Halma Regulatory News (HLMA)

HALMA plc

HALF YEAR REPORT FOR THE 26 WEEKS TO 29 SEPTEMBER 2012

20 NOVEMBER 2012

Record 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 29 September 2012.

Highlights include:

●

Adjusted pre-tax profit from continuing operations1 up 6% to £60.8m (2011/12: £57.5m) on revenue up 6% at £298.1m (2011/12: £280.0m).

●

Organic growth2 at constant currency: Profit up 3%, Revenue up 3%.

●

Strong growth in Asia Pacific and Australasia with revenue up 17% including 32% growth in China. Good overall revenue performance in developed regions, with USA up 19% offsetting weaker demand in UK and Europe.

●

Health and Analysis and Industrial Safety Sectors performed strongly with double-digit profit growth. Infrastructure Sensors profit marginally lower - Elevator Safety reorganisation completed on schedule. 

●

High level of returns maintained: Return on Sales3 of 20.4% (2011/12: 20.5%), Return on Total Invested Capital of 16.4% (2011/12: 16.9%) and Return on Capital Employed of 71.6% (2011/12: 68.8%).

●

Three acquisitions and one disposal completed during the period, acquisition pipeline remains healthy.

●

Adjusted earnings per share from continuing operations4 up 5% to 12.34p (2011/12: 11.75p). Statutory earnings per share up 25% to 13.14p (2011/12: 10.52p).

●

Interim dividend of 4.06p per share, up 7% (2011/12: 3.79p).

●

Net debt of £74m at period end (March 2012: £19m). Borrowing facilities of £260m in place until 2016, providing significant financial capacity for further organic growth and value adding acquisitions.

Andrew Williams, Chief Executive of Halma, commented:

"Halma made good progress during the period, achieving record revenue and profit and strong returns.

Our focus on building strong positions in markets with sustainable, long-term growth drivers such as Health and Safety regulation, increasing demand for healthcare and the need for life-critical resources (including energy and water) is providing both resilience and opportunities to grow. Order intake continues to be slightly ahead of revenue and Halma remains on track to make further progress in the second half of the year."

Notes:

1

Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration and profit on disposal of operations of £1.4m credit (2011/12: £6.2m charge). See note 2 for details.

2

Organic growth rates are non-GAAP performance 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, acquisition transaction costs, movement in contingent consideration, profit on disposal of operations and the associated tax. See note 6 for details.

For further information, please contact:

Halma plcAndrew 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:

● Health and Analysis

Products used to improve personal and public health. We develop technologies for analysis in safety, life sciences and environmental markets.

● Infrastructure Sensors

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

● Industrial Safety

Products which protect assets and people in industry.

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)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.

HALMA plcHalf year results for the 26 weeks to 29 September 2012

Financial Highlights

Change

Unaudited

26 weeks to

29 September

2012

Unaudited

26 weeks to

1 October

2011

Continuing Operations

Revenue

+ 6%

£298.1m

£280.0m

Adjusted Profit before Taxation1

+ 6%

£60.8m

£57.5m

Statutory Profit before Taxation

+ 21%

£62.2m

£51.3m

Adjusted Earnings per Share2

+ 5%

12.34p

11.75p

Statutory Earnings per Share

+ 25%

13.14p

10.52p

Interim Dividend per Share3

+ 7%

4.06p

3.79p

Return on Sales4

20.4%

20.5%

Return on Total Invested Capital5

16.4%

16.9%

Return on Capital Employed5

71.6%

68.8%

Pro-forma information:

1

Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration and profit on disposal of operations of £1.4m credit (2011/12: £6.2m charge). See note 2 for details.

2

Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration, profit on disposal of operations and the associated tax. See note 6 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, Return on Total Invested Capital and Return on Capital Employed 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:

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 safety, health and the environment. Our businesses are autonomous and entrepreneurial, building strong positions in market niches where the demand is global.

Half year results

In the first half, revenue from continuing operations of £298.1m increased by 6% compared with the prior year (2011/12: £280.0m); this included a net 4% contribution from acquisitions less disposals, and a negative currency impact of 1%, giving organic revenue1 growth at constant currency of 3%. Adjusted1 profit before tax from continuing operations also increased by 6% to £60.8m (2011/12: £57.5m), with organic growth of 3% at constant currency. Statutory profit before tax increased by 21% to £62.2m (2011/12: £51.3m). Return on Total Invested Capital1 was 16.4% (2011/12: 16.9%).

We spent £65.6m (excluding £3.5m of cash but including £1.4m of debt acquired) on three acquisitions (2011/12: £14.5m) and £15.8m on earnouts for acquisitions made in previous years (2011/12: £5.4m). We also disposed of a business for £21.8m including £2.1m of deferred consideration. This resulted in a net debt of £74.1m at the end of the period compared with £18.7m at 31 March 2012. Our financial position remains strong.

Dividends

The Board declares a 7% increase in the interim dividend to 4.06 pence per share which will be paid on 6 February 2013 to shareholders on the register at 4 January 2013. This increase reflects the Board's continuing confidence in Halma's long-term growth prospects.

Progress

Despite weak economic growth and uncertainties in both Europe and the USA, Halma has made further progress, thanks to the continuous efforts of our employees to innovate. Return on Sales1 was virtually unchanged at 20.4% (2011/12: 20.5%). Our investment in China again produced good results with sales growth of 32%. We continue to actively manage our portfolio of companies in line with our strategic objectives as illustrated by the following summary of acquisitions and disposals.

Acquisitions and disposals

During the first half year, Halma made three acquisitions: Accutome, a manufacturer of ophthalmic instruments, for US$20m (including US$2.3m of bank loans) plus an earnout of up to US$5m; Sensorex, a manufacturer of water analysis sensors, for US$38m; and Suntech Medical Group, a supplier of non-invasive blood pressure monitoring devices, for US$46m (plus US$5m for cash retained in the business) and up to US$6m earnout. We also sold Tritech (subsea asset monitoring equipment) for £21.8m, following the disposal at the very end of 2011/12 of Volumatic (cash counting equipment).

Outlook

Despite continuing global economic uncertainties, our structure of decentralised, market responsive management and the underpinning of demand from fundamental growth drivers have once more proved resilient in challenging markets. Halma remains on track to make further progress in the second half of the year.

1 See Financial Highlights

Chief Executive's Review

Andrew Williams, Chief Executive of Halma, said:

Halma made good progress during the period, achieving record revenue and profit and strong returns. Our focus on safety, health and environmental markets with long-term growth drivers is enabling us to continue to find growth opportunities.

Trading trends

We achieved strong revenue growth of 17% in Asia Pacific and Australasia including 32% revenue growth in China. Revenue growth of 6% in Africa, Near and Middle East and the Americas (ex-USA) contributed to the proportion of revenue from outside the UK/Europe/USA increasing to 25% of the Group total (2011/12: 23%), making further progress towards our goal of 30% by 2015. In absolute terms, half of our revenue growth during the period was generated from those regions.

There was a resilient trading performance in developed markets. Revenue grew by 19% in the USA which offset the performances in Europe and the UK, where revenue was down by 3% and 6% respectively. Acquisitions, disposals and currency rate changes had a significant impact on these figures. Taking these factors into account, we estimate that the underlying organic1 growth rates at constant currency were as follows: USA up 2%, Europe up 0.3% and UK down 2%.

Order intake in the first half was slightly ahead of revenue - a trading pattern which has continued into the second half.

Sector performances

Health and Analysis grew revenue by 12% to £135.2m (2011/12: £121.1m) and profit by 10% to £30.9m (2011/12: £28.0m). Return on Sales remained strong at 22.9% (2011/12: 23.1%). Our Water and Health Optics sub-sectors performed well, although we expect growth in Water to slow in the second half as UK water utilities move into the latter phases of their5-year budget cycle. As forecast, Fluid Technology achieved a steady recovery as we progressed through 2012, although this was in contrast to Photonics where strong growth in Asia was insufficient to fully mitigate the impact of lower demand from US government research customers.

Infrastructure Sensor revenue was 1% lower at £100.5m (2011/12: £101.1m) whilst profit was down by 2% at £18.9m (2011/12: £19.4m). Return on Sales was slightly lower at 18.8% (2011/12: 19.2%). As forecast, there were one-off costs of £1m during the period, predominantly to complete the reorganisation of our European and Asian Elevator Safety businesses. This was completed on schedule in September 2012 so we expect to see the benefit of these changes emerge more strongly during the second half. Fire Detection, Elevator Safety and Security Sensors all achieved modest revenue increases whilst our Automatic Door Sensors business saw lower revenue due to weakness in European markets.

Industrial Safety had another strong performance with revenue increasing by 8% to £62.5m (2011/12: £58.0m) and profit up by 13% to £15.3m (2011/12: £13.6m). Return on Sales of 24.5% (2011/12: 23.4%) remained the highest of our three sectors. Gas Detection, Safety Interlocks and Bursting Disks all performed strongly and it was pleasing to see higher growth from regions outside the UK/Europe/USA. The disposal of our Asset Monitoring business in August 2012 (see details below) will further increase the proportion of this sector's revenues from developing markets. In the longer term, this will be boosted further by the increased internal collaboration to serve Industrial customers in South America.

Acquisitions and disposals

During the period we spent £66m (plus up to £7m in earn-outs based on future growth) acquiring three companies for our Health and Analysis sector, details of which were given in Halma's Annual Report 2012 and this Half Year Report. All three businesses are trading well, with Accutome and SunTech already progressing new opportunities through collaboration with our other Health Optics companies and Sensorex continuing to grow sales of its water quality sensors.

In August 2012, we sold our Asset Monitoring business, Tritech, to a UK subsidiary of Moog Inc. for a total consideration of £21.8m. We acquired Tritech in 2006 as our first entry into the subsea asset market and, whilst it has performed well, we believe we can create greater shareholder value by reallocating resources to other sub-sectors. Moog's presence in marine energy markets will enable Tritech to make strong progress under their ownership. A gain of £8.2m has been recognised in the Group Income Statement after accounting for the disposal of these assets, including the associated goodwill.

Although the first half was a busy period for M&A, our search for acquisition opportunities continues. We are aiming to increase the number of prospects within our two safety-related sectors (Infrastructure Sensors and Industrial Safety) although currently the majority of opportunities in our pipeline are still within our Medical and Environmental related sector (Health and Analysis).

Cash generation and financial resources

There was good cash generation during the first half year, when dividend payments tend to be greater than those made in the second half. We ended the period with net debt of £74.1m (March 2012: £18.7m) after funding acquisitions (net of disposals) of £62.5m (2011/12: £19.9m) and capital expenditure of £8.1m (2011/12: £8.4m). We have a £260m 5-year revolving credit facility in place until October 2016 so we are in a strong financial position to support our future investment.

Investment for growth

Halma increased investment in each of the three strategic initiatives which underpin the sustainability of our growth and high returns:

• Investment in Innovation increased across all three sectors. R&D expenditure grew by 11% to £14.9m (2011/12: £13.4m).

• In October 2012, a group of graduates started the first Halma Graduate Development Programme (HGDP) underpinning our commitment to People Development. This programme will provide them with a series of six-month placements in Halma companies across the world. The first group of nine technical graduates includes a mix from leading universities in the UK and USA. Recruitment for the 2013 HGDP is already underway.

• Halma companies are working together to accelerate the pace of International Expansion. In China, our Fluid Technology companies have created a combined manufacturing company, whilst in Brazil our Industrial Safety businesses are together establishing a trading company to serve key Oil, Gas and Process industry customers in that region.

Risks and uncertainties

There are no significant changes to the risks and uncertainties in the Annual Report and on our website, www.halma.com. These are summarised in note 13 of this Half Year Report.

Summary

To meet the challenge of sustaining growth and high returns, the need to create competitive advantage is more critical than ever. Halma's business model is to operate with a diverse group of global businesses. Each has a management team empowered to adapt and allocate resources as the needs of their niche markets change leaving them well positioned to succeed.

Our focus on building strong positions in markets with sustainable, long-term growth drivers such as Health and Safety regulation, increasing demand for healthcare and the need for life-critical resources (including energy and water) is providing both resilience and opportunities to grow. Order intake continues to be slightly ahead of revenue and Halma remains on track to make further progress in the second half of the year.

1 See Financial Highlights

Unaudited 26 weeks to 29 September 2012

Unaudited 26 weeks to 1 October 2011

Audited52 weeks to31 March 2012

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

298,078

-

298,078

279,997

-

279,997

579,883

Operating profit

62,700

(6,771)

55,929

58,158

(6,218)

51,940

109,910

Share of results of associates

(120)

-

(120)

(94)

-

(94)

(37)

Profit on disposal of continuing operations

-

8,188

8,188

-

-

-

3,543

Finance income

3

4,407

-

4,407

4,919

-

4,919

10,070

Finance expense

4

(6,209)

-

(6,209)

(5,482)

-

(5,482)

(11,512)

Profit before taxation

60,778

1,417

62,195

57,501

(6,218)

51,283

111,974

Taxation

5

(14,222)

1,632

(12,590)

(13,258)

1,612

(11,646)

(25,260)

Profit for the year attributable to equity shareholders

46,556

3,049

49,605

44,243

(4,606)

39,637

86,714

Earnings per share

6

From continuing operations

Basic

12.34p

13.14p

11.75p

10.52p

23.01p

Diluted

13.13p

10.50p

22.97p

Dividends in respectof the period

7

Dividends (£000)

15,342

14,298

36,723

Per share

4.06p

3.79p

9.74p

* Adjustments include the amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration, profit on disposal of continuing operations and the associated taxation thereon.

Unaudited26 weeks to 29 September 2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March2012£000

Profit for the period

49,605

39,637

86,714

Exchange differences on translation of foreign operations

(10,862)

3,384

(5,707)

Actuarial losses on defined benefit pension plans

(10,700)

(11,440)

(3,024)

Effective portion of changes in fair value of cash flow hedges

(162)

244

545

Tax relating to components of other comprehensive income

2,162

2,529

(11)

Other comprehensive expense for the period

(19,562)

(5,283)

(8,197)

Total comprehensive income for the period attributable to equity shareholders

30,043

34,354

78,517

The exchange differences of (£10,862,000) (26 weeks to 1 October 2011: £3,384,000; 52 weeks to 31 March 2012: (£5,707,000)) comprises £1,488,000 (26 weeks to 1 October 2011: (£1,120,000); 52 weeks to 31 March 2012: (£776,000)) which relate to net investment hedges.

Unaudited29 September 2012£000

Unaudited1 October 2011£000

Audited31 March2012£000

Non-current assets

Goodwill

290,106

273,049

267,471

Other intangible assets

96,874

80,665

74,483

Property, plant and equipment

72,860

72,508

72,118

Interests in associates

5,023

1,914

1,968

Deferred tax asset

9,341

11,148

11,039

474,204

439,284

427,079

Current assets

Inventories

63,269

63,310

57,368

Trade and other receivables

116,286

109,029

114,674

Tax receivable

138

448

288

Cash and cash equivalents

43,000

41,674

45,305

Derivative financial instruments

355

108

469

223,048

214,569

218,104

Total assets

697,252

653,853

645,183

Current liabilities

Borrowings

-

2,051

-

Loan notes

2,515

-

-

Trade and other payables

84,379

86,304

93,499

Provisions

1,762

2,691

2,618

Tax liabilities

12,238

12,627

11,870

Derivative financial instruments

277

380

126

101,171

104,053

108,113

Net current assets

121,877

110,516

109,991

Non-current liabilities

Borrowings

114,594

95,649

64,014

Retirement benefit obligations

40,611

44,590

32,997

Trade and other payables

6,253

14,971

13,388

Provisions

3,193

2,108

2,301

Deferred tax liabilities

27,167

24,927

26,258

191,818

182,245

138,958

Total liabilities

292,989

286,298

247,071

Net assets

404,263

367,555

398,112

Equity

Share capital

37,869

37,841

37,856

Share premium account

22,350

21,993

22,177

Treasury shares

(2,958)

(3,665)

(4,569)

Capital redemption reserve

185

185

185

Hedging and translation reserve

18,149

38,078

29,212

Other reserves

(2,905)

(96)

1,346

Retained earnings

331,573

273,219

311,905

Shareholders' funds

404,263

367,555

398,112

For the 26 weeks ended 29 September 2012

Sharecapital

£000

Share premium account

£000

Treasury shares

£000

Capital redemption reserve

£000

Hedging and translation reserve

£000

Otherreserves

£000

Retained earnings

£000

Total

£000

At 31 March 2012 (audited)

37,856

22,177

(4,569)

185

29,212

1,346

311,905

398,112

Profit for the period

-

-

-

-

-

-

49,605

49,605

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

-

-

-

-

(10,862)

-

-

(10,862)

Actuarial losses on defined benefit pension plans

-

-

-

-

-

-

(10,700)

(10,700)

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

(162)

-

-

(162)

Tax relating to componentsof other comprehensive income

-

-

-

-

(39)

-

2,201

2,162

Total other comprehensive incomeand expense

-

-

-

-

(11,063)

-

(8,499)

(19,562)

Share options exercised

13

173

-

-

-

-

-

186

Dividends paid

-

-

-

-

-

-

(22,425)

(22,425)

Share-based payments

-

-

-

-

-

(3,991)

-

(3,991)

Deferred tax on share-basedpayment transactions

-

-

-

-

-

(260)

-

(260)

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

-

-

-

-

-

-

987

987

Net movement in treasury shares

-

-

1,611

-

-

-

-

1,611

At 29 September 2012 (unaudited)

37,869

22,350

(2,958)

185

18,149

(2,905)

331,573

404,263

For the 26 weeks ended 1 October 2011

Sharecapital

£000

Share premium account

£000

Treasury shares

£000

Capital redemption reserve

£000

Hedging and translation reserve

£000

Otherreserves

£000

Retained earnings

£000

Total

£000

At 2 April 2011 (audited)

37,824

21,744

(5,016)

185

34,511

3,634

262,503

355,385

Profit for the period

-

-

-

-

-

-

39,637

39,637

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

-

-

-

-

3,384

-

-

3,384

Actuarial losses on defined benefit pension plans

-

-

-

-

-

-

(11,440)

(11,440)

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

244

-

-

244

Tax relating to components of other comprehensive income

-

-

-

-

(61)

-

2,590

2,529

Total other comprehensive income and expense

-

-

-

-

3,567

-

(8,850)

(5,283)

Share options exercised

17

249

-

-

-

-

-

266

Dividends paid

-

-

-

-

-

-

(20,935)

(20,935)

Share-based payments

-

-

-

-

-

(3,261)

-

(3,261)

Deferred tax on share-basedpayment transactions

-

-

-

-

-

(469)

-

(469)

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

-

-

-

-

-

-

864

864

Net movement in treasury shares

-

-

1,351

-

-

-

-

1,351

At 1 October 2011 (unaudited)

37,841

21,993

(3,665)

185

38,078

(96)

273,219

367,555

For the 52 weeks ended 31 March 2012

Sharecapital

£000

Share premium account

£000

Treasury shares

£000

Capital redemption reserve

£000

Hedging and translation reserve

£000

Otherreserves

£000

Retained earnings

£000

Total

£000

At 2 April 2011 (audited)

37,824

21,744

(5,016)

185

34,511

3,634

262,503

355,385

Profit for the period

-

-

-

-

-

-

86,714

86,714

Other comprehensive income and expense:

Exchange differences on translation of foreign operations

-

-

-

-

(5,707)

-

-

(5,707)

Actuarial losses on defined benefit pension plans

-

-

-

-

-

-

(3,024)

(3,024)

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

545

-

-

545

Tax relating to components of other comprehensive income

-

-

-

-

(137)

-

126

(11)

Total other comprehensive income and expense

-

-

-

-

(5,299)

-

(2,898)

(8,197)

Share options exercised

32

433

-

-

-

-

-

465

Dividends paid

-

-

-

-

-

-

(35,232)

(35,232)

Share-based payments

-

-

-

-

-

(2,082)

-

(2,082)

Deferred tax on share-basedpayment transactions

-

-

-

-

-

(206)

-

(206)

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

-

-

-

-

-

-

818

818

Net movement in treasury shares

-

-

447

-

-

-

-

447

At 31 March 2012 (audited)

37,856

22,177

(4,569)

185

29,212

1,346

311,905

398,112

Notes

Unaudited26 weeks to29 September 2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March2012£000

Net cash inflow from operating activities

8

49,050

36,571

97,687

Cash flows from investing activities

Purchase of property, plant and equipment

(7,595)

(7,658)

(15,196)

Purchase of computer software

(469)

(753)

(1,293)

Purchase of other intangibles

(6)

-

(46)

Proceeds from sale of property, plant and equipment

347

370

1,244

Development costs capitalised

(2,369)

(2,005)

(4,718)

Interest received

52

132

212

Acquisition of businesses, net of cash acquired

10

(80,004)

(18,729)

(18,667)

Acquisition of investments in associates

(3,187)

-

-

Disposal of business, net of cash disposed

11

18,955

-

3,554

Net cash used in investing activities

(74,276)

(28,643)

(34,910)

Financing activities

Dividends paid

(22,425)

(20,935)

(35,232)

Proceeds from issue of share capital

186

266

465

Purchase of treasury shares

(3,700)

(3,045)

(3,985)

Interest paid

(1,150)

(580)

(1,490)

Loan arrangement fee

-

-

(1,903)

Proceeds from borrowings

50,630

19,975

76,456

Repayment of borrowings

-

(4,305)

(94,050)

Net cash from/(used in) financing activities

23,541

(8,624)

(59,739)

(Decrease)/increase in cash and cash equivalents

8

(1,685)

(696)

3,038

Cash and cash equivalents brought forward

45,305

42,610

42,610

Exchange adjustments

(620)

(240)

(343)

Cash and cash equivalents carried forward

43,000

41,674

45,305

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 29 September 2012, has not been audited or reviewed by the Group's auditors and was approved by the Directors on 20 November 2012.

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 52 weeks to 31 March 2012.

The figures shown for the 52 weeks to 31 March 2012 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 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, which includes a £260m five-year revolving credit facility due to expire in October 2016. 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 three main reportable segments (Health and Analysis, Infrastructure Sensors 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 31 March 2012 consolidated accounts.

Segment revenue and results

Revenue (all continuing operations)

Unaudited26 weeks to 29 September 2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March2012£000

Health and Analysis

135,157

121,070

253,647

Infrastructure Sensors

100,509

101,102

204,280

Industrial Safety

62,535

58,007

122,240

Inter-segmental sales

(123)

(182)

(284)

Revenue for the period

298,078

279,997

579,883

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 and has no material revenue derived from the rendering of services.

Profit (all continuing operations)

Unaudited26 weeks to29 September2012£000

Unaudited 26 weeks to1 October2011£000

Audited52 weeks to31 March2012£000

Segment profit before allocation of amortisation of acquired intangible assets, acquisition costs and profit on disposal of continuing operations

Health and Analysis

30,886

27,953

57,848

Infrastructure Sensors

18,907

19,364

39,099

Industrial Safety

15,335

13,596

29,226

65,128

60,913

126,173

Segment profit after allocation of amortisation of acquired intangible assets,acquisition costs and profit on disposal of continuing operations

Health and Analysis

24,416

22,024

49,779

Infrastructure Sensors

18,907

19,364

39,276

Industrial Safety

23,222

13,307

28,627

Segment profit

66,545

54,695

117,682

Central administration costs

(2,548)

(2,849)

(4,266)

Net finance expense

(1,802)

(563)

(1,442)

Group profit before taxation

62,195

51,283

111,974

Taxation

(12,590)

(11,646)

(25,260)

Profit for the period

49,605

39,637

86,714

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 on disposal of continuing operations 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 amortisation of acquired intangible assets, acquisition transaction costs, movements on contingent consideration (including any arising from foreign exchange revaluation) and profit on disposal of continuing operations are analysed as follows:

For the 26 weeks ended 29 September 2012

Acquisition costs

Amortisationof acquiredintangibleassets£000

Transactioncosts£000

Adjustmentstocontingentconsideration£000

Totalamortisationcharge andacquisitioncosts£000

Disposal ofcontinuingoperations(note 11)£000

Total£000l

Health and Analysis

(6,128)

(1,468)

1,126

(6,470)

-

(6,470)

Infrastructure Sensors

- 

-

-

-

-

-

Industrial Safety

(301)

-

-

(301)

8,188

7,887

Total Group

(6,429)

(1,468)

1,126

(6,771)

8,188

1,417

The transaction costs mainly arose on the acquisitions in note 10 of Accutome, Inc. (£225,000), Sensorex Inc. (£295,000) and SunTech Medical Group Limited (£939,000).

For the 26 weeks ended 1 October 2011

Acquisition costs

Amortisationof acquiredintangibleassets£000

Transactioncosts£000

Adjustmentsto contingentconsideration£000

Totalamortisationcharge andacquisitioncosts£000

Disposal ofcontinuingoperations(note 11)£000

Total£000l

Health and Analysis

(4,901)

(66)

(962)

(5,929)

-

(5,929)

Infrastructure Sensors

-

-

-

-

-

-

Industrial Safety

(244)

(45)

-

(289)

-

(289)

Total Group

(5,145)

(111)

(962)

(6,218)

-

(6,218)

For the 52 weeks ended 31 March 2012

Acquisition costs

Amortisationof acquiredintangibleassets£000

Transactioncosts£000

Adjustmentsto contingentconsideration£000

Totalamortisationcharge andacquisitioncosts£000

Disposal ofcontinuingoperations(note 11)£000

Total£000l

Health and Analysis

(9,804)

(667)

(1,141)

(11,612)

3,543

(8,069)

Infrastructure Sensors

- 

-

177

177

-

177

Industrial Safety

(548)

(51)

-

(599)

-

(599)

Total Group

(10,352)

(718)

(964)

(12,034)

3,543

(8,491)

The total assets of the Health and Analysis sector were £385,299,000 at 29 September 2012 (£332,051,000 at 1 October 2011; £317,280,000 at 31 March 2012), the increase in the period being primarily due to additional goodwill and acquired intangible assets arising from the three acquisitions (see note 10). The other two sectors' total assets have not been disclosed as there have been no material changes to those disclosed in the 2012 Annual Report.

Geographical information

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

Revenue by destination

Unaudited26 weeks to 29 September2012£000

Unaudited26 weeks to1 October 2011£000

Audited52 weeks to31 March2012£000

United States of America

93,491

78,598

161,951

Mainland Europe

73,306

75,264

154,428

United Kingdom

57,213

60,638

125,613

Asia Pacific and Australasia

48,826

41,611

87,277

Africa, Near and Middle East

14,240

13,024

27,750

Other countries

11,002

10,862

22,864

Group revenue

298,078

279,997

579,883

3 Finance income

Unaudited26 weeks to 29 September 2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March2012£000

Interest receivable

52

132

212

Expected return on pension assets

4,355

4,772

9,529

4,407

4,904

9,741

Fair value movement on derivative financial instruments

-

15

329

4,407

4,919

10,070

4 Finance expense

Unaudited26 weeks to29 September2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March 2012£000

Interest payable on bank loans and overdrafts

1,107

543

1,383

Amortisation of finance costs

317

-

282

Interest charge on pension scheme liabilities

4,615

4,845

9,684

Other interest payable

43

37

107

6,082

5,425

11,456

Fair value movement on derivative financial instruments

108

-

-

Unwinding of discount on provisions

19

57

56

6,209

5,482

11,512

5 Taxation

The total Group tax charge for the 26 weeks to 29 September 2012 of £12,590,000 (26 weeks to 1 October 2011: £11,646,000; 52 weeks to 31 March 2012: £25,260,000) comprises a current tax charge of £13,130,000 (26 weeks to 1 October 2011: £11,457,000; 52 weeks to 31 March 2012: £25,409,000) and a deferred tax credit of £540,000 (26 weeks to 1 October 2011: charge of £189,000; 52 weeks to 31 March 2012: credit of £149,000). The tax charge is based on the estimated effective tax rate for the year.

The tax charge includes £9,501,000 (26 weeks to 1 October 2011: £7,903,000; 52 weeks to 31 March 2012: £15,635,000) 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 2013 will reduce from 24% to 23%. This reduction in rate has resulted in a credit to the deferred tax asset of £282,000, of which £406,000 was charged to Other Comprehensive Income and £124,000 credited to the Income Statement.

6 Earnings per ordinary share

Basic earnings per ordinary share are calculated using the weighted average of 377,388,541 (1 October 2011: 376,659,210; 31 March 2012: 376,926,013) 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 377,927,267 (1 October 2011: 377,319,197; 31 March 2012: 377,473,142) shares which includes dilutive potential ordinary shares of 538,726 (1 October 2011: 659,987; 31 March 2012: 547,129). 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, acquisition transaction costs, movement on contingent consideration and profit on disposal of continuing operations 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 is presented below:

Unaudited26 weeks to 29 September2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March 2012£000

Earnings from continuing operations

49,605

39,637

86,714

Add back amortisation of acquired intangible assets (after tax)

4,530

3,783

7,561

Acquisition transaction costs (after tax)

1,468

111

691

Adjustments to contingent consideration (after tax)

(859)

712

786

Profit on disposal of continuing operations (after tax)

(8,188)

-

(3,543)

Adjusted earnings

46,556

44,243

92,209

Per ordinary share

Unaudited26 weeks to 29 September2012pence

Unaudited26 weeks to1 October2011pence

Audited52 weeks to31 March 2012pence

Earnings from continuing operations

13.14

10.52

23.01

Add back amortisation of acquired intangible assets (after tax)

1.21

1.01

2.00

Acquisition transaction costs (after tax)

0.39

0.03

0.18

Adjustments to contingent consideration (after tax)

(0.23)

0.19

0.21

Profit on disposal of continuing operations (after tax)

(2.17)

-

(0.94)

Adjusted earnings

12.34

11.75

24.46

7 Dividends

Per ordinary share

Unaudited26 weeks to29 September2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March 2012£000

Amounts recognised as distributions to shareholders in the period

Final dividend for the year to 31 March 2012 (2 April 2011)

5.95

5.56

5.56

Interim dividend for the year to 31 March 2012

-

-

3.79

5.95

5.56

9.35

Dividends in respect of the period

Interim dividend for the year to 30 March 2013 (31 March 2012)

4.06

3.79

3.79

Final dividend for the year to 31 March 2012

-

-

5.95

4.06

3.79

9.74

Unaudited26 weeks to29 September2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March 2012£000

Amounts recognised as distributions to shareholders in the period

Final dividend for the year to 31 March 2012 (2 April 2011)

22,425

20,935

20,934

Interim dividend for the year to 31 March 2012

-

-

14,298

22,425

20,935

35,232

Dividends in respect of the period

Interim dividend for the year to 30 March 2013 (31 March 2012)

15,342

14,298

14,298

Final dividend for the year to 31 March 2012

-

-

22,425

15,342

14,298

36,723

8 Notes to the Consolidated Cash Flow Statement

Unaudited26 weeks to 29 September2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March2012£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 on disposal of continuing operations

55,929

51,940

109,910

Depreciation of property, plant and equipment

6,262

6,077

12,178

Amortisation of computer software

677

588

1,319

Amortisation of capitalised development costs and other intangibles

1,824

1,879

3,820

Amortisation of acquired intangible assets

6,429

5,145

10,352

Share-based payment expense in excess of amounts paid

1,378

1,250

2,432

Additional payments to pension scheme

(3,346)

(3,160)

(6,419)

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

13

(64)

(495)

Operating cash flows before movement in working capital

69,166

63,655

133,097

Increase in inventories

(3,021)

(7,504)

(3,777)

Decrease/(increase) in receivables

1,831

3,140

(1,190)

Decrease in payables

(7,543)

(9,553)

(2,671)

Cash generated from operations

60,433

49,738

125,459

Taxation paid

(11,383)

(13,167)

(27,772)

Net cash inflow from operating activities

49,050

36,571

97,687

Reconciliation of net cash flow to movement in net debt

(Decrease)/increase in cash and cash equivalents

(1,685)

(696)

3,038

Cash (inflow)/outflow from (drawdowns)/repayment of borrowings

(50,630)

(15,670)

17,594

Bank loan acquired

(1,438)

(1,144)

(1,144)

Loan notes issued

(2,515)

-

-

Exchange adjustments

868

(1,438)

(1,119)

(55,400)

(18,948)

18,369

Net debt brought forward

(18,709)

(37,078)

(37,078)

Net debt carried forward

(74,109)

(56,026)

(18,709)

Analysis of net debt

Cash and cash equivalents

43,000

41,674

45,305

Loan notes falling due within one year*

(2,515)

-

-

Bank loans falling due within one year

-

(2,051)

-

Bank loans falling due after more than one year

(114,594)

 (95,649)

(64,014)

(74,109)

 (56,026)

(18,709)

* The loan notes were issued on 6 June 2012 and are convertible at par into cash at any time between six and twelve months from date of issue.

9 Non-GAAP measures

Return on Capital Employed

Unaudited26 weeks to29 September 2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March 2012£000

Operating profit before amortisation of acquired intangible assets, acquisition transaction costs and movement on contingent consideration, but after shareof results of associates

62,580

58,064

121,907

Computer software costs within intangible assets

2,421

2,948

2,678

Capitalised development costs within intangible assets

10,602

9,823

10,508

Other intangibles within intangible assets

179

216

215

Property, plant and equipment

72,860

72,508

72,118

Inventories

63,269

63,310

57,368

Trade and other receivables

116,286

109,029

114,674

Trade and other payables

(84,379)

(86,304)

(93,499)

Provisions

(1,762)

(2,691)

(2,618)

Net tax liabilities

(12,100)

(12,179)

(11,582)

Non-current trade and other payables

(6,253)

(14,971)

(13,388)

Non-current provisions

(3,193)

(2,108)

(2,301)

Add back accrued contingent purchase consideration

16,870

29,142

29,110

Capital employed

174,800

168,723

163,283

Return on capital employed (annualised)

71.6%

68.8%

74.7%

Return on Total Invested Capital

Unaudited26 weeks to 29 September2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March 2012£000

Post-tax profit before amortisation of acquired intangible assets, acquisition transaction costs, movement on contingent consideration and profit on disposal of continuing operations

46,556

44,243

92,209

Total shareholders' funds

404,263

367,555

398,112

Add back retirement benefit obligations

40,611

44,590

32,997

Less associated deferred tax assets

(9,341)

(11,148)

(7,920)

Cumulative amortisation of acquired intangible assets

41,850

31,663

36,306

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

566,932

522,209

549,044

Return on total invested capital (annualised)

16.4%

16.9%

16.8%

Organic growth

Organic growth measures the change in revenue and profit from continuing Group operations. The effect of acquisitions and disposals made during the current and prior financial periods has been equalised by adjusting the results for a pro-rated contribution based on their revenue and profit before taxation at the date of acquisition or disposal.

10 Acquisitions

The Group made three acquisitions during the period. Below are summaries of the assets and liabilities acquired and the purchase consideration of:

a) the total of all three acquisitions, including an adjustment to a prior period acquisition;

b) the three acquisitions, namely Accutome, Inc., Sensorex Inc. and SunTech Medical Group Limited.

(A) Total of all three acquisitions and adjustments to prior period acquisition

Bookvalue£000

Provisional fair value adjustments£000

Total£000

Non-current assets

Intangible assets

12

31,436

31,448

Property, plant and equipment

1,641

(305)

1,336

Deferred tax

212

698

910

Current assets

Inventories

7,379

(1,211)

6,168

Trade and other receivables

6,132

494

6,626

Cash and cash equivalents

3,641

(5)

3,636

Total assets

19,017

31,107

50,124

Current liabilities

Trade and other payables

(3,219)

(595)

(3,814)

Overdrafts

(116)

-

(116)

Bank loans

(1,307)

-

(1,307)

Provisions

(100)

(316)

(416)

Corporation tax

(44)

539

495

Non-current liabilities

Bank loans

(131)

-

(131)

Provisions

(21)

(25)

(46)

Deferred tax

-

(7,123)

(7,123)

Total liabilities

(4,938)

(7,520)

(12,458)

Net assets of businesses acquired

14,079

23,587

37,666

Cash consideration paid

67,760

Cash consideration to be paid (estimated)

804

Contingent purchase consideration (current period acquisitions)

6,977

Total consideration

75,541

Goodwill arising on current period acquisitions

37,875

Goodwill arising on prior period acquisitions

-

Goodwill arising on acquisitions

37,875

Due to their contractual dates, the fair value of receivables acquired (shown above) approximates to the gross contractual amounts receivable. The amount of gross contractual receivables not expected to be recovered is immaterial.

There are no material contingent liabilities recognised in accordance with paragraph 23 of IFRS 3 (Revised).

£9,586,000 of the goodwill arising on acquisitions in the period is expected to be deductible for tax purposes.

Together, all three acquisitions contributed £16,647,000 of revenue and £2,502,000 of profit after tax for the 26 weeks ended 29 September 2012. If these acquisitions had been held since the start of the financial period, it is estimated the Group's reported revenue and profit after tax would have been £2,621,000 and £418,000 higher, respectively.

Adjustments were made to the book values of the net assets of the companies acquired to reflect their provisional fair values to the Group. Acquired inventories were valued at the lower of cost and net realisable value adopting Group bases and any liabilities for warranties relating to past trading were recognised. Other previously unrecognised assets and liabilities at acquisition were included and accounting policies were aligned with those of the Group where appropriate.

The adjustment to a prior period acquisition resulted in a reclassification of balances between asset and liability categories, although overall the net asset adjustment was £nil.

Analysis of cash outflow in the Consolidated Cash Flow Statement

Unaudited26 weeks to29 September2012£000

Unaudited26 weeks to1 October2011£000

Audited52 weeks to31 March2012£000

Cash consideration in respect of current period acquisitions

67,760

13,383

13,305

Cash acquired on acquisitions

(3,636)

(49)

(49)

Overdrafts acquired on acquisitions

116

-

-

Contingent consideration paid in relation to prior period acquisitions*

15,764

5,395

5,411

Net cash outflow relating to acquisitions (per cash flow statement)

80,004

18,729

18,667

Bank loans acquired

1,438

1,144

1,144

Net cash outflow, including repayment of acquired bank loans

81,442

19,873

19,811

* Of the £15,764,000 (26 weeks to 1 October 2011: £5,395,000; 52 weeks to 31 March 2012: £5,411,000) contingent purchase consideration payment, £15,764,000 (26 weeks to 1 October 2011: £5,395,000; 52 weeks to 31 March 2012: £5,411,000) was provided in the prior period's financial statements.

(Bi) Accutome, Inc.

Bookvalue£000

Provisionalfair valueadjustments£000

Total£000

Non-current assets

Intangible assets

3

6,161

6,164

Property, plant and equipment

683

(39)

644

Deferred tax

-

375

375

Current assets

Inventories

2,768

111

2,879

Trade and other receivables

1,809

(527)

1,282

Total assets

5,263

6,081

11,344

Current liabilities

Trade and other payables

(1,418)

(392)

(1,810)

Overdrafts

(116)

-

(116)

Bank loans

(1,307)

-

(1,307)

Provisions

(49)

(94)

(143)

Non-current liabilities

Bank loans

(131)

-

(131)

Provisions

-

(25)

(25)

Deferred tax

-

(2,342)

(2,342)

Total liabilities

(3,021)

(2,853)

(5,874)

Net assets of businesses acquired

2,242

3,228

5,470