Halma plc · LSE:HLMA
Halma — FY2014/15 Earnings Presentation
45 slides from Halma's earnings presentation, June 2015
Slide 1: Final results 2014/15
Final results 2014/15 Andrew Williams – Chief Executive Kevin Thompson – Finance Director Halma Final results – June 2015
Slide 2: Summary 2014/15
Summary 2014/15 Strong Revenue Profit ROS growth & +7% +10% 21.2% returns £726m £153.6m (LY: 20.7%) Continued ROW revenue R&D spend Acquisitions strategic +16% +8% £84m investment £197m £35m spend Cash flow ROTIC Dividend Good cash performance 87% 16.3% +7% of adjusted profit (LY: 16.7%*) 11.96p • P
Slide 3: Financial Review
Financial Review Halma Final results – June 2015
Slide 4: Record results
Record results Revenue Profit* £m £m £726m £153.6m 800 160 700 140 600 120 500 100 400 80 300 60 200 40 100 20 0 0 10/11 14/15 10/11 14/15 * Profit before amortisation of acquired intangibles, acquisition items, profit or loss on disposal of operations and curtailment gain on DB pension schemes (201
Slide 5: Revenue growth
Revenue growth FY 2014/15 % growth Headline growth 7% Disposal 1% Currency 2% Ongoing at Constant currency 10% Acquisitions (5%) Organic constant currency growth 5% Halma Final results – June 2015
Slide 6: Revenue growth
Revenue growth FY 2014/15 Organic: £m Total Constant Currency H1 341 2% 4% H2 385 12% 6% Total 726 7% 5% Halma Final results – June 2015
Slide 7: Revenue by destination
Revenue by destination Revenue and revenue growth, 2014/15 USA UK 4% 19% 8% 9% 31% 21% 15% £726m 23% Europe 27% 16% 28% 2% 11% Asia Pacific 5% Other 36% Halma Final results – June 2015
Slide 8: Revenue by destination: organic constant currency
Revenue by destination: organic constant currency Revenue and revenue growth, 2014/15 USA UK 7% 2% 9% 21% 15% Europe 27% 28% 2% Asia Pacific 1% Other 18% Halma Final results – June 2015
Slide 9: Profit* growth
Profit* growth FY 2014/15 % growth Headline growth 10% Currency 2% Ongoing at Constant currency 12% Acquisitions (5%) Organic constant currency growth 7% * Profit before amortisation of acquired intangibles, acquisition items, profit or loss on disposal of operations and curtailment gain o
Slide 10: Profit* growth
Profit* growth Organic: £m Total Constant Currency H1 69.0 6% 7% H2 84.6 13% 7% Total 153.6 10% 7% * Profit before amortisation of acquired intangibles, acquisition items, profit or loss on disposal of operations and curtailment gain on DB pension schemes (2013/14 only) Halma Final results – June 20
Slide 11: Currency
Currency Translation impact in 14/15 H1 net adverse impact 5% Full year net adverse impact 2% At current Fx rates 15/16 impact*:- H1: ~2% Benefit FY: ~ 1% Benefit Impact varying by sector More information in Appendix * Based on 14/15 results Halma Final results – June 2015
Slide 12: Cash flow 2014/15
Cash flow 2014/15 Working capital: outflow £6m (2014: £11m) Effective tax rate: 23.2% (2014:23.3%) £100m Working Profit capital Capex > Pensions: Deficit £67m (2014: £37m) Depn Tax £80m £60m Pensions £40m Acquisitions £20m Debt b/f Mar 14 0 £(20)m £(40)m £(60)m Acquisitions: Disposal £(80)m £84m spe
Slide 13: Funding
Funding £360m facility – 5 years to November 2018 Comfortable with net debt of up to 1.25x EBITDA (March 15: 0.57x) Strong balance sheet with significant capacity Halma Final results – June 2015
Slide 14: Financial KPI Summary 2014/15
Financial KPI Summary 2014/15 Target Achieved Organic profit growth* > 5% 7% Organic revenue growth* > 5% 5% Revenue outside UK/Europe/USA 30% by 2015 27% Return on Sales > 18% 21.2% Returns on Total Invested Capital >12% 16.3% R&D investment (% of revenue) > 4% 4.8% Cash conversion > 85% 87% * at c
Slide 15: Trading Review
Trading Review Halma Final results – June 2015
Slide 16: Sector performances
Sector performances Revenue Profit* Process Infrastructure Process Infrastructure Safety Safety Safety Safety +25% +6% +28% +12% 22% 27% 32% 30% 46% 23% 16% 23% 27% Medical Medical Environmental +4% Environmental +9% & Analysis & Analysis (1)% (14)% • Profit before amortisation of acquired intangibl
Slide 17: Sector performances: Organic constant currency growth
Sector performances: Organic constant currency growth Revenue Profit* Process Infrastructure Process Infrastructure Safety Safety Safety Safety +9% +5% +14% +12% 46% Medical Medical Environmental +6% Environmental +10% & Analysis & Analysis +0% (12)% • Profit before amortisation of acquired intangib
Slide 18: Process Safety: Trading performance
Process Safety: Trading performance Revenue: +25% Profit: +28% £m Organic ccy: +9% £m Organic ccy: +14% 200 50 £45m £159m 40 150 30 100 20 50 10 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Return on Sales: 28.3% Halma Final results – June 2015
Slide 19: Process Safety: Revenue by destination
Process Safety: Revenue by destination FY 2014/15: % of sector & % growth UK USA +2% +34% 18% 25% 22% Europe Asia Pacific 17% +8% +18% 18% Other +99% Halma Final results – June 2015
Slide 20: Process Safety: Revenue by end market
Process Safety: Revenue by end market % of sector 5% 6% Buildings 15% Utilities 1% Science/Env 49% Process 24% Energy/Res Others Halma Final results – June 2015
Slide 21: Infrastructure Safety: Trading performance
Infrastructure Safety: Trading performance Revenue: +6% Profit: +12% Organic ccy: +5% Organic ccy: +12% £m £m £50m 250 £234m 50 200 40 150 30 100 20 50 10 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Return on Sales: 21.4% Halma Final results – June 2015
Slide 22: Infrastructure Safety: Revenue by destination
Infrastructure Safety: Revenue by destination FY 2014/15: % of sector & % growth [excluding disposal] USA +5% UK 18% +23% 30% Asia Pacific 14% (1)% 8% Other 30% +28% Europe +3% Halma Final results – June 2015
Slide 23: Infrastructure Safety: Revenue by end market
Infrastructure Safety: Revenue by end market % of sector 3% Buildings Others 97% Halma Final results – June 2015
Slide 24: Medical: Trading performance
Medical: Trading performance Revenue: +4% Profit: +9% £m Organic ccy: +6% £m Organic ccy: +10% 200 50 £45m £169m 40 150 30 100 20 50 10 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Return on Sales: 26.8% Halma Final results – June 2015
Slide 25: Medical: Revenue by destination
Medical: Revenue by destination FY 2014/15: % of sector & % growth UK (2)% 6% Europe 21% USA (2)% 46% +8% 12% Other +10% 15% Asia Pacific Halma Final results – June 2015 (2)%
Slide 26: Medical: Revenue by end market
Medical: Revenue by end market % of sector 1% 2% 6% Health/Medical Science/Env 91% Process Others Halma Final results – June 2015
Slide 27: Environmental & Analysis: Trading performance
Environmental & Analysis: Trading performance Revenue: (1)% Profit: (14)% £m Organic ccy: +0% £m Organic ccy: (12)% 200 40 £164m 150 30 £27m 100 20 50 10 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Return on Sales: 16.7% Halma Final results – June 2015
Slide 28: Environmental & Analysis: Revenue by destination
Environmental & Analysis: Revenue by destination FY 2014/15: % of sector & % growth UK (9)% 18% USA (4)% 39% 16% Europe +1% 8% 19% Other +11% Asia Pacific Halma Final results – June 2015 +7%
Slide 29: Environmental & Analysis: Revenue by end market
Environmental & Analysis: Revenue by end market % of sector 1% Buildings 17% Utilities 2% 23% Health/Medical 7% Science/Env 9% Process Energy/Res 41% Others Halma Final results – June 2015
Slide 30: Strategy update
Strategy update Innovation International Expansion Talent Development M&A Halma Final results – June 2015
Slide 31: Innovation: HITE Film
Innovation: HITE Film The HITE 2015 video can be viewed on the Halma website at: http://www.halma.com/news/video/corporate-videos.aspx Halma Final results – June 2015
Slide 32: International expansion: China R&D
International expansion: China R&D Sales to China 60 40 Ocean Optics Accuman PR-500 20 0 SunTech BP60 Halma Final results – June 2015
Slide 33: Talent Development: sector structures
Talent Development: sector structures Group CEO Group FD Sector SECTOR CEO BOARD Sector FD Sector Sector VP VP Company Company Company Company Company Company
Slide 34: Acquisitions: past years
Acquisitions: past 10 years 160 Spend: £113m Spend: £360m 140 120 100 Spend £m 80 60 40 20 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Acquisitions 11 19 Halma Final results – June 2015
Slide 35: Summary and Outlook statement
Summary and Outlook statement “….. through continued and disciplined execution of our well proven growth strategy. We expect to make further progress in the year ahead” Halma Final results – June 2015
Slide 36: Questions
Questions Halma Final results – June 2015
Slide 37: Appendices
Appendices Halma Final results – June 2015
Slide 38: Currency impacts
Currency impacts $ % € % change change 14/15 13/14 14/15 13/14 • Average 1.61 1.59 (1%) 1.27 1.19 (7%) rates v £ • 1% change* $ (~40% of total) € (~15% of total) Revenue +/- £2.9m +/- £0.9m Profit +/- £0.6m +/- £0.2m • At $1.55/€1.40 average rates full year profit would increase by a net amount of a
Slide 39: Profit Adjustments*
Profit Adjustments* 2014/15 2013/14 £m £m Amortisation of Intangibles (19.9) (17.5) Acquisitions items** (1.5) 12.5 Disposal of operations 1.4 (0.5) Defined Benefit pension schemes closure - 3.9 (20.0) (1.6) * Items (charged)/credited in arriving at Statutory profit ** Including adjustment to acquis
Slide 40: Pensions
Pensions DB plans Deficit March 15 March 14 £m £m Assets 224.8 190.5 Liabilities (291.6) (227.3) Deficit (66.8) (36.8) Discount rate reduced to 3.25% (March 2014: 4.4%) significantly increasing liabilities. Closed DB to future accrual December 2014 Contributions to pay off deficit : currently
Slide 41: Acquisitions/Disposals
Acquisitions/Disposals Sector Consideration Maximum Acquired Initial Earn out Revenue* EBIT* £m £m £m £m 2014/15 Acquisitions Plasticspritzerei Medical May 14 4 - - 0.7 Advanced Electronics Infrastructure Safety May 14 14 10 14.6 2.5 RCS Process Safety May 14 64 - 26.6 6.6 82 10 2015/16 Acquisitions
Slide 42: Impact of M&A
Impact of M&A Revenue £m* Actual Expected Contribution 14/15 15/16 Acquisitions 14/15 35 6 Disposal 14/15 (6) (1) Acquisition 15/16 - 1 29 6 Profit after financing costs £m* Actual Expected Contribution 14/15 15/16 Acquisitions 14/15 7.4 1.3 Disposal 14/15 (1.0) - Acquisition 15/16 - 0.2 6.4 1.5 * a
Slide 43: 2015/16 forecasts
2014/15 Full year Notes Full year 15/16 14/15 Actual forecasts Capex 1 ~ £27.5m £23.2m Effective tax rate 2 ~ 23.0% 23.2% Central costs 3 ~ £10.8m £9.0m Net finance expense 4 ~ £5.2m £4.9m Notes: 1. 14/15 capex includes £5m for a new property purchase. 15/16 includes a further £5m. 2. 15/16 forecast
Slide 44: Sector history
Sector history £m 10/11 11/12 12/13** 13/14 14/15 Sector revenue Process Safety 103.0 122.2 125.7 126.7 158.4 Infrastructure Safety 197.2 204.3 205.3 220.3 234.1 Medical 82.2 100.4 136.1 163.2 169.3 Environmental & Analysis 136.2 153.4 152.4 166.5 164.4 Inter-segmental sales (0.2) (0.4) (0.3) (0.2)
Slide 45: Disclaimer
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, div