Halma plc · LSE:HLMA
Halma — FY2015/16 Earnings Presentation
47 slides from Halma's earnings presentation, June 2016
Slide 1: Final results 2015/16
Final results 2015/16 Andrew Williams – Chief Executive Kevin Thompson – Finance Director Halma Final results – June 2016
Slide 2: Summary 2015/16
Summary 2015/16 Growth & Revenue Profit ROS high +11% +8% 20.6% returns £808m £166m (LY: 21.2%) Continued Acquisitions R&D spend ROW revenue strategic £193m +19% +7% investment spend £41m £211m Cash flow ROTIC Dividend Good cash performance 86% 15.6% +7% of adjusted profit (LY: 16.3%) 12.81p Halma F
Slide 3: Financial Review
Financial Review Halma Final results – June 2016
Slide 4: Record results
Record results £m Revenue £m Profit* 900 180 £166m £808m 800 160 700 140 600 120 500 100 400 80 300 60 200 40 100 20 0 0 11/12 15/16 11/12 15/16 * Profit before amortisation of acquired intangibles, acquisition items and profit or loss on disposal of operations Halma Final results – June 2016
Slide 5: Revenue growth
Revenue growth FY 2015/16 % growth Organic constant currency growth 6% Currency 2% Acquisitions 3% Headline growth 11% Halma Final results – June 2016
Slide 6: Revenue growth
Revenue growth FY 2015/16 Organic: £m Total Constant Currency H1 380 11% 7% H2 428 11% 4% Total 808 11% 6% Halma Final results – June 2016
Slide 7: Revenue by destination
Revenue by destination Revenue and revenue growth, 2015/16 USA UK 22% 18% 5% 9% 34% 21% 15% £808m 22% Europe 27% 11% 28% 7% Other 15% Outside US/Europe/UK 7% Asia Pacific = 7% growth 7% Halma Final results – June 2016
Slide 8: Revenue by destination: organic constant currency
Revenue by destination: organic constant currency Revenue and revenue growth, 2015/16 USA UK 9% 4% 9% 21% 15% Europe 27% 28% 7% Other (1)% Asia Pacific 3% Halma Final results – June 2016
Slide 9: Profit* growth
Profit* growth FY 2015/16 % growth Organic constant currency growth 3% Currency 2% Acquisitions 3% Headline growth 8% Return on sales 20.6% (2015: 21.2%) * Profit before amortisation of acquired intangibles, acquisition items and profit or loss on disposal of operations Halma Final results
Slide 10: Profit* growth
Profit* growth Organic: £m Total Constant Currency H1 74.7 8% 4% H2 91.3 8% 3% Total 166.0 8% 3% * Profit before amortisation of acquired intangibles, acquisition items and profit or loss on disposal of operations Halma Final results – June 2016
Slide 11: Currency
Currency Translation impact in 15/16 H1 net benefit: revenue 3%; profit 2% Full year net benefit: revenue and profit 2% At recent Fx rates 16/17 profit impact*:- H1: ~ 3% Benefit FY: ~ 2% Benefit Impact varying by sector More information in Appendix * Based on 15/16 results Halma Fin
Slide 12: Cash flow 2015/16
Cash flow 2015/16 Working capital: £100m outflow £6m (2015: £6m) £75m Effective tax rate: 21.9% (2015:23.2%) £50m Working Capex > Pensions: Deficit £52m (2015: £67m) capital Depn £25m Tax Pensions 0 £(25)m £(50)m £(75)m £(100)m Debt b/f Profit £(125)m Mar 15 Acquisitions: £193m spend £(150)m plus £1
Slide 13: Funding
Funding USPP over 5,7,10 years $250m Weighted average interest rate of 2.5% £360m bank facility – 5 years to 2018 Comfortable with: Net debt ~ 1.25x EBITDA (March 16: 1.27x) Temporarily higher gearing to fund acquisitions Strong balance sheet with significant capacity
Slide 14: Financial KPI Summary 2015/16
Financial KPI Summary 2015/16 Target Achieved Organic revenue growth* > 5% 6% Organic profit growth* > 5% 3% Acquisition profit growth ** > 5% 8% Revenue growth outside UK/Europe/USA > 10% 7% Return on Sales 18% - 22% 20.6% R&D investment (% of revenue) > 4% 5.1% Cash conversion > 85% 86% Return on
Slide 15: Trading Review
Trading Review Halma Final results – June 2016
Slide 16: Sector performances
Sector performances Revenue Profit* Process Infrastructure Process Infrastructure Safety Safety Safety Safety (2)% +13% (12)% +12% 19% 22% 33% 31% £808m 46% £182m 23% 19% 25% 28% Medical Medical Environmental +17% Environmental +14% & Analysis & Analysis +15% +26% *Profit before amortisation of acqu
Slide 17: Sector performances: Organic constant currency growth
Sector performances: Organic constant currency growth Revenue Profit* Process Infrastructure Process Infrastructure Safety Safety Safety Safety (5)% +6% (15)% +5% 46% Medical Medical Environmental +10% Environmental +9% & Analysis & Analysis +11% +21% *Profit before amortisation of acquired intangib
Slide 18: Infrastructure Safety: Trading performance
Infrastructure Safety: Trading performance Revenue: +13% Profit: +12% Organic ccy: +6% Organic ccy: +5% £m £m 300 60 £56m £265m 250 50 200 40 150 30 100 20 50 10 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Return on Sales: 21.2% Halma Final results – June 2016
Slide 19: Infrastructure Safety: Revenue by destination
Infrastructure Safety: Revenue by destination % of sector & % growth 15% USA USA +39% UK +14% UK 23% 27% +4% +4% As Organic Other 9% reported Other ccy +37% +17% 13% 28% Europe Europe Asia Pacific +5% Asia Pacific +1% +6% (4)%
Slide 20: Infrastructure Safety: Revenue by end market
Infrastructure Safety: Revenue by end market % of sector 5% Buildings Others 95% Halma Final results – June 2015
Slide 21: Medical: Trading performance
Medical: Trading performance Revenue: +17% Profit: +14% £m Organic ccy: +10% £m Organic ccy: +9% £199m 200 60 £52m 50 150 40 100 30 20 50 10 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Return on Sales: 26.0% Halma Final results – June 2016
Slide 22: Medical: Revenue by destination
Medical: Revenue by destination % of sector & % growth UK UK +8% +7% USA USA +23% 6% Europe +8% Europe +19% +17% 22% 48% As Organic reported ccy 15% Asia Asia 9% Pacific Pacific +20% +16% Other Other (3)% (2)%
Slide 23: Medical: Revenue by end market
Medical: Revenue by end market % of sector 1% 1% 6% Health/Medical Science/Env 92% Process Others Halma Final results – June 2016
Slide 24: Environmental & Analysis: Trading performance
Environmental & Analysis: Trading performance Revenue: +15% Profit: +26% Organic ccy: +11% £m Organic ccy: +21% £m 200 £189m 40 £34.5m 150 30 100 20 50 10 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Return on Sales: 18.3% Halma Final results – June 2016
Slide 25: Environmental & Analysis: Revenue by destination
Environmental & Analysis: Revenue by destination % of sector & % growth UK UK USA +5% USA +6% +21% 17% +14% 41% As Organic reported 15% ccy Europe Europe +3% +6% 8% 19% Other Other Asia Pacific Asia Pacific +28% +26% +11% +15%
Slide 26: Environmental & Analysis: Revenue by end market
Environmental & Analysis: Revenue by end market % of sector 1% Buildings 2% 12% Utilities 26% 7% Health/Medical Science/Env 10% Process Energy/Res 42% Others Halma Final results – June 2016
Slide 27: Process Safety: Trading performance
Process Safety: Trading performance Revenue: (2)% Profit: (12)% £m Organic ccy: (5)% £m Organic ccy: (15)% 200 50 £155m £40m 40 150 30 100 20 50 10 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Return on Sales: 25.4% Halma Final results – June 2016
Slide 28: Process Safety: Revenue by destination
Process Safety: Revenue by destination % of sector & % growth USA USA UK UK (2)% +4% +4% +4% 19% 27% As Organic reported ccy 22% Other 15% Other (16)% Europe (24)% Europe 17% +2% +2% Asia Pacific Asia Pacific (6)% (9)%
Slide 29: Process Safety: Revenue by end market
Process Safety: Revenue by end market % of sector Buildings 7% 7% 16% Utilities Science/Env 1% 41% Process 28% Energy/Res Others Halma Final results – June 2016
Slide 30: Strategy update
Strategy update M&A Innovation Talent Development International Expansion Halma Final results – June 2016
Slide 31: Four acquisitions
Four acquisitions VAS Firetrace Visiometrics CenTrak Halma Final results – June 2016
Slide 32: CenTrak Film
CenTrak Film The CenTrak acquisition video can be viewed on the Halma website at: http://www.halma.com/news/video/acquisitions.aspx Halma Final results – June 2016
Slide 33: Innovation: R&D investment
Innovation: R&D investment 45 9 40 8 35 7 30 6 Spend £m % of rev 25 5 20 4 15 3 10 2 5 1 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 R&D Spend R&D Spend as % of revenue Halma Final results – June 2016
Slide 34: Innovation: 2016 Award winners
Innovation: 2016 Award winners HWM-Water, PermaNET+ Halma Final results – June 2016
Slide 35: Talent: New HPD Programmes
Talent: New HPD Programmes Developing ability at MD and SVP level to innovate across all aspects of the business Focusing on the leadership skills needed at board level in our operating companies. Personal development, enhancing self- awareness and teamwork skills for managerial roles. Our graduate
Slide 36: International Expansion: growth in India
International Expansion: growth in India 12 10 Halma India Hub Revenue £m 8 Leadership change 6 Relocation to Bengaluru Engineering talent 4 Regional expansion 2 0 09 10 11 12 13 14 15 16 year Halma Final results – June 2016
Slide 37: Summary and Outlook statement
Summary and Outlook statement Record results Widespread growth, strength in diversity Strong returns and cash generation Increased dividend Record investment 4 acquisitions Focus on Innovation, Talent & International Expansion Solid start to new financial year Order intake ahead of
Slide 38: Questions
Questions Halma Final results – June 2016
Slide 39: Appendices
Appendices Halma Final results – June 2016
Slide 40: Currency impacts
Currency impacts $ % € % change change 15/16 14/15 15/16 14/15 • Average 1.51 1.61 +6% 1.37 1.27 (8%) rates v £ • 1% change* $ (~40% of total) € (~10% of total) Revenue +/- £3.4m +/- £0.9m Profit +/- £0.7m +/- £0.2m • At $1.45/€1.30/CHF1.46 average rates full year profit would increase by a net amou
Slide 41: Profit Adjustments*
Profit Adjustments* 2015/16 2014/15 £m £m Amortisation of Intangibles (23.1) (19.9) Acquisitions items** (7.2) (1.5) Disposal of operations 0.6 1.4 (29.7) (20.0) * items (charged)/credited in arriving at Statutory profit ** including acquisition costs and adjustment to acquisition contingent conside
Slide 42: Pensions
Pensions Defined Benefit pension deficit March 16 March 15 £m £m Assets 221.9 224.8 Liabilities (274.2) (291.6) Deficit (52.3) (66.8) Discount rate increased to 3.4% (March 2015: 3.25%) reducing liabilities. Closed DB to future accrual December 2014 Contributions to pay off deficit : 2015/16:
Slide 43: Acquisitions
Acquisitions Sector Consideration Maximum Acquired Initial Earn out Revenue* EBIT* £m £m £m £m 2015/16 Acquisitions VAS Medical May 15 3 1 2 0.3 Firetrace Infrastructure Oct 15 73 - 26 7.4 Safety Visiometrics Medical Dec 15 20 ** 71 *** 3 1.2 CenTrak Medical Feb 16 97 - 30 7.0 193 72 * at acquisitio
Slide 44: Impact of M&A
Impact of M&A Revenue £m* 15/16 Contribution* 16/17 Acquisitions 14/15 6 - Disposal 14/15 (1) - Acquisition 15/16 20 41 25 41 Profit after financing costs £m* 15/16 Contribution* 16/17 Acquisitions 14/15 1.2 - Disposal 14/15 0.1 - Acquisition 15/16 4.3 8.0 5.6 8.0 * at acquisition run-rate Halma Fin
Slide 45: 2015/16 Full year
2015/16 Full year Notes Full year 16/17 15/16 Actual forecasts Capex 1 £28m £24.1m Effective tax rate 2 22.1% 21.9% Central costs 3 £10.5m £8.9m Net finance expense 4 £9.1m £7.1m Notes: 1. 2015/16 includes £4m for a property purchase: 2016/17 includes several business expansion projects. 2. 2016/17
Slide 46: Sector history
Sector history £m 11/12 12/13** 13/14 14/15 15/16 Sector revenue Process Safety 122.2 125.7 126.7 158.4 155.5 Infrastructure Safety 204.3 205.3 220.3 234.1 264.8 Medical 100.4 136.1 163.2 169.3 198.7 Environmental & Analysis 153.4 152.4 166.5 164.4 188.9 Inter-segmental sales (0.4) (0.3) (0.2) (0.1)
Slide 47: 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