Full Year Results 2019/20 14 July 2020 Andrew Williams Group Chief - - PowerPoint PPT Presentation

Full Year Results 2019/20

14 July 2020 Andrew Williams – Group Chief Executive Marc Ronchetti – Chief Financial Officer

Introduction

Andrew Williams Group Chief Executive

Sustainable value creation

Clear and positive purpose Diverse and high calibre people

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

Focused and sustainable growth strategy Long-term growth drivers Robust, agile organisation and culture

200 400 600 800 1000 1200 1400 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

£1,338m

Revenue (£m)

Sustainable value creation

4

10% CAGR

50 100 150 200 250 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

£267m

Adjusted Profit before Tax (£m)

11% CAGR

5 10 15 2004 2005 2006 2007 2008 2009 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

2 4 6 8 10 10 20 30 40 50 60 70 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

£72m

R&D expenditure

% £m % of sales

Sustainable value creation

Clear and positive purpose Diverse and high calibre people

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

Focused and sustainable growth strategy Long-term growth drivers Robust, agile organisation and culture 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.

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

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%

• f adjusted
• perating profit

Dividend for the year

+5%

16.50p Net debt4

£375m

2018/19: £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 Ronchetti Chief Financial Officer

Revenue growth

Halma Full Year Results 2019/20 – 14 July 2020

2018 18/19 19 Organic Acquisitions Disposals Currency 201 2019/20 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 destination

Reven evenue e and reven evenue e grow

• wth

th, 201 2019/20 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%

Halma Full Year Results 2019/20 – 14 July 2020

Profit* growth

Halma Full Year Results 2019/20 – 14 July 2020

2018 18/19 19 Organic Acquisitions Disposals Currency 201 2019/20 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

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

Revenue

£467m: +14%

Organic ccy +3% Profit*

£108m: +21%

Organic ccy +7% 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

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

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

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.

Environmental & Analysis

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

Revenue1

£325m: +16%

Organic ccy +14% Profit1,2

£69m: +15%

Organic ccy +13% Return on sales

21.4%

2018/19: 21.5% R&D spend

£19.3m: +9%

6.0% of revenue

Other

+16%

+15% occy

21% Revenue by destination

£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

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

Revenue1

£347m: +7%

Organic ccy +3% 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% Revenue by destination

£347m

UK

+7%

+5% occy

17%

Europe

+2%

(2)% occy Asia Pacific

+9%

+6% occy

17% 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.

£182m net debt

YE 18/19 EBITDA Working capital Capex Tax Pensions Acquisitions Dividend

£375m

net debt YE 19/20 15

Cash flow

Pension deficit

£5m

2018/19: £39m Acquisition spend1

£238m

2018/19: £68m Dividend spend

£61.2m

2019: £57.2m

Halma Full Year Results 2019/20 – 14 July 2020

£100m £(100)m £(200)m £(400)m £(300)m Cash conversion

97%

2018/19: 88% Working capital

• utflow

£9m

2018/19: £16m Capex

£32m

2018/19: £29m Effective tax rate

18.5%

2018/19: 18.6%

Lease additions IFRS16 effect £(50.3)m Own share purchase Interest FX and

• ther

Net debt

£375m

(£314m ex IFRS16) 2018/19: £182m

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

Substantial financial capacity

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

US Private Placement1 Revolving Credit Facility £550m Other US$15m

£913m

Cash £167m

£(424)m £489m

Cash and funding Gross debt Liquidity

Available liquidity (as at 4 July 2020)

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.

17 Halma Full Year Results 2019/20 – 14 July 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

• utside

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

Andrew Williams Group Chief Executive

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

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 Prioritising safe 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 Innovation Network International Expansion Finance, Legal & Risk Strategic Communications Digital Growth Engines

Halma Strategy: our Growth Enablers

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

Talent & Culture

Executive Board: strategic evolution

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

Andrew Williams Group Chief Executive Marc Ronchetti Chief Financial Officer Laura Stoltenberg Sector Chief Executive, Medical & Environmental Jennifer Ward Group Talent and Communications Director Inken Braunschmidt Chief Innovation and Digital Officer Catherine Michel Chief Technology Officer Adam Meyers Sector Chief Executive, Safety Funmi Adegoke General Counsel (joins Oct 2020)

Record year of acquisitions

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

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) International Expansion Innovation Network M&A

ESG: living our purpose

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

• Quantifying our positive

impact:

• Revenues & acquisitions

aligned to chosen SDGs

• External recognition:
• CDP score improved to

“Management B” from “Awareness C”

• Reducing our environmental

impact:

• Exceeded CO2e intensity

reduction target

• Will report in line with TCFD by

2022

• Positive impact on society:
• Significant progress on

diversity and inclusion

• Addressing supply chain risks
• Next global community

campaign focused on Water

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

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

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

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.

Clear and positive purpose Diverse and high calibre people Focused and sustainable growth strategy Long-term growth drivers Robust, agile organisation and culture

Questions?

Appendices

28

Revenue and profit: First and second half performance

Halma Full Year Results 2019/20 – 14 July 2020

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%

Environmental & Analysis

+16% 15% 35%

Process Safety

+1%

Infrastructure Safety

+14% xx% xx% xx% xx% xx% 23%

£305m

Medical

+1% 28%

Environmental & Analysis

+15% 14% 35%

Process Safety

(3)%

Infrastructure Safety

+21%

Halma Full Year Results 2019/20 – 14 July 2020

* 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

Environmental & Analysis

+14%

Process Safety

(2)%

Infrastructure Safety

+3% xx% xx% xx% xx% xx%

+2%

Medical

(3)%

Environmental & Analysis

+13%

Process Safety

(6)%

Infrastructure Safety

+7%

Halma Full Year Results 2019/20 – 14 July 2020

* 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

Halma Full Year Results 2019/20 – 14 July 2020

£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

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

• 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

Halma Full Year Results 2019/20 – 14 July 2020

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

Halma Full Year Results 2019/20 – 14 July 2020

£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

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

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

• wnership 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

Halma Full Year Results 2019/20 – 14 July 2020

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

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

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

• A small reduction in net assets of £(6.1)m, comprising:
• An increase in assets of £55.4m
• An increase in liabilities of £61.5m
• An immaterial net effect on the Group’s profit and loss account
• Operating lease costs of c.£15.6m replaced by:
• A depreciation charge of £13.2m
• A financing expense of £2.1m
• There has been no effect on tax
• There has been no effect on cash flow

Cash tax

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

• 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 pandemic

• 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

• 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

• 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

• n 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

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

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

• perating 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 for any such information or opinions. This information is being supplied to you for information purposes only and not for any other purpose. This document and the information 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 whose possession 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.

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

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