Half Year Results 2020/21 19 November 2020 Andrew Williams Group - - PowerPoint PPT Presentation

Half Year Results 2020/21

19 November 2020 Andrew Williams – Group Chief Executive Marc Ronchetti – Chief Financial Officer

Introduction

Andrew Williams Group Chief Executive

Resilient by design

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

Halma Half Year Results 2020/21 – 19 November 2020

Net debt

£315.0m

FY20: £375.3m

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Half Year 20/21 summary

Resilient trading performance Strong cash performance & dividend growth Improving momentum & confidence in the future Revenue

• 5%

£618m Return on sales

19.7%

(H1 FY20: 19.7%) Profit1

• 5%

£122m Sequential revenue

+11%

(Q2 v Q1 growth) R&D spend2

5.6%

(H1 FY20: 5.3%) Interim dividend

+5%

6.87p per share Available liquidity

£493m

YE 2020: £431m M&A activity ‘active prospects’

1: Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations. 2: As a % of revenues.

Halma Half Year Results 2020/21 – 19 November 2020

Resilient by design: improving outlook

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• Sustaining value creation for all

stakeholders

• Better than expected H1

performance

• Improving momentum and strategic

investment in H2

• Expect FY21 profit* around 5% below

FY20

* Adjusted profit before tax. For further detail please refer to the Half 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

Halma Half Year Results 2020/21 – 19 November 2020

Financial Review

Marc Ronchetti Chief Financial Officer

Revenue performance

201 2019/20 20 Organic Acquisitions Disposals Currency 2020 2020/21 21

(11.0)% (0.2)% (0.4)% £618.4m (5.4)%

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£653.7m +6.2%

Halma Half Year Results 2020/21 – 19 November 2020

14% Reported Organic constant currency

£618m (5)%

UK

(17)%

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Revenue by destination

Reven evenue e and r reven evenue e grow

• wth

th, H1 H1 2020 2020/21 21

21%

Europe

(6)%

Asia Pacific

(6)% 16% 8% 41%

Other

(16)%

USA

+2%

UK

(18)%

Europe

(9)%

Asia Pacific

(14)%

Other

(15)%

USA

(7)%

Halma Half Year Results 2020/21 – 19 November 2020

(11)%

Profit* performance

201 2019/20 20 Organic Acquisitions Disposals Currency 2020 2020/21 21

£128.8m (11.1)% +6.0% +0.1% (0.3)% £122.0m (5.3)%

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

Halma Half Year Results 2020/21 – 19 November 2020

Infrastructure Safety

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Revenue

£201m: (13)%

Organic ccy (16)% Profit*

£46m: (12)%

Organic ccy (15)% Return on sales

22.8%

2019/20: 22.5% R&D spend

£12.2m: (14)%

6.1% of revenue 21%

£201m

UK

(20)%

(19)% occy

31%

Europe

(13)%

(13)% occy Asia Pacific

(1)%

(22)% occy

16% 8% 24%

Other

(19)%

(18)% occy USA

(13)%

(12)% occy

Revenue by destination

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

Halma Half Year Results 2020/21 – 19 November 2020

Expect further H2 progress towards resilient full year with continued strategic investment

Process Safety

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Revenue

£91m: (10)%

Organic ccy (17)% Profit*

£17m: (33)%

Organic ccy (37)% Return on sales

18.2%

2019/20: 24.5% R&D spend

£4.5m: +26%

4.9% of revenue 14%

£91m

UK

(8)%

(8)% occy

22%

Europe

6%

4% occy Asia Pacific

(17)%

(18)% occy

16% 15% 33%

Other

(11)%

(10)% occy USA

(16)%

(34)% occy

Revenue by destination

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

Halma Half Year Results 2020/21 – 19 November 2020

Expect continued gradual H2 improvement

Environmental & Analysis

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Revenue1

£154m: +1%

Organic ccy +1% Profit1,2

£38m: +22%

Organic ccy +23% Return on sales

24.9%

2019/20: 20.5% R&D spend

£8.3m: (11)%

5.4% of revenue

Other

+9%

+9% occy

17% Revenue by destination

£154m

UK

(14)%

(15)% occy

10%

Asia Pacific

(7)%

(6)% occy

16% 4% 53%

USA

+10%

+11% occy Europe

(8)%

(9)% occy

1: Historic revenue and profit have been restated for the transfer of Perma Pure to the Medical sector. 2: Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs and profit or loss on disposal of operations.

Halma Half Year Results 2020/21 – 19 November 2020

Expect good full year performance with H2 Return on Sales returning to historic levels

Medical

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Revenue1

£172m: +3%

Organic ccy (11)% Profit1,2

£38m: (3)%

Organic ccy (22)% Return on sales

22.1%

2019/20: 23.7% R&D spend

£9.4m: +22%

5.5% of revenue 3% Revenue by destination

£172m

UK

(21)%

(36)% occy

17%

Europe

+6%

(6)% occy Asia Pacific

(6)%

(10)% occy

16% 8% 56%

Other

(23)%

(24)% occy USA

+14%

(8)% occy

1: Historic revenue and profit have been restated for the transfer of Perma Pure to the Medical sector. 2: Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs and profit or loss on disposal of operations.

Halma Half Year Results 2020/21 – 19 November 2020

The sector is expected to deliver a resilient full year performance

£375m

net debt FY20

EBITDA Working capital Capex Tax Pensions Acquisitions Dividend

£315m

net debt HY21 14

Net debt and cash flow

Pension deficit

£45m

FY20: £5m Acquisition spend1

£8m

H1 FY20: £88m Dividend spend

+4%

£37.7m

£100m £(200)m £(400)m £(300)m

Cash conversion

111%

H1 FY20: 82% Working capital inflow

£6m

H1 FY20: £(25)m

• utflow

Capex

£11m

H1 FY20: £14m Effective tax rate

20.6%

FY20: 18.5%

Lease additions Interest FX and

• ther

Net debt

£315m

FY20: £375m 1: Includes fees, prior year earn-outs and cash acquired.

Halma Half Year Results 2020/21 – 19 November 2020

Net debt to EBITDA ratio 1.0x; £493m available liquidity

15 Halma Half Year Results 2020/21 – 19 November 2020

Performance against financial KPIs

* At constant currency ** annualised profit of acquisitions made in the last twelve months (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%

(11)% (11)% +3% (10)% 19.7% 12.6% 111% 5.6%

Strategy update

• Structured for

growth

• Investing for the

future: Technology

• Living our purpose

Structured for growth: Safer, Cleaner, Healthier

17 Halma Half Year Results 2020/21 – 19 November 2020

Laura Stoltenberg Sector Chief Executive ~30% Group profit Constance Baroudel Sector Chief Executive ~30% Group profit Wendy McMillan Sector Chief Executive ~40% Group profit

New organisational and financial reporting structure to apply from 1 April 2021

Re-balancing resources across sectors to drive growth

Safety Environmental & Analysis Medical

Modernising our ways

• f working and doing

business in a more tech-enabled way

Operational

Enabling new digital business models in line with our Halma 4.0 Growth Strategy

Strategic

Enhanced Core IT Services

HQ Digital Transformation Programmes

Architecture CoE

IoT CoE Software CoE

Investing for the future: Technology

Halma Half Year Results 2020/21 – 19 November 2020 18

Living our purpose: Global water campaign

19 Halma Half Year Results 2020/21 – 19 November 2020

• Aligned with our purpose and SDGs 3 & 6
• Providing clean water supply for 8,000+ people in India
• Raising funds and contributing water testing technologies
• Reducing operating companies’ water use

SDG 3 SDG 6

Bringing our purpose to life, engaging our employees

Living our purpose: Focus on “social” in ESG

20 Halma Half Year Results 2020/21 – 19 November 2020

• Manufacturing PPE for our

communities

• Maintaining supplier

payments

External stakeholders Wellbeing & development Diversity & inclusion

• ‘Best practice’ workplace safety and

legal support

• Employee assistance and mental

health support

• Expanded online/virtual employee

training

• Continued investment in Halma

Future Leaders

• New global parental leave

policy - 14 weeks for all parents

• ‘Accelerate Inclusion’

growth enabler roll-out

• Exceeding Hampton-

Alexander Review gender targets

• Sustaining value creation for all

stakeholders

• Better than expected H1

performance

• Improving momentum and strategic

investment in H2

• Expect FY21 profit* around 5% below

FY20

Confidence in the future

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* Adjusted profit before tax. For further detail please refer to the Half 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

Halma Half Year Results 2020/21 – 19 November 2020

Questions?

Appendices

25% Revenue Profit*

£618m

Medical

+3%

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Sector performances

28%

Environmental & Analysis

+1% 15% 32%

Process Safety

(10)%

Infrastructure Safety

(13)% xx% xx% xx% xx% xx% 28%

£139m

Medical

(3)% 27%

Environmental & Analysis

+22% 12% 33%

Process Safety

(33)%

Infrastructure Safety

(12)%

Halma Half Year Results 2020/21 – 19 November 2020

* Adjusted operating profit before central administration costs, after share of associate. Adjustments include amortisation of acquired intangibles, acquisition items, significant restructuring costs and profit or loss on disposal of operations.

Revenue Profit*

(11)%

Medical

(11)%

25

Sector performances: Organic constant currency

Environmental & Analysis

+1%

Process Safety

(17)%

Infrastructure Safety

(16)% xx% xx% xx% xx% xx%

(13)%

Medical

(22)%

Environmental & Analysis

+23%

Process Safety

(37)%

Infrastructure Safety

(15)%

Halma Half Year Results 2020/21 – 19 November 2020

* Adjusted operating profit before central administration costs, after share of associate. Adjustments include amortisation of acquired intangibles, acquisition items, significant restructuring costs and profit or loss on disposal of operations.

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Sector history

Halma Half Year Results 2020/21 – 19 November 2020

£m H1 16/17 H1 17/18 H1 18/19 H1 19/20 H1 20/21

Revenue Process Safety 76.7 88.8 97.9 101.3 91.1 Infrastructure Safety 148.0 167.9 197.6 232.9 201.5 Environmental & Analysis3 91.2 109.1 134.4 153.1 154.0 Medical3 126.3 140.7 155.8 166.5 172.4 Inter-segment sales (0.1) (0.2) (0.2) (0.1) (0.6) Group revenue 442.1 506.3 585.5 653.7 618.4 Sector profit1,2 Process Safety 17.4 20.2 22.2 24.9 16.6 Infrastructure Safety 32.0 35.7 41.7 52.3 46.0 Environmental & Analysis3 13.4 19.2 26.2 31.4 38.3 Medical3 31.5 31.3 37.8 39.3 38.2 Segment profit 94.3 106.4 127.9 147.9 139.1 Central & net finance costs (10.7) (11.9) (15.0) (19.1) (17.1) Profit2 83.6 94.5 112.9 128.8 122.0

1: Adjusted operating profit before central administration costs, after share of associate. 2: Adjustments include amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations and in H1 18/19 only the effect of pension benefits equalisation. 3: Historic comparatives have been restated for the effect of the transfer of Perma Pure to the Medical sector from the Environmental & Analysis sector.

2020/21 Full Year Forecasts

Notes: 1. Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, profit or loss on disposal of operations. 2. 2020/21 based on expected mix of profit. 3. Assuming no further acquisitions 4. Cash contributions to defined benefit pension plans. 5. Includes estimated £2m lease financing charge under IFRS 16

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Notes Current 2020/21 Full Year Forecasts Previous 2020/21 Full Year Forecast Adjusted profit before tax 1 Around 5% below FY20 5% - 10% below FY20 Capex c.£30m c.£30m Effective tax rate 2 c.21% c.19% Central costs c.£25m c.£20m Net finance expense 3 £10.8m5 £11.2m5 Pension contributions 4 £13.7m £13.7m

Halma Half Year Results 2020/21 – 19 November 2020

Currency effects

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* Based on H1 2020/21 results

Halma Half Year Results 2020/21 – 19 November 2020

US$ % change Euro % change H1 20/21 H1 19/20 H1 20/21 H1 19/20 Average rates versus Sterling 1.27 1.26 (0.8)% 1.12 1.13 +0.9% 1% change* US$ (~51% of total) Euro (~12% of total) Revenue £3.2m £0.7m Profit £0.7m £0.2m

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Profit adjustments*

* items charged in arriving at statutory profit ** including acquisition costs, adjustment to acquisition contingent consideration primarily relating FireMate, NeoMedix and Infowave, and release of fair value uplifts to inventory on acquisition, primarily relating to Sensit and NovaBone

£m H1 20/21 H1 19/20 Intangible amortisation (21.6) (18.3) Acquisition items** (4.1) (4.7) (25.7) (23.0)

Halma Half Year Results 2020/21 – 19 November 2020

Pensions

• Discount rate 1.5% (March 2020: 2.6%)
• Closed DB to future accrual December 2014
• Contributions to pay off deficit : 2020/21: £13.7m
• Triennial valuation due 1 November for Halma scheme, 1 April 2021 for Apollo

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Defined Benefit Pension Scheme (£m) 30 September 2020 31 March 2020 Assets 331.7 298.8 Liabilities (376.7) (304.0) Deficit (45.0) (5.2)

Halma Half Year Results 2020/21 – 19 November 2020

• COVID-19-related tax liability deferrals (impact on working capital):
• In the UK, a £4m cash VAT liability has been deferred to H2. There is therefore

no VAT cash deferral benefit for the year as a whole.

• In the US, approximately US$5m (£4m) of Employer Payroll Tax liability relating

to H1 has been deferred. We expect to defer a further US$2m in H2 2020/21. Half of the deferred amounts are due by 31 December 2021 and the remainder by 31 December 2022.

• EU ruling on the UK controlled Finance Company Partial Exemption (potential

future cash tax outflow):

• Payment of up to £17.0m expected to be made in H2 2020/21.
• No provision recognised based on current assessment.

COVID-19-related tax payments and EU State Aid

31 Halma Half Year Results 2020/21 – 19 November 2020

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.

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Disclaimer

Halma Half Year Results 2020/21 – 19 November 2020