Halma Regulatory News (HLMA)

HALMA p.l.c.

HALF YEAR REPORT FOR THE 26 WEEKS TO 2 OCTOBER 2010

30 NOVEMBER 2010

Record profit growth of 29 per cent at the half year

Halma, the leading safety, health and sensor technology group, today announces its half year results for the 26 weeks to 2 October 2010.

Highlights include:

●

Pre-tax profit from continuing operations1 up 29% to £49.3m (2009/10: £38.1m) on revenue up 12% at £249.1m (2009/10: £222.1m).

●

Organic growth2 at constant currency: Profit up 28%, Revenue up 10%.

●

High and increased level of returns achieved with Return on Sales3 of 19.8% (2009/10: 17.1%).

●

All three sectors reported growth in revenue and profit with strong growth in Health & Analysis, solid progress in Infrastructure Sensors and significantly improved profitability in Industrial Safety.

●

Revenue outside of the UK/Europe and USA reaches 23% of total revenue, in line with the Group's strategic objective of international expansion with a focus on Asia.

●

Adjusted earnings per share from continuing operations4 up 32% at 9.75p (2009/10: 7.37p). Statutory earnings per share up 37% at 9.38p (2009/10: 6.87p).

●

Order intake in the first half in line with revenue.

●

Increase in the interim dividend of 7%, reflecting the Board's continued confidence in Halma's long-term growth prospects.

●

Strong balance sheet with significant headroom for M&A. Solid cash generation resulting in net cash of £27.6m. Acquisition of Alicat Scientific for $25.2m (£15.7m) completed since the period end.

Commenting on the results, Andrew Williams, Chief Executive of Halma, said:

"We have seen increased revenue and profit in each of our sectors, continuing the earnings momentum we maintained throughout the financial downturn. Market conditions are much steadier than they have been over the previous two years and, therefore, this year we expect a much more evenly balanced split between first half and second half trading. We made an attractive acquisition following the period end and continue our search for high quality opportunities within our existing markets."

Notes:

1

Adjusted to remove the amortisation of acquired intangible assets of £2.0m (2009/10: £2.7m).

2

Organic growth rates are non-GAAP measures used by management to assess underlying performance. See note 9 for details.

3

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

4

Adjusted to remove the amortisation of acquired intangible assets and the associated tax. See note 6 for details.

For further information, please contact:

Halma p.l.c.Andrew Williams, Chief ExecutiveKevin Thompson, Finance Director

+44 (0)1494 721111

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 three business sectors:

●

Infrastructure Sensors

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

●

Health and Analysis

Components and products used to improve personal and public health. We also develop technologies and products which are used for analysis in safety, environmental and leisure related markets including water.

●

Industrial Safety

Products which protect assets and people at work.

The key characteristics of Halma's businesses are that they are based on advanced technology and offer strong growth potential. Many Group businesses are clear market leaders in their specialist field and, in a number of cases, are the dominant world supplier.

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' link, then 'Image Library'. Photo queries: David Waller +44 (0)20 8205 0038, 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.

HALMA p.l.c.Half year results for the 26 weeks to 2 October 2010

Financial Highlights

Change

Unaudited

26 weeks to

2 October

2010

Unaudited

27 weeks to

3 October

2009

Continuing Operations

Revenue

+ 12%

£249.1m

£222.1m

Adjusted Profit before Taxation1

+ 29%

£49.3m

£38.1m

Statutory Profit before Taxation

+ 34%

£47.3m

£35.4m

Adjusted Earnings per Share2

+ 32%

9.75p

7.37p

Statutory Earnings per Share

+ 37%

9.38p

6.87p

Interim Dividend per Share

+ 7%

3.54p

3.31p

Return on Sales3

19.8%

17.1%

Return on Total Invested Capital4

15.5%

12.6%

Return on Capital Employed4

72.3%

52.4%

Pro-forma information:

1

Adjusted to remove the amortisation of acquired intangible assets of £2.0m (2009/10: £2.7m).

2

Adjusted to remove the amortisation of acquired intangible assets and the associated tax. See note 6 for details.

3

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

4

Organic growth rates, Return on Total Invested Capital (ROTIC) and Return on Capital Employed (ROCE) are non-GAAP performance measures used by management in measuring the returns achieved from the Group's asset base. See note 9 for details.

Chairman's Statement

Geoff Unwin, Chairman of Halma, said:

Half year results maintain momentum

Halma: What we do and our strategy

Our business is to make products which protect lives and improve the quality of life for people worldwide. We do this through continuous innovation in market-leading products, which meet the increasing demands for improvements to health, safety and the environment. We build strong positions in market niches where the demand is global. Our businesses are autonomous and highly entrepreneurial.

Results

For the first half, revenue from continuing operations of £249.1m was 12% up compared with the prior year (2009/10: £222.1m); organic revenue1 growth was 12% and, at constant currency, was 10%.

Adjusted1 profit before tax from continuing operations increased 29% to £49.3m (2009/10: £38.1m), almost entirely organic growth, and including 1% benefit from currency translation. Statutory profit before tax increased by 34% to £47.3m.

Return on Total Invested Capital1 was 15.5% (2009/10: 12.6%). Cash flow continued to be strong in the half year, resulting in a net cash balance of £27.6m compared with £9.1m at 3 April 2010.

DividendsThe Board declares a 7% increase in the interim dividend to 3.54 pence per share, maintaining the higher rate of dividend increase established last year. This dividend will be paid on 9 February 2011 to shareholders on the register at 7 January 2011. This increase reflects the Board's continuing confidence in Halma's long-term growth prospects.

Progress

Halma's half year results reflect the efforts of our employees over the past 18+ months to improve our effectiveness, controlling costs yet still delivering revenue growth. This is demonstrated by the 2.7% improvement in the Group's half-year Return on Sales to 19.8% (2009/10: 17.1%).

We invest strongly in products, markets and people and expect to continue to see the results of these investments, particularly in new products and in China, in the short to medium term.

Acquisition

Earlier this month, Halma purchased Alicat Scientific, Inc. for $25.2m (£15.7m). Alicat provides Halma with complementary technology for its Fluid Technology sub-sector and is a first step in investing some of the £100m we identified as available for acquisitions.

OutlookAfter the volatility of the past two years, there is greater stability in our markets although customer visibility is still shorter-term than before the credit crunch. Prospects for the deployment of further capital in quality acquisitions continue to improve.

Looking at our performance sequentially, following a strong second half last year (£48.1m adjusted profit), we have continued to make progress in the first half of this year (£49.3m adjusted1 profit). We are well placed to perform equally strongly in the second half of 2010/11.

1 See Financial Highlights

Chief Executive's Review

Andrew Williams, Chief Executive of Halma, said:

Growth in every sector and all geographic regions

Record performance with strong organic growth

Halma performed strongly during the first half year, achieving record revenue and profit with growth in every sector and all geographic regions. We achieved revenue growth of 12% and this, together with continued good control of costs, enabled us to deliver adjusted1 profit growth of 29%. There was only a small positive contribution from currency exchange movement and acquisitions. Therefore, underlying organic revenue and profit growth at constant currency was impressive, at 10% and 28% respectively.

We have continued to achieve record levels of performance throughout the downturn. After the significant volatility experienced in 2009, there was a clear change in demand levels at the start of 2010. We saw both a step-up in order intake and greater month-to-month stability. This has continued throughout the year. We expect to make further progress in the second half, with a more evenly balanced first half to second half trading pattern than we saw last year.

High and increased levels of return

All three sectors increased Return on Sales1, which for the Group improved to 19.8% (2009/10: 17.1%). Our companies maintained product margins even though some experienced raw material cost rises whilst certain suppliers struggled to ramp-up their output to keep pace with rapidly increasing demand. Overhead costs grew more slowly than revenue and we will continue to balance this cost control with the need for investment to ensure we meet our longer-term strategic growth objectives.

Solid cash generation reflected good operational discipline by our subsidiary management teams. Return on Capital Employed1 increased to 72% (2009/10: 52%) whilst Return on Total Invested Capital1 was 15.5% (2009/10: 12.6%) - both excellent performances given the level of revenue growth achieved. We ended the first half with net cash of £27.6m and our financial position remains strong.

Growth in all sectors

All three sectors grew revenue and profit at the interim stage.

Infrastructure Sensors made solid progress, growing revenue 5% to £96.0m (2009/10: £91.3m) and profit2 by 8% to £17.9m (2009/10: £16.6m). All four sub-sector businesses, Fire Detection, Security Sensors, Automatic Door Sensors and Elevator Safety increased revenue. Unsurprisingly, this good performance across the sector was driven by growth in developing regions. Outside UK/USA/Mainland Europe revenue was up by 24%, more than compensating for flat revenue in these developed markets. We will continue to increase resources and investment in faster growing countries like China and India.

Health and Analysis performed very impressively becoming our largest sector, with revenue up 22% to £102.4m (2009/10: £83.6m) and profit2 up 39% to £22.1m (2009/10: £15.9m). All four sub-sector businesses increased revenue and profit. There were particularly strong performances in Photonics, Fluid Technology and Water whilst Health Optics made steady progress. Encouragingly, the geographic growth trends were good in both developed and developing regions. There was double-digit revenue growth in both the UK and the USA whilst Mainland Europe was slightly ahead of the prior year. Outside of these regions, revenue grew by 40% with Far East and Australasia revenue rising by 48%. Here our photonics businesses are achieving high levels of growth, benefiting from the fast growing market in low energy lighting and displays.

Industrial Safety grew revenue by 8% to £50.8m (2009/10: £47.2m) and, impressively, increased profit2 by 36% to £11.4m (2009/10: £8.4m). All four sub-sector businesses grew revenue and profit. Gas Detection, Bursting Disks and Asset Monitoring performed strongly, whilst Safety Interlocks made steadier progress. These businesses delivered 8% revenue growth in UK/USA/Mainland Europe combined and 5% growth elsewhere. Clearly, the regional trends in Industrial Safety are different to our other two sectors since industrial Health and Safety regulation tends to be introduced later in the growth cycle in developing countries than, for example, basic healthcare. However, we remain committed to investing in these new territories and working with our customers towards improving safety in the workplace.

Growth in all major geographic regions

The strong performance in Health and Analysis boosted the Group's total revenue from the USA by 15% and the UK by 6%. Revenue from Mainland Europe rose by 4% with the major contributor being improved demand for our Industrial Safety products.

Outside of UK/USA/Mainland Europe, revenue increased 26% to £58.1m (2009/10: £46.2m) contributing 23% to total Group revenue (2009/10: 21%). This improvement is in line with our goal for these regions to represent over 30% of the Group by 2015.

In China revenue increased by 34% to £10.6m, double that of two years ago although still only a step towards our objective of it being 10% of the Group by 2015. We continue to look at new ways to help our companies grow faster here.

Greater investment in strategic growth initiatives

We have successfully maintained investment for growth throughout the downturn and are clearly seeing the benefit of this in our financial performance. We are committed to further increased investment aligned with our key strategic objectives. Notable features of the first half included:

●

High rate of innovation - our R&D expenditure increased in line with revenue growth by 12% to £12.2m (2009/10: £10.9m). At 4.9% of revenue, this is well above our minimum 4% KPI target level.

●

International expansion with focus on Asia - we opened new China regional offices in Chengdu (western China) and Guangzhou (southern China) supplementing our existing presence in Shanghai and Beijing. A further regional office in Shenyang for northern China will become operational before the year end.

●

Management development - 20 engineers and scientists from our subsidiary companies started the first module of the new Halma Certificate in Applied Technology (HCAT) training programme in June 2010. HCAT will develop engineering talent across the Group with a particular focus on improving the return from our investment in innovation.

Acquisition completed, stronger pipeline of opportunities

Following the period end, in November 2010, we acquired Alicat Scientific, Inc. for $25.2m (£15.7m). Based in Arizona, USA, Alicat adds new precision flow control technology to our Fluid Technology sub-sector within Health and Analysis. In their last unaudited accounts for the financial year to end of September 2010, Alicat produced operating profit of $3.2m and has sustained a Return on Sales above our 18% - 22% target range for the past five years.

We have a stronger pipeline of acquisition opportunities than a year ago and vendor valuation expectations are becoming better aligned with our own.

Risks and uncertainties

There are no significant changes to the risks and uncertainties outlined in our Annual Report and on our website, www.halma.com. These are summarised in note 11 of this Half Year Report.

Outlook

We have seen increased revenue and profit in each of our sectors, continuing the earnings momentum we maintained throughout the financial downturn. Market conditions are much steadier than they have been over the previous two years and, therefore, this year we expect a much more evenly balanced split between first half and second half trading. We made an attractive acquisition following the period end and continue to search for other high quality opportunities within our existing markets.

1 See Financial Highlights

2 See note 2 to the Condensed Financial Statements

Unaudited26 weeks to 2 October 2010

Unaudited 27 weeks to3 October 2009

Audited53 weeks to3 April2010

Beforeacquiredintangiblesamortisation£000

Amortisationof acquiredintangibles£000

Total£000

Beforeacquiredintangiblesamortisation£000

Amortisationof acquiredintangibles£000

Total£000

Total£000

Continuing operations

Revenue (note 2)

249,080

-

249,080

222,050

-

222,050

459,118

Operating profit

49,645

(1,987)

47,658

39,732

(2,693)

37,039

84,295

Finance income (note 3)

4,758

-

4,758

3,332

-

3,332

6,566

Finance expense (note 4)

(5,144)

-

(5,144)

(5,001)

-

(5,001)

(9,487)

Profit before taxation

49,259

(1,987)

47,272

38,063

(2,693)

35,370

81,374

Taxation (note 5)

(12,561)

596

(11,965)

(10,468)

824

(9,644)

(20,937)

Profit for the period from continuing operations attributable to equity shareholders

36,698

(1,391)

35,307

27,595

(1,869)

25,726

60,437

Earnings per ordinaryshare (note 6)

From continuing operations

Basic

9.75p

9.38p

7.37p

6.87p

16.10p

Diluted

9.36p

6.85p

16.05p

Dividends in respect of the period (note 7)

Declared (£000)

13,336

12,459

32,009

Declared per share

3.54p

3.31p

8.50p

Unaudited26 weeks to2 October2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Profit for the period

35,307

25,726

60,437

Exchange differences on translation of foreign operations

(5,762)

(9,902)

(8,613)

Actuarial losses on defined benefit pension plans

(8,396)

(4,709)

(4,644)

Effective portion of changes in fair value of cash flow hedges

137

(186)

(47)

Tax relating to components of other comprehensive income

1,836

2,803

2,917

Other comprehensive expense for the period

(12,185)

(11,994)

(10,387)

Total comprehensive income for the period attributable to equity shareholders

23,122

13,732

50,050

Unaudited2 October 2010£000

(Restated)*

Unaudited3 October 2009£000

Audited3 April2010£000

Non-current assets

Goodwill

194,203

191,317

195,334

Other intangible assets

30,849

36,797

33,705

Property, plant and equipment

65,923

68,009

66,786

Deferred tax assets

13,095

12,766

10,612

304,070

308,889

306,437

Current assets

Inventories

51,325

45,792

47,014

Trade and other receivables

96,901

90,078

98,077

Tax receivable

97

-

1,067

Cash and cash equivalents

41,210

40,420

31,323

Derivative financial instruments

320

22

232

189,853

176,312

177,713

Total assets

493,923

485,201

484,150

Current liabilities

Borrowings

517

-

317

Trade and other payables

71,095

54,284

66,955

Provisions

2,138

1,724

1,515

Tax liabilities

15,014

6,535

7,843

Derivative financial instruments

247

367

331

89,011

62,910

76,961

Net current assets

100,842

113,402

100,752

Non-current liabilities

Borrowings

13,054

61,843

21,924

Retirement benefit obligations

48,497

45,591

43,071

Trade and other payables

3,858

1,490

4,554

Provisions

1,897

1,480

1,954

Deferred tax liabilities

13,329

15,490

13,193

80,635

125,894

84,696

Total liabilities

169,646

188,804

161,657

Net assets

324,277

296,397

322,493

Equity

Share capital

37,802

37,632

37,765

Share premium account

21,426

19,239

20,959

Treasury shares

(3,163)

(1,786)

(2,581)

Capital redemption reserve

185

185

185

Hedging and translation reserve

33,388

37,585

39,013

Other reserves

2,261

3,072

4,178

Retained earnings

232,378

200,470

222,974

Shareholders' funds

324,277

296,397

322,493

*Provisions, previously within 'Trade and other payables', have been separately disclosed.

Share capital £000 

Share premium  account £000 

Treasury shares £000 

Capital  redemption reserve £000 

Hedging and  translation reserve £000 

Other  reserves £000 

Retained earnings£000

Total £000 

At 3 April 2010 (audited)

37,765 

20,959 

(2,581)

185 

39,013 

4,178 

222,974 

322,493 

Profit for the period

- 

- 

- 

- 

- 

- 

35,307 

35,307 

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

- 

- 

- 

- 

(5,762)

- 

- 

(5,762)

Actuarial losses on defined benefit pension plans

- 

- 

- 

- 

- 

- 

(8,396)

(8,396)

Effective portion of changes in fair value of cash flow hedge 

- 

- 

- 

- 

137 

- 

- 

137 

Tax relating to components of other comprehensive income

- 

- 

- 

- 

- 

- 

1,836 

1,836 

Total other comprehensive income and expense

- 

- 

- 

- 

(5,625)

- 

(6,560)

(12,185)

Share options exercised

37 

467 

- 

- 

- 

- 

- 

504 

Dividends paid

- 

- 

- 

- 

- 

- 

(19,550)

(19,550)

Share-based payments

- 

- 

- 

- 

- 

(1,808)

- 

(1,808)

Deferred tax on share-based payment transactions

- 

- 

- 

- 

- 

(109)

- 

(109)

Excess tax deductions relating to share-based payments on exercised options

- 

- 

- 

- 

- 

- 

207 

207 

Net movement in treasury shares

- 

- 

(582)

- 

- 

- 

- 

(582)

At 2 October 2010 (unaudited)

37,802 

21,426 

(3,163)

185 

33,388 

2,261 

232,378 

324,277 

At 28 March 2009 (audited)

37,539 

18,146 

(2,759)

185 

47,673 

4,246 

194,585 

299,615 

Profit for the period

- 

- 

- 

- 

- 

- 

25,726 

25,726 

Total other comprehensive income and expense

- 

-  

- 

- 

(10,088)

- 

(1,906)

(11,994)

Share options exercised

93 

1,093 

- 

- 

- 

- 

- 

1,186 

Dividends paid

- 

- 

- 

- 

- 

- 

(17,935)

(17,935)

Share-based payments

- 

- 

- 

- 

- 

(1,682)

- 

(1,682)

Deferred tax on share-based payment transactions

- 

- 

- 

- 

- 

508 

- 

508 

Net movement in treasury shares

- 

- 

973 

- 

- 

- 

- 

973 

At 3 October 2009 (unaudited)

37,632 

19,239 

(1,786)

185 

37,585 

3,072 

200,470 

296,397 

At 28 March 2009 (audited)

37,539 

18,146 

(2,759)

185 

47,673 

4,246 

194,585 

299,615 

Profit for the period

- 

- 

- 

- 

- 

- 

60,437 

60,437 

Total other comprehensive income and expense

- 

- 

- 

- 

(8,660)

- 

(1,727)

(10,387)

Share options exercised

226 

2,813 

- 

- 

- 

- 

- 

3,039 

Dividends paid

- 

- 

- 

- 

- 

- 

(30,394)

(30,394)

Share-based payments

- 

- 

- 

- 

- 

(1,017)

- 

(1,017)

Deferred tax on share-based payment transactions

- 

- 

- 

- 

- 

949 

- 

949 

Excess tax deductions relating to share-based payments on exercised options

- 

- 

- 

- 

- 

- 

73 

73 

Net movement in treasury shares

- 

- 

178 

- 

- 

- 

- 

178 

At 3 April 2010 (audited)

37,765 

20,959 

(2,581)

185 

39,013 

4,178 

222,974 

322,493 

Unaudited26 weeks to2 October 2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Net cash inflow from operating activities (note 8)

49,460 

51,637 

100,338 

Cash flows from investing activities

Purchase of property, plant and equipment

(5,906)

(5,560)

(9,781)

Purchase of computer software

(522)

(576)

(1,260)

Purchase of intangibles

(17)

(33)

(38)

Proceeds from sale of property, plant and equipment

344

498

854

Development costs capitalised

(1,994)

(1,703)

(3,072)

Interest received

184

108

189

Acquisition of businesses

(241)

(5)

(1,676)

Disposal of businesses

-

267

520

Net cash used in investing activities

(8,152)

(7,004)

(14,264)

Financing activities

Dividends paid

(19,550)

(17,935)

(30,394)

Proceeds from issue of share capital

504

1,186

3,039

Net purchase of treasury shares

(3,469)

(1,426)

(2,252)

Interest paid

(331)

(606)

(1,047)

Repayment of borrowings

(8,348)

(19,316)

(58,845)

Net cash used in financing activities

(31,194)

(38,097)

(89,499)

Increase/(decrease) in cash and cash equivalents (note 8)

10,114

6,536

(3,425)

Cash and cash equivalents brought forward

31,006

34,987

34,987

Exchange adjustments

(427)

(1,103)

(556)

Cash and cash equivalents carried forward

40,693

40,420

31,006

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 2 October 2010, has not been audited or reviewed by the Group's auditors and was approved by the Directors on30 November 2010.

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 3 April 2010, except as noted below.

The figures shown for the 53 weeks to 3 April 2010 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. They were unqualified, did not include a reference to any matters for which the auditors 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. 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.

Accounting policies

The Group has adopted IFRS 3 (Revised) 'Business Combinations' for transactions arising after 3 April 2010.

This has changed the Group's definition of the cost of business combinations and the treatment of deferred and contingent consideration as follows:a) previously, acquisition costs were included in the cost of investment, but under IFRS 3 (Revised) these costs are expensed; andb) previously, subsequent adjustments to deferred or contingent consideration were made against goodwill, but under IFRS 3 (Revised) may now be expensed depending on whether the deferred or contingent consideration is initially recognised as equity or as a liability and whether the event is considered a measurement period adjustment.The adoption of IFRS 3 (Revised) has not had a material impact on assets, profit or earnings per share in the current interim period, but may impact the Group's accounting for any future business combinations.

2 Segmental Analysis

Sector analysis

The Group has three main reportable segments (Infrastructure Sensors, Health and Analysis and Industrial Safety), 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 Officer.

These reportable segments remain unchanged from the 3 April 2010 consolidated accounts.

Segment revenue and results

Revenue (all continuing operations)

Unaudited26 weeks to2 October2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Infrastructure Sensors

96,008

91,260

182,923

Health and Analysis

102,405

83,649

175,988

Industrial Safety

50,781

47,214

100,462

Inter-segmental sales

(114)

(73)

(255)

Revenue for the period

249,080

222,050

459,118

Profit (all continuing operations)

Unaudited26 weeks to2 October2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Segment profit before allocation of amortisation of acquired intangible assets

Infrastructure Sensors

17,911

16,574

35,510

Health and Analysis

22,063

15,867

35,254

Industrial Safety

11,391

8,354

19,795

51,365

40,795

90,559

Segment profit after allocation of amortisation of acquired intangible assets

Infrastructure Sensors

17,911

16,574

35,510

Health and Analysis

20,355

14,126

31,755

Industrial Safety

11,112

7,402

18,454

Segment profit

49,378

38,102

85,719

Central administration costs

(1,720)

(1,063)

(1,424)

Net finance expense

(386)

(1,669)

(2,921)

Group profit before taxation

47,272

35,370

81,374

Taxation

(11,965)

(9,644)

(20,937)

Profit for the period

35,307

25,726

60,437

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.The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit before amortisation of acquired intangible assets is disclosed separately above as this is the measure reported to the Chief Executive Officer for the purpose of allocation of resources and assessment of segment performance.The total assets have not been disclosed as there have been no material changes to those disclosed in the 2010 Annual Report.

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

Revenue by destination

Unaudited26 weeks to2 October2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

United Kingdom

51,220

48,466

135,676

United States of America

74,400

64,696

127,152

Mainland Europe

65,404

62,641

98,339

Asia Pacific and Australasia

35,061

28,080

59,143

Africa, Near and Middle East

14,037

11,112

23,695

Other countries

8,958

7,055

15,113

Group revenue

249,080

222,050

459,118

3 Finance income

Unaudited26 weeks to2 October2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Interest receivable

184

108

189

Expected return on pension assets

4,539

3,224

6,377

4,723

3,332

6,566

Fair value movement on derivative financial instruments

35

-

-

4,758

3,332

6,566

4 Finance expense

Unaudited26 weeks to2 October2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Interest payable on bank loans and overdrafts

313

584

972

Interest charge on pension scheme liabilities

4,760

4,236

8,375

Other interest payable

18

22

75

5,091

4,842

9,422

Fair value movement on derivative financial instruments

-

159

52

Unwinding of discount on provisions

53

-

13

5,144

5,001

9,487

5 Taxation

The total Group tax charge for the 26 weeks to 2 October 2010 of £11,965,000 (27 weeks to 3 October 2009: £9,644,000; 53 weeks to 3 April 2010: £20,937,000) comprises a current tax charge of £12,245,000 (27 weeks to 3 October 2009: £9,460,000; 53 weeks to 3 April 2010: £19,787,000) and a deferred tax credit of £280,000 (27 weeks to 3 October 2009: charge of £184,000; 53 weeks to 3 April 2010: charge of £1,150,000). The tax charge is based on the estimated effective tax rate for the year.

The tax charge includes £7,202,000 (27 weeks to 3 October 2009: £5,933,000; 53 weeks to 3 April 2010: £10,941,000) in respect of overseas tax.

Deferred tax assets have been recognised at the rate at which they are expected to reverse. In the UK, this is at the standard rate of corporation tax, which from 1 April 2011 will reduce from 28% to 27%. This reduction in rate has resulted in a debit to deferred tax of £368,000, of which £431,000 was taken to Other Comprehensive Income and £63,000 credited to the Income Statement.

6 Earnings per ordinary share

Basic earnings per ordinary share are calculated using the weighted average of 376,493,113 (3 October 2009: 374,670,385;3 April 2010: 375,485,642) shares in issue during the period (net of shares purchased by the Company and held as treasury shares). Diluted earnings per ordinary share are calculated using 377,361,172 (3 October 2009: 375,570,655; 3 April 2010: 376,513,219) shares which includes dilutive potential ordinary shares of 868,059 (3 October 2009: 900,270; 3 April 2010: 1,027,577). Dilutive potential ordinary shares are calculated from those exercisable share options where the exercise price is less than the average price of the Company's ordinary shares during the period.

Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation of acquired intangible assets after tax. 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 are presented below:

Unaudited26 weeks to2 October2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Earnings from continuing operations

35,307

25,726

60,437

Add back amortisation of acquired intangible assets after taxation

1,391

1,869

2,970

Adjusted earnings

36,698

27,595

63,407

Per ordinary share

Unaudited26 weeks to2 October2010pence

Unaudited27 weeks to3 October2009pence

Audited53 weeks to3 April2010pence

Earnings from continuing operations

9.38

6.87

16.10

Add back amortisation of acquired intangible assets after taxation

0.37

0.50

0.79

Adjusted earnings

9.75

7.37

16.89

7 Dividends

Per ordinary share

Unaudited26 weeks to2 October2010pence

Unaudited27 weeks to3 October2009pence

Audited53 weeks to3 April2010pence

Amounts recognised as distributions to shareholders in the period

Final dividend for the year to 3 April 2010 (28 March 2009)

5.19

4.78

4.78

Interim dividend for the year to 3 April 2010

-

-

3.31

5.19

4.78

8.09

Dividends declared in respect of the period

Interim dividend for the year to 2 April 2011 (3 April 2010)

3.54

3.31

3.31

Final dividend for the year to 3 April 2010

-

-

5.19

3.54

3.31

8.50

Unaudited26 weeks to2 October2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Amounts recognised as distributions to shareholders in the period

Final dividend for the year to 3 April 2010 (28 March 2009)

19,550

17,935

17,935

Interim dividend for the year to 3 April 2010

-

-

12,459

19,550

17,935

30,394

Dividends declared in respect of the period

Interim dividend for the year to 2 April 2011 (3 April 2010)

13,336

12,459

12,459

Final dividend for the year to 3 April 2010

-

-

19,550

13,336

12,459

32,009

8 Notes to the Consolidated Cash Flow Statement

Unaudited26 weeks to2 October2010£000

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Reconciliation of profit from operations to net cash inflow from operating activities

Profit from continuing operations before finance income and expense

47,658

37,039

84,295

Profit on disposal of operations before taxation

-

-

(382)

Depreciation of property, plant and equipment

5,665

5,747

11,461

Amortisation of computer software

616

542

1,116

Amortisation of capitalised development costs and other intangibles

2,142

1,710

3,815

Retirement of capitalised development costs

30

-

19

Amortisation of acquired intangible assets

1,987

2,693

4,840

Share-based payment expense in excess of amounts paid

1,162

694

1,333

Additional payments to pension scheme

(3,191)

(3,166)

(6,902)

(Profit)/loss on sale of property, plant and equipment and computer software

(114)

131

42

Operating cash flows before movement in working capital

55,955

45,390

99,637

(Increase)/decrease in inventories

(4,934)

3,585

2,990

(Increase)/decrease in receivables

(181)

9,530

3,636

Increase/(decrease) in payables

2,852

(5,238)

6,427

Cash generated from operations

53,692

53,267

112,690

Taxation paid

(4,232)

(1,630)

(12,352)

Net cash inflow from operating activities

49,460

51,637

100,338

Reconciliation of net cash flow to movement in net cash/(debt)

Increase/(decrease) in cash and cash equivalents

10,114

6,536

(3,425)

Cash outflow from borrowings

8,348

19,316

58,845

Exchange adjustments

95

3,911

4,848

18,557

29,763

60,268

Net cash/(debt) brought forward

9,082

(51,186)

(51,186)

Net cash/(debt) carried forward

27,639

(21,423)

9,082

Analysis of net cash/(debt)

Cash and cash equivalents

40,693

40,420

31,006

Bank loans falling due after one year

(13,054)

(61,843)

(21,924)

27,639

(21,423)

9,082

9 Non-GAAP measures

Unaudited26 weeks to2 October2010£000

(Restated)*

Unaudited27 weeks to3 October2009£000

Audited53 weeks to3 April2010£000

Return on Capital Employed

Operating profit from continuing operations before amortisation of acquiredintangible assets

49,645

39,732

89,135

Computer software costs within intangible assets

2,907

2,893

3,050

Capitalised development costs within intangible assets

8,997

9,929

9,202

Other intangibles within intangible assets

177

236

223

Property, plant and equipment

65,923

68,009

66,786

Inventories

51,325

45,792

47,014

Trade and other receivables

96,901

90,078

98,077

Trade and other payables

(71,095)

(54,284)

(66,955)

Provisions

(2,138)

(1,724)

(1,515)

Net tax liabilities

(14,917)

(6,535)

(6,776)

Non-current trade and other payables

(3,858)

(1,490)

(4,554)

Non-current provisions

(1,897)

(1,480)

(1,954)

Add back retirement benefit accruals included within payables

-

295

-

Add back accrued deferred purchase consideration

5,047

55

2,921

Capital employed

137,372

151,774

145,519

Return on Capital Employed (annualised)

72.3%

52.4%

61.3%

*Provisions, previously within 'Trade and other payables', have been separately disclosed.

Return on Total Invested Capital

Post-tax profit from continuing operations before amortisation of acquiredintangibles

36,698

27,595

63,407

Total shareholders' funds

324,277

296,397

322,493

Add back retirement benefit accruals included within payables

-

295

-

Add back retirement benefit obligations

48,497

45,591

43,071

Less associated deferred tax assets

(13,095)

(12,766)

(12,060)

Cumulative amortisation of acquired intangible assets

23,723

19,864

21,919

Goodwill on disposals

5,441

5,441

5,441

Goodwill amortised prior to 3 April 2004

13,177

13,177

13,177

Goodwill taken to reserves prior to 3 April 1998

70,931

70,931

70,931

Total invested capital

472,951

438,930

464,972

Return on Total Invested Capital (annualised)

15.5%

12.6%

13.6%

Organic growth

Organic growth measures the change in revenue and profit from continuing operations. The effect of acquisitions and disposals during the current and prior financial periods has been equalised by adjusting for their contributions based on their revenue and profit at the dates of acquisition and disposal.

10 Other matters

Seasonality

The Group's financial results have not historically been subject to significant seasonal trends.

Equity and borrowings

Issues and repurchases of Halma p.l.c.'s ordinary shares and drawdowns and repayments of borrowings are shown in the Consolidated Cash Flow Statement.

Related party transactions

There were no significant changes in the nature and size of related party transactions for the period to those reported in the 2010 Annual Report.

Events after the balance sheet date

On 2 November 2010 the Group acquired the entire share capital of Alicat Scientific, Incorporated (Alicat) for a cash consideration of $25.2m (£15.7m). The cash consideration is adjustable $1 for $1 if the completion accounts demonstrate net tangible assets above or below $1.5m. Due to the proximity of the acquisition date to the date of approval of the Half Year Report, it is impracticable to provide further information as the accounting for the business combination is not complete.

Alicat designs and manufactures mass flow meters and controllers which are used in life science and industrial applications for high-precision measurement of fluid flows. Alicat provides Halma with complementary technology for its Fluid Technology sub-sector.

11 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 in place processes for identifying, evaluating and managing key risks. These risks, together with a description of the approach to mitigating them, are set out in the 2010 Annual Report on pages 40 and 41 which is available on the Group's website at www.halma.com.

The principal risks and uncertainties relate to:

●

Operational risk

●

Organic growth, supplier risk and competition

●

Research and Development

●

Intangible resources

●

Laws and regulations

●

Information Technology/Business Interruption

●

Acquisitions

●

Financial irregularities and increasing span of control

●

Treasury and cash risks

●

Current economic conditions

●

Pension deficit.

The Directors do not consider that the principal risks and uncertainties have changed since the publication of the 2010 Annual Report.

12 Responsibility statement

We confirm that to the best of our knowledge:

(a)

these Condensed Financial Statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union;

(b)

this Half Year Report includes a fair review of the information required by Disclosure and Transparency Rule (DTR) 4.2.7R (indication of important events during the period and description of principal risks and uncertainties for the remainder of the financial year); and

(c)

this Half Year Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

Andrew Williams

Chief Executive

30 November 2010

Kevin Thompson

Finance Director