Half Year results 2018/19 20 November 2018 Andrew Williams - - - PowerPoint PPT Presentation

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Half Year results 2018/19 20 November 2018 Andrew Williams - - - PowerPoint PPT Presentation

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Half Year results 2018/19 20 November 2018 Andrew Williams - Group Chief Executive Marc Ronchetti - Chief Financial Officer Half Year 2018/19: Record results Revenue Profit ROS Growth & +16% +19% 19.3% High returns 585m

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Half Year results 2018/19

Andrew Williams Marc Ronchetti

20 November 2018

  • Group Chief Executive
  • Chief Financial Officer
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SLIDE 2

Half Year 2018/19: Record results

Growth & High returns Increased strategic investment Strong cash performance Revenue

+16%

£585m Profit

+19%

£113m ROS

19.3%

(H1,18: 18.7%) ROW revenue

+10%

£149m R&D spend

+14%

£31m Cash flow

86%

  • f adjusted profit

Dividend

+7%

6.11p Net Debt

£195m

FY18: £220m

Acquisitions

5*

£32m spend

* Includes Limotec and Navtech completed after period end

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Halma Half Year results – 20 November 2018

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SLIDE 3

Financial Review

Marc Ronchetti – Chief Financial Officer

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Halma Half Year results – 20 November 2018

100 200 300 400 500 600 14/15 15/16 16/17 17/18 18/19 20 40 60 80 100 120 14/15 15/16 16/17 17/18 18/19

Record results

H1, 2018/19 £585m £113m

Revenue Profit*

£m

* Profit before amortisation and impairment of acquired intangibles, acquisition items, significant restructuring costs and profit or loss on disposal of operations

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Halma Half Year results – 20 November 2018

£m 585.5 (+15.6%) 506.3 +14.2% H1 17/18 H1 18/19 Organic Acquisitions Disposals Currency

Revenue growth

H1, 2018/19 +3.9% (0.6)% (1.9)%

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Halma Half Year results – 20 November 2018

+14% +21% 10% 21% 17% UK 46% +19% USA 37%

£585m

Europe

Revenue by destination

Revenue and revenue growth, H1 2018/19

15% +5% Asia Pacific +17% Other

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Reported Organic constant currency

+8% +13% UK +23% USA Europe +14% Other +5% Asia Pacific

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SLIDE 7

Halma Half Year results – 20 November 2018

Profit* growth

H1, 2018/19

*Profit before amortisation and impairment of acquired intangibles, acquisition items, restructuring and other costs and profit or loss on disposal of operations 7

£m 112.9 (+19.4%) 94.5 +16.1% H1 17/18 H1 18/19 Organic Acquisitions Disposals Currency +5.1% +0.4% (2.2)%

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Halma Half Year results – 20 November 2018 Debt b/f YE 18 EBITDA Working capital Capex Tax Pensions Acquisitions net of disposals Dividend Other

  • incl. FX (net)

Debt c/f HY 18

£(20)m £(100)m £(40)m £(120)m £(60)m £(80)m £(140)m £(160)m £(180)m £(200)m

Cash flow H1 2018/19

Working capital: Outflow £11m (H1, 2017/18: £13m) Cash conversion: 86% Effective tax rate: 20.5% (FY 2017/18: 19.7%) Pensions: Deficit £20.7m (FY 2017/18: £53.9m) Annual contributions: £12m Dividend: 7% increase Debt: £195m net debt (FY 2018: £220m net debt).

£(220)m

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Halma Half Year results – 20 November 2018

Substantial financial capacity

Ø Revolving Credit Facility

Ø £550m (from November 2016) Ø Extended to November 2023

Ø In addition to existing $250m USPP Ø Capacity for medium term growth Ø Half year gearing 0.7x, comfortable up to 2x

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Halma Half Year results – 20 November 2018

Financial KPI summary 2018/19 Half Year

Target Achieved Organic revenue growth* > 5% 14% Organic profit growth* > 5% 16% Acquisition profit growth ** > 5%

  • Revenue growth outside UK/Europe/USA

> 10% 10.4% Return on Sales 18% - 22% 19.3% Return on Total Invested Capital >12% 14.9% Cash conversion > 85% 86% R&D investment (% of revenue) > 4% 5.3%

* at constant currency ** annualised profit of acquisitions made in the year (net of finance cost) as % of prior year adjusted profit 10

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SLIDE 11

Trading Review

Andrew Williams – Group Chief Executive

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SLIDE 12

Halma Half Year results – 20 November 2018

Sector performances

+23% +10% +10% 17% 24% 25% Process Safety Medical 23% 46% 33%

Revenue Profit*

+18% Infrastructure Safety 34% 27% 17%

* Profit before amortisation and impairment of acquired intangibles, acquisition items, significant restructuring costs and profit or

loss on disposal of operations

£585m £128m

+33% +9% +22% Medical Env & Analysis +17% Infrastructure Safety Process Safety Env & Analysis

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Halma Half Year results – 20 November 2018

Sector performances: Organic growth constant currency

46%

Revenue Profit*

+19% +12% +14% +13% +21% +11% +22% +12%

+14% +16%

Process Safety Medical Infrastructure Safety Env & Analysis Process Safety Medical Infrastructure Safety Env & Analysis

13 * Profit before amortisation and impairment of acquired intangibles, acquisition items, significant restructuring costs and profit or

loss on disposal of operations

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Halma Half Year results – 20 November 2018

50 100 150 200 14/15 15/16 16/17 17/18 18/19

Infrastructure Safety: Trading performance

10 20 30 40 14/15 15/16 16/17 17/18 18/19

Return on Sales: 21.1% R&D Spend (ccy): +31%

£198m £42m

£m £m Revenue: +18%

Organic ccy: +13%

Profit: +17%

Organic ccy: +12%

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Halma Half Year results – 20 November 2018

Infrastructure Safety: Revenue by destination

Asia Pacific +1% +21%

20% 26% 15%

UK

31%

Europe +16% USA +20%

11%

+34% Other

% of sector & % growth

Asia Pacific +1% +14% UK Europe +5% USA 24% +30% Other As reported Organic ccy

12%

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Halma Half Year results – 20 November 2018

20 40 60 80 100 14/15 15/16 16/17 17/18 18/19

Process Safety: Trading performance

5 10 15 20 25 14/15 15/16 16/17 17/18 18/19 £98m £22m

Revenue: +10%

Organic ccy: +12%

Profit: +9%

Organic ccy: +11%

£m £m

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Return on Sales: 22.6% R&D Spend (ccy): +12%

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Halma Half Year results – 20 November 2018

Process Safety: Revenue by destination

Asia Pacific +6% +6%

33% 16% 14%

UK

20%

Europe +3% USA +23%

17%

+5% Other

% of sector & % growth

Asia Pacific +8% +6% UK Europe +3% USA +26% +7% Other As reported Organic ccy

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Halma Half Year results – 20 November 2018

50 100 150 14/15 15/16 16/17 17/18 18/19

Medical: Trading performance

10 20 30 40 14/15 15/16 16/17 17/18 18/19 £147m £35m

£m £m Revenue: +10%

Organic ccy: +14%

Profit: +22%

Organic ccy: +22%

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Return on Sales: 23.8% R&D Spend (ccy): (2)%

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Halma Half Year results – 20 November 2018

Asia Pacific +7% 3% UK +14% USA +18% +7% Other Europe

% of sector & % growth

Medical: Revenue by destination

Asia Pacific +6% 2%

53% 4% 15%

UK

17% +11%

USA +11%

11%

+19% Other Europe As reported Organic ccy

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Halma Half Year results – 20 November 2018

50 100 150 14/15 15/16 16/17 17/18 18/19

Environmental & Analysis: Trading performance

10 20 30 14/15 15/16 16/17 17/18 18/19 £143m £29m

£m £m Revenue: +23%

Organic ccy: +19%

Profit: +33%

Organic ccy: +21%

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Return on Sales: 20.3% R&D Spend (ccy): +11%

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Halma Half Year results – 20 November 2018

Asia Pacific +6% +21% UK +18% USA +27% +1% Other Europe

% of sector & % growth

Environmental & Analysis: Revenue by destination

Asia Pacific +8% +39%

46% 17% 20%

UK

12%

+26% USA +27%

5%

0% Other Europe As reported Organic ccy

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SLIDE 22

Strategy update

Andrew Williams – Chief Executive

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Halma Half Year results – 20 November 2018

23 International Expansion Talent & Culture M&A Innovation Network Finance & Risk

Halma’s Strategic Growth Enablers

Strategic Comms Digital Growth Engines

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Halma Half Year results – 20 November 2018

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Halma’s Strategic Growth Enablers

International Expansion Talent & Culture M&A Innovation Network Finance & Risk Strategic Comms Digital Growth Engines

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Halma Half Year results – 20 November 2018

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Halma Half Year results – 20 November 2018

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Halma’s Strategic Growth Enablers

International Expansion Talent & Culture M&A Innovation Network Finance & Risk Strategic Comms Digital Growth Engines

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SLIDE 27

Halma Half Year results – 20 November 2018

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Halma’s Strategic Growth Enablers

International Expansion Talent & Culture M&A Innovation Network Finance & Risk Strategic Comms Digital Growth Engines M&A

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SLIDE 28

Halma Half Year results – 20 November 2018

M&A Update: 5 acquisitions completed

Limotec (Oct 18) LAN Controls (Sept 18) AWP/Elpas (Jul 18) Navtech (Nov 18)

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Halma Half Year results – 20 November 2018

Summary & Outlook

Ø Very strong H1; on track for a strong Full Year

Ø Growth in all sectors and regions Ø Order intake ahead of revenue and order intake last year Ø Continued investment supported by Growth Enablers Ø Recent acquisitions, healthy acquisition pipeline

Ø Investor event early February 2019

Ø Focus on Medical sector

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Halma Half Year results – 20 November 2018

Questions

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Halma Half Year results – 20 November 2018

Appendices

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Halma Half Year results – 20 November 2018

Currency effects

Ø Translation effect H1 18/19 v H1 17/18

Ø US$/£: D 3.0% weaker US$ Ø Euro/£: D 0.4% stronger € Ø Net negative effect: 2% revenue and profit

Ø At current FX rates

Ø FY: broadly neutral

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Halma Half Year results – 20 November 2018

Currency effects

$

% change

€

% change

Average rates 18/19 17/18 18/19 17/18

  • H1 v £

1.33 1.29 +3% 1.13 1.14

  • 1%
  • Full Year v £

1.33 1.13

  • 1% change*

(Annual impact) $(46% of 1H 18/19 total) € (12% of 1H 18/19 total) Revenue +/- £5.6m +/- £1.2m Profit +/- £1.2m +/- £0.3m

  • At $1.32/€1.13 Average rates for the full year 2018/19, (assuming $1.31/€1.13 relative to

Sterling for balance of financial year), currency translation impact on revenue and profit would be broadly neutral compared with using 2017/18 Fx rates*.

* Based on H1 2018/19 currency mix

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Halma Half Year results – 20 November 2018

Pensions

Ø Discount rate increased to 2.9% (Year end 2018: 2.5%), decreasing

  • liabilities. All other assumptions remain unchanged.

Ø Closed UK DB pension plans to future accrual December 2014 Ø Annual contributions to pay off deficit : 2017/18: expected £11m; 2018/19: expected £12m Ø Latest Triennial Actuarial valuations: Halma pension plan – December 2017, finalised and approved; Apollo pension plan – April 2018, still being finalised

Defined Benefit Pension Deficit HY 2018/19 FY 18 £m £m Assets 276.3 271.7 Liabilities (297.0) (325.6) Deficit (20.7) (53.9)

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Halma Half Year results – 20 November 2018

2018/19 Full Year Forecasts

Notes Current Full year 18/19 forecast Previous Full year 18/19 forecast Capex 1 £32m £34m Effective tax rate 2 20.5% 20% Central costs 3 £20m £20m Net finance expense 4 £9.8m £9.3m

Notes: 1. 2018/19 includes several business expansion projects, some deferred from 2017/18, in particular in Infrastructure Safety. 2. 2018/19 based on expected mix of profit. 3. 2018/19 includes the full year impact of resources added in 2017/18 and further investment to support our growth strategy including Digital and Talent. 4. Assuming no further acquisitions

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Halma Half Year results – 20 November 2018

Annual contribution * HQ Month acquired Initial consideration Max earnout Revenue EBIT Elpas US Aug 18 AwarePoint US Aug 18 £3m LAN Control Systems UK Sept 18 £0.8m Limotec bvba Belgium Oct 18 €9.3 m (£8.2m) None €6.7 m (£5.9m)

  • Navtech

Radar Ltd UK Nov 18 £21.0m £18.0m £6.2m

  • Acquisitions 2018/19

* As announced. Most recent full year results.

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Halma Half Year results – 20 November 2018

£m H1 14/15 H1 15/16 H1 16/17 H1 17/18 H1 18/19 5 year org ccy growth2

Sector revenue Process Safety 73.6 77.8 76.7 88.8 97.9 3.6% Infrastructure Safety 112.7 122.4 148.0 167.9 197.6 6.8% Medical 78.5 92.3 118.7 133.3 147.2 6.7% Environmental & Analysis 76.2 87.2 98.8 116.5 143.0 8.0% Inter-segmental sales (0.1)

  • (0.1)

(0.2) (0.2) Group revenue 340.9 379.7 442.1 506.3 585.5 6.4%

)

Sector profit1 Process Safety 20.4 19.1 17.4 20.2 22.2 (0.1%) Infrastructure Safety 22.8 24.6 32.0 35.7 41.7 8.4% Medical 20.9 24.6 28.9 28.7 35.0 5.3% Environmental & Analysis 11.9 14.7 16.0 21.8 29.0 11.5% Segment Profit 76.0 83.0 94.3 106.4 127.9 6.2% Central cost/net finance expense (7.0) (8.3) (10.7) (11.9) (15.0) Profit* 69.0 74.7 83.6 94.5 112.9 5.8%

Sector History – Half Year Results

1 Profit before amortisation and impairment of acquired intangibles, acquisition items, significant restructuring costs and profit or loss on disposal of operations 2 Weighted average full year organic constant currency growth 2013/14 – 2017/18
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Halma Half Year results – 20 November 2018

£m H1 18/19 H1 17/18

Items affecting

  • perating profit

Amortisation and impairment of acquired intangibles 17.5 17.3 Acquisition items: Transaction costs

  • 0.9

Adjustments to contingent consideration (1.5) (0.6) Release of fair value adjustments to inventory 1.5 0.1 Disposal of operations and restructuring 0.9

  • Total

18.4 17.7 Items affecting taxation Taxation (3.2) (6.0) Total adjustments 15.2 11.7

Adjustments

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Halma Half Year results – 20 November 2018

Disclaimer

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 potential synergies; 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 of any such person 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 of such persons and the environment in which each will operate in the future. 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 the cautionary statement above. 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.