Halma plc · LSE:HLMA
Halma — FY2021 Earnings Presentation
41 slides from Halma's earnings presentation, Jun 10, 2021
Slide 1: Full Year Results 2020/21
Full Year Results 2020/21 10 June 2021 Andrew Williams – Group Chief Executive Marc Ronchetti – Chief Financial Officer
Slide 2: Introduction
Introduction Andrew Williams Group Chief Executive Growing a safer, cleaner, healthier future for everyone, every day
Slide 3: How we create value for our stakeholders
How we create value for our stakeholders A robust financial performance No UK government or shareholder financial support Enhanced support for our people Strong leadership, aligned to our purpose Further strategic investment to sustain growth New Sustainability Framework Halma Full Year Results 2020
Slide 4: Full year 2020/21: Record profit
Full year 2020/21: Record profit Revenue Profit1 Statutory profit Record profit (2)% +4% +13% £1,318m (+1% OCCY2) £253m (FY20: £1,338m) £278m (FY20: £267m) (FY20: £224m) Strong cash Cash flow Net debt3 R&D spend4 performance and 104% £256m 5.3% growth investment of adj operating profit (FY20: £375m)
Slide 5: Stronger second half performance
Stronger second half performance H1 2021 H2 2021 Revenue 5% 2% OCCY2 Revenue 11% 0% Adjusted1 Profit 5% 13% OCCY2 Profit 11% 12% Acquisition spend £0m £37m* 1: Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, and profit or loss on disposal of op
Slide 6: Financial Review
Financial Review Marc Ronchetti Chief Financial Officer Growing a safer, cleaner, healthier future for everyone, every day
Slide 7: Revenue
Revenue £1,338m (5.6)% +5.4% (0.3)% £1,318m (1.0)% (1.5)% 2019/20 Organic Acquisitions Disposals Currency 2020/21 Halma Full Year Results 2020/21 – 10 June 2021 7
Slide 8: Revenue by destination
Revenue by destination Revenue and revenue change, 2020/21 Reported Organic constant currency UK H1 H2 FY (3)% 16% USA (7)% (5)% (6)% USA 0% 39% Europe (9)% +3% (3)% £1,318m 21% Europe 0% UK (18)% +4% (7)% 8% 16% Asia Pacific (14)% +7% (4)% Other Asia Pacific Other (16)% (6)% (11)% (12)% +1% Halma F
Slide 9: Profit growth
Profit growth +4.7% (0.2%) (1.0)% £278.3m +4.2% +0.7% £267.0m 2019/20 Organic Acquisitions Disposals Currency 2020/21 * Profit before amortisation of acquired intangibles, acquisition items, significant restructuring costs, and profit or loss on disposal of operations. Halma Full Year Results 2020/2
Slide 10: Profit growth
Profit growth Return on Sales 19.9% 21.1% £278.3m £2m +4.2% £6m £7m £267.0m (£49m) £13m £17m £15m 2019/20 OCCY Acquisitions Travel & Employee R&D Marketing Other incl. 2020/21 Volume Net of disposals Entertainment Costs Interest and Currency * Profit before amortisation of acquired intangibles, acqu
Slide 11: Cash flow
Cash flow £100m Effective tax Cash conversion rate 104% 20.1% FY20: 97% FY20: 18.5% 0 Working capital Working capital Lease inflow Pension deficit £(100)m additions £3m Capex £23m Acquisitions FY20: FY20: £5m £9m outflow Tax £(200)m Pensions Capex Dividend spend £26m Dividend FX, £63.7m FY20: £32m £
Slide 12: 2021/22 Full Year Guidance
2021/22 Full Year Guidance Working Continued focus and control in the context of revenue capital growth Effective tax Based on expected profit mix and reflecting tax law rate c.21.5% changes Pension cash Triennial review under way; outcome expected later contributions £14.6m this year Capital
Slide 13: Potential effect of IAS 38
Potential effect of IAS 38 Background April 2021: IFRS Implementation Committee (IFRIC) Agenda Decision Implementation costs of SaaS now likely to be expensed against profit Applicable with immediate effect Effect Acceleration of costs recorded in the Income statement Impacts accounting fo
Slide 14: Process Safety
Process Safety Revenue by destination Revenue UK Return on sales £189m: (6)% (4)% 19.4% (5)% occy Organic ccy (12)% USA 2019/20: 21.9% (6)% 15% (24)% occy 33% Europe £189m 21% +2% +1% occy 15% 16% Profit* R&D spend Other £37m: (17)% (12)% Asia Pacific £9.1m: +21% Organic ccy (22)% (12)% occy (8)% 4.
Slide 15: Infrastructure Safety
Infrastructure Safety Revenue by destination Revenue Return on sales £450m: (3)% USA UK 24.5% Organic ccy (5)% (8)% +1% 2019/20: 23.1% (5)% occy +2% occy 22% 25% Other (10)% 7% £450m (8)% occy 15% 31% Profit* Asia Pacific Europe R&D spend £111m: +3% (1)% (3)% £25.6m: (10)% (13)% occy (4)% occy Organ
Slide 16: Environmental & Analysis
Environmental & Analysis Revenue by destination Revenue1 Return on sales UK £309m: (5)% (17)% 25.1% Organic ccy (3)% (17)% occy 2019/20: 21.4% 18% USA (5)% Europe (1)% occy 48% £309m 12% +4% +4% occy 18% Profit1 4% R&D spend Asia Pacific £77m: +11% Other +9% £16.6m: (14)% +11% occy Organic ccy +15%
Slide 17: Medical
Medical Revenue by destination Revenue1 UK Return on sales £371m: +7% +25% 23.3% (26)% occy Organic ccy (5)% Europe 2019/20: 24.3% +3% 5% (7)% occy 17% USA +11% 54% £371m (4)% occy 16% Asia Pacific +4% (1)% occy Profit1 8% R&D spend £87m: +3% Other £18.8m: +14% Organic ccy (11)% (9)% 5.1% of revenue
Slide 18: Performance against financial KPIs
Performance against financial KPIs Organic revenue* Organic profit* Acquisition profit Revenue outside ** UK/USA/Europe (6)% +1% +1% (3)% Target ≥5% Target ≥5% Target ≥5% Target ≥10% Return on sales Return on Total Cash conversion R&D investment Invested Capital (% of revenue) 21.1% 14.4% 104% 5.3%
Slide 19: Summary
Summary Record profit: reported and OCCY1 growth Robust revenue performance; resilient in all major regions Stronger second half: revenue flat and profit +11.8% (OCCY1) Strong cash generation and balance sheet Good start to FY22: order intake ahead of revenue and FY21 FY outlook: low double digit pe
Slide 20: Strategy update
Strategy update Andrew Williams Group Chief Executive Growing a safer, cleaner, healthier future for everyone, every day
Slide 21: Sustainable Growth Model: evolving to sustain success
Sustainable Growth Model: evolving to sustain success Core elements Actions in the past five years Purpose and DNA Refined our purpose; articulated our DNA; a new Halma brand Maintained strong R&D investment; created new digital Growth Enabler; Growth strategy expanded our growth opportunities throu
Slide 22: Strategic priorities in a post-COVID world
Strategic priorities in a post-COVID world Purpose and DNA Growth strategy Organic growth M&A investment Business model Leadership and Talent Sustainability Infrastructure people Halma Full Year Results 2020/21 – 10 June 2021 22
Slide 23: Organic growth investment
Organic growth investment 2021 R&D investment Expanding into new markets and technologies £70m Maintaining high levels of R&D investment 5.3% of revenue 2022 technology expenditure Accelerating planned technology investments Organic growth investment c.£12m Digital products Digital growth en
Slide 24: Purpose-aligned M&A
Purpose-aligned M&A Dec 2020: Acquired Increased activity in H2 has continued Static Systems for £37m Disposals based on purpose, growth & returns April 2021: Acquired Increasing resource with three dedicated sector teams PeriGen for US$58m (c.£42m) Good pipeline of potential prospects April
Slide 25: Talent to scale
Talent to scale Passionate about our purpose Leveraging the power of our network to prioritise employee health, safety and welfare Entrepreneurial Implementing our Future of Work Philosophy and agile Bespoke tools to assess, develop and onboard leaders, aligned to DNA and business model Empowe
Slide 26: New Sustainability Framework
New Sustainability Framework Growth + Returns + Positive impact = Value Sustainability 26
Slide 27: New Sustainability Framework: actions
New Sustainability Framework: actions Key Sustainability Objectives (KSOs) Committing to 1.5O Science-Based Target Climate Change by 2030; net zero by 2040 (for Scope 1 & 2 emissions); increasing external disclosure, including TCFD Diversity, equity Target 40%-60% gender balance in and inclusion
Slide 28: Strategic priorities: Infrastructure to scale
Strategic priorities: Infrastructure to scale Enhanced core IT services IT Infrastructure Upgraded cybersecurity infrastructure Legal & Scalable and global support function for Compliance sectors and operating companies Infrastructure Capital Expanding facilities to support growth investment
Slide 29: Summary and outlook
Summary and outlook Purpose Robust financial performance, improved momentum in second half Sustainable growth strategy Value creation for all stakeholders Long-term growth drivers Organic and inorganic strategic investment for sustainable growth Agile organisation and culture FY22 outlook: e
Slide 30: Questions?
Questions? Growing a safer, cleaner, healthier future for everyone, every day
Slide 31: Appendices
© Halma Appendices
Slide 32: Revenue and profit: First and second half performance
Revenue and profit: First and second half performance First half 2020/21 Second half 2020/21 Full year 2020/21 Reported revenue £618.4m (-5.4%) £699.8m (+2.2%) (1.5)% Organic revenue** (11.0)% (0.3)% (5.6)% Reported profit* £122.0m (-5.3%) £156.3m (+13.1%) +4.2% Organic profit* ** (11.1)% +11.8% +0.
Slide 33: Sector performances
Sector performances Revenue Profit* Environmental Environmental Infrastructure & Analysis Infrastructure & Analysis Safety (5)% xx% +11% Safety (3)% 24% 25% 34% +3% 35% xx% £1,318m £311m xx% 28% xx% 12% 28% 14% xx% Medical Medical Process +7% Process +3% Safety Safety (6)% (17)% * Adjusted operating
Slide 34: Sector performances: Organic constant currency
Sector performances: Organic constant currency Revenue Profit* Environmental Environmental Infrastructure & Analysis & Analysis Infrastructure Safety (3)% Safety xx% +15% (5)% +1% xx% (6)% +1% xx% xx% xx% Medical Medical Process (5)% (11)% Process Safety Safety (12)% (22)% * Adjusted operating profi
Slide 35: Sector History
Sector History £m 2016/17 2017/18 2018/19 2019/20 2020/21 Revenue Process Safety 167.0 184.5 197.5 200.0 188.8 Infrastructure Safety 315.2 348.8 408.6 466.5 450.5 Environmental & Analysis3 202.7 243.9 280.0 325.0 308.8 Medical3 277.0 299.3 325.2 347.2 371.3 Inter-segment sales (0.2) (0.3) (0.4) (0.3
Slide 36: Currency Effects
Currency Effects US$ % change Euro % change 2020/21 2019/20 2020/21 2019/20 Average rates 1.31 1.27 3.1% 1.12 1.14 (1.8)% versus Sterling 1% change* US$ (~48% of total) Euro (~12% of total) Revenue £6.4m £1.6m Profit £1.4m £0.4m * Based on 2020/21 results. Halma Full Year Results 2020/21 – 10 June 2
Slide 37: Profit Adjustments
Profit Adjustments* £m 2020/21 2019/20 Intangible amortisation (42.3) (38.3) Acquisition items** (5.2) (7.5) Disposal of operations 22.1 2.9 (25.4) (42.9) * items (charged)/credited in arriving at statutory profit. ** including acquisition costs, adjustment to acquisition contingent consideration pr
Slide 38: Pensions
Pensions Defined Benefit Pension Scheme March 2021 March 2020 (£m) Assets 333.1 298.8 Liabilities (355.6) (304.0) Deficit (22.5) (5.2) • Discount rate 1.95% (March 2020: 2.55%). • Closed DB to future accrual December 2014 • Contributions to pay off deficit : 2020/21: £13.7m; expected for 2021/22: £1
Slide 39: Acquisition Contribution
Acquisition Contribution 2020/21 2021/22 Run-rate at Actual* Run-rate at acquisition (£m) (£m) acquisition (£m) Revenue 61.5 72.4 15.0 Operating profit 11.7 16.0 2.6 Profit (net of financing cost) 8.5 12.6 2.1 Return on Sales** 19.0 22.1 17.3 The table above gives the results for Ampac, Enoveo, Fire
Slide 40: 2021/22 Full Year Forecasts
2021/22 Full Year Forecasts 2021/22 Full Year Notes 2020/21 Actual Forecasts Capex c.£30m £26.4m Effective tax rate 1 c.21.5% 20.1% Central costs 2 c.£32m £22.9m Net finance expense 3 c.£9m5 £10.0m Pension contributions 4 £14.2m £13.3m Notes: 1. 2021/22 based on expected mix of profit. 2. Excluding
Slide 41: 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