16% to £442m (2015/16: £380m) including a positive currency translation impact of 8%. Organic revenue growth at constant currency was 2% and 6% on a weekly average basis when adjusted for 27 weeks in the prior period1.

Adjusted1 profit before taxation increased by 12% to £83.6m (2015/16: £74.7m) including a positive currency translation impact of 8%. Organic profit growth at constant currency was 2% and 6% on a weekly average basis1.

Return on Sales1 was 18.9% (2015/16: 19.7%). The slight reduction from the prior year was predominantly due to slower than expected progress from acquisitions made in 2015/16 coupled with increased investment across all sectors in innovation, international expansion, talent development and M&A resources. Excluding prior year acquisitions, Return on Sales was in line with the first half of last year.

Strong financial resources and increased interim dividend

Cash generation remained strong and in November 2016, we increased our Revolving Credit Facility from £360m to £550m for a further five-year term. This combination of good cash generation, a healthy balance sheet and increasing 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.

The Board has declared an increase of 7% in the interim dividend to 5.33p per share (2015/16: 4.98p per share). The interim dividend will be paid on 8 February 2017 to shareholders on the register on 30 December 2016. For the past 37 years we have increased our full year dividend by 5% or more each year.

Revenue growth in all major regions

In varied market conditions, we achieved revenue growth in all major regions supported by organic growth, favourable currency translation and acquisitions. Revenue from Asia Pacific rose by 17% including 7% organic constant currency growth - the highest of all our major regions. The USA also grew revenue strongly, increasing by 29% to contribute 36% of total revenue. There were low single-digit organic constant currency growth rates in the UK, Mainland Europe and the USA.

Revenue from regions outside the UK, Mainland Europe and the USA increased by 14% with the strong growth in Asia Pacific, an improved performance in South America and weaker demand in the Near and Middle East. Revenue from China was up by 17% to £29.9m (2015/16: £25.6m) with organic constant currency growth of 8% and increases in all four sectors reflecting the opportunity for continued growth in this market.

The tables below summarise revenue growth by region and by sector, including the underlying rates of organic growth at constant currency. Organic constant currency rates exclude the effect of currency translation and acquisitions but do not include any weekly average adjusted figures.

Robust sector trading performances

Infrastructure Safety revenue grew strongly by 21% to £148.0m (2015/16: £122.4m) including 5% organic constant currency growth, a 6% positive impact from currency translation and a 10% contribution from acquisitions in the prior year. There was growth in all major market segments with good growth in Fire and Door Safety and steadier progress in Security and Elevator Safety. These trends contributed to higher organic constant currency growth in the UK and Mainland Europe and solid growth rates in Asia Pacific and the USA.

Profit2 increased by an impressive 30% to £32.0m (2015/16: £24.6m) including 17% organic constant currency growth, a 5% positive impact from currency translation and an 8% contribution from the prior year acquisitions. Return on Sales rose from 20.1% to 21.6% with organic improvement coming from a small increase in gross margins and good overhead cost control.

Firetrace, acquired in October 2015, performed below expectations after a delay in shipping a major contract, which is now expected to be released in the first half of 2017. However, we continued to invest in innovation, international expansion and talent management reflecting our confidence in its growth prospects.

The Medical sector's revenue was up by 29% to £118.7m (2015/16: £92.3m) including 4% organic constant current growth, an 11% positive currency translation impact and a 14% contribution from prior year acquisitions. There was growth in all major market segments with the strongest performances from the Patient Care businesses involved in vital signs monitoring and ophthalmology. Regionally, there was excellent organic constant currency growth in Asia Pacific and more modest growth in the UK and the USA. There was a decline in Mainland Europe due to lower demand from a major global ophthalmology OEM customer.

Profit2 increased by 17% to £28.9m (2015/16: £24.6m) including 2% organic constant currency growth, a 10% positive currency translation impact and a 5% contribution from prior year acquisitions. Return on Sales was 24.3% (2015/16: 26.6%) with the majority of the decline due to the lower than average returns from Visiometrics and CenTrak, acquired in 2015/16. CenTrak's performance in the first half was adversely affected by a postponement in the roll-out of a major project in the USA due to third-party delays. We believe that shipments will recommence in the first half of 2017/18. CenTrak has continued to invest in new healthcare applications and geographic expansion and has a number of new pilot projects already underway, underlining its exciting growth potential.

The Environmental & Analysis sector revenue increased by 13% to £98.7m (2015/16: £87.2m) including 4% organic constant currency growth and a 9% positive impact from currency translation. There was strong organic constant currency growth in Asia Pacific and the USA, with a decline in both the UK and Mainland Europe.

Profit2 increased by 9% to £16.0m (2015/16: £14.8m) including a 2% organic constant currency reduction and an 11% positive impact from currency translation. Return on Sales of 16.2% (2015/16: 16.9%) reflected steady performances from the Environmental, Water and Food Safety businesses but reduced profit from the Life Science and Research business.

In September 2016, and following the geographic consolidation of our photonics coatings business (Pixelteq) in 2014/15, we decided to transfer certain technology and assets into Ocean Optics (also based near Tampa, Florida, USA) which will be completed in early 2017. The restructuring of the Pixelteq business is expected to benefit the sector's full year adjusted profit by at least £0.5m in 2016/17 and £1.5m in 2017/18, also improving key returns metrics. This restructuring resulted in exceptional costs amounting to £2.1m, which are included within the adjustments2 to the Income Statement. No further restructuring costs are expected in the second half year.

Process Safety revenue reduced by 1% to £76.7m (2015/16: £77.8m) including an organic constant currency decline of 6% and a positive currency translation impact of 5%. Trading conditions in energy and resource markets, which contribute around 40% of sector revenue, remained challenging and there was organic constant currency revenue decline in all major regions. The year-on-year comparatives will become more favourable during the second half of the year and recent order intake trends support a return to year-on-year growth.

Profit was 9% lower at £17.4m (2015/16: £19.1m) including an organic constant currency decline of 13% and a 4% positive currency translation impact. Return on Sales was 22.7%, compared with 24.5% last year. We continue to balance the need to control costs with investment for growth in non-energy related markets and expect sector profitability to improve in the second half of the year as the benefits of our market diversification efforts continue to emerge.

Continued strategic investment for growth

Halma has achieved sustained success over a long period by building 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 strategic investment in innovation, international expansion and talent development both centrally and within each sector. Examples during the first half included:

· Our companies increased R&D expenditure by 16% to £23.0m (2015/16: £19.8m) representing 5.2% of Group revenue (2015/16: 5.2%) with higher rates of investment in the Infrastructure Safety and Environmental & Analysis sectors.

· All four sector boards recruited dedicated M&A resources.

· We successfully completed the first of our new flagship HPD Enterprise programmes which encourages our Sector Vice Presidents and MDs to think more entrepreneurially, particularly in the increasingly digital world.

Currency volatility

Currency translation had a significant impact on the half year results and balance sheet. We report our results in Sterling with approximately 45% of Group revenue denominated in US Dollars and approximately 15% in Euros. Average exchange rates are used to translate results in the Income Statement. Sterling weakened in 2016/17, in particular following the result of the EU referendum in the UK, by an average 11% relative to the US Dollar and 12% against the Euro. This resulted in an 8% positive currency translation impact on Group revenue and profit. If exchange rates continue at current levels for the full year, we estimate that the currency translation impact will be approximately 10% positive year on year on both revenue and profit.

Pension deficit

On an IAS19 basis the deficit on the Group's defined benefit plans at the half year has increased to £94.0m (2 April 2016: £52.3m) before the related deferred tax asset. The value of plan assets increased in the half year but this was more than offset by the increase in liabilities caused by a reduction from 3.4% to 2.3% in the discount rate used to value liabilities following the result of the EU referendum. Earlier in 2016, increased contributions to the pension plans were agreed and these contributions will be reviewed at the next triennial plan valuations.

Cash flow and balance sheet

Cash conversion (adjusted operating cash flow as a percentage of adjusted operating profit) was 84% (2015/16: 88%) just below our cash conversion target of 85%. As well as continued organic investment, dividend and tax payments increased this half year. Capital expenditure of £11.4m (2015/16: £9.0m) was up 27% as expected, with projects progressing across the Group and in particular in the Infrastructure Safety and Medical sectors.

Net debt at the end of the period was £237m (2 April 2016: £247m). The positive effect of cash generation was partially offset by a £12m increase in net debt due to the translation of debt denominated in US Dollar, Euro and Swiss Franc following the weakening of Sterling. Gearing (the ratio of net debt to EBITDA) at half year end was 1.17 times (2 April 2016: 1.27 times), comfortably within our typical operating range of up to 2 times gearing.

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 30 to 33 of the Annual Report and Accounts 2016, which is available on the Group's website at www.halma.com. The principal risks and uncertainties relate to operational, strategic, legal, financial, cyber, people and economic issues. See note 15 to the Condensed Financial Statements for further details.

The UK referendum decision in June 2016 to leave the European Union has added a new dimension to the uncertainties surrounding global economic growth. In the last financial year, approximately 10% of Group revenue came from direct sales between the UK and Mainland Europe. Our decentralised model with businesses in diverse markets and locations enables each Halma company to adapt quickly to changing trading conditions, such as weaker Sterling, offering competitive pricing opportunities for exports from the UK.

Halma has formed an executive working group that is tasked with assessing and monitoring the impacts on our business and to communicate updates and guidance as the Brexit process evolves. To date, the following principal 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 FX 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.

The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report and Accounts 2016 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. Movements in foreign exchange rates continue to remain a risk to financial performance.

Going concern

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

Board changes

At the AGM in July 2016, Jane Aikman retired from the Board as a non-executive Director. Jane joined the Board in 2007 and we thank her for her contribution to our success, particularly as Chairman of the Audit Committee. Carole Cran, who was appointed as a non-executive Director in January 2016, has now assumed this role.

In September 2016, Jennifer Ward, Halma's Group Talent Director, was promoted to the Board as an executive Director. Since joining Halma in 2014, Jennifer has contributed significantly to the evolution of our growth strategy and talent development. Prior to Halma, she held senior positions with divisions of PayPal (an eBay company), Bank of America and Honeywell.

In October 2016, Jo Harlow joined the Board as a non-executive Director. Jo has global executive experience in consumer products encompassing strategy, innovation, product development and marketing including senior positions with Microsoft, Nokia, Reebok and Procter & Gamble.

Full biographies of both Jennifer and Jo can be found on our website, www.halma.com.

Outlook

Halma has continued to make good progress, delivering record revenue, profit and dividends for shareholders. The diversity of our business and the evolution of our organisational model through our four sectors is enabling us to sustain growth in varied market conditions. Since the period end, order intake has continued to be ahead of revenue and order intake last year and we are benefiting from the currency tailwind due to the weakening of Sterling since June. Halma remains on track to make progress in the second half of the year in line with the Board's expectations.

Andrew Williams

Chief Executive

Kevin ThompsonFinance Director

1 See Financial Highlights.

2 See note 2 to the Condensed Financial Statements.

Independent review report to Halma plc

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 26 week period ended 1 October 2016 which comprises the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income and Expenditure, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement and related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company 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. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

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 inquiries, 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 Ireland) 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.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 26 week period ended 1 October 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

DELOITTE LLP

Chartered Accountants and Statutory Auditor

London, UK

22 November 2016

Half year results 2016/17

Condensed Financial Statements

Consolidated Income Statement

Unaudited 26 weeks to 1 October 2016

Unaudited 27 weeks to 3 October 2015

Audited 53 weeks to 2 April  2016

Notes

Before adjustments*£000 

Adjustments*(note 2)£000 

Total £000 

Before adjustments*£000 

Adjustments*(note 2)£000 

Total £000

Total £000

Continuing operations

Revenue

2

442,121 

- 

442,121 

379,657 

- 

379,657

807,805

Operating profit

88,564 

(18,405)

70,159 

77,657 

(11,004)

66,653

142,943

Share of results of associates

(43)

- 

(43)

(79)

- 

(79)

(159)

Profit on disposal of operations

- 

- 

- 

- 

592 

592

556

Finance income

3

96 

- 

96 

128 

- 

128

217

Finance expense

4

(4,987)

- 

(4,987)

(3,049)

- 

(3,049)

(7,269)

Profit before taxation

83,630 

(18,405)

65,225 

74,657 

(10,412)

64,245

136,288

Taxation

5

(18,398)

5,385 

(13,013)

(17,170)

3,143 

(14,027)

(27,447)

Profit for the period attributable to equity shareholders

65,232 

(13,020)

52,212 

57,487 

(7,269)

50,218

108,841

Earnings per share

6

From continuing operations

Basic and diluted

17.23p 

13.79p 

15.19p 

13.27p

28.76p

Dividends in respectof the period

7

Dividends paid and proposed (£000)

20,196 

18,855

48,472

Per share

5.33p 

4.98p

12.81p

*

Adjustments include the amortisation of acquired intangible assets, acquisition items and profit or loss on disposal of operations and restructuring, and the associated taxation thereon.

Consolidated Statement of Comprehensive Income and Expenditure

Unaudited

 26 weeks to

1 October

2016

£000

Unaudited

 27 weeks to

3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

Profit for the period

52,212

50,218

108,841

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

Actuarial (losses)/gains on defined benefit pension plans

(45,838)

13,122

8,841

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

9,168

(2,625)

(2,304)

Items that may be reclassified subsequently to the Income Statement:

Effective portion of changes in fair value of cash flow hedges

(453)

(343)

(990)

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

57,825

(14,096)

30,036

Exchange losses transferred to Income Statement on disposal of operation

-

22

22

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

91

80

209

Other comprehensive income/(expense) for the period

20,793

(3,840)

35,814

Total comprehensive income for the period attributable to equity shareholders

73,005

46,378

144,655

The exchange gains of £57,825,000 (27 weeks to 3 October 2015: losses of £14,096,000; 53 weeks to 2 April 2016: gain of £30,036,000) include gains of £16,267,000 (27 weeks to 3 October 2015: losses of £211,000; 53 weeks to 2 April 2016: gain of £9,336,000) which relate to net investment hedges.

Consolidated Balance Sheet

Notes

Unaudited

1 October

2016

£000

Unaudited

3 October

2015

£000

Audited

2 April

2016

£000

Non-current assets

Goodwill

586,940

400,237

544,259

Other intangible assets

235,473

128,781

231,753

Property, plant and equipment

103,417

86,000

96,562

Interests in associates

3,660

3,763

3,722

Deferred tax asset

52,725

25,512

44,424

982,215

644,293

920,720

Current assets

Inventories

113,757

83,014

105,318

Trade and other receivables

179,659

143,144

183,619

Tax receivable

474

547

190

Cash and cash equivalents

76,093

133,716

53,938

Derivative financial instruments

135

173

1,131

370,118

360,594

344,196

Total assets

1,352,333

1,004,887

1,264,916

Current liabilities

Trade and other payables

109,841

90,721

122,791

Borrowings

2,161

-

4,748

Provisions

5,571

2,179

4,437

Tax liabilities

12,446

9,978

15,158

Derivative financial instruments

1,920

270

2,196

131,939

103,148

149,330

Net current assets

238,179

257,446

194,866

Non-current liabilities

Borrowings

311,252

227,103

295,908

Retirement benefit obligations

11

94,024

51,405

52,323

Trade and other payables

11,387

4,058

10,153

Provisions

18,859

2,534

18,510

Deferred tax liabilities

94,304

49,783

92,352

529,826

334,883

469,246

Total liabilities

661,765

438,031

618,576

Net assets

690,568

566,856

646,340

Equity

Share capital

37,965

37,965

37,965

Share premium account

23,608

23,608

23,608

Own shares

(4,896)

(6,452)

(8,219)

Capital redemption reserve

185

185

185

Hedging reserve

(972)

(92)

(610)

Translation reserve

133,212

31,255

75,387

Other reserves

(9,481)

(8,387)

(5,831)

Retained earnings

510,947

488,774

523,855

Shareholders' funds

690,568

566,856

646,340

Consolidated Statement of Changes in Equity

For the 26 weeks ended 1 October 2016

Share

capital

£000

Share

premium

account

£000

Own

shares

£000

Capital

redemption

reserve

£000

Hedging

reserve

£000

Translation reserve

£000

Other

reserves

£000

Retained

earnings

£000

Total

£000

At 2 April 2016 (audited)

37,965

23,608

(8,219)

185

(610)

75,387

(5,831)

523,855

646,340

Profit for the period

-

-

-

-

-

-

-

52,212

52,212

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

-

-

-

-

-

57,825

-

-

57,825

Actuarial losses on defined benefit pension plans

-

-

-

-

-

-

-

(45,838)

(45,838)

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

(453)

-

-

-

(453)

Tax relating to components of other comprehensive income and expense

-

-

-

-

91

-

-

9,168

9,259

Total other comprehensive income and expense

-

-

-

-

(362)

57,825

-

(36,670)

20,793

Dividends paid

-

-

-

-

-

-

-

(29,609)

(29,609)

Share-based payments charge

-

-

-

-

-

-

3,110

-

3,110

Deferred tax on share-basedpayment transactions

-

-

-

-

-

-

(127)

-

(127)

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

-

-

-

-

-

-

-

1,159

1,159

Performance share plan awards vested

-

-

3,323

-

-

-

(6,633)

-

(3,310)

At 1 October 2016 (unaudited)

37,965

23,608

(4,896)

185

(972)

133,212

(9,481)

510,947

690,568

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 1 October 2016 the number of treasury shares held was 462,188 (3 October 2015: 940,421; 2 April 2016: 940,421) and the number of shares held by the Employee Benefit Trust was 262,417 (3 October 2015: 89,198; 2 April 2016: 311,444).

For the 27 weeks ended 3 October 2015

Share

capital

£000

Share

premium

account

£000

Own

shares

£000

Capital

redemption

reserve

£000

Hedging

reserve

£000

Translation

reserve

£000

Other

reserves

£000

Retained

earnings

£000

Total

£000

At 28 March 2015 (audited)

37,965

23,608

(8,450)

185

171

45,329

(4,073)

454,213

548,948

Profit for the period

-

-

-

-

-

-

-

50,218

50,218

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

-

-

-

-

-

(14,096)

-

-

(14,096)

Exchange losses transferred to Income Statement on disposal of operation

-

-

-

-

-

22

-

-

22

Actuarial gains on defined benefit pension plans

-

-

-

-

-

-

-

13,122

13,122

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

(343)

-

-

-

(343)

Tax relating to components of other comprehensive income and expense

-

-

-

-

80

-

-

(2,625)

(2,545)

Total other comprehensive incomeand expense

-

-

-

-

(263)

(14,074)

-

10,497

(3,840)

Dividends paid

-

-

-

-

-

-

-

(27,630)

(27,630)

Share-based payments charge

-

-

-

-

-

-

1,952

-

1,952

Deferred tax on share-basedpayment transactions

-

-

-

-

-

-

(575)

-

(575)

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

-

-

-

-

-

-

-

1,476

1,476

Purchase of Employee Benefit Trust shares

-

-

(1,216)

-

-

-

-

-

(1,216)

Performance share plan awards vested

-

-

3,214

-

-

-

(5,691)

-

(2,477)

At 3 October 2015 (unaudited)

37,965

23,608

(6,452)

185

(92)

31,255

(8,387)

488,774

566,856

For the 53 weeks ended 2 April 2016

Share

capital

£000

Share

premium

account

£000

Own

shares

£000

Capital

redemption

reserve

£000

Hedging

reserve

£000

Translation

reserve

£000

Other

reserves

£000

Retained

earnings

£000

Total

£000

At 28 March 2015 (audited)

37,965

23,608

(8,450)

185

171

45,329

(4,073)

454,213

548,948

Profit for the period

-

-

-

-

-

-

-

108,841

108,841

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

-

-

-

-

-

30,036

-

-

30,036

Exchange losses transferred to Income Statement on disposal of operation

-

-

-

-

-

22

-

-

22

Actuarial gains on defined benefit pension plans

-

-

-

-

-

-

-

8,841

8,841

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

(990)

-

-

-

(990)

Tax relating to components of other comprehensive income and expense

-

-

-

-

209

-

-

(2,304)

(2,095)

Total other comprehensive income and expense

-

-

-

-

(781)

30,058

-

6,537

35,814

Dividends paid

-

-

-

-

-

-

-

(46,473)

(46,473)

Share-based payments charge

-

-

-

-

-

-

3,845

-

3,845

Deferred tax on share-based payment transactions

-

-

-

-

-

-

109

-

109

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

-

-

-

-

-

-

-

737

737

Purchase of Own shares

-

-

(3,003)

-

-

-

-

-

(3,003)

Performance share plan awards vested

-

-

3,234

-

-

-

(5,712)

-

(2,478)

At 2 April 2016 (audited)

37,965

23,608

(8,219)

185

(610)

75,387

(5,831)

523,855

646,340

Consolidated Cash Flow Statement

Notes

Unaudited

26 weeks to

 1 October

2016

£000

Unaudited

27 weeks to

 3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

Net cash inflow from operating activities

8

70,345

61,886

149,273

Cash flows from investing activities

Purchase of property, plant and equipment

(10,728)

(8,244)

(22,418)

Purchase of computer software

(702)

(778)

(1,669)

Purchase of other intangibles

(209)

(81)

(535)

Proceeds from sale of property, plant and equipment

287

468

2,364

Proceeds from sale of capitalised development costs

-

-

166

Development costs capitalised

(4,814)

(3,990)

(8,579)

Interest received

96

128

217

Acquisition of businesses, net of cash acquired

10

(148)

(12,902)

(202,575)

Disposal of operation, net of cash disposed

-

908

907

Net cash used in investing activities

(16,218)

(24,491)

(232,122)

Financing activities

Dividends paid

(29,609)

(27,630)

(46,473)

Purchase of Own shares

-

(1,216)

(3,003)

Interest paid

(3,489)

(1,589)

(4,149)

Loan arrangement fee paid

-

-

(770)

Proceeds from bank borrowings

-

87,000

74,788

Repayment of bank borrowings

-

-

(97,000)

Proceeds from issue of loan notes

-

-

167,473

Net cash (used in)/from financing activities

(33,098)

56,565

90,866

Increase in cash and cash equivalents

21,029

93,960

8,017

Cash and cash equivalents brought forward

49,526

39,525

39,525

Exchange adjustments

3,713

231

1,984

Cash and cash equivalents carried forward

74,268

133,716

49,526

Unaudited

 1 October

2016

£000

Unaudited

 3 October

2015

£000

Audited

2 April

2016

£000

Reconciliation of net cash flow to movement in net debt

Increase in cash and cash equivalents

21,029

93,960

8,017

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

-

(87,000)

22,212

Proceeds from issue of loan notes

-

-

(167,473)

Loan notes issued in respect of acquisitions*

-

(263)

(288)

Loan notes repaid in respect of acquisitions*

241

368

367

Exchange adjustments

(11,873)

442

(8,659)

9,397

7,507

(145,824)

Net debt brought forward

(246,718)

(100,894)

(100,894)

Net debt carried forward

(237,321)

(93,387)

(246,718)

*

Of the £577,000 loan notes outstanding at the prior period end £241,000 was converted at par into cash on 14 May 2016. The remaining loan notes are outstanding. The loan notes, which attract interest of 1%, are convertible into cash by the holder at par on each anniversary of the acquisition date until 14 May 2019.

Notes to the Condensed Financial Statements

1 Basis of preparation

General information

The Half Year Report, which includes the Interim Management Report and Condensed Financial Statements for the 26 weeks to 1 October 2016, was approved by the Directors on 22 November 2016.

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 53 weeks to 2 April 2016.

The figures shown for the 53 weeks to 2 April 2016 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.

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 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 completed on 4 November 2016 of which £428m remains undrawn at the date of this report.

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.

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 Chief Executive.

Segment revenue and results

Revenue (all continuing operations)

Unaudited

26 weeks to

 1 October

2016

£000

Unaudited

27 weeks to

3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

Process Safety

76,743

77,773

155,467

Infrastructure Safety

147,988

122,411

264,843

Medical

118,664

92,297

198,715

Environmental & Analysis

98,797

87,243

188,928

Inter-segmental sales

(71)

(67)

(148)

Revenue for the period

442,121

379,657

807,805

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 £14,034,000 (27 weeks to 3 October 2015: £12,165,000; 53 weeks to 2 April 2016: £25,134,000). All revenue was otherwise derived from the sale of products.

Profit (all continuing operations)

Unaudited

26 weeks to

 1 October

2016

£000

Unaudited

27 weeks to

 3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

Segment profit before allocation of adjustments*

Process Safety

17,395

19,090

39,557

Infrastructure Safety

31,991

24,591

56,167

Medical

28,876

24,579

51,695

Environmental & Analysis

16,022

14,767

34,527

94,284

83,027

181,946

Segment profit after allocation of adjustments*

Process Safety

15,491

17,393

36,095

Infrastructure Safety

29,735

23,707

50,965

Medical

18,933

18,826

34,747

Environmental & Analysis

11,720

12,689

30,413

Segment profit

75,879

72,615

152,220

Central administration costs

(5,763)

(5,449)

(8,880)

Net finance expense

(4,891)

(2,921)

(7,052)

Group profit before taxation

65,225

64,245

136,288

Taxation

(13,013)

(14,027)

(27,447)

Profit for the period

52,212

50,218

108,841

* Adjustments include the amortisation of acquired intangible assets, acquisition items and profit or loss on disposal of operations and restructuring.

The accounting policies of the reportable segments are the same as the Group's accounting policies. For acquisitions after 3 April 2010, acquisition transaction costs and adjustments to contingent purchase consideration are recognised in the Consolidated Income Statement. Segment profit before these acquisition costs, the amortisation of acquired intangible assets and the profit or loss on disposal of continuing operations and restructuring is disclosed separately above as this is the measure reported to the Chief Executive for the purpose of allocation of resources and assessment of segment performance.

These adjustments are analysed as follows:

Unaudited for the 26 weeks ended 1 October 2016

Acquisition items

Amortisation

of acquired

intangibles

£000

Transaction

costs

£000

Adjustments

to contingent

consideration

£000

Release of

 fair value

adjustments

to inventory

£000

Total

amortisation

charge and

acquisition

items

£000

Disposal of

operations and restructuring

£000

Total

£000

Process Safety

(1,904)

-

-

-

(1,904)

-

(1,904)

Infrastructure Safety

(2,256)

-

-

-

(2,256)

-

(2,256)

Medical

(8,815)

-

(338)

(790)

(9,943)

-

(9,943)

Environmental & Analysis

(2,217)

-

15

-

(2,202)

(2,100)

(4,302)

Total Segment & Group

(15,192)

-

(323)

(790)

(16,305)

(2,100)

(18,405)

The £338,000 charge to contingent consideration comprises a credit arising from a revision to the estimate of the payable for Value Added Solutions LLC (VAS) by £339,000 from £704,000 (US$1,000,000) to £411,000 (US$535,000) with exchange differences of £46,000, offset by a £677,000 charge arising from changes in the discount rate along with exchange differences on the payable for Visiometrics S.L. (Visiometrics) which is denominated in Euros.

The £790,000 charge relates to the release of the remaining fair value adjustments on revaluing the inventory of CenTrak on acquisition in the prior year.

The £2,100,000 charge relates to inventory and fixed asset write downs and severance costs arising on the restructuring of non-core operations in one of the Group's subsidiaries.

Unaudited for the 27 weeks ended 3 October 2015

Acquisition items

Amortisation

of acquired

intangibles

£000

Transaction

costs

£000

Adjustments

to contingent

consideration

£000

Release of

 fair value

adjustments

to inventory

£000

Total

amortisation

charge and

acquisition

items

£000

Disposal of

operations and restructuring

£000

Total

£000

Process Safety

(1,697)

-

-

-

(1,697)

-

(1,697)

Infrastructure Safety

(411)

(148)

(325)

-

(884)

-

(884)

Medical

(6,217)

(114)

(14)

-

(6,345)

592

(5,753)

Environmental & Analysis

(2,078)

-

-

-

(2,078)

-

(2,078)

Total Segment & Group

(10,403)

(262)

(339)

-

(11,004)

592

(10,412)

The transaction costs arose on the acquisitions of VAS, £114,000; and Firetrace USA LLC, £148,000.

The £325,000 charge to contingent consideration related to the revision of the estimate of the remaining payable for Advanced Electronics Limited.

The £592,000 profit on disposal relates to the disposal of 8.8% of the Group's ownership interest in Optomed Oy on 26 August 2015.

Audited for the 53 weeks ended 2 April 2016

Acquisition items

Amortisation

of acquired

intangibles

£000

Transaction

costs

£000

Adjustments

to contingent

consideration

£000

Release of

 fair value

adjustments

to inventory

£000

Total

amortisation

charge and

acquisition

items

£000

Disposal of

operations and restructuring

£000

Total

£000

Process Safety

(3,462)

-

-

-

(3,462)

-

(3,462)

Infrastructure Safety

(2,398)

(1,101)

(827)

(842)

(5,168)

(34)

(5,202)

Medical

(13,018)

(2,926)

(826)

(768)

(17,538)

590

(16,948)

Environmental & Analysis

(4,225)

-

111

-

(4,114)

-

(4,114)

Total Segment & Group

(23,103)

(4,027)

(1,542)

(1,610)

(30,282)

556

(29,726)

The transaction costs arose mainly on the prior year acquisitions of Firetrace in the Infrastructure Safety sector and VAS, Visiometrics and CenTrak in the Medical sector.

The £1,542,000 charge comprised changes in estimate of the deferred contingent consideration payable for Advanced Electronics in the Infrastructure Safety sector, ASL, a prior acquisition, in the Environmental & Analysis sector, and foreign exchange movements on the Visiometrics payable in the Medical sector. The Advanced payable was settled in full in the period.

The release of fair value adjustments to inventory related to the acquisitions of Firetrace and CenTrak.

The £590,000 profit on disposal relates to the disposal of 8.8% of the Group's ownership interest in Optomed Oy on 26 August 2015.

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 2016.

Geographic information

The Group's revenue from external customers (by location of customer) is as follows:

Revenue by destination

Unaudited

 26 weeks to

 1 October

2016

£000

Unaudited

 27 weeks to

 3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

United States of America

160,807

124,415

272,933

Mainland Europe

95,965

85,190

179,290

United Kingdom

72,901

71,520

144,821

Asia Pacific

69,686

59,736

124,992

Africa, Near and Middle East

26,742

25,419

55,712

Other countries

16,020

13,377

30,057

Group revenue

442,121

379,657

807,805

3 Finance income

Unaudited

 26 weeks to

 1 October

2016

£000

Unaudited

 27 weeks to

 3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

Interest receivable

96

128

217

4 Finance expense

Unaudited

26 weeks to

 1 October

2016

£000

Unaudited

27 weeks to

3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

Interest payable on loans and overdrafts

3,463

1,580

4,104

Amortisation of finance costs

325

265

561

Net interest charge on pension plan liabilities

832

1,008

2,013

Other interest payable

25

9

45

4,645

2,862

6,723

Fair value movement on derivative financial instruments

267

187

508

Unwinding of discount on provisions

75

-

38

4,987

3,049

7,269

5 Taxation

The total Group tax charge for the 26 weeks to 1 October 2016 of £13,013,000 (27 weeks to 3 October 2015: £14,027,000; 53 weeks to 2 April 2016: £27,447,000) comprises a current tax charge of £15,032,000 (27 weeks to 3 October 2015: £15,280,000; 53 weeks to 2 April 2016: £30,685,000) and a deferred tax credit of £2,019,000 (27 weeks to 3 October 2015: £1,253,000; 53 weeks to 2 April 2016: £3,238,000). The tax charge is based on the estimated effective tax rate for the year.

The tax charge includes £12,253,000 (27 weeks to 3 October 2015: £12,270,000; 53 weeks to 2 April 2016: £25,014,000) in respect of overseas tax.

6 Earnings per ordinary share

Basic and diluted earnings per ordinary share are calculated using the weighted average of 378,549,906 (3 October 2015: 378,390,374; 2 April 2016: 378,412,359) shares in issue during the period (net of shares purchased by the Company and held as treasury and Employee Benefit Trust shares). All remaining share options were exercised during the year ended March 2015, accordingly there are no dilutive potential ordinary shares.

Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation of acquired intangible assets, acquisition items, profit or loss on disposal of operations and restructuring, and 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

26 weeks to

 1 October

2016

£000

Unaudited

27 weeks to

 3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

Earnings from continuing operations

52,212

50,218

108,841

Amortisation of acquired intangible assets (after tax)

10,383

7,351

16,102

Acquisition transaction costs (after tax)

-

171

2,941

Release of fair value adjustments to inventory (after tax)

490

-

998

Adjustments to contingent consideration (after tax)

300

339

1,315

Loss/(profit) on disposal of operations and restructuring (after tax)

1,847

(592)

(556)

Adjusted earnings

65,232

57,487

129,641

Per ordinary share

Unaudited

26 weeks to

 1 October

2016

pence

Unaudited

27 weeks to

 3 October

2015

pence

Audited

53 weeks to

2 April

2016

pence

Earnings from continuing operations

13.79

13.27

28.76

Amortisation of acquired intangible assets (after tax)

2.74

1.94

4.26

Acquisition transaction costs (after tax)

-

0.05

0.78

Release of fair value adjustments to inventory (after tax)

0.13

-

0.26

Adjustments to contingent consideration (after tax)

0.08

0.09

0.35

Loss/(profit) on disposal of operations and restructuring (after tax)

0.49

(0.16)

(0.15)

Adjusted earnings

17.23

15.19

34.26

7 Dividends

Per ordinary share

Unaudited

26 weeks to

 1 October

2016

pence

Unaudited

27 weeks to

 3 October

2015

pence

Audited

53 weeks to

2 April

2016

pence

Amounts recognised as distributions to shareholders in the period

Final dividend for the year to 2 April 2016 (28 March 2015)

7.83

7.31

7.31

Interim dividend for the year to 2 April 2016

-

-

4.98

7.83

7.31

12.29

Dividends in respect of the period

Interim dividend for the year to 1 April 2017 (2 April 2016)

5.33

4.98

4.98

Final dividend for the year to 2 April 2016

-

-

7.83

5.33

4.98

12.81

Unaudited

26 weeks to

 1 October

2016

£000

Unaudited

27 weeks to

 3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

Amounts recognised as distributions to shareholders in the period

Final dividend for the year to 2 April 2016 (28 March 2015)

29,628

27,630

27,629

Interim dividend for the year to 2 April 2016

-

-

18,844

 29,628

27,630

46,473

Dividends in respect of the period

Interim dividend for the year to 1 April 2017 (2 April 2016)

20,196

18,855

18,844

Final dividend for the year to 2 April 2016

-

-

29,628

20,196

18,855

48,472

8 Notes to the Consolidated Cash Flow Statement

Unaudited

26 weeks to

 1 October

2016

£000

Unaudited

27 weeks to

 3 October

2015

£000

Audited

53 weeks to

2 April

2016

£000

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 associates and profit or loss on disposal of operations

70,159

66,653

142,943

Depreciation of property, plant and equipment

8,743

7,387

15,245

Amortisation of computer software

696

610

1,348

Amortisation of capitalised development costs and other intangibles

3,508

2,347

5,202

Amortisation of acquired intangible assets

15,192

10,403

23,103

Share-based payment expense (less than)/in excess of amounts paid

(695)

(1,052)

1,899

Additional payments to pension plans

(5,104)

(3,241)

(7,728)

Loss on restructuring of operation

2,057

-

-

Loss/(profit) on sale of property, plant and equipment and computer software

14

35

(1,345)

Operating cash flows before movement in working capital

94,570

83,142

180,667

Increase in inventories

(2,350)

(4,525)

(4,809)

Decrease/(increase) in receivables

12,680

11,661

(8,786)

(Decrease)/increase in payables and provisions

(18,104)

(12,398)

7,844

Revision to estimate of contingent consideration payable

323

339

1,543

Cash generated from operations