Summary of Halma p.l.c. Annual report and accounts 2006
Accounting Policies and Notes
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During the last year, Halma has made significant progress.
During the last year, Halma has made significant progress. First of all, the headline numbers. The total Group including discontinued operations, which is what we were responsible for throughout the year, increased revenue by 12.8% to £337.3 million (2004/05: £299.1 million). Profit before tax and amortisation of acquired intangibles on this basis increased by 19.4% to £59.6 million (2004/05: £49.9 million*). Revenue and profit before tax and amortisation of acquired intangibles from continuing operations increased by 15.7% to £310.8 million and 20.3% to £58.1 million respectively. Statutory profit before tax increased by 17.9% to £56.6 million. All these figures are clear records for the Group. These results reflect organic revenue growth** of 10.8% and organic profit growth** of 14.9%. The Board is recommending a final dividend of 4.12p per share, an increase of 5% for the year, in line with our policy of progressively increasing the dividend but also increasing cover which now moves to 1.6 times (2004/05: 1.5 times). Return on total invested capital** improved to 12.8% (2004/05: 12.1%).
Over the last few years our focus has been on re-establishing organic growth; a point emphasised and supported by shareholders at last year's annual general meeting. In previous statements I highlighted some of the areas that may have been holding us back and some of our actions to address them, for example - more and faster innovation, upgrading our sales capabilities, more investment in training our people, sharpening and simplifying our devolved management structures, rethinking management incentives and so on. Well, the action we took certainly worked last year. The statistician in me would love to be able to determine what benefit we got from what changes - intriguing, but impossible to do with precision. What I can say, is that we are not resting on one year's results and we continue to examine and debate each and every factor that may be impeding us.
What is also very noticeable is the impact of our new CEO Andrew Williams. Our strategy is clearer than it has been since I arrived on the Board (this is articulated later in this report both at the Group level and for each of the three new major operating sectors). Speed of decision making has improved dramatically (the same piece of paper rarely gets picked up off his desk twice) and this is spreading throughout the Group, although Andrew would be the first to modestly say "it's a team effort", and he's right.
With this strategy as a template, the direction of cash allocation is much clearer. In line with this, we have disposed of eight businesses during the year and acquired three, so, in turn, our structures and focus are also far clearer. Our balance sheet remains strong - at the year end we had net cash of £4 million despite investing £36 million in acquisitions and receiving £15 million from disposals. Including £60 million of debt capacity, we have significant firepower to acquire more companies in line with our strategic directions. We are also investing in more sales and production infrastructure in the new fast-growing economies - particularly China, the aim being to make it easier for our individual companies to make further, and in some cases first, steps there in developing more business.
I should like to thank all of our employees for their dedication to our customers and their constant ability to come up with innovative ideas. The increased investment in people seems to be having a very significant payback with a healthy queue of excellent internal candidates now clamouring to participate in our customised management training.
So, behind these record results also lies record investment - in people, innovation and new markets as well as new acquisitions. This, together with clarity of direction and increased momentum gives us confidence for the future.
All in all, an excellent vintage.
Geoff Unwin Chairman
* Restated under IFRS see note 1 to the accounts.
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