Full Year Results 2019/20/media/Files/H/Halma/Corp/... · Halma Full Year Results 2019/20 – 14...

Full Year Results 2019/2014 July 2020

Andrew Williams – Group Chief ExecutiveMarc Ronchetti – Chief Financial Officer

Introduction

Andrew WilliamsGroup Chief Executive

Sustainable value creation

Clear and positive purpose

Diverse and high calibre people

3Halma Full Year Results 2019/20 – 14 July 2020

Focused and sustainable growth strategy

Long-term growth drivers

Robust, agile organisation and culture

0200400600800

100012001400

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

£1,338mRevenue (£m)


4

10% CAGR

0

50

100

150

200

250

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

£267mAdjusted Profit before Tax (£m)

11% CAGR

0

5

10

15

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

15.3%

Return on Total Invested Capital (%)

WACC

Halma Full Year Results 2019/20 – 14 July 2020

0

2

4

6

8

10

010203040506070

200

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

£72mR&D expenditure

%

£m

% of sales








Further progress in FY2020

Value creation for all stakeholders

Agile response to COVID-19

Expect FY21 profit* 5%-10% below FY20

* Adjusted profit before tax. For further detail please refer to the Full Year results announcement.


Full year 2019/20: Record results

Record revenue and

profit and higher

returns

Increased strategic

investment

Strong cash

performance

Revenue

+10.5%£1,338m

Profit1

+8.7%£267m

Return on Sales

19.9%2018/19: 20.3%

R&D spend2

5.4%(2019: 5.2%)

Capex

+9%£34.1m

Acquisitions

10£238m spend3

Cash flow

97%of adjusted

operating profit

Dividend for the year

+5%16.50p

Net debt4

£375m2018/19: £232m

1: Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of pension benefits equalisation. 2: As a % of revenues. 3: Includes fees, prior year earn-outs and cash acquired. 4: On an IFRS16 basis.

Financial Review

Marc RonchettiChief Financial Officer

Revenue growth


2018/19 Organic Acquisitions Disposals Currency 2019/20

+4.8%

(0.7)%+1.6%

£1,338m+10.5%

8

£1,210.9m

+4.8%

16%

Reported Organic constant currency

£1,338m

UK+10%

9

Revenue by destinationRevenue and revenue growth, 2019/20

21% Europe+4%

Asia Pacific+16%

16% 9%

38%

Other+1%

USA+15%

UK+8%

Europe+1%

Asia Pacific+4%

Other(1)%

USA+8%


Profit* growth


2018/19 Organic Acquisitions Disposals Currency 2019/20

£245.7m

+2.2%**

+4.9% (0.2%)+1.8%

£267.0m+8.7%

10

* Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of pension benefits equalisation. ** 4.2% excluding provisions of £5.0m for increased customer bad debt risk.

Infrastructure Safety


Revenue

£467m: +14%Organic ccy +3%

Profit*


Return on sales

23.1%2018/19: 21.8%

R&D spend

£28.3m: +14%6.1% of revenue

24%

£467m

UK+8%

+6% occy

30%

Europe+9%

+4% occy

Asia Pacific+46%

+4% occy

15%

8%

23%

Other(6)%

(9)% occy

USA+20%

+2% occy

Revenue by destination

* Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of pension benefits equalisation.

Process Safety


Revenue

£200m: +1%Organic ccy (2)%

Profit*

£44m: (3)%Organic ccy (6)%

Return on sales

21.9%2018/19: 23.0%

R&D spend

£7.5m: +7%3.7% of revenue

14%

£200m

UK(12)%

(12)% occy

20% Europe(6)%

(6)% occy

Asia Pacific+12%

+12% occy

17% 16%

33%

Other(2)%

(3)% occy

USA+9%

+1% occy


* Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of pension benefits equalisation.

Environmental & Analysis


Revenue1


Profit1,2


Return on sales

21.4%2018/19: 21.5%

R&D spend

£19.3m: +9%6.0% of revenue

Other+16%

+15% occy

21%


£325m

UK+28%

+26% occy

11%

Asia Pacific(3)%

(4)% occy

16%4%

48%

USA+24%

+20% occy Europe(1)%

(1)% occy

1: Historic revenue and profit have been restated for the transfer of Perma Pure to the Medical sector. See slides 31 and 32. 2: Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of pension benefits equalisation.

Medical


Revenue1


Profit1,2

£84m: +1%Organic ccy (3)%

Return on sales

24.3%2018/19: 25.6%

R&D spend

£16.5m: +28%4.8% of revenue

4%


£347m

UK+7%

+5% occy

17%

Europe+2%

(2)% occy

Asia Pacific+9%

+6% occy17%

10%

52%

Other+5%

+4% occy

USA+8%

+4% occy

1: Historic revenue and profit have been restated for the transfer of Perma Pure to the Medical sector. See slides 31 and 32. 2: Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of pension benefits equalisation.

£182mnet debtYE 18/19

EBITDA

Working capital Capex

TaxPensions

Acquisitions

Dividend

£375mnet debtYE 19/20

0

15

Cash flow

Pension deficit

£5m2018/19: £39m

Acquisition spend1

£238m2018/19: £68m

Dividend spend

£61.2m2019: £57.2m


£100m

£(100)m

£(200)m

£(400)m

£(300)m

Cash conversion

97%2018/19: 88%

Working capital outflow

£9m2018/19: £16m

Capex

£32m2018/19: £29m

Effective tax rate

18.5%2018/19: 18.6%

Leaseadditions

IFRS16effect

£(50.3)m

Ownshare

purchase

InterestFX

andother

Net debt

£375m(£314m ex

IFRS16)2018/19: £182m

1: Includes fees, prior year earn-outs and cash acquired.

Substantial financial capacity


US PrivatePlacement1

RevolvingCredit

Facility

£550m

OtherUS$15m

£913m

Cash£167m

£(424)m £489m

Cash and

fundingGross

debtLiquidity

Available liquidity (as at 4 July 2020)

0

100

200

300

400

500

600

700

2020 2021 2022 2023 2024 2025 2026

Funding maturity profile

Revolving Credit Facility matures in

2023

Net debt/EBITDA2

1.1x (2018/19: 0.85x)

1: Comprises 3 tranches of £82m, US$64m and €56m. 2: As at 31 March 2020.


Performance against financial KPIs

* At constant currency** annualised profit of acquisitions made in the year (net of finance cost) as a percentage of prior year adjusted profit

Organic revenue growth*

Target ≥5%

Organic profit growth*

Target ≥5%

Acquisition profit growth**

Target ≥5%

Revenue growth outside

UK/USA/Europe

Target ≥10%

Return on sales

Target 18-22%

Return on Total Invested Capital

Target ≥12%

Cash conversion

Target ≥85%

R&D investment (% of revenue)

Target ≥4%

+5% +2% +6% +10%

20% 15.3% 97% 5.4%

Strategy update



Our COVID-19 pandemic response

Agility and diversity:Rapid, decentralised

decision-making

Balancing impacts across key stakeholder groups

Created new central and regional

support forums

Prioritisingsafe working environments

‘Double-down’ on key investment

priorities

Ensuring a strong balance sheet and liquidity position

Ensuring delivery of critical safety, health and environmental solutions

M&A Talent &Culture

InnovationNetwork

InternationalExpansion

Finance, Legal& Risk

StrategicCommunications

Digital GrowthEngines

Halma Strategy: our Growth Enablers


Talent &Culture

Executive Board: strategic evolution

21Halma Half Year Results 2019/20 – 19 November 2019


Marc RonchettiChief Financial Officer

Laura StoltenbergSector Chief Executive,

Medical & Environmental

Jennifer WardGroup Talent and

Communications Director

Inken BraunschmidtChief Innovation and

Digital Officer

Catherine MichelChief Technology Officer

Adam MeyersSector Chief Executive,

Safety

Funmi AdegokeGeneral Counsel(joins Oct 2020)

Record year of acquisitions


Ampac (July 2019)Consideration:

AUS$135.0m (£75.2m)

Invenio (July 2019)Max consideration:

£6.0m

Enoveo (July 2019)Max consideration:

€1.2m (£1.1m)

NeoMedix (Oct 2019)Max consideration:US$25.0m (£20.5m)

Infowave (Oct 2019)Max consideration:US$12.3m (£10.1m)

NovaBone (Jan 2020)Max consideration:

US$136.5m (£104.1m)

FireMate* (Jan 2020)Max consideration:A$18.2m (£9.6m)

* 70% shareholding

Maxtec (Feb 2020)Consideration:

US$20.0m (£15.3m)

Sensit (Feb 2020)Consideration:

US$51.5m (£39.2m)

Spreo (Feb 2020)Max consideration:US$5.5m (£4.2m)

InternationalExpansion

InnovationNetwork

M&A

ESG: living our purpose


• Quantifying our positive impact:o Revenues & acquisitions

aligned to chosen SDGs

• External recognition:o CDP score improved to

“Management B” from “Awareness C”

• Reducing our environmental impact:o Exceeded CO2e intensity

reduction target

o Will report in line with TCFD by 2022

• Positive impact on society:o Significant progress on

diversity and inclusion

o Addressing supply chain risks

o Next global community campaign focused on Water


Resilient first quarter 2021 performance

• Revenue (4)% lower, (13)% organic constant currency

• Order intake ahead of revenue and same period last year

• Wide variation in individual companies’ performance

• Profit effects mitigated by >£20m variable cost savings

• Cash generation remains good

• Strong balance sheet and liquidity position

Summary and outlook


Good financial performance in FY20

Expect FY21 profit* 5%-10% below FY20

Focused investment to sustain value creation for all stakeholders

Resilient trading in Q1, FY21

Expect earnings to be weighted to 2H

* Adjusted profit before tax. For further detail please refer to the Full Year results announcement.






Questions?

Appendices

28

Revenue and profit: First and second half performance


Reported revenue

Organic revenue**

Reported profit*

Organic profit* **

* Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of equalisation of benefits for men and women in the defined benefit pension plans.

** At constant currency

£653.7m (+11.7%) £684.7m (+9.5%)

First half 2019/20 Second half 2019/20 Full year 2019/20

+5.4% +4.3%

+10.5%

+4.8%

+8.7%

+2.2%

£128.8m (+14.1%) £138.2m (+4.1%)

+6.5% (1.5)%

24%

Revenue Profit*

£1,338m

Medical+7%

29

Sector performances

26%


+16%

15%

35%

ProcessSafety+1%

Infrastructure Safety+14%

xx%

xx%

xx% xx%

xx% 23%

£305m

Medical+1%

28%


+15%

14%

35%

ProcessSafety(3)%



* Adjusted operating profit before central administration costs, after share of associate. Adjustments include amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of pension benefits equalisation.

Revenue Profit*

+5%

Medical+3%

30

Sector performances: Organic constant currency


+14%

ProcessSafety(2)%


xx%

xx%

xx% xx%

xx%

+2%

Medical(3)%


+13%

ProcessSafety(6)%



* Adjusted operating profit before central administration costs, after share of associate. Adjustments include amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of equalisation of pension benefits equalisation.

31

Sector History


£m 2015/16 2016/17 2017/18 2018/19 2019/20

Revenue Process Safety 155.5 167.0 184.5 197.5 200.0

Infrastructure Safety 264.8 315.2 348.8 408.6 466.5

Environmental & Analysis2 176.1 202.7 243.9 280.0 325.0

Medical2 211.5 277.0 299.3 325.2 347.2

Inter-segment sales (0.1) (0.2) (0.3) (0.4) (0.3)

Group revenue 807.8 961.7 1,076.2 1,210.9 1,338.4

Sector profit* Process Safety 39.6 40.3 43.4 45.5 43.9

Infrastructure Safety 56.2 65.1 73.3 88.9 107.7

Environmental & Analysis2 29.9 35.8 49.5 60.1 69.4

Medical2 56.3 72.6 72.5 83.2 84.4

Segment profit 182.0 213.8 238.7 277.7 305.4

Central & net finance costs (16.0) (19.8) (25.0) (32.0) (38.4)

Profit* 166.0 194.0 213.7 245.7 267.0

1: Adjusted operating profit before central administration costs, after share of associate. Adjustments include amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in the prior year only the effect of pension benefits equalisation. 2: Historic comparatives have been restated for the effect of the transfer of Perma Pure to the Medical sector from the Environmental & Analysis sector. See slide 32.

Effects of transfer of Perma Pure


• In the second half of FY19/20, the Perma Pure business was transferred from the Environmental & Analysis sector to the Medical sector

• This followed the acquisition of Maxtec, whose incorporation into Perma Pure has resulted in the majority of Perma Pure’s business being focused on medical applications

• There has been no material effect on year-on-year revenue or profit growth rates in FY 2019/20 in either sector

• Revenue and profit transferred on restatement of FY 2018/19 from the Environmental & Analysis sector to the Medical sector amounted to £19.1m and £6.3m respectively

33

Medical: new subsectors

Halma Full Year Results 2019/20– 14 July 2020

Subsector Companies

Life Sciences BioChem, Diba, Longer Pump

Healthcare Assessment Cardios, CenTrak, Keeler, Riester, SunTech, Volk

Therapeutic Solutions Medicel, MST, NovaBone, PermaPure

Currency Effects

34

* Based on 2019/20 results


US$ % change Euro % change

2019/20 2018/19 2019/20 2018/19

Average rates versus Sterling

1.27 1.31 (3.1)% 1.14 1.14 -

1% change* US$ (~47% of total) Euro (~12% of total)

Revenue £6.3m £1.6m

Profit £1.3m £0.3m

35

Profit Adjustments*

* items (charged)/credited in arriving at statutory profit** including acquisition costs, adjustment to acquisition contingent consideration primarily relating Mini-Cam, Navtech, NovaBone and Infowave,

and release of fair value uplifts to inventory on acquisition, primarily relating to Ampac


£m 2019/20 2018/19

Intangible amortisation (38.3) (35.6)

Acquisition items** (7.5) (0.3)

Disposal of operations 2.9 (1.0)

Defined benefit pension charge - (2.1)

(42.9) (39.0)

Pensions

• Discount rate 2.6% (March 2019: 2.4%).

• Closed DB to future accrual December 2014

• Contributions to pay off deficit : 2019/20: £12.8m; agreed for 2020/21: £13.7m


Defined Benefit Pension Scheme (£m) March 2020 March 2019

Assets 298.8 292.2

Liabilities (304.0) (331.4)

Deficit (5.2) (39.2)

The table above gives the results for LAN Controls, Limotec, Navtech Radar and Rath Communications acquired in 2018/19, and for the Ampac, Enoveo, FireMate, Infowave, Invenio, Maxtec, NeoMedix, NovaBone, Sensit and Spreo in 2019/20 for the period of ownership included as acquisition contribution. It excludes the Accudynamics disposal, that resulted in an £8.5m reduction in revenue and a £0.6m increase in profit year-on-year in 2019/20.

37

Acquisition Contribution

* Includes Halma management charges and investment to support growth

** Based on operating profit


2019/20 2020/21

Run-rate at acquisition (£m)

Actual*(£m)

Run-rate at acquisition (£m)

Revenue 54.4 58.0 46.6

Operating profit 13.7 14.8 10.9

Profit (net of financing cost) 10.9 12.1 7.8

Return on Sales** 25.2 25.5 23.4

IFRS 16 effects


The effects of IFRS 16 in this financial year have been as follows:

• A small reduction in net assets of £(6.1)m, comprising:o An increase in assets of £55.4mo An increase in liabilities of £61.5m

• An immaterial net effect on the Group’s profit and loss accounto Operating lease costs of c.£15.6m replaced by:

o A depreciation charge of £13.2mo A financing expense of £2.1m

• There has been no effect on tax

• There has been no effect on cash flow

Cash tax


• In FY 2020, taxation paid increased to £52.4m (2018: £40.6m), partly reflecting the acceleration of the payment timetable for UK Corporation Tax payments for larger companies which resulted in a one-off increase in cash taxation payable of approximately £5m

• In FY 2021, payments of certain tax liabilities are expected to be deferred, as permitted by governments as a result of the COVID-19 pandemico In the UK, the deferral of VAT payments will result in the payment of a cash tax

liability of approximately £4m being deferred from the first half of the financial year to March 2021 to the second half. There will therefore be no cash tax benefit from VAT deferral in the year as a whole

o In the US, the Employer Payroll Tax deferral will result in a cash tax liability of approximately US$6m (£5m) relating to the period 27 March 2020 to 31 December 2020 being deferred, with half of this amount due by 31 December 2021 and the remainder by 31 December 2022

o In relation to the EU ruling on the UK controlled Finance Company Partial Exemption (FCPE) constituting State Aid, it is currently expected that the Group will have to make a payment in the second half of FY 2021 of up to £16.9m. Based on its current assessment, the Group believes that no provision is required in respect of this issue

2020/21 Full Year Forecasts

Notes:1. 2020/21 based on expected mix of profit. 2. Assuming no further acquisitions 3. Cash contributions to the two UK defined benefit pension plans.4. Includes estimated £2m lease financing charge under IFRS 16


Notes 2020/21 Full Year Forecasts 2019/20 Actual

Capex c.£30m £34.1m

Effective tax rate 1 c.19% 18.5%

Central costs c.£20m £26.2m

Net finance expense 2 £11.2m4 £12.2m

Pension contributions 3 £13.7m £12.8m

This document contains statements about Halma plc that are or may be forward-looking statements. Forward-looking statements include statements relating to (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Halma plc’s operations; and (iii) the effects of government regulation on business.

These forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of Halma plc. They involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by such statements. They are based on numerous assumptions regarding the present and future business strategies and the future operating environment . All subsequent oral or written forward-looking statements attributable to Halma plc or any of its shareholders or any persons acting on its behalf are expressly qualified in their entirety by this cautionary statement. All forward-looking statements included in this document speak only as of the date they were made and are based on information then available to Halma plc. Investors should not place undue reliance on such forward-looking statements, and Halma plc does not undertake any obligation to update publicly or revise any forward-looking statements.

No representation or warranty, express or implied, is given regarding the accuracy of the information or opinions contained in this document and no liability is accepted by Halma plc or any of its directors, members, officers, employees, agents or advisers forany such information or opinions.

This information is being supplied to you for information purposes only and not for any other purpose. This document and theinformation contained in it does not constitute or form any part of an offer of, or invitation or inducement to apply for, securities.

The distribution of this document in jurisdictions other than the United Kingdom may be restricted by law and persons into whosepossession this document comes should inform themselves about, and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of laws of any such other jurisdiction.


Disclaimer

Full Year Results 2019/20/media/Files/H/Halma/Corp/... · Halma Full Year Results 2019/20 – 14...

Documents

Transcript of Full Year Results 2019/20/media/Files/H/Halma/Corp/... · Halma Full Year Results 2019/20 – 14...