". . . no shortage of ideas, determination or actions . . . "

Geoff Unwin, Chairman

In my first year as Chairman of Halma, I am delighted to announce record profit before tax* of £50.3 million.

However, before turning to more of the headline numbers, I thought it might be useful, as a new boy to the Group, to share some of my initial observations, and to glimpse behind the scenes at some of the issues we have been tackling.

Firstly let me say that I was attracted to Halma by its extraordinary track record (one of the top performing stocks on the London Stock Exchange over 20 years), its management style and the robustness of demand for its products even under difficult market conditions. I was intrigued. My induction into the Group, guided by David Barber, was exemplary. He left me alone to go where I wanted, ask whatever I wished, yet was always available to discuss, debate and question what I had observed.

Over the first few months I visited operations accounting for about half our profits. I saw companies both large and small; some fighting in tough markets, many successful - the picture became clearer. The strengths were evident:

• demand related to health and safety provided a driver or (at least) support to demand.
  
• high market shares gave some protection to pricing.
  
• autonomously run companies gave clarity of responsibility and ownership of performance.
  
• high returns on sales and capital.
  
• financial control was tight.
  
• a track record of which to be proud
  
• many truly excellent and dedicated people.
  

However, over the last few years, performance as measured by our high historic standards had not moved ahead as we would have wished. This was undoubtedly due, to a certain extent, to the tough economic conditions we have seen recently, but had other factors crept in that were holding us back?

This was the question that was posed to the Board and senior management. Extremely thoughtful answers came in followed by very lively debates - no factor remained unexamined, no cow, sacred or otherwise, undisturbed. The outcome? Work was accelerated on a number of potential bottlenecks:

• management: much strengthening (from both within and outside) and training programmes increased.
  
• incentives: new bonus schemes to explicitly align performance to shareholder value.
  
• knowledge transfer: "wiring up" the Group to facilitate transfer of knowledge without destroying the foundations of autonomy.
  
• reduced span of control: remarkably, senior management felt they could be more effective if they had fewer companies to manage and could therefore implement necessary change faster. Done.
  
• sales: renewed emphasis on all aspects of selling and sharing of the best ideas for tackling new markets across the Group.
  
• innovation: more funds allocated to innovation and new techniques introduced to get improved or new products to market, faster.
  
• resource allocation: the beginnings (more to come) of a more rigorous allocation of resources (capital and management) to higher growth areas. This year we have made three non-core disposals.
  

Profit before tax* was a record £50.3 million and earnings per share*, also a record, increased by 10% to 9.44p. Return on capital* was 52.4% and net cash at the year end was £22 million.

Turnover grew by 9% to a record £292.6 million. During the year we disposed of three businesses deemed to be non-core, and shortly after the year end acquired Diba Industries, Inc., strengthening our position in the life sciences market, and Ocean Optics, Inc., extending our optical technology.

The Board recommend a final dividend of 3.75 pence per share, giving an increase of 7% for the year.

There is no shortage of ideas, determination or actions and these should show through next year, as they have this year, in our results. We continue to focus on those areas that are clearly under our control or influence, notwithstanding that there is still little evidence of any significant uplift in our markets.