Half Year Results 2020/21

19 November 2020

Resilient performance and continued dividend growth

Halma, the global group of life-saving technology companies focused on growing a safer, cleaner and healthier future, today announces its half year results for the 6 months to 30 September 2020.

Highlights

• A resilient performance with a continued focus on the long-term sustainability of our business supported by our positive purpose, the strength of our culture and our agile business model.
• Revenue and Adjusted¹ Profit before Taxation declined by 5%, both including a 6% positive contribution from prior year acquisitions. Statutory Profit before Taxation reduced by 9%.
• Organic constant currency⁶ (OCCY) revenue was 11% lower, reflecting the net negative impact of the COVID-19 pandemic; revenue momentum improved during the period and has continued into the second half to date.
• High level of returns maintained: discretionary cost reductions of over £20m in Q1 and ongoing overhead control contributed to Return on Sales⁴ remaining flat at 19.7%. Return on Total Invested Capital⁵ of 12.6% was in excess of our KPI and significantly above the Group's cost of capital.
• Revenue growth in the Environmental & Analysis and Medical sectors. Safety sectors' revenue declined, although trends improved during the half year.
• Revenue growth in the USA. Moderate declines in Mainland Europe and Asia Pacific, despite growth in China, and a weaker performance in the UK.
• Strong cash generation with good working capital management. A robust balance sheet with net debt of £315.0m (net debt to EBITDA of 1.02 times) and significant liquidity. No furlough or debt funding sought, or received, from the UK Government.
• Continued investment in future growth. R&D expenditure increased to 5.6% of revenue and more M&A search activity and engagement from Q2 onwards.
• Interim dividend increased by 5%, reflecting the Board's continued confidence in the Group's resilience and long-term growth prospects.
• Notwithstanding the continued uncertainty in the Group's major markets, including in relation to the current COVID-19 pandemic and the wider macroeconomic environment, the Board now expects Adjusted profit before tax for FY 2020/21 to be around 5% below FY 2019/20, compared to prior guidance of 5% to 10% below FY 2019/20.

Andrew Williams, Group Chief Executive of Halma, commented:

'Halma's proven strategic, financial and organisational model has contributed to a resilient performance in testing circumstances, with our financial performance improving as the first half progressed. Throughout the pandemic, we have maintained our focus on employee safety and wellbeing, while working hard to ensure the continued delivery of critical safety, health and environmental solutions for our customers. This was achieved thanks to the tremendous commitment and capability of our colleagues across the Group. Our rapid response to the many new challenges of recent months enabled Halma to not only weather the storm, but to be well positioned to meet the challenges and opportunities ahead.

We have had a good start to the second half, with order intake ahead of revenue and up on the same period last year. Our improving trading performance, together with our strong cash position, will enable us to accelerate strategic investments in the second half of the year. As a result of our progress so far this year, we now expect Adjusted profit before tax for FY 2020/21 to be around 5% below FY 2019/20, compared to prior guidance of 5% to 10% below FY 2019/20.'

Notes:

1. Adjusted to remove the amortisation of acquired intangible assets, acquisition items, restructuring costs, and profit or loss on disposal of operations, totaling £25.7m (2019/20: £23.0m). See note 2 to the Condensed Interim Financial Statements for details.
2. Adjusted to remove the amortisation of acquired intangible assets, acquisition items, restructuring costs, profit or loss on disposal of operations and the associated taxation thereon. See note 2 to the Condensed Interim Financial Statements for details.
3. Interim dividend paid and 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. Return on Total Invested Capital (ROTIC) is defined as post-tax Adjusted¹ Profit as a percentage of average Total Invested Capital.
6. Organic constant currency measures exclude the effect of movements in foreign exchange rates on the translation of revenue and profit¹ into Sterling, as well as acquisitions and disposals for the year following completion.
7. Adjusted¹ Profit before Taxation, Adjusted² Earnings per Share, organic growth rates, Return on Sales and ROTIC are alternative performance measures used by management. See notes 2, 6 and 9 to the Condensed Interim Financial Statements for details.

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