Halma Plc · LSE:HLMA
Halma — FY2013/14 Earnings Presentation
44 slides from Halma's earnings presentation, June 2014
Slide 1: Final results 2013/14
Final results 2013/14 Andrew Williams – Chief Executive Kevin Thompson – Finance Director Halma Final results – June 2014
Slide 2: Summary 2013/14
Summary 2013/14 Growth & Revenue Profit ROS High +9% +9% 20.7% returns £677m £140.2m (LY: 20.8%) ROW revenue China revenue R&D spend Strategic investment +9% +26% +3% £170m £47m £32m Cash flow Dividend ROTIC Good cash performance 89% +7% 16.1% of adjusted profit 11.17p (LY: 15.6%) Halma Final result
Slide 3: Financial Review
Financial Review Halma Final results – June 2014
Slide 4: Record results
Record results Revenue Profit* £m £m £677m 700 5 year CAGR: 160 £140.2m 8.2% 140 5 year CAGR: 600 12.1% 120 500 100 400 80 300 60 200 40 100 20 0 0 03/04 13/14 03/04 13/14 * Profit before amortisation of acquired intangibles, acquisition items, curtailment gain on DB pension schemes and profit or lo
Slide 5: Revenue growth
Revenue growth Organic: £m Total Constant Currency H1 333 12% 6% H2 344 7% 6% Total 677 9%* 6% * Excluding disposal in prior year, growth is 10% Halma Final results – June 2014
Slide 6: Revenue by destination
Revenue by destination Revenue and revenue growth, 2013/14 USA UK 10% 19% 11% 9% 32% 21% 15% £677m 24% Europe 27% 16% 28% 8% 9% Asia Pacific 11% Other 4% Halma Final results – June 2014
Slide 7: Revenue by destination: organic constant currency
Revenue by destination: organic constant currency Revenue and revenue growth, 2013/14 USA UK 6% 6% 9% 21% 15% Europe 27% 28% 5% Asia Pacific 7% Other 3% Halma Final results – June 2014
Slide 8: Profit* Bridge
Profit* Bridge £m Profit* IAS 19 Profit* Currency Disposal Acquisitions** Organic ccy Profit* 6.8 (2.1) 0.4 (0.9) 5.4 130.6 57.5 128.5 140.2 12/13 12/13 As reported 13/14 Restated * Profit before amortisation of acquired intangibles, acquisition items, curtailment gain on DB pension schemes and prof
Slide 9: Profit* growth
Profit* growth Organic: £m Total Constant Currency H1 65.1 9% 2% H2 75.1 9% 8% Total 140.2 9% ** 5% * Profit before amortisation of acquired intangibles, acquisition items, curtailment gain on DB pension schemes and profit or loss on disposal of operations ** Excluding disposal in prior year, growth
Slide 10: Currency
Currency Minimal translation impact in 13/14 H1 13/14: 2% currency benefit £ v $/€ headwind in H2 13/14 At current Fx rates*:- H1: 5% Adverse FY: ~ 3% Adverse Impact varying by sector More information in Appendix * Based on 13/14 results Halma Final results – June 2014
Slide 11: Strong Returns
Strong Returns ROCE* 76.4% (2013: 70.7%) ROTIC** 16.1% (2013: 15.6%) Return on Sales 2013/14 20.7% (2013: 20.8%) Range 18-22% * Return on Capital Employed ** Return on Total Invested Capital Prior year restated to include impact of IAS 19 accounting for pensions Halma Final results – June 2014
Slide 12: Cash flow 2013/14
Working capital: Cash flow 2013/14 outflow £11m (2013: £11m) Profit Effective tax rate: 23.3% (2013:24.2%) £30m Capex > Depn Tax Pensions: Deficit £37m (2013: £47m) £15m Working capital Debt b/f Mar 13 0 Pensions £(15)m £(30)m Disposal Dividend Acquisitions £(45)m Acquisitions: £17m spend £(60)m inc
Slide 13: Funding
Funding New £360m facility – 5 years to November 2018 Comfortable with net debt of up to 1.25x EBITDA (March 14: 0.41x) May 2014 M&A Net spend £78m 2014/15 contribution: Revenue £29m, Profit £6.4m* Strong balance sheet with significant capacity * At acquisition/disposal run rate. After f
Slide 14: Financial KPI Summary 2013/14
Financial KPI Summary 2013/14 Target Achieved Organic revenue growth > 5% 6% Organic profit growth > 5% 6% Revenue outside UK/Europe/USA 30% by 2015 25% Return on Sales > 18% 20.7% R&D investment (% of revenue) > 4% 4.7% Cash conversion > 85% 89% Halma Final results – June 2014
Slide 15: Trading Review
Trading Review Halma Final results – June 2014
Slide 16: Sector performances
Sector performances Revenue Profit* Environmental & Process Environmental & Process Analysis Safety Analysis Safety +9% +1% +4% +8% 19% 21% 23% 25% 46% 27% 24% 32% 29% Medical Infrastructure Medical Infrastructure +20% Safety +16% Safety +7% +7% • Profit before amortisation of acquired intangibles,
Slide 17: Process Safety: Trading performance
Process Safety: Trading performance Revenue: +1% Profit: +8% £m Organic ccy: +5% £m Organic ccy: +11% 150 40 £127m £35m 30 100 20 50 10 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Return on Sales: 27.5% Halma Final results – June 2014
Slide 18: Process Safety: Revenue by destination
Process Safety: Revenue by destination FY 2013/14: % of sector & % growth (excluding disposal) USA UK (1)% +13% 24% 22% Asia Pacific 18% 25% Europe +12% +1% 11% Other +1% Halma Final results – June 2014
Slide 19: Process Safety: Revenue by end market
Process Safety: Revenue by end market % of sector 5% 8% Buildings Utilities 16% Science/Env 40% 1% 1% Process Energy/Res 29% Others Halma Final results – June 2014
Slide 20: Infrastructure Safety: Trading performance
Infrastructure Safety: Trading performance Revenue: +7% Profit: +7% £m Organic ccy: +6% £m Organic ccy: +5% 250 50 £220m £44m 200 40 150 30 100 20 50 10 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Return on Sales: 20.2% Halma Final results – June 2014
Slide 21: Infrastructure Safety: Revenue by destination
Infrastructure Safety: Revenue by destination FY 2013/14: % of sector & % growth USA +8% UK 21% +4% 26% Asia Pacific 15% +5% 31% Europe 7% Other +12% +2% Halma Final results – June 2014
Slide 22: Infrastructure Safety: Revenue by end market
Infrastructure Safety: Revenue by end market % of sector 3% Buildings Others 97% Halma Final results – June 2014
Slide 23: Medical: Trading performance
Medical: Trading performance Revenue: +20% Profit: +16% £m Organic ccy: +7% £m Organic ccy: +1% 200 50 £163m £42m 40 150 30 100 20 50 10 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Return on Sales: 25.6% Halma Final results – June 2014
Slide 24: Medical: Revenue by destination
Medical: Revenue by destination FY 2013/14: % of sector & % growth UK +11% 6% Europe USA 23% 44% +12% +19% 11% Other 16% +12% Asia Pacific Halma Final results – June 2014 +52%
Slide 25: 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 2014
Slide 26: Environmental & Analysis: Trading performance
Environmental & Analysis: Trading performance Revenue: +9% Profit: +4% £m Organic ccy: +5% £m Organic ccy: +2% 200 40 £167m £32m 150 30 100 20 50 10 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Return on Sales: 19.1% Halma Final results – June 2014
Slide 27: Environmental & Analysis: Revenue by destination
Environmental & Analysis: Revenue by destination FY 2012/13: % of sector & % growth UK +53% 20% USA +4% 40% Europe 16% +6% 7% 17% Other +3% Asia Pacific Halma Final results – June 2014 (5)%
Slide 28: Environmental & Analysis: Revenue by end market
Environmental & Analysis: Revenue by end market % of sector 1% Buildings 2% 14% Utilities 26% Health/Medical 9% Science/Env 10% Process Energy/Res 38% Others Halma Final results – June 2014
Slide 29: Strategy update
Strategy update M&A International Expansion Innovation People Development Halma Final results – June 2014
Slide 30: M&A: RCS Acquisition
M&A : RCS Acquisition Portable monitoring system Wireless corrosion monitoring system Downhole Corrosion Monitoring System Halma Final results – June 2014
Slide 31: International expansion: China growth
International expansion: China growth Revenue £m Employees 50 1000 40 800 30 600 20 400 10 200 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Halma Final results – June 2014 113
Slide 32: Innovation: Award winner 2014 - collaboration
Innovation: Award winner 2014 - collaboration Halma Final results – June 2014
Slide 33: People Development: New Executive Board
People Development: New Executive Board Group CEO Andrew Williams Finance Director Halma China Group Talent Kevin Thompson Martin Zhang Jennifer Ward Sector CEO Sector CEO Sector CEO Sector CEO Process Safety Infrastructure Safety Medical Env. & Analysis Neil Quinn Nigel Trodd Adam Meyers Chuck Dubo
Slide 34: Summary and Outlook statement
Summary and Outlook statement We achieved revenue and profit growth in all four of our business sectors and in all four major geographic regions even though market conditions were variable. We expect this varied trading environment to continue, providing both opportunities and challenges including a
Slide 35: Questions
Questions Halma Final results – June 2014
Slide 36: Appendices
Appendices Halma Final results – June 2014
Slide 37: Currency impacts
Currency impacts $ % € % change change 13/14 12/13 13/14 12/13 • Average 1.59 1.58 (1%) 1.19 1.23 3% rates v £ • 1% change* $ (~40% of total) € (~15% of total) Revenue +/- £2.7m +/- £0.9m Profit +/- £0.5m +/- £0.2m • At $1.68/€1.23 average rates full year profit would decrease by a net amount of app
Slide 38: Profit Adjustments*
Profit Adjustments* 2013/14 2012/13 £m £m Amortisation of Intangibles (17.5) (14.2) Acquisitions: Transaction costs (0.1) (2.8) Adj to Deferred Consideration 12.6 0.5 Disposal of operations (0.5) 8.1 Defined Benefit pension schemes closure 3.9 - (1.6) (8.4) * Items (charged)/credited in arriving at
Slide 39: Pensions
Pensions DB plans Deficit March 14 March 13 £m £m Assets 190.5 176.3 Liabilities (227.3) (223.5) Deficit (36.8) (47.2) Closed DB plans to new members in 2003 Closing DB to future accrual December 2014 Contributions to pay off deficit : £7m/year IAS 19*: Comparatives restated Profit reduction
Slide 40: Acquisitions/Disposals
Acquisitions/Disposals Sector Consideration Maximum 2013/14 Acquisitions Acquired Initial Earn out Revenue* EBIT* £m £m £m £m Talentum Infrastructure Safety April 13 3 0 2 0.6 Earn-outs re prior year acquisitions 14 17 2014/15 Acquisitions Plasticspritzerei Medical May 14 3 - - 0.7 Advanced Electron
Slide 41: Impact of M&A
Impact of M&A Revenue £m* Actual Contribution 13/14 14/15 Acquisitions/Disposal 12/13 19 - Acquisitions 13/14 2 - Acquisitions/Disposal 14/15 - 29 21 29 Profit after financing costs £m* Actual Contribution 13/14 14/15 Acquisitions/Disposal 12/13 3.9 - Acquisitions 13/14 0.6 - Acquisitions/Disposal 1
Slide 42: 2014/15 Full year
2014/15 Full year Notes Full year 14/15 13/14 Actual forecasts Capex 1 ~ £25.0m £17.4m Effective tax rate 2 ~ 24.0% 23.3% Central costs* 3 ~ £8.5m £7.9m Net finance expense 4 ~ £5.0m £4.7m Notes: 1. 14/15 capex includes £6m for a new property purchase 2. Increase mainly due to higher forecast US pro
Slide 43: Sector history
Sector history £m 09/10 10/11 11/12 12/13** 13/14 Sector revenue Process Safety 98.3 103.0 122.2 125.7 126.7 Infrastructure Safety 182.9 197.2 204.3 205.3 220.3 Medical 68.7 82.2 100.4 136.1 163.2 Environmental & Analysis 109.3 136.2 153.4 152.4 166.5 Inter-segmental sales (0.1) (0.2) (0.4) (0.3) (0
Slide 44: 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