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Halma PLC Full Year Results 2021

10/06/2021 7:00am

UK Regulatory (RNS & others)


Halma (LSE:HLMA)
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From May 2021 to Jul 2021

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TIDMHLMA

RNS Number : 4035B

Halma PLC

10 June 2021

HALMA plc

FULL YEAR RESULTS 2021

Record profit for 18(th) consecutive year

Halma, the global group of life-saving technology companies focused on growing a safer, cleaner and healthier future, today announces its full year results for the 12 months to 31 March 2021.

Financial Highlights

 
 
                                          Change          2021          2020 
 Continuing Operations 
 Revenue                                     -2%   GBP1,318.2m   GBP1,338.4m 
 Adjusted Profit before Taxation(1,          +4%     GBP278.3m     GBP267.0m 
  3) 
 Adjusted Earnings per Share(2, 3)           +2%        58.67p        57.39p 
 
 Statutory Profit before Taxation           +13%     GBP252.9m     GBP224.1m 
 Statutory Earnings per Share               +10%        53.61p        48.66p 
 Total Dividend per Share(4)                 +7%        17.65p        16.50p 
 
 Return on Sales(3,5)                                    21.1%         19.9% 
 Return on Total Invested Capital(3)                     14.4%         15.3% 
 Net Debt(6)                                         GBP256.2m     GBP375.3m 
 

-- Record profit: Adjusted(1) profit before tax up 4%; organic constant currency(3,7) profit up 1%; statutory profit before tax up 13%, including a GBP21.6m gain on disposal of Fiberguide Industries.

-- Three out of four sectors grew profit on a reported basis; two on an organic constant currency(7) basis.

-- Revenue down 2%, with a 5% decline in the first half improving to 2% growth in the second half.

-- O rganic constant currency(3,7) revenue down 6%, with an 11% decline in the first half improving to a flat performance in the second half.

-- Robust revenue performance in all major regions: Asia Pacific slightly up including double digit growth in China; the USA and Mainland Europe stable; a small decline in the UK.

   --      Strong returns: Return on Sales(3,5) of 2 1.1 % and ROTIC(3) of 1 4.4 %. 
   --      Continued investment in future growth: R&D expenditure at 5.3% of revenue. 

-- Impressive cash generation: cash conversion of 104%, driven primarily by good working capital control.

-- Rebound in M&A activity since the start of the second half, with a healthy pipeline and momentum continuing into the new financial year.

-- Strong balance sheet and significant liquidity supporting value-enhancing acquisitions and an increased dividend.

-- Total dividend(4) per share for the year up 7%, the 42(nd) consecutive year of an increase of 5% or more.

Operational and Sustainability Highlights

-- Self-financed an employee furlough programme without accessing the UK Government's employee support scheme. Total employee numbers at end March 2021 unchanged from end March 2020.

   --      No balance sheet support requested from the UK Government or our other stakeholders. 

-- Accelerated planned technology investments to support our companies' growth, including operational IT and digital product development projects.

-- Increasing our impact: new Sustainability Framework to amplify our positive impact from purpose-aligned growth and focus our efforts on the most material areas both for Halma and its stakeholders.

-- Set a 1.5 degree-aligned 2030 target for Scope 1 & 2 emissions and a target to achieve net zero Scope 1 & 2 emissions by 2040.

-- Made new public commitments including: paying a Real Living Wage across UK operations from 1 June 2022; signing the Change the Race Ratio charter; and disclosing for the first time the gender pay gap in our UK and US operations.

-- Appointed Dame Louise Makin as Chair Designate and Dharmash Mistry as non-executive Director. Dame Louise will succeed Paul Walker as Chair at our AGM in July 2021.

-- Announced a new sector organisation from April 2021 to better align Halma's operations and reporting with its purpose and focus on the safety, environmental and health markets.

Andrew Williams, Group Chief Executive of Halma, commented:

"Halma's purpose is to grow a safer, cleaner, healthier future, for everyone, every day. It underpins our growth strategy, financial model, culture and organisational design. The combination and interaction of these elements has created increasing value for all stakeholders on a sustainable basis for almost 50 years.

Together, they have enabled us to make further progress during the ongoing pandemic, giving us an agility which has been crucial in allowing us to address short-term challenges while simultaneously investing for a fast-changing future. Our progress has also been supported by our teams' relentless execution across all parts of our business, and our resilience which stems from the diversity of our market niches, their fundamental growth drivers, and the value of the solutions we provide.

For the year ahead, we expect our markets to continue to recover, albeit at varying rates, while acknowledging that there are potential headwinds including currency, inflation, and supply chain constraints. Organic constant currency revenue for the period from the beginning of January to the end of May is up 10% year-on-year. We have made a good start to the year, order intake is currently ahead of revenue and the same period last year, and we also have a good pipeline of potential acquisition opportunities. We currently expect to deliver full year low double-digit percentage organic constant currency profit growth (prior to any IAS 38 impact(8) ) and a more normal level of return on sales. We look forward to making further progress, in this year and the longer term."

Notes

 
 1.   Adjusted to remove the amortisation and impairment of acquired 
       intangible assets, acquisition items, restructuring costs, 
       and profit or loss on disposal of operations totalling GBP25.4m 
       (2020: GBP42.9m). See note 1 to the Results for details. 
 2.   Adjusted to remove the amortisation and impairment of acquired 
       intangible assets, acquisition items, restructuring costs, 
       profit or loss on disposal of operations and the associated 
       taxation thereon. See note 2 to the Results for details. 
 3.   Adjusted(1) Profit before Taxation, Adjusted(1) Earnings per 
       Share, organic growth rates, Return on Sales(5) and Return 
       on Total Invested Capital (ROTIC) are alternative performance 
       measures used by management. See notes 1, 2 and 3 to the Results 
       for details. 
 4.   Total dividend paid and proposed per share, comprising interim 
       dividend of 6.87p per share and proposed final dividend of 
       10.78p per share. 
 5.   Return on Sales is defined as Adjusted(1) Profit before Taxation 
       from continuing operations expressed as a percentage of revenue 
       from continuing operations. 
 6.   Includes IFRS 16 lease liabilities of GBP65.0m (2020: GBP61.5m). 
 7.   Organic constant currency measures exclude the effect of movements 
       in foreign exchange rates on the translation of revenue and 
       profit (1) into Sterling, as well as acquisitions and disposals 
       for the year following completion. 
 8.   See "New accounting standards and interpretations" section 
       in the Financial Review. 
 

For further information, please contact:

 
 Halma plc 
  Andrew Williams, Group Chief 
  Executive 
  Marc Ronchetti, Chief Financial    +44 (0)1494 721 111 
  Officer 
 
  Charles King, Head of Investor 
  Relations                           +44 (0)7776 685948 
 MHP Communications 
  Andrew Jaques/Giles Robinson       +44 (0)20 3128 8788 
 
 
 A copy of this announcement, together with other information 
  about Halma, may be viewed on the Group's website: www.halma.com 
  . A webcast of today's results presentation will be available 
  on the same website later today. 
 
 
 NOTE TO EDITORS 
 
 
 1.   Halma is a global group of life-saving technology companies, 
       focused on growing a safer, cleaner, healthier future for everyone, 
       every day. 
 
       Its purpose defines the three broad market areas where it operates: 
 
             *    Safety: protecting life as populations grown and 
                  protecting worker safety. 
 
             *    Environment: improving food and water quality, and 
                  monitoring air pollution. 
 
             *    Health: meeting rising healthcare demand as growing 
                  populations age and lifestyles change. 
      It employs over 7,000 people in more than 20 countries, with 
       major operations in the UK, Mainland Europe, the USA and Asia 
       Pacific. Halma is listed on the London Stock Exchange (LON: 
       HLMA) and is a constituent of the FTSE 100 index. 
 
       In January 2021, Halma was named Britain's Most Admired Company 
       2020 by Management Today. 
 2.   You can view or download copies of this announcement and the 
       latest Half Year and Annual Reports from the website at www.halma.com 
       . 
 3.   This announcement contains certain forward-looking statements 
       which have been made by the Directors in good faith using information 
       available up until the date they approved the announcement. 
       Forward-looking statements should be regarded with caution 
       as by their nature such statements involve risk and uncertainties 
       relating to events and circumstances that may occur in the 
       future. Actual results may differ from those expressed in such 
       statements, depending on the outcome of these uncertain future 
       events . 
 

Strategic Review

A true test of Sustainability and Purpose

I am pleased to report Halma's 18th consecutive year of profit growth in the most challenging of circumstances, demonstrating both the value of our Sustainable Growth Model and the authenticity of our purpose. Our robust performance in the past year also reflected the fundamental strength of Halma's DNA, including our focus on market niches with long-term growth drivers, and our ability to adapt rapidly to changes in our markets when they arise.

Adjusted1 profit before taxation rose by 4% to GBP278.3m, on revenue which was broadly similar to last year at GBP1,318.2m. Statutory profit before taxation, which benefited from the profit realised on the disposal of Fiberguide Industries, increased by 13% to GBP252.9m. Returns remained at a high level, with Return on Sales1 increasing from 19.9% to 21.1% and a Return on Total Invested Capital of 14.4%, remaining well above our Weighted Average Cost of Capital of 6.7%. Cash generation was impressive, with cash conversion of 104%, and our balance sheet position remained strong, with net debt reducing by GBP119m to GBP256m, representing gearing (net debt to EBITDA) of 0.76 times.

It is worth reminding ourselves that this time last year, although faced with major uncertainties, we had a clear short-term operational, financial, and organisational strategy to guide us through the coming year in the interests of all stakeholders. Our expectation was that profit would be 5-10% below the prior year, and therefore ultimately delivering 4% profit growth is a terrific achievement. While the Group has reported higher levels of growth in previous years, I have never been prouder or more impressed with Halma's ability to deliver a robust financial performance while also satisfying the broader needs of all stakeholders. I was also pleased that this was recognised externally with Halma being awarded Britain's Most Admired Company 2020, as voted for by our peers.

Our companies continued to meet their customers' needs by providing lifesaving and life-sustaining solutions, while establishing new ways of working to maintain the safety of their people, suppliers, and customers throughout the pandemic. Many Halma companies also directly provided support to their local and national healthcare providers either through their core products, or by repurposing their manufacturing capabilities to supply urgently needed personal protective equipment. Meanwhile, as a Group, we provided assistance to those colleagues and businesses in difficulty through a variety of support programmes, without seeking Government financial assistance, while continuing to create value for shareholders.

I would like to pay tribute to everyone in all our businesses for what they have achieved throughout the year and to thank them personally for their continued support, unwavering commitment, and operational excellence.

Given our performance in the year and the opportunities we see for future growth, the Board is recommending an 8% increase in the final dividend to 10.78p per share. Together with the 6.87p per share interim dividend, this would result in a total dividend for the year of 17.65p, up 7%, making this the 42nd consecutive year of dividend per share growth of 5% or more.

Halma's Sustainable Growth Model

Our Sustainable Growth Model is designed to be resilient and to deliver strong growth and returns over the long term. At its core is our purpose, which is to grow a safer, cleaner, healthier future for everyone, every day. This creates a motivating and stretching ambition for everyone at Halma to play their part in growing our positive impact on the world, while ensuring that we consider the needs of all our stakeholders. Our positive impact is articulated and amplified by Halma's Sustainability Framework, which is discussed later in this review.

Our purpose has never been more relevant than it is today, as our customers look to Halma to help them address significant, long-term challenges, which have global impacts. Many of these are well aligned with the increasing Environmental, Social and Governance (ESG) demands being placed on individual citizens, corporations and countries: from the pressure on natural resources that comes from climate change and growing populations; to increasing safety, environmental and health regulation; and the impact of demographic and societal shifts, such as urbanisation, ageing populations and changing lifestyles. The demand from our customers for products and services which help them address these ESG issues will sustain our growth over the long term.

The positive interdependency of our financial model, organisational structure and growth strategy is critical to our sustainability. The diversity of our portfolio and focus on valuable market niches provides us with broad growth opportunities and strong returns over the long term, but also enables us to be resilient, rapidly adapting to changes in markets and economic conditions. Our decentralised organisational model protects and grows the valuable intellectual property in our companies to maintain their strong market positions and financial returns, as well as providing agility for portfolio management if long-term market trends change.

Improving performance as the year progressed

Our Sustainable Growth Model enabled us to adapt our products and operations quickly to the changes in our markets during the year, including those brought about by the COVID-19 pandemic. As a result, our trading performance strengthened as the year progressed.

In the early part of the year, we saw significant changes in demand in certain end markets and geographies, and our companies faced a broad spectrum of challenges in manufacturing, sales, and distribution as a result of the pandemic. These included the overriding need to ensure safe working conditions and the limitations on gaining physical access to customer sites.

Our agility and collaborative culture allowed us to respond rapidly to these changes. To ensure that we maintained our financial strength, we reduced our quarterly overhead cost run-rate by more than GBP20m in the first quarter, with each company determining what savings were appropriate for their situation. To preserve liquidity, we decided not to complete any acquisitions in the first half, and limited capital investment to research and development (R&D) and essential projects only, until the impact of the pandemic on our trading and balance sheet became clearer. We also focused on effective management of working capital, while ensuring that we maintained productive relationships with our customers and suppliers.

At the same time as our companies were rapidly addressing new challenges from disruptions to supply chains and their distribution networks, they were also responding to new opportunities arising from changes in their markets. These factors, combined with demand normalising in some market segments during the course of the year, meant that our trading momentum progressively strengthened, allowing us to gradually ease some of the financial constraints we had put in place in the early part of the year. These included a rebounding in M&A activity in the second half of the financial year and it is pleasing to see that this has continued into the new financial year.

The sector reviews later in this document contain further details of their individual performances, although there were several common themes. These included accelerating the digitalisation of products and introducing more online training and remote installation support in response to restriction in physical access; flexing manufacturing footprints and distribution capabilities to respond to changes in product demand and product mix; responding to new regulatory requirements; and rapidly adapting existing technology to meet new market needs. The agility of this response supported our delivery of a robust financial performance in the year and will be a key element in sustaining our growth in the future.

Market trends accelerated by the pandemic

Our strategy is to acquire and grow companies providing valuable solutions for selected market niches with global reach, in our chosen areas of safety, the environment and health. These niche markets offer opportunities for sustainable, superior growth with high returns, which are supported by long-term demographic, climate, and regulatory trends.

The effects of the pandemic have accelerated some of the existing long-term trends in our markets and have led to the emergence of new growth opportunities and areas of investment:

- We expect our Medical sector to benefit from an increased focus on ensuring the resilience of healthcare systems, not just in acute care products and services, but also in helping to improve patient outcomes, efficiency, and the safety of patients and staff.

- The increased focus on hygiene has increased demand for automated and touchless access systems in our People and Vehicle Flow and Elevator businesses. We also expect it to drive the adoption of technologies in our Medical sector such as our real-time location systems for healthcare facilities, which control access and ensure compliance with hand hygiene standards.

- The acceleration in the use of digital technology is driving the increasing use of telemedicine in our Medical sector, and the greater use of remote monitoring and control technologies in a broad range of applications, from fire systems and elevator monitoring, to water and waste water leak and spill detection, in our Safety and Environmental & Analysis sectors.

- The pandemic has further heightened awareness of the need to conserve increasingly scarce natural resources, given that climate change and the degradation of the environment have the potential to increase our susceptibility to disease in the future. We expect this to increase demand for our technologies supporting the transition to cleaner energy, water analysis and treatment, environmental monitoring and improving industrial efficiency and energy usage.

Increased investment despite the short-term challenges

Given our market opportunities, strong cash generation and robust liquidity position, we increased investment for growth and even accelerated our efforts in key areas.

Our companies continued to invest in new product development, with R&D expenditure staying at the same level as the previous year. They invested GBP70m, representing 5.3% of revenue, reflecting their confidence in their long-term growth prospects.

We have accelerated our planned technology investments, given that the pandemic has amplified the importance of digital technologies, both in terms of how we operate, and the way our customers want to access our services and solutions.

In addition to the investments made by individual Halma operating companies, we expect to invest at the Group level around GBP10m of incremental expenditure over the next three years, as well as adding around GBP2m per annum to our operating costs. These will bring significant benefits in support of our companies' growth in the medium term and modernise ways of working across Halma. These include:

   -      Enhancing security, including for remote working, across the whole Group. 

- Improving our data and analytics capabilities, and enhancing controls, in central functions such as finance and treasury, talent and human resources, sustainability, and legal.

- Supporting our companies in upgrading their operating technology in areas such as sales and customer management, procurement, e-commerce, and operations, finance, and human resource management.

- Enabling our companies to create new digital business models in line with our Halma 4.0 growth strategy, by building a common core of technology to support their digital and Internet of Things (IoT) solutions.

Investment in our innovation and digital growth programmes has been focused on supporting our companies in bringing their digital products to market and in enhancing the impact of our R&D spend by supporting agile decision-making to increase the speed and reduce the cost of new product development.

We currently have over 20 digital and agile new product development projects underway within these programmes. These are being supported by our Innovation and Digital team and our Digital Champions network which enables the sharing of expertise between companies. The interest these initiatives has generated was reflected in our recent Digital Execution Accelerator Summit event, which saw 130 attendees from across Halma explore new ways of providing value to customers through digital products. To help our companies assess their current digital development and potential, we have further refined our definitions of digital offerings. We now measure digital revenue based on connected devices, IoT (Internet of Things) solutions, and software and services revenues, while non-digital products include mechanical and non-connected intelligent devices. Approximately 40% of our revenue currently comes from digital products and solutions. These new definitions are more consistent with external benchmarks and will allow us to better assess our ability to capture, support and monetise digital opportunities.

We have continued to develop our external partnerships, including making minority investments through our Halma Ventures programme, that offers Halma access to new technology and capabilities. In January 2021, we announced that we had agreed a minority investment and strategic partnership with Oxbotica, a global leader in autonomous vehicle software. This strengthens the existing relationship between Oxbotica and our Halma company Navtech, which specialises in radar technology for transport applications.

Shortly before the year end, we also completed the spin-out of our food technology start-up, OneThird, from our company Ocean Insight. This new digital business was created following our first Halma Digital Edge programme in 2019 and uses spectroscopy data, a software platform and artificial intelligence to predict the shelf life of fresh produce to avoid food wastage. The spin-out will provide OneThird with access to new external partners to further accelerate its growth, with Halma retaining a minority shareholding in the company.

We are continuing to invest in the expansion and modernisation of our operating facilities to support recent and future growth expectations. After a year of reduced activity and spend during the pandemic of GBP26m, capital investment in the coming year is expected be higher at around GBP30m, including the start of construction of a new manufacturing facility for one of our largest companies, BEA, in Belgium.

Organisational and leadership changes to drive our growth strategy

During the year we announced several organisational, leadership and reporting changes. These demonstrate our commitment to developing our people to ensure we have a strong and sustainable leadership succession for the future, as well as our ability to recruit the very best talent.

In September 2020, we welcomed Funmi Adegoke as Group General Counsel. Funmi's international legal and commercial background has enabled her to have an immediate positive impact with our operating companies, sectors, and Executive Board.

We announced at our half year results in November that, from 1 April 2021, we would operate and report as three sectors to better align with our purpose and focus on safety, environmental and health markets, while still providing an easily scalable organisational model as we grow. Each of the three sectors is led by a Sector CEO and small sector support team, following the same model we have successfully deployed since 2014.

Two of our Divisional CEOs, Wendy McMillan and Constance Baroudel have been promoted to Sector Chief Executive for the Safety and Environmental & Analysis sectors respectively, while Laura Stoltenberg will continue to lead the Medical Sector. This change to three sectors will result in increased and dedicated M&A support for our Environmental & Analysis and Medical growth opportunities, and maintain the existing level of support for the combined Safety sector.

Following the resignation of Paul Simmons at the start of the pandemic in March 2020, Adam Meyers remained on our Executive Board as interim Chief Executive of our Safety sector. After completion of the Sector leadership succession process outlined above, Adam will retire from the Executive Board and Halma Board after our forthcoming Annual General Meeting in July 2021. I would like to thank Adam for his exceptional contribution since he joined the Group in 1996. In his time as a member of the Executive Board (since 2003) and the Halma Board (since 2008), Adam has completed over 20 acquisitions and had Divisional or Sector responsibility for almost every company in the Group. He has been a tremendous supporter of emerging talent and over the years has done a fantastic job helping new Divisional CEOs and Sector CEOs transition into their new roles. On behalf of everyone at Halma, I wish him all the best for a long and happy retirement.

Accelerating our growth through M&A

Our M&A strategy is focused on acquiring businesses with valuable intellectual property, which operate in market niches aligned with our purpose of growing a safer, cleaner, healthier future for everyone, every day.

Our organisational model is easily scalable and gives us the ability to continue acquiring small-to-medium sized businesses which increase our market opportunities and achieve our strategic growth objectives. We are also able to sell and merge businesses relatively easily should market dynamics change, enabling us to maintain a growth-oriented portfolio without it becoming significantly more complex to manage. The benefit of this active portfolio management is reflected in the number of companies within Halma remaining relatively stable, whilst we have grown and maximised value for our shareholders. For example, in 2011, Halma had revenue of GBP518m from 38 operating companies, and today we have only 42 operating companies delivering revenue of over GBP1.3bn.

After our decision to postpone M&A transactions in the first half of the year, activity rapidly picked-up in the second half and this has continued into the new financial year.

In December 2020, we acquired Static Systems Group, a UK-based manufacturer of critical healthcare communication systems, for GBP37.6m. In the same month, we divested Fiberguide Industries, Inc., a US-based manufacturer of fibre optic technology, for US$38m (GBP27.6m).

Following the year-end, in April 2021, we acquired PeriGen, a US company whose advanced technology protects mothers and their unborn babies by alerting doctors, midwives and nurses to potential problems during childbirth, for US$58m (equivalent to approximately GBP42m at the time of announcement).

We have also continued to strengthen our companies' capabilities across our three sectors through bolt-on acquisitions:

- In the Safety sector, our wireless fire safety company, Argus, purchased its Italian distributor for EUR0.5m and our industrial access control company, Fortress, bought the assets and IP associated with monitored safety valves from FluidSentry Pty Ltd in Australia for A$0.6m.

- In the Environmental & Analysis sector, the UV Group acquired Orca GmbH, a German manufacturer of ultraviolet disinfection systems, primarily for the food and beverage sector, for an initial consideration of EUR6.2m (GBP5.3m); Crowcon purchased its UK flue gas analyser distribution partner, Anton Industrial Services Limited, for GBP1.9m.

- In the Medical sector, Riester acquired the trade and assets of RNK, a US-based digital stethoscope company, for an initial consideration of US$2.7m (GBP1.9m).

A Sustainability Framework introduced to amplify our positive impact

Our new Sustainability Framework, which we have developed this year, aims to demonstrate our positive impact through continued and more focused efforts to minimise our environmental footprint, maximise our social impact, and be a responsible business. It is designed to assist us in understanding the areas of sustainability which are most important both for Halma and our stakeholders, and to help our companies prioritise the actions that are going to deliver the greatest return for the time and resources invested.

Many of our technologies enable others to achieve their own sustainability commitments including through the protection of natural resources or reduction of carbon emissions. We have recognised this by explicitly including climate change as a new key long-term growth driver for our products and services, and when assessing opportunities for future organic and inorganic growth. The beneficial effects of our products and services, which help solve many critical safety, environmental and health issues, also contribute to the achievement of our chosen United Nations Sustainable Development Goals (SDGs).

Our Sustainability Framework prioritises specific Key Sustainability Objectives (KSOs), which we believe are both highly aligned to our purpose, and key issues for Halma and our stakeholders. While these may be refined over time, the initial focus of our KSOs will be on addressing climate change, transitioning our business towards a circular economy, and continuing to build inclusion, diversity and equity in delivering our purpose-aligned growth.

In the coming financial year, we will set challenging objectives and KSO targets, and in future consider aligning management incentives with them where appropriate. We will also continue to develop policies and metrics relating to a wider scope of responsible business issues in support of these KSOs.

The delivery of our Sustainability Framework is supported by our new Head of Sustainability, who joined in September 2020, and two new leadership groups created this year: our Group-wide Sustainability Network, which includes representatives from almost every Halma company, and a Sustainability Management Committee, which is responsible for oversight of our sustainability initiatives and KSOs, and includes senior Halma group executives.

In addition to these structural changes, we have made substantial progress on our specific sustainability initiatives. For climate change, we have set a 1.5 degree-aligned 2030 target for our Scope 1 and 2 emissions, in line with guidance from the Science-Based Target Initiative, and a target to achieve net zero Scope 1 and 2 emissions by 2040. Alongside these commitments, we recognise the need for us to work towards net zero across our entire value chain. Over the year, we will be carrying out a full assessment of our supply chain and other Scope 3 emissions to determine the targets and commitments that will be most appropriate for Halma.

These objectives are supported by our ongoing work to further increase the percentage of the energy we consume from renewable sources. We have also commenced work towards implementing the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), including initial identification of opportunities and risks for Halma. Our target is to report fully under the TCFD framework from next year.

We have also made progress in assessing the importance to Halma of other key sustainability-related issues. We have commenced an analysis of the sustainability-related impact and risk across our supply chains, and an initial analysis of our operating presence in water-stressed areas while improving our environmental reporting on water and waste. These will enable us to establish more robust baselines for reporting our future progress.

In October 2020, we were excited to launch our second group-wide purpose-driven campaign, Water for Life, in partnership with the international non-profit organisation WaterAid. Further details are included in the Annual Report and Accounts 2021.

Building greater inclusion, equity, and diversity to drive our performance

A critical component of Halma's continued success is our culture, which in turn is dependent on the quality and diversity of our leaders and teams. We seek to ensure that Halma is an organisation that is inclusive and treats all people equitably. In doing this, we maximise the pool of talent available to us, recruit and retain the best people for every role, and build committed, diverse and resilient teams. These qualities and benefits were critical in our ability to deliver a robust performance in the year.

Our continued efforts to embed the principles of diversity, equity and inclusion (DEI) within Halma were supported by several new initiatives this year. These included the global implementation of an equal parental leave policy for all our employees and the launch of Accelerate Inclusion, our programme to build deeper awareness and provide practical tools to enable our teams around the world to create inclusive cultures. These principles were reinforced by the new public commitments we made in the year, including paying a Real Living Wage across our UK operations from 1 June 2022, signing up to the Change the Race Ratio campaign, and disclosing for the first time the gender pay gap in our UK and US operations.

We are confident that our efforts will deliver results, as we have already seen from the significant progress we have made in recent years. For example, with new appointments to the Board and Executive Board, our gender balance is now 42% and 70% women respectively as at 10 June 2021. You can find more detail on our progress on diversity, equity and inclusion in Our People and Culture section in the Annual Report and Accounts 2021.

Halma Board changes

Earlier in 2021, we welcomed Dame Louise Makin and Dharmash Mistry to our Board as non-executive Directors. Both will bring significant additional expertise to our Board and I am looking forward to working more closely with Louise when she steps up to become our new Chair after our AGM in July.

With these changes, and in addition to the retirement of Adam Meyers referred to above, Daniella Barone Soares and Paul Walker will be retiring as non-executive Director and Chair respectively, at the AGM. Both have made significant contributions to Halma's development and growth and we give them our thanks and best wishes for their new challenges ahead.

On a personal level, I would particularly like to thank Paul for his support and guidance as Halma's Chair. During his tenure, Halma has transitioned into a FTSE 100 company with its market capitalisation growing from around GBP2bn in 2013 to over GBP9bn at the end of this financial year. I have really appreciated Paul's commitment to ensuring that we have strengthened our culture and talent pool as we grow, the benefits of which are clearly to be seen in the recent leadership succession processes for our Executive and Sector Boards. He leaves a strong legacy and a foundation upon which I am confident that Halma will continue to deliver success in the future.

Summary and Outlook

Halma's purpose is to grow a safer, cleaner, healthier future, for everyone, every day. It underpins our growth strategy, financial model, culture and organisational design. The combination and interaction of these elements has created increasing value for all stakeholders on a sustainable basis for almost 50 years.

Together, they have enabled us to make further progress during the ongoing pandemic, giving us an agility which has been crucial in allowing us to address short-term challenges while simultaneously investing for a fast-changing future. Our progress has also been supported by our teams' relentless execution across all parts of our business, and our resilience which stems from the diversity of our market niches, their fundamental growth drivers, and the value of the solutions we provide.

For the year ahead, we expect our markets to continue to recover, albeit at varying rates, while acknowledging that there are potential headwinds including currency, inflation, and supply chain constraints. Organic constant currency revenue for the period from the beginning of January to the end of May is up 10% year-on-year. We have made a good start to the year, order intake is currently ahead of revenue and the same period last year, and we also have a good pipeline of potential acquisition opportunities. We currently expect to deliver full year low double-digit percentage organic constant currency profit growth (prior to any IAS 38 impact) and a more normal level of return on sales. We look forward to making further progress, in this year and the longer term.

Andrew Williams

Group Chief Executive

(1) See Highlights

Financial Review

Record profit

Halma delivered a robust financial performance in the period, despite the effects of the COVID-19 pandemic. We responded rapidly to the challenges and new opportunities which arose in the year to deliver a record profit for the 18th consecutive year, while increasing our investment in future growth opportunities and further strengthening our balance sheet. This financial performance reflects the value of our Sustainable Growth Model and the authenticity of our purpose.

Revenue for the year to 31 March 2021 was GBP1,318.2m (2020: GBP1,338.4m), down 1.5%. This reflected a resilient organic performance, supported by the agility of our companies in responding to fast-changing market conditions, and a benefit from recent acquisitions. Adjusted(1) profit before taxation grew 4.2% to GBP278.3m (2020: GBP267.0m), and benefited from discretionary variable cost reductions, good ongoing control of overheads and a reduction in financing costs. Statutory profit before taxation increased by 12.9% to GBP252.9m (2020: GBP224.1m), and included a GBP21.6m gain on disposal of Fiberguide Industries, Inc. in the second half of the year.

The decrease in revenue included a 5.6% decline in organic constant currency revenue. The contribution from acquisitions was a positive 5.4% (5.1% net of disposals), and there was a negative effect from currency translation of 1.0%. The 4.2% increase in Adjusted(1) profit comprised a 0.7% increase in organic constant currency profit, a 4.7% contribution from acquisitions (4.5% net of disposals), and a negative effect from currency of 1.0%.

Statutory profit before taxation of GBP252.9m is calculated after charging the amortisation of acquired intangible assets of GBP42.3m (2020: GBP38.3m), a GBP22.1m gain on disposals (2020: GBP2.9m), and other items of a net GBP5.2m (2020: GBP7.5m). Further detail on these items is given in note 1 to the Financial Statements.

Cash conversion was very strong at 104%, primarily driven by good underlying working capital control, in addition to specific actions taken in response to the pandemic. As a result, net debt (on an IFRS 16 basis which includes lease commitments) reduced substantially to GBP256.2m (31 March 2020: GBP375.3m).

Robust revenue and profit performance

Revenue fell by 5.4% in the first half and increased by 2.2% in the second half. Having declined in the first quarter, revenue increased sequentially in each subsequent quarter. Constant currency organic revenue declined by 5.6%, comprising an 11.0% reduction in the first half, reflecting the effects of the COVID-19 pandemic, and a decline of only 0.3% in the second half. There was a small negative effect of 0.4% from currency translation in the first half which increased in the second half, giving a negative effect of 1.0% for the year as a whole.

Adjusted(1) profit declined by 5.3% in the first half, but grew by 13.1% in the second half. As a result, the first half/second half split of adjusted profit was 44%/56%, compared to our typical 45%/55% pattern. As with revenue, profit grew sequentially from the first quarter onwards, and there was a small negative effect from currency translation in the first half, which increased in the second half. Organic profit at constant currency declined by 11.1% in the first half, but increased by 11.8% in the second half, resulting in modest growth of 0.7% for the year.

Profitability in the year benefited from the discretionary variable cost reductions delivered in the first quarter, good ongoing control of overheads including reduced travel and trade show costs and reduced absolute research and development spend in line with revenue. These savings were, in part, offset by increased distribution costs and one-off enhanced employee COVID-19 related payments. These overall savings included the impact of our decision during the second half to repay all employees below the Executive Board the temporary salary reductions implemented from 1 April 2020 for a three-month period (ensuring all employees were paid at least 100% for hours worked). The Board and Executive Board incurred a reduction in salaries of 20% for the first quarter and did not feel it appropriate for this to be repaid.

 
 Revenue and profit change 
                                                    Percentage growth 
                                                   ---------------------------------- 
                                                            Organic      Organic 
                       2021      2020      Change   Total    growth(2)    growth(2) 
                                                                          at constant 
                                                                           currency 
                        GBPm      GBPm       GBPm    %       %             % 
--------------------  --------  --------  -------  ------  -----------  ------------- 
 Revenue               1,318.2   1,338.4   (20.2)   (1.5)   (6.6)        (5.6) 
--------------------  --------  --------  -------  ------  -----------  ------------- 
 Adjusted(1) profit 
  before taxation      278.3     267.0     11.3     4.2     (0.3)        0.7 
 Statutory profit 
  before taxation      252.9     224.1     28.8     12.9    -            - 
--------------------  --------  --------  -------  ------  -----------  ------------- 
 

(1) In addition to those figures reported under IFRS Halma uses alternative performance measures as key performance indicators, as management believe these measures enable them to better assess the underlying trading performance of the business by removing non-trading items that are not closely related to the Group's trading or operating cash flows. Adjusted profit excludes the amortisation and impairment of acquired intangible assets; acquisition items; restructuring costs and profit or loss on disposal of operations. All of these are included in the statutory figures. Notes 1 and 3 to the Financial Statements give further details with the calculation and reconciliation of adjusted figures.

(2) See Highlights.

Stronger second half performance

Our companies saw significant and varying changes in demand in the year as a result of the COVID-19 pandemic, and this was reflected in the different sector performances. Having seen a substantial decline in the first quarter (compared to the final quarter of the prior year), overall performance improved as the year progressed. All sectors delivered a stronger absolute revenue and profit performance in the second half, compared to the first half of the year. For the full year as a whole, while revenue increased in only one sector, three of the four sectors grew profit on a reported basis, and two on an organic constant currency basis.

Process Safety revenue declined 5.6%, which included a benefit from the acquisition of Sensit Technologies in the prior year. Revenue on an organic constant currency basis fell 11.9%, which reflected the adverse effects of the COVID-19 pandemic, including the difficulty of gaining access to customer sites and the deferral of project-based business, in addition to a challenging oil and gas market and a strong comparative in Industrial Access Control (which included a large logistics contract). Profit decreased by 16.7% (21.5% on an organic constant currency basis), mainly because of the decline in higher margin US onshore oil and gas business, as well as one-off restructuring costs of GBP1.9m. As a result, Return on Sales was lower, at 19.4% (2020: 21.9%). The second half saw a sequential improvement in revenue, albeit still marginally down on the same period last year, with revenue declining 1.0% on a reported basis and 6.5% on an organic constant currency basis. Our companies have continued to broaden and diversify their revenue streams and acted to more closely align overheads with revenue, to deliver an improved profit performance as the year progressed. Looking ahead we anticipate some recovery in the Process Safety end markets which, in addition to new product introductions, should return the sector to growth for the year ahead.

Infrastructure Safety delivered a resilient performance for the year, despite a 13.5% fall in revenue in the first half (a decline of 16.2% on an organic constant currency basis) which included an adverse impact from the COVID-19 pandemic. As market conditions started to recover, revenue grew by 6.6% in the second half of the year (6.7% on an organic constant currency basis) compared to the same period in the prior year, resulting in revenue for the full year being down 3.4% (4.7% on an organic constant currency basis). Return on Sales was higher at 24.5% (2020: 23.1%), reflecting an improvement in gross margin from favourable business mix and good underlying overhead control. As a result, reported profit grew by 2.7% in the full year and by 1.2% on an organic constant currency basis. Looking ahead we expect a continuation of the recovery we saw in the second half, albeit against the potential headwinds relating to ongoing supply chain challenges and the ongoing risk of further COVID-19 related disruption.

The Environmental & Analysis sector delivered a robust performance for the year. While reported revenue declined by 5.0%, this was partly due to the disposal of Fiberguide Industries, Inc. in the third quarter of the year, and revenue on an organic constant currency basis fell by only 2.7%. This was a resilient performance given the very strong comparative in the second half of the previous year. Profit grew strongly, by 11.4% on a reported basis and by 14.7% on an organic constant currency basis, reflecting the benefit to gross margin from a favourable mix of business, and very strong control of overheads. As a result, Return on Sales increased to 25.1% (2020: 21.4%) and, given that this was driven by mix of business, discretionary variable cost reductions and the phasing of a long-term photonics project, we do not expect this high level of Return on Sales to be maintained in the coming year. Looking ahead we expect the sector to make continued progress albeit against a strong comparative with the continued contribution of some large photonics projects, in addition to the timing of the UK water infrastructure investment cycle and the continued recovery of the water testing markets.

The Medical sector delivered good revenue growth of 7.0% for the year. This included a significant contribution from prior year acquisitions, with revenue declining by 5.4% on an organic constant currency basis. Sector companies experienced substantially different changes in demand as a result of the pandemic, with some having to meet significantly increased demand for products and services related to the diagnosis or treatment of COVID-19, and others seeing substantial falls in revenue as a result of a slowdown in elective procedures and difficulties in gaining access to hospitals. This change in business mix had an adverse effect on gross margin which, alongside an increased R&D spend in the year, meant that Return on Sales decreased by 1 percentage point to 23.3%. Our companies responded with agility to these changes, both in terms of addressing new revenue opportunities and adjusting overheads where required. This, together with some modest recovery in elective procedures as the year progressed and a further contribution from acquisitions, resulted in the sector returning to revenue and profit growth in the second half. Looking ahead, we expect to continue to see the recovery in elective procedures and for there to be a decline in demand for COVID-19 related products. These factors, alongside the continued contribution from recent acquisitions means that the sector is expected to deliver

more normal levels of growth for the year ahead.

We continue to hold an additional GBP5.0m central provision for bad debt, reflecting the continuing increased risk of customer bad debt in all sectors due to the ongoing effects of the COVID-19 pandemic.

Central administration costs, which include our Growth Enabler functions, decreased to GBP22.9m (2020: GBP26.3m). This principally reflected the discretionary cost reduction measures implemented in the first quarter of the year, in addition to ongoing overhead control for the balance of the year. These actions delivered savings across all functions driven by reduced travel, the use of virtual conferences, deferred spend on projects, reduced development programmes and a reduction in bonus payments as a result of financial performance. These savings were in part offset by the one-off enhanced employee COVID-19 related payments of GBP2m and the acceleration of planned IT investment spend. As we plan to increase and selectively accelerate investment in our Growth Enablers in the year ahead, we expect central costs to increase to approximately GBP32m in 2022 (excluding up to GBP5m of IT Software as a Service (SaaS) configuration and customisation costs). This will include both a return to more normalised levels of central investment, in addition to an acceleration in our investments in IT and Technology, strategic communications and governance and compliance (including ESG), and a return to more normal levels of annual bonus payments. This level of investment is expected to normalise (relative to revenue) during the financial year ending 2023.

As previously announced, from 1 April 2021, we will align our organisational structure and financial reporting with our purpose and core market focus. We will report our performance in three sectors, namely Safety, Environmental & Analysis, and Medical.

 
 Sector revenue change 
                                    2021      2020 
                   --------  -----------  -------- 
                                                                                % growth         % organic 
                                                                                              growth(2) at 
                                                                                                  constant 
                       GBPm   % of total      GBPm   % of total   Change GBPm                     currency 
-----------------  --------  -----------  --------  -----------  ------------  ---------  ---------------- 
   Process Safety     188.8           14     200.0           15        (11.2)      (5.6)            (11.9) 
-----------------  --------  -----------  --------  -----------  ------------  ---------  ---------------- 
   Infrastructure 
           Safety     450.5           34     466.5           35        (16.0)      (3.4)             (4.7) 
-----------------  --------  -----------  --------  -----------  ------------  ---------  ---------------- 
  Environmental & 
         Analysis     308.8           24     325.0           24        (16.2)      (5.0)             (2.7) 
-----------------  --------  -----------  --------  -----------  ------------  ---------  ---------------- 
          Medical     371.3           28     347.2           26          24.1        7.0             (5.4) 
-----------------  --------  -----------  --------  -----------  ------------  ---------  ---------------- 
    Inter-segment 
            sales     (1.2)                  (0.3)                      (0.9) 
-----------------  --------  -----------  --------  -----------  ------------  ---------  ---------------- 
                    1,318.2          100   1,338.4          100        (20.2)      (1.5)             (5.6) 
-----------------  --------  -----------  --------  -----------  ------------  ---------  ---------------- 
 
 
 
 Sector profit change 
                                          2021                  2020 
                          --------------------  -------------------- 
                                                                                              % organic 
                                                                                              growth(2) 
                                                                       Change               at constant 
                             GBPm   % of total     GBPm   % of total     GBPm   % growth       currency 
------------------------  -------  -----------  -------  -----------  -------  ---------  ------------- 
          Process Safety     36.6           12     43.9           14    (7.3)     (16.7)         (21.5) 
------------------------  -------  -----------  -------  -----------  -------  ---------  ------------- 
          Infrastructure 
                  Safety    110.6           35    107.7           35      2.9        2.7            1.2 
------------------------  -------  -----------  -------  -----------  -------  ---------  ------------- 
         Environmental & 
                Analysis     77.4           25     69.4           23      8.0       11.4           14.7 
------------------------  -------  -----------  -------  -----------  -------  ---------  ------------- 
                 Medical     86.6           28     84.4           28      2.2        2.6         (10.5) 
------------------------  -------  -----------  -------  -----------  -------  ---------  ------------- 
        Sector profit(3)    311.2          100    305.4          100      5.8 
------------------------  -------  -----------  -------  -----------  -------  ---------  ------------- 
  Central administration 
                   costs   (22.9)                (26.3)                   3.4 
------------------------  -------  -----------  -------  -----------  -------  ---------  ------------- 
     Net finance expense   (10.0)                (12.1)                   2.1 
------------------------  -------  -----------  -------  -----------  -------  ---------  ------------- 
      Adjusted(4) profit 
              before tax    278.3                 267.0                  11.3        4.2            0.7 
------------------------  -------  -----------  -------  -----------  -------  ---------  ------------- 
 

(3) Sector profit before allocation of adjustments. See Note 1 to the Financial Statements.

(4) Adjusted profit excludes the amortisation and impairment of acquired intangible assets; acquisition items; restructuring costs; and profit or loss on disposal of operations. All of these are included in the statutory figures. Note 3 to the Financial Statements gives further details with the calculation and reconciliation of adjusted figures.

Resilient revenue performance in all major regions

The Group's four major regions delivered a resilient revenue performance and individually reflected the mix of businesses and the extent of contributions from recent acquisitions in each region. Asia Pacific delivered a small amount of growth, the USA and Mainland Europe were flat, and the UK saw a small decline. The contribution from acquisitions was largest in the USA, with a modest benefit in the other three major regions. Revenue in other regions fell more sharply, with the effects of the pandemic more severe and sustained in a number of developing markets.

Revenue in the USA declined by 0.3%, and remains our largest revenue destination, accounting for 39% of Group revenue, an increase of one percentage point compared to the prior year. Organic constant currency revenue declined by 6.0%. There was a wide range of performances by each sector. On a reported basis, Medical delivered strong growth, which included a substantial benefit from recent acquisitions, and the other three sectors saw modest declines. Revenue in Process Safety benefited from the acquisition of Sensit, but on an organic constant currency basis saw a significant decline given a strong comparator (due to a large logistics contract in the prior year), in addition to weak demand for safety products in the US onshore oil and gas related businesses and site access issues. Environmental & Analysis delivered the most resilient performance on an organic constant currency basis, but total revenue was impacted by the disposal of Fiberguide Industries, Inc. in the third quarter.

Mainland Europe revenue was 0.2% lower. There was a modest contribution from recent acquisitions, and revenue on an organic constant currency basis declined by 3.0%. The region's largest sector, Infrastructure Safety, saw a small decline in revenue, despite a strong performance in the People and Vehicle Flow sub sector. The other three sectors grew on a reported basis, with Process Safety benefiting from the fulfilment of some significant projects, Environmental & Analysis seeing a good performance in Water Analysis and Treatment, and Medical's performance including the benefit of recent acquisitions.

UK revenue was 3.5% lower, or 7.0% on an organic constant currency basis. Infrastructure Safety grew slightly, supported by a strong recovery in the Fire and Security businesses in the second half of the year. Environmental & Analysis, however, saw a substantial decline against a very strong prior year comparator, particularly in our Water businesses. In the other, much smaller, sectors, Process Safety delivered a resilient performance, with a modest decline in revenue, while the Medical sector revenue grew strongly on a reported basis, with the benefit of the Static Systems acquisition offsetting a sharp decline on an organic constant currency basis.

Asia Pacific grew 1.3%, which included double-digit growth in China, as it recovered from the effects of the pandemic. There was good growth in South Korea, but significant declines in other markets, largely as a result of the pandemic. There was good growth in the Environmental & Analysis sector, supported by the recovery in China, and a solid performance in Medical which benefited from recent acquisitions. Revenue in the Safety sectors declined with a slowing of large project approvals in Process Safety. Infrastructure Safety's performance benefited from the acquisition of Ampac in Australia in the prior year. On an organic constant currency basis, Asia Pacific revenue declined by 3.6%.

In other regions, revenue was 11.5% lower and 10.6% down on an organic constant currency basis. This performance reflected the significant and continuing impact of the pandemic on developing regions, with all sectors seeing a decline in revenue. Of the larger countries, only Canada delivered growth. As a result, and despite the modest improvement in Asia Pacific, revenue from territories outside the UK/Mainland Europe/the USA fell by 3.2%, which was below our 10% KPI growth target.

 
       Geographic revenue 
                             2021                         2020 
          -----------------------  -----------  -------------- 
                                                                                                     % organic 
                                                                                                     growth at 
                                                                                 Change               constant 
                             GBPm   % of total            GBPm   % of total        GBPm   % change    currency 
 --------------------  ----------  -----------      ----------  -----------  ----------  ---------  ---------- 
     United States of 
              America       508.8           39           510.3           38       (1.5)      (0.3)       (6.0) 
 --------------------  ----------  -----------      ----------  -----------  ----------  ---------  ---------- 
      Mainland Europe       276.0           21           276.4           21       (0.4)      (0.2)       (3.0) 
 --------------------  ----------  -----------      ----------  -----------  ----------  ---------  ---------- 
       United Kingdom       213.6           16           221.2           16       (7.6)      (3.5)       (7.0) 
 --------------------  ----------  -----------      ----------  -----------  ----------  ---------  ---------- 
         Asia Pacific       216.1           16           213.3           16         2.8        1.3       (3.6) 
 --------------------  ----------  -----------      ----------  -----------  ----------  ---------  ---------- 
     Africa, Near and 
          Middle East        54.1            4            63.2            5       (9.1)     (14.4)      (15.1) 
 --------------------  ----------  -----------      ----------  -----------  ----------  ---------  ---------- 
      Other countries        49.6            4            54.0            4       (4.4)      (8.1)       (5.3) 
 --------------------  ----------  -----------      ----------  -----------  ----------  ---------  ---------- 
                          1,318.2          100         1,338.4          100      (20.2)      (1.5)       (5.6) 
 --------------------  ----------  -----------      ----------  -----------  ----------  ---------  ---------- 
 
 

Continued high returns

Halma's Return on Sales(2) has exceeded 16% for 36 consecutive years. Our KPI target is to deliver Return on Sales in the range of 18-22% and this year Return on Sales increased to 21.1% (2020: 19.9%). This reflected discretionary cost reductions of over GBP20m realised in the first quarter of the year (compared to the previous quarter's run rate), strong ongoing overhead control, and a modest reduction in research and development spend, in line with revenue. The previously reported GBP5m increase in customer bad debt provision included in 2020 due to the additional risk from COVID-19 has remained in place.

We successfully achieved our objective of continuing to invest in our businesses while delivering growth and we maintained a high level of Return on Total Invested Capital (ROTIC)(2) , the post-tax return on the Group's total assets including all historical goodwill. This year, ROTIC was 14.4% (2020: 15.3%), with the change principally reflecting a lower level of constant currency earnings growth than in the prior year, as well as lower dividend growth in the year as a result of the COVID-19 pandemic. Our ROTIC remains well ahead of our KPI target of 12% and substantially in excess of Halma's Weighted Average Cost of Capital (WACC), estimated to be 6.7% (2020: 7.7%).

Currency effects well managed

Halma reports its results in Sterling. Our other key trading currencies are the US Dollar, Euro and to a lesser extent the Swiss Franc, the Chinese Renminbi and the Australian Dollar. Over 45% of Group revenue is denominated in US Dollars and approximately 12% in Euros.

The Group has both translational and transactional currency exposure with translational exposures not hedged. For transactional exposures, after matching currency of revenue with currency of costs wherever practical, forward exchange contracts are used to hedge a proportion (up to 75%) of the remaining forecast net transaction flows where there is a reasonable certainty of an exposure. We hedge up to 12 months forward.

Sterling strengthened on average in the year, principally in the second half. This gave rise to a negative currency translation impact of 1.0% on revenue and on profit for the full year.

Based on the current mix of currency denominated revenue and profit, a 1% movement in the US Dollar relative to Sterling changes revenue by GBP6.3m and profit by GBP1.3m. Similarly, a 1% movement in the Euro changes revenue by GBP1.6m and profit by GBP0.3m.

If currency rates for the financial year 2022 were US Dollar 1.378/ Euro 1.174 relative to Sterling, and assuming a constant mix of currency results, we would expect approximately a GBP39m negative revenue and a GBP9m negative profit impact compared to financial year 2021, with the majority of the impact in the first half of the year.

 
                   Weighted average rates        Exchange rates used 
                                  used in                         to 
                     the Income Statement      translate the Balance 
                                                               Sheet 
                -------------------------  ------------------------- 
                        2021         2020          2021         2020 
         First     Full year    Full year      Year end     Year end 
          half 
------  ------  ------------  -----------  ------------  ----------- 
 US$     1.267         1.308        1.271         1.378         1.25 
------  ------  ------------  -----------  ------------  ----------- 
 Euro    1.116         1.121        1.144         1.174        1.133 
------  ------  ------------  -----------  ------------  ----------- 
 

Financing cost decreased

The net financing cost in the Income Statement of GBP10.0m was lower than the prior year (2020: GBP12.1m). This reflected the lower average net borrowings in the year given strong cash generation, a lower level of expenditure on acquisitions, and lower interest rates (see the 'Average debt and interest rates' table below for more information).

Interest cover (EBITDA as a multiple of net interest expense as defined by our Revolving Credit Facility) was 47 times (2020: 40 times) which was substantially in excess of the four times minimum required in our banking covenants.

The net pension financing impact under IAS 19 is included within the net financing cost. This year the Group recognised a gain of GBP0.1m (2020: charge of GBP0.8m), reflecting the lower net deficit at 31 March 2020.

Group tax rate increased

The Group has major operating subsidiaries in 10 countries and the Group's effective tax rate is a blend of these national tax rates applied to locally generated profits.

The Group's effective tax rate on adjusted profit was higher than in the prior year at 20.1% (2020: 18.5%). This was mainly due to the reversal of one-off credits in the prior year and a change in the expected mix of profits arising from increased profits in higher tax jurisdictions. Based on the forecast mix of adjusted profits for the year to 31 March 2022 we currently anticipate the Group effective tax rate to increase to approximately 21.5% of adjusted profits. The forecast increase is a result of changes in tax laws reducing the benefits arising from intra-group financing arrangements.

On 2 April 2019, the European Commission published its final decision that the UK controlled Finance Company Partial Exemption (FCPE) constituted State Aid. In common with many other UK companies, Halma has benefited from the FCPE. The total benefit to Halma in the periods affected by the European Commission's decision has been approximately GBP15.4m in respect of tax. Halma has appealed against the European Commission's decision, as have the UK Government and several other UK companies. Following receipt of a charging notice from HM Revenue & Customs (HMRC) in January, we made payment of GBP13.9m to HMRC in respect of tax, and since the year end have received a further charging notice in respect of interest of approximately GBP0.8m. We expect these payments to be refundable in the event of a successful appeal and have recognised a corporation tax asset of GBP13.9m in the balance sheet.

Strong cash generation

Cash generation is an important component of the Halma model, underpinning further investment in organic growth, supporting value-enhancing acquisitions and funding an increasing dividend. Our cash conversion in 2021 was strong.

Cash generated from operations was GBP331.4m (2020: GBP307.9m) and adjusted operating cash flow, which excludes operating cash adjusting items, and includes net cash capital expenditure, was GBP300.3m (2020: GBP272.2m) which represented 104% (2020: 97%) of adjusted operating profit. This was significantly ahead of our cash conversion KPI target of 90%, reflecting a strong underlying performance primarily driven by good working capital control and the cash conservation measures in place during the year. Adjusted operating cash flow is defined in note 3 to the Financial Statements.

A summary of the year's cash flow is shown in the tables below. The largest outflows in the year were in relation to acquisitions, dividends and taxation paid.

There was a working capital inflow of GBP2.8m, comprising changes in inventory, receivables and creditors (2020: outflow of GBP9.3m), reflecting an increase in creditors, including from the acquisition of Static Systems Group, a reduction in debtors, given the Group's success in collecting aged receivables, and the deferral of employer social security tax liabilities in the USA.

The deferral of payment of tax liabilities related to the employers' share of quarterly social security tax deposits in the USA, as permitted during the COVID-19 pandemic, resulted in a deferral of a cash tax liability of approximately US$6m (GBP5m) relating to the period 27 March 2020 to 31 December 2020. Half of this amount was due by 31 December 2021 and the remainder by 31 December 2022. Given the Group's strong financial position, we paid substantially all of the amount due in May 2021, with the remainder to be paid in June, ahead of these due dates.

Dividends totalling GBP63.7m (2020: GBP61.2m) were paid to shareholders in the year.

Taxation paid increased to GBP53.8m (2020: GBP52.4m), and included the GBP13.9m paid to HMRC following the receipt of the charging notice for the UK FCPE State Aid issue. Excluding the GBP13.9m payment, the taxation paid decreased compared to last year mainly due to changes in the timing of tax payments in the prior year.

 
 Operating cash flow summary 
                                                        2021         2020 
                                                         GBPm         GBPm 
-----------------------------------------------------  -----------  ------- 
 Operating profit                                       240.8        233.4 
 Net acquisition costs and contingent consideration 
  fair value adjustments                                5.2          7.5 
 Amortisation and impairment of acquisition-related 
  acquired intangible assets                            42.3         38.3 
-----------------------------------------------------  -----------  ------- 
 Adjusted operating profit                              288.3        279.2 
 Depreciation and other amortisation                    50.8         51.5 
 Working capital movements                              2.8          (9.3) 
 Capital expenditure net of disposal proceeds           (25.9)       (32.2) 
 Additional payments to pension plans                   (13.0)       (12.5) 
 Other adjustments                                      (2.7)        (4.5) 
-----------------------------------------------------  -----------  ------- 
 Adjusted operating cash flow                           300.3        272.2 
-----------------------------------------------------  -----------  ------- 
 Cash conversion %                                      104%         97% 
-----------------------------------------------------  -----------  ------- 
 
 
 
 Non-operating cash flow and reconciliation 
  to net debt 
                                                      2021      2020 
                                                       GBPm      GBPm 
---------------------------------------------------  --------  -------- 
 Adjusted operating cash flow                         300.3     272.2 
---------------------------------------------------  --------  -------- 
 Tax paid                                             (53.8)    (52.4) 
---------------------------------------------------  --------  -------- 
 Acquisition of businesses including cash/debt 
  acquired and fees                                   (48.8)    (238.0) 
---------------------------------------------------  --------  -------- 
 Purchase of equity investments                       (3.4)     (4.8) 
---------------------------------------------------  --------  -------- 
 Disposal of businesses                               26.1      7.6 
---------------------------------------------------  --------  -------- 
 Net movement in loan notes                           -         0.1 
---------------------------------------------------  --------  -------- 
 Net finance costs and arrangement fees (excluding 
  lease interest)                                     (7.0)     (8.5) 
---------------------------------------------------  --------  -------- 
 Lease liabilities additions                          (23.7)    (26.3) 
---------------------------------------------------  --------  -------- 
 Dividends paid                                       (63.7)    (61.2) 
---------------------------------------------------  --------  -------- 
 Own shares purchased                                 (16.2)    (16.7) 
---------------------------------------------------  --------  -------- 
 Adjustment for cash outflow on share awards 
  not settled by own shares                           (7.8)     (6.0) 
---------------------------------------------------  --------  -------- 
 Effects of foreign exchange                          17.1      (9.3) 
---------------------------------------------------  --------  -------- 
 Movement in net debt                                 119.1     (143.3) 
---------------------------------------------------  --------  -------- 
 Opening net debt                                     (375.3)   (181.7) 
---------------------------------------------------  --------  -------- 
 Closing net debt                                     (256.2)   (375.3) 
---------------------------------------------------  --------  -------- 
 
 
 Net debt to EBITDA 
                                                      2021    2020 
                                                       GBPm    GBPm 
---------------------------------------------------  ------  ------ 
 Adjusted operating profit                            288.3   279.2 
---------------------------------------------------  ------  ------ 
 Depreciation and amortisation (excluding acquired 
  intangible assets)                                  50.8    51.5 
---------------------------------------------------  ------  ------ 
 EBITDA                                               339.1   330.7 
---------------------------------------------------  ------  ------ 
 Net debt to EBITDA                                   0.76    1.13 
---------------------------------------------------  ------  ------ 
 
 
 Average debt and interest rates 
                                                 2021    2020 
----------------------------------------------  ------  ------ 
 Average gross debt (GBPm)                       445.5   388.4 
----------------------------------------------  ------  ------ 
 Weighted average interest rate on gross debt    2.32%   2.86% 
----------------------------------------------  ------  ------ 
 Average cash balances (GBPm)                    148.8   88.3 
----------------------------------------------  ------  ------ 
 Weighted average interest rate on cash          0.51%   0.63% 
----------------------------------------------  ------  ------ 
 Average net debt (GBPm)                         296.7   300.1 
----------------------------------------------  ------  ------ 
 Weighted average interest rate on net debt      3.22%   3.52% 
 
 

Capital allocation and funding priorities

Halma aims to deliver high returns, measured by ROTIC(2), well in excess of our cost of capital. We invest to deliver the future earnings growth and strong cash returns which underpin this aim, and our capital allocation priorities remain as follows:

- Investment for organic growth: Organic growth is our first priority and is driven by investment in our existing businesses, including through capital expenditure, innovation for digital growth and in new products, international expansion and the development of our people.

- Value-enhancing acquisitions: We supplement organic growth with acquisitions in current and adjacent market niches. This brings new technology, intellectual property and talent into the Group and expands our market reach, keeping Halma well-positioned in growing markets over the long term.

- Regular and increasing returns to shareholders: We have maintained a progressive dividend policy for over 40 years and this is our preferred route for delivering regular cash returns to shareholders.

Continued investment for organic growth

All sectors continue to innovate and invest in new products, with R&D spend determined by each individual Halma company. R&D expenditure as a percentage of revenue remained well above our KPI target of 4% or more at 5.3% (2020: 5.4%). In absolute terms, this meant that R&D expenditure declined by 2.1%, in line with revenue, reflecting the caution and agility of our companies in the earlier stages of the COVID-19 pandemic. In the medium term we expect R&D expenditure to continue to increase broadly in line with revenue growth.

Under IFRS accounting rules we are required to capitalise certain development projects and amortise the cost over an appropriate period, which we determine as three years. In the 2021 financial year we capitalised GBP15.4m (2020: GBP15.6m), impaired GBP1.9m (2020: GBP5.2m) and amortised GBP7.9m (2020: GBP7.9m). The closing intangible asset carried on the Consolidated Balance Sheet, after a GBP2.0m loss (2020: GBP0.5m gain) relating to foreign exchange was GBP38.9m (2020: GBP36.1m). All R&D projects, and particularly those requiring capitalisation, are subject to rigorous review and approval processes.

Capital expenditure on property, plant, equipment and vehicles, computer software and other intangible assets was GBP26.4m (2020: GBP34.1m). The expenditure on fixed assets was lower than in the prior year, reflecting our actions to limit capital investment to essential projects and R&D due to the COVID-19 pandemic. We anticipate capital expenditure to increase to approximately GBP30m in the coming year, reflecting a level of catch up in deferred expenditure as a result of the actions taken this year and further investment across our sectors to support our future growth. This includes the start of construction of a new manufacturing facility for one of our largest companies, BEA, in Belgium, and other facility expansions.

We are also investing in automation and technology upgrades including the Group-level investment in enhanced security, improved data and analytics capability and investments to support our companies in upgrading their operating technology and creating new digital models in line with our Halma 4.0 growth strategy. We expect this investment to total approximately GBP12m in the financial year ending 31 March 2022, which we expect to be mostly operating expense although this will depend on the specifics of each project.

Lease right-of-use asset additions were GBP24.3m (2020: GBP21.9m). This included additions of GBP0.6m as a result of acquisitions made in the year, and the commencement of new leases and extensions or renewals of existing leases.

Value-enhancing acquisitions and investments

Acquisitions and disposals are a key component of our sustainable growth strategy, as they keep our portfolio of companies focused on markets which have strong growth opportunities over the medium and long term.

In the year we made one acquisition at a cost of GBP38.4m (net of cash acquired of GBP7.9m and including acquisition costs). In addition, we paid GBP10.4m in contingent consideration and other payments for acquisitions made in prior years, giving a total spend of GBP48.8m. We also divested Fiberguide Industries, Inc., for GBP26.1m, net of disposal costs.

Details of the acquisitions and investments made in the year are given in the sector reviews in the Annual Report and Accounts 2021 and in note 8 to the Financial Statements. Details of acquisitions made since the year end are contained in the Group Chief Executive's review.

The acquisitions completed in the current and prior year contributed to revenue in 2021 in line with expectations overall, albeit that individual company performances were affected by end market variations caused by the pandemic, and we expect a good performance from these acquisitions in the future.

Regular and increasing returns for shareholders

Adjusted earnings per share increased by 2.2% to 58.67p (2020: 57.39p) and statutory earnings per share, which included a gain on disposal of Fiberguide Industries, Inc., increased by 10.2% to 53.61p (2020: 48.66p).

The Board is recommending an 8.2% increase in the final dividend to 10.78p per share (2020: 9.96p per share), which together with the 6.87p per share interim dividend gives a total dividend per share of 17.65p (2020: 16.50p), up 7.0% in total. Dividend cover (the ratio of adjusted profit after tax to dividends paid and proposed) is 3.33 times (2020: 3.48 times).

The final dividend for 2021 is subject to approval by shareholders at the AGM on 22 July 2021 and, if approved, will be paid on 12 August 2021 to shareholders on the register at 9 July 2021.

We aim to increase dividends per share each year, while maintaining a prudent level of dividend cover, and declare approximately 35-40% of the anticipated total dividend as an interim dividend. The Board's determination of the proposed final dividend increase this year took into account the Group's financial performance, the effects of the COVID-19 pandemic, the continued strong balance sheet and medium-term organic constant currency growth.

Substantial funding capacity and liquidity

Halma's operations have continually been cash generative and the Group has access to competitively priced committed debt finance, providing good liquidity for the Group. Group treasury policy remains conservative and no speculative transactions are undertaken.

We have a strong balance sheet, strong cash generation, and substantial available liquidity. At the year end, our committed facilities totalled approximately GBP670m, based on exchange rates at that time, with the earliest maturity being in 2023. The financial covenants on these facilities remain for leverage (net debt/adjusted EBITDA on a pre-IFRS 16 basis) to not be more than three times and for adjusted interest cover to be not less than four times. The Group continues to operate well within its banking covenants with significant headroom under each financial ratio.

At 31 March 2021, net debt was GBP256.2m, a combination of GBP325.3m of debt, GBP65.0m of IFRS 16 lease liabilities and GBP134.1m of cash held around the world to finance local operations. Net debt at 31 March 2020 was GBP375.3m.

The gearing ratio at the year end (net debt to EBITDA) was 0.76 times (2020: 1.13 times) on a post-IFRS 16 basis and 0.59 times (2020: 1.00 times) on a pre-IFRS 16 basis. Net debt (on a post-IFRS 16 basis) represented 3% (2020: 5%) of the Group's year-end market capitalisation.

Pensions update

The Group accounts for post-retirement benefits in accordance with IAS 19 Employee Benefits. The Consolidated Balance Sheet reflects the net deficit on our pension plans at 31 March 2021 based on the market value of assets at that date and the valuation of liabilities using year end AA corporate bond yields.

We closed the two UK defined benefit (DB) plans to new members in 2002. In December 2014 we ceased future accrual within these plans with future pension benefits earned within the Group's Defined Contribution (DC) pension arrangements.

On an IAS 19 basis the deficit on the Group's DB plans at the 2021 year end increased to GBP22.5m (2020: GBP5.2m) before the related deferred tax asset. The value of plan assets increased to GBP333.1m (2020: GBP298.8m). Plan liabilities increased to GBP355.6m (2020: GBP304.0m) due to movements in the discount rate and inflation rate. The discount rate decreased from 2.55% to 1.95%, as bond markets stabilised following the disruption at 31 March 2020 caused by the COVID-19 pandemic. The inflation rate increased from 2.5% to 3.2% reflecting economic conditions at the balance sheet date.

The plans' actuarial valuation reviews, rather than the accounting basis, determine any cash deficit payments by Halma. In 2021 these contributions amounted to GBP13.7m, consistent with our expectations, following a triennial actuarial valuation of the two UK pension plans in 2017/18, after which cash contributions increasing at 7% per annum aimed at eliminating the deficit were agreed with the trustees. In the unlikely event that these payments result in a surplus on winding up, the Group has an unconditional right to a refund under the plan rules.

New accounting standards and interpretations

The Group adopted new accounting standards and interpretations with effect from 1 April 2020 with no material impact on the Group's financial statements. After the year-end, the IFRS Interpretations Committee published a paper covering the finalisation of their agenda decision regarding configuration and customisation costs in Cloud Computing Arrangements (Software as a Service, 'SaaS') under IAS 38. This agenda decision offers clarification of the treatment of implementation costs which is relevant to the Group's ongoing technology investments and Company operational technology upgrades which are predominantly SaaS arrangements with third party implementation partners.

The Interpretations Committee paper clarifies that much of the implementation costs that previously may have been capitalised as intangible assets are now likely to be expensed against profit immediately for SaaS arrangements unless they meet the definition of separate intangible assets. Going forward this will result in an acceleration of costs recorded in the Income Statement in relation to these projects. There was no material financial impact in this or previous financial years, and we estimate an impact of up to GBP12m for the financial year ending 31 March 2022, with subsequent years' costs being lower where amortisation will not occur. The timing and quantum of cash outflows for these projects will be unchanged.

Conclusion

We delivered a robust financial performance, despite the challenges of the COVID-19 pandemic, delivering a record profit and strong cash flow, while increasing our investment in future growth opportunities and further strengthening our balance sheet. I am proud of the commitment shown by my colleagues in our finance and risk teams in helping our companies to respond to the opportunities and challenges in the year by ensuring that they had rapid access to actionable insights, and in maintaining high standards of control. I would like to thank all of them for their hard work in difficult circumstances.

Marc Ronchetti

Chief Financial Officer

Process Safety Sector Review

Process Safety's technologies protect people and assets at work, across a range of critical industrial and logistics operations.

Sector overview and growth drivers

Process Safety has a key part to play in making critical industrial processes safer and cleaner. We provide innovative and increasingly digitally connected products to address our customers' needs around the

world. The longer-term growth prospects for our Process Safety businesses are supported by increasing health and safety regulation and associated legal risks, higher environmental standards to address the

challenges of climate change, the continuing move toward renewable energy sources and conserving scarce natural resources, and growing industrialisation and automation.

Our ability to find new applications in adjacent industrial markets is broadening the sector's growth opportunities, both organically and through acquisition. In Gas Detection, market growth over the longer term is being driven by ongoing industrialisation, increasing safety and environmental regulatory standards, greater demand for continuous monitoring of harmful substances to protect worker safety, and the accelerated use of wireless sensors and connected devices.

Increasing automation, higher electrical safety standards and the increasing need for remote safety monitoring are growth drivers for our Industrial Access Control, Pressure Management and Safe Storage and Transfer businesses which serve a diverse range of industrial end markets. The COVID-19 pandemic has also further accelerated the growth of e-commerce and therefore of the logistics sector which supports it; this offers opportunities to help our customers ensure safe working environments in these highly automated facilities.

Several of our businesses, notably in Pressure Management, operate in markets driven by the increasing need for energy and other critical resources. Global energy demand is estimated to have reduced by 4% in 2020 as a result of the COVID-19 pandemic, but is forecast to increase by 4.6% in 2021, and to continue to grow over the long term, with forecasts putting demand in 2050 at between 25% and 50% higher than current levels. Renewable energy is expected to account for an ever greater proportion of consumption, and in absolute terms to be at least three times greater in 2050 than currently. The drive towards net zero emissions offers our companies good opportunities for growth, both in helping our customers minimise their environmental impact, and as we repurpose our solutions to support more sustainable energy solutions.

Performance

It was a challenging year for Process Safety, with significant reductions in end-market demand resulting in declines in both revenue and profitability. There was a gradual improvement in trading as the year progressed but overall performance was affected by the lower oil price, which resulted in a fall in demand for higher margin safety products in the US onshore oil and gas-related businesses, by site access issues as a result of the pandemic, and a slowdown in new projects in Gas Detection. The sector's performance year-on-year also reflected a strong prior year comparative in Industrial Access Control (which included a large logistics contract), although this was partly offset by good demand in this segment from logistics and paper and packaging and electrical safety customers. The sector's companies continued to invest in new connected technologies and in diversification away from the oil market, which together with the development of products and services to help customers address increasing safety and environmental regulation, are expected to improve performance in the longer term.

Revenue was GBP188.8m (2020: GBP200.0m), 5.6% lower. This included a benefit from the acquisition in the prior year of Sensit Technologies, and revenue was 11.9% lower on an organic constant currency basis. Performance improved as the year progressed, resulting in a small decline in reported revenue in the second half and a moderate reduction on an organic constant currency basis.

Revenue trends on a regional basis reflected the trends in the underlying markets. Mainland Europe grew, benefiting from the fulfilment of significant Safe Storage and Transfer projects, some of which had been in the order book prior to the start of the financial year. However, revenue in the USA declined substantially on an organic constant currency basis, due to weakness in the onshore oil and gas market and the strong comparative in Industrial Access Control, although on a reported basis this was partly offset by a good contribution from the Sensit acquisition. The UK delivered a resilient performance, but a slowing of large project approvals affected Asia Pacific, particularly in the first half, and our businesses in the Middle East. Performance improved in each of the USA, the UK and Asia Pacific in the second half.

Profit was GBP36.6m (2020: GBP43.9m), representing a decline of 16.7%, or 21.5% on an organic constant currency basis. Gross margin was broadly stable, with favourable product mix in Gas Detection offsetting the effect of a decline in higher margin Pressure Management business. Return on Sales, however, decreased to 19.4% (2020: 21.9%), despite good overhead control, reflecting lower revenues from higher Return on Sales businesses in US onshore oil and gas and Industrial Access Control, one-off restructuring costs of GBP1.9m, and a GBP1.6m increase in R&D expenditure, to 4.8% of revenues (2020: 3.7%) as the sector continued to invest in opportunities for future growth such as connected safety monitoring solutions.

There were no acquisitions or disposals in the year, and the net impact of prior year acquisitions was a positive effect of 6.9% on revenue and 5.3% on profit. Currency exchange movements had a small negative effect, of 0.6% on revenue and 0.5% on profit. Since the year end one small bolt-on acquisition has been completed, with our industrial access control company, Fortress, buying the assets and IP associated with monitored safety valves from FluidSentry Pty Ltd in Australia for A$0.6m. This acquisition provides complementary products which ensure the safety of hydraulic and pneumatics systems whose usage is growing as automation increases.

Looking ahead we anticipate a recovery in the Process Safety end markets which, in addition to new product introductions, should return Process Safety to growth in the year ahead.

Infrastructure Safety Sector Review

Infrastructure Safety's technologies save lives, protect infrastructure and enable safe movement.

Sector overview and growth drivers

The Infrastructure Safety sector makes the world a safer place by protecting commercial, industrial and public buildings and spaces and enabling safe movement. Our products and services address increasing life safety concerns, more stringent regulatory requirements and accelerating demand for connected infrastructure systems globally.

Growth in our Infrastructure Safety markets is supported by expanding and ageing populations, increasing urbanisation, and tighter safety regulation. We expect the agility of our companies in responding to the evolution of these trends to support our growth over the long term.

While we see the growth of cities as likely to continue, given their economic, community and cultural attractions, new ways of living and working are emerging as a result of the pandemic. These are likely to lead to the acceleration and amplification of a number of existing trends in our markets, and changes in the way urban environments evolve, which we expect to provide opportunities for our companies. They include upgrades of office space to allow for better collaboration, health, and flexibility; changes in the use of buildings; 'green' initiatives to improve energy use; increased remote monitoring and efficiency through digital innovation and connected products; and the use of touchless technologies to support safety and hygiene.

We expect these trends to support continued growth across our Infrastructure Safety markets. For example, the greater need to manage health and safety concerns as a result of the COVID-19 pandemic is already presenting new opportunities for our People and Vehicle Flow businesses to enhance safety through automated access solutions as people move around, and increasing population densities are driving demand for our solutions which address congestion and help to increase the capacity of existing infrastructure.

In global fire detection and suppression equipment, growth is expected to be sustained by more stringent regulation and increased adherence to that regulation, driven both by rising standards from national and supranational regulators and by international initiatives such as the International Fire Safety Standards (IFSS) coalition. In addition, infrastructure upgrades are expected to support greater demand for connected, intelligent building systems to drive greater efficiency and support remote monitoring and control.

The medium-term forecasts for the global elevator market also reflect the trends of rising urbanisation and increasing spending on maintenance and modernisation of existing equipment and increased accessibility requirements. Opportunities are also emerging to enhance efficiency through remote monitoring and preventative maintenance, and safety and hygiene through touchless operation.

Performance

Infrastructure Safety delivered a solid performance, with profit growing both on a reported and organic constant currency basis, despite a modest decline in revenue. Having been affected in the early part of the year by difficulties of gaining physical access to sites and the impact of furlough (or local equivalent schemes) on the availability of installers, the sector's performance improved substantially as the year progressed. This was partly driven by the easing of lockdown restrictions and the furloughed employees returning to work. It also reflected the agility of our companies in responding to changes in demand and new customer requirements. For example, a number of companies accelerated online training and remote installation support in response to restrictions on physical access, while the People and Vehicle Flow subsector delivered a robust performance, driven by their agility in responding to increased demand from logistics customers for door automation technologies, and by refocusing their business to address a mix shift away from sliding door sensors, to sensors which can be retrofitted to swing doors and other touchless entry devices. Our companies also successfully positioned themselves to take advantage of new regulatory requirements in a number of geographies, notably in the Fire businesses in the UK and the Middle East, and for new opportunities emerging in highway safety, and in retrofitting buildings, for example in Area of Refuge (part of the Elevator Safety subsector).

Revenue of GBP450.5m (2020: GBP466.5m) was 3.4% lower, and 4.7% lower on an organic constant currency basis. This included a substantially improved performance in the second half of the year, with organic constant currency revenue increasing by 6.7%.

The stronger second half performance included a substantial recovery in Fire Detection, particularly in the UK market, and in Security Sensors, as well as a strong performance in People and Vehicle Flow. As a result, revenue in the UK market grew modestly for the year as a whole, both on a reported and organic constant currency basis, despite the substantial impact of the pandemic in the early part of the year. Revenue in Mainland Europe saw a modest decline; however, the region returned to growth in the second half, with an improvement in revenue trends across all subsectors and a strong performance in People and Vehicle Flow, driven by its swift response to changes in customer demand. Asia Pacific revenue also saw a modest decline; its performance included a contribution from the acquisition of Ampac in Australia last year. In the USA, revenue declined, but momentum improved in the second half, and there were strong performances in People and Vehicle Flow and Area of Refuge. Revenue fell in other regions largely due to the prolonged impact of the COVID-19 pandemic in these territories.

Profit grew by 2.7% to GBP110.6m (2020: GBP107.7m), or by 1.2% on an organic constant currency basis, and Return on Sales increased to 24.5% (2020: 23.1%). This growth reflected an increase in gross margin from a favourable mix of business, good overhead control and, following last year's substantial increase, a modest reduction in R&D expenditure as a percentage of revenue, to 5.7% (2020: 6.1%).

There were no acquisitions or disposals in the year, and the impact of prior year acquisitions was a positive effect of 1.6% on revenue and 1.8% on profit. Currency exchange movements had a small negative effect, of 0.3%, on both revenue and profit.

In January 2021, we announced that we had agreed a minority investment and strategic partnership with Oxbotica, a global leader in autonomous vehicle software. This strengthens the existing relationship between Oxbotica and the Halma company Navtech, which specialises in radar technology for transport applications.

Since the year end, one small bolt-on acquisition has been completed, with the Argus wireless fire safety company purchasing its Italian distributor for EUR0.5m.

Looking ahead we expect a continuation of the recovery we saw in the second half albeit against the potential headwinds relating to ongoing supply chain challenges and risk of further COVID-19 related disruption.

Environmental & Analysis Sector Review

Environmental & Analysis' technologies are used to preserve, monitor and protect the environment, ensure the availability, quality and sustainability of natural resources, and to analyse materials in a wide range of applications.

Sector overview and growth drivers

The Environmental & Analysis sector is focused on growing a safer, cleaner and healthier future by improving the quality and availability of life-critical natural resources such as air, water and food, by protecting the environment and wellbeing, and by delivering high-technology solutions in a wide variety of end markets based on our digital, optical and optoelectronic expertise. Our valuable solutions are technically differentiated through strong application knowledge, supported by high quality and customer responsiveness.

The sector's long-term growth is sustained by rising demand for life-critical resources, increasing environmental regulations and worldwide population growth with rising standards of living. It is underpinned by our ability to design, develop and manufacture innovative, high-technology detection and analysis solutions with applications in a wide range of sectors. These include water and waste water management and treatment (including water utilities); gas analysis and detection; food, beverage, agriculture and aquaculture; medical and bio-medical; communications; research and science; and a variety of industrial markets.

Population growth is driving increasing demand for life-critical natural resources, such as clean water and air, and these resources are under growing pressure as a result of factors including climate change, increasing urbanisation and industrialisation, and changing patterns of land use. For example, according to the United Nations, water use has been growing globally at more than twice the rate of population increase in the last century, and 2.3 billion people live in water-stressed countries, of which 721 million people live in high and critically water-stressed countries. In terms of waste water, according to the United Nations, less than 50% of domestic waste water is safely treated (based on 24 out of 75 reporting countries, most of which are high-income countries), and over 3 billion people are at risk because the health of their rivers, lakes and groundwater is unknown. This drives demand for our water testing and disinfection technologies, and for our water network monitoring solutions which help to ensure integrity of networks.

Similarly, air pollution is a growing health risk in both developing and developed countries. The World Health Organization (WHO) estimates that air pollution kills seven million people worldwide every year. Their data shows that nine out of ten people breathe air that exceeds WHO guideline limits containing high levels of pollutants, with low- and middle-income countries suffering from the highest exposures. This underpins the growth opportunities for our spectroscopy solutions which assist in the precise detection of contaminates, and for our environmental solutions which support emissions and air quality monitoring and calibrate pollution monitoring equipment.

Performance

Environmental & Analysis delivered a robust performance. While there was a modest decline in revenue, this compared to a very strong performance in the prior year, and profit grew strongly, both on a reported and organic constant currency basis. The agility of our companies in responding to market changes contributed to the sector's performance in the year. Examples included our gas flowmeter business, Alicat, rapidly adapting its technology to make components to meet urgent new requirements from ventilator manufacturers in response to the COVID-19 pandemic, and Optical Analysis businesses addressing new opportunities which are emerging in end-to-end measurement and calibration solutions for use in a wide range of applications, including in laboratory instrumentation, consumer electronics, biopharmaceuticals and food and beverage.

Revenue of GBP308.8m (2020: GBP325.0m) was 5.0% lower, which partly reflected the loss of revenue from the disposal of Fiberguide Industries, Inc. in the third quarter of the year. On an organic constant currency basis, revenue declined by 2.7% against a very strong comparator, with the prior year having benefited both from delivery of some large photonics projects within the Optical Analysis subsector in the second half of the year, and increased spending by UK water companies ahead of the end of the previous five year Asset Management Plan (AMP) investment cycle.

There was strong revenue growth in Asia Pacific across all three subsectors, driven by recovery in China, and Mainland Europe grew, benefiting from a good performance in Water Analysis and Treatment. The USA, the sector's largest region, delivered a resilient performance, given a strong prior year comparative and the phasing of some large photonics projects; underlying growth trends in photonics remain strong, given increasing demand from customers to help them build their digital and data capabilities. The UK saw a substantial decline in revenue, given a very strong performance last year, and delayed demand in UK water due to the start of the new AMP cycle and COVID-19 related access restrictions; we continue to see good opportunities for growth in this market, driven by higher regulatory standards for clean water networks and an increasing focus on waste water management. Other regions, which represent less than 5% of sector revenue, also saw a decline, mainly due to the non-repeat of large water testing contract in Canada which had benefited the prior year.

Profit grew by 11.4% to GBP77.4m (2020: GBP69.4m), or by 14.7% on an organic constant currency basis, and Return on Sales increased substantially to 25.1% (2020: 21.4%). This reflected a benefit to gross margin from a favourable mix of business, including from some COVID-19 related and one-off orders, and very strong control of overheads. R&D expenditure remained above the Group average as a percentage of sales, at 5.4% (2020: 6.0%), reflecting continued high investment in future growth across all three subsectors.

There were no acquisitions in the year, and the net impact of prior year acquisitions and the disposal of Fiberguide Industries, Inc. was a negative effect of 0.7% on revenue and 1.2% on profit. Currency exchange movements also had a negative effect, of 1.6% on revenue and 2.1% on profit.

Since the year end, two sector companies have completed small bolt-on acquisitions. The UV Group acquired Orca GmbH, a German manufacturer of ultraviolet disinfection systems, primarily for the food and beverage sector, for an initial consideration of EUR6.2m (GBP5.3m), and Crowcon, which became part of the sector after the year end, purchased its UK flue gas analyser distribution partner, Anton Industrial Services Limited, for GBP1.9m.

Looking ahead we expect the sector to make continued progress albeit against a strong comparative with the continued contribution of some large photonics projects, in addition to the timing of the UK water infrastructure investment cycle and the continued recovery of the water testing markets. We expect Return on Sales to return to more normalised levels driven by the mix of business and growth going forward.

Medical Sector Review

Medical's technologies enhance the quality of life for patients and improve the quality of care delivered by

healthcare providers.

Sector overview and growth drivers

The Medical sector is focused on growing a healthier future by enhancing the quality of life for patients and improving the quality of care delivered by providers.

We serve niche applications in global markets providing critical components, devices, systems and therapies which are embedded in the standard of care. We look for niches where there is a 'non-discretionary' element, meaning our products and technologies are critical to the function or management of care, for example cataract surgery or cardiac monitoring, and where there is a connection between medical conditions and chronic illnesses, thereby driving potentially higher rates of demand on a sustainable basis.

The sector's long-term growth is supported by increasing demand due to worldwide population growth and ageing, and the greater prevalence of chronic illnesses. There is little evidence that people today are in better health than previous generations. We see an increase in the prevalence of common health conditions associated with ageing, which include cataracts, back and neck pain and osteoarthritis, and diabetes, as well as cardiac and pulmonary disease, depression and dementia. In addition, COVID-19 has reduced average life expectancy and will likely present continued health complications. These factors are key growth drivers for our Therapeutic Solutions businesses, given their presence in the ophthalmic surgery device, respiratory therapy and bone replacement markets.

In Healthcare Assessment, we expect the rising prevalence of cardiac, circulatory, and respiratory illness, increased health awareness and availability of healthcare to drive growth over the longer term. In addition, healthcare facilities are seeking to improve outcomes, reduce costs and ensure the safety of patients and staff, which is driving the global market for our real-time location services business.

In Life Sciences, the market for our critical fluidic components is being driven by more directed and personalised diagnostic methods combined with increased testing efficiency. North America and Europe continue to be our largest markets, with Asia Pacific exhibiting the fastest growth rate.

Performance

Medical sector companies experienced significant variations in demand in the year. Demand for products and services related to elective healthcare procedures reduced sharply. This moderated as the year progressed, reflecting an easing of the initial acute effects of the pandemic on healthcare systems including some modest improvement during the year in patient demand for elective surgeries and discretionary ophthalmic diagnosis procedures. Demand in general health diagnostics, including vital signs monitoring, and in products supporting patient oxygenation remained at a high level relative to previous years. Life Sciences businesses continued to be adversely impacted by the ongoing focus on COVID-19 testing and point-of-care diagnostics. In Health Assessment, while our location services business was affected by hospital access restrictions, it has built a strong order book, driven by the need for its healthcare customers to improve efficiency and ensure hygiene and access control.

Revenue grew by 7.0% to GBP371.3m (2020: GBP347.2m), which included a substantial contribution from current and prior year acquisitions. On an organic constant currency basis, revenue declined by 5.4%, reflecting the fall in demand for elective healthcare and diagnostic procedures which represents a majority of our Medical portfolio, partially offset by increases in patient monitoring and respiratory products.

Revenue grew in four out of five regions. The USA, which accounts for over half of sector revenues, grew strongly, benefitting from recent acquisitions, including Maxtec (part of Perma Pure), which saw a very substantial increase in demand for its oxygen analysis and delivery products. On an organic constant currency basis, the USA delivered a resilient performance given the agility of our companies in responding to the COVID-19 pandemic, with the modest decline in revenue also reflecting the mix of businesses in the region. Mainland Europe and Asia Pacific saw a similar pattern, with modest increases in reported revenue and declines on an organic constant currency basis. There was strong growth in China as the country recovered from the effects of the pandemic, driven by good commercial execution. The UK, which represents only 5% of sector revenue, delivered very strong growth, benefiting from the acquisition in the third quarter of Static Systems Group, a UK-based manufacturer of critical healthcare communication systems, for GBP43.9m, including cash acquired; revenue on an organic constant currency basis, however, saw a substantial decline. Other regions saw revenues decline, principally as a result of the effects of the COVID-19 pandemic.

Profit grew by 2.6% to GBP86.6m (2020: GBP84.4m) and declined by 10.5% on an organic constant currency basis. Return on Sales remained above the Group average at 23.3% (2020: 24.3%), with the decline reflecting the impact on gross margin of the substantial changes in business mix in the year, and a further 14% increase in research and development (R&D) investment to GBP18.8m; R&D expenditure in the year represented 5.1% of revenues (2020: 4.8%). These effects were partly offset by operational efficiencies and strong overhead control.

The impact of current and prior year acquisitions (net of prior year disposals) was a positive effect of 14.3% on revenue and 14.1% on profit. Currency exchange movements had a negative effect, of 1.9% on revenue and 1.0% on profit.

After the year end, we acquired PeriGen, Inc., whose advanced technology protects mothers and their unborn babies during childbirth, for US$58m (approximately GBP42m), expanding our presence in patient assessment and monitoring into the US perinatal care market, and further extending our analytics capabilities. The sector also completed one bolt-on acquisition, with Riester acquiring the trade and assets of RNK, a US-based digital stethoscope company, for an initial consideration of US$2.7m (GBP1.9m).

Looking ahead, we expect to continue to see a recovery in elective procedures and for there to be a decline in demand for COVID-19 related products. These factors, alongside the continued contribution from recent acquisitions, means that the sector is expected to deliver more normal levels of growth for the year ahead.

Principal Risks and Uncertainties

1. Organic Growth

Risk Owner: Andrew Williams

Gross risk level: High

Change: No Change

Risk appetite: Open

Growth enablers

   --    Digital Growth Engines 
   --    Finance, Legal & Risk 
   --    Innovation Network 
   --    International Expansion 
   --    Strategic Communications and Brand 
   --    Talent & Culture 

Risk and impact

-- Failing to deliver desired organic growth, resulting in missed expected strategic growth targets and erosion of shareholder value.

How do we manage the risk?

-- Clear Group strategy to achieve organic growth targets, supported by detailed company strategies and

seven Halma Growth Enablers with Executive Board owners.

-- Sector management ensure that the Group strategy is fulfilled through ongoing review and chairing of companies.

-- Regional hubs, for example in China and India, support local strategic growth initiatives for all companies.

   --    Annual strategic plan and budgeting process with rolling 12 month forecasting. 
   --    Remuneration of company executives and above is based on profit growth. 

-- Continued investment in R&D to drive innovation and growth with KPIs monitored at Board level.

   --    Innovation rewarded through Innovation Awards at leadership conferences. 

-- Agile business model and culture of innovation to take advantage of new growth opportunities as they arise.

-- Potential new acquisitions, partnerships and investments assessed for future organic growth prospects to align to strategy.

   --    Focus on having the best talent on board to deliver strategy and therefore organic growth. 

2. Acquisitions and Investments

Risk Owner: Andrew Williams

Gross risk level: High

Change: No Change

Risk appetite: Open

Growth enablers

   --    Finance, Legal & Risk 
   --    International Expansion 
   --    M&A 
   --    Strategic Communications and Brand 
   --    Talent & Culture 

Risk and impact

-- Failing to achieve our strategic growth target for acquisitions and investments due to insufficient opportunities being identified, poor due diligence or poor integration, resulting in erosion of shareholder value. Whilst this risk remains high, our available financial resources and performance during the last year means we are well positioned to continue our acquisition strategy going forward.

-- This risk has been updated during the year to also include strategic partnerships and minority equity investments as well as 100% equity or asset purchases.

How do we manage the risk?

-- Clarity of strategy and agile business model that allows us to take advantage of new growth opportunities

as they arise.

   --    Acquisition of companies in our existing or adjacent markets. 

-- Dedicated M&A Directors with Group Chief Executive, Chief Financial Officer and plc Board oversight, scrutiny and approval of all acquisitions.

   --    Regular reporting of the acquisition pipeline to the Executive and plc Boards. 
   --    Careful due diligence by experienced staff who bring in specialist expertise as required. 

-- Strategic transformation plans in place for new acquisitions to seek to ensure they achieve their growth potential.

-- Clear process in place to ensure successful integration from a control and compliance perspective.

   --    Internal Audit visit within nine months of acquisition to review minimum expected controls. 

-- Post-acquisition reviews are performed for all acquisitions after 12 months to ensure strategic objectives are being met and to identify learnings for future acquisitions.

-- Investment framework and model in place to capture process, approvals and oversight for minority equity investments.

   --    Regular review by the Investment Committee. 

3. Business Model and its Communication

Risk Owner: Andrew Williams

Gross risk level: High

Change: No Change

Risk appetite: Open

Growth enablers

   --    Digital Growth Engines 
   --    Finance, Legal & Risk 
   --    International Expansion 
   --    M&A 
   --    Strategic Communications and Brand 

Risk and impact

-- Failing to clearly articulate or adapt our business model as Halma grows through exploring and implementing additional or new business models, resulting in missed growth opportunities and erosion of shareholder value.

-- We have refined the communications risk reported last year to specifically cover our business model which is critical to our growth strategy, both organic and through acquisition.

How do we manage the risk?

-- Clear communication of Halma's business model and any new developments disclosed in the Annual Report and Accounts and at investor events. Regular external and internal communications to reinforce business model understanding.

-- Comprehensive expert reviews of existing and potential new markets to identify strategies with significant growth potential.

-- Identification of companies with products or markets that would have a good strategic fit for Halma. This includes start-ups, service and software companies that could help accelerate the growth of existing companies.

-- Monitoring of market trends, including customer preferences, emerging technologies and competitors.

-- Developing collaboration capabilities of every company to take advantage of identified opportunities.

-- Post-acquisition monitoring to ensure that the objective for acquiring each business has been achieved and learning opportunities identified.

-- Strategic reviews of business model at plc Board level to consider the strengths and weaknesses of the existing business model and alternative business models.

   --    Sector and Executive Boards perform reviews to identify opportunities which may require a new organisational approach. 

4. Talent and Diversity

Risk Owner: Jennifer Ward

Gross risk level: High

Change: Increased

Risk appetite: Open

Growth enablers

   --    Digital Growth Engines 
   --    Innovation Network 
   --    International Expansion 
   --    Strategic Communications and Brand 
   --    Talent & Culture 

Risk and impact

-- Not having the right talent and diversity at all levels of the organisation to deliver our strategy, resulting in reduced financial performance. The increased risk reflects retention risks emerging due to our rapid escalation through the FTSE 100, increased profile and track record of success .

How do we manage the risk?

-- Annual Performance and Development Review process for Sector and Executive Board members. Nomination Committee annual review of succession candidates and development plans.

-- Periodic assessment of diversity (gender, ethnicity and nationality), used to drive action plans at each level.

-- Annual employee engagement survey to provide insight into employee sentiment including alignment between strategy and objectives and clarity to employees about their contribution towards achieving objectives.

   --    Comprehensive recruitment processes to recruit the best and brightest talent. 

-- Development of talent and diversity across our companies, including development programmes, to give us competitive advantage and ensure we have motivated leaders to deliver our strategy.

-- Annual strategic review of sector board and company leadership talent to identify and develop future leaders. Defined competency and potential model used.

   --    Future Leaders programme to develop graduates. 

-- Senior Management reward structure aligned with strategic priorities of companies, sectors and Group. Work is continuing in this area to ensure that our reward packages are competitive, reflect our high long term growth and are benchmarked to market.

5. Innovation

Risk Owner: Inken Braunschmidt

Gross risk level: High

Change: No Change

Risk appetite: Seeking

Growth enablers

   --    Digital Growth Engines 
   --    Innovation Network 
   --    M&A 
   --    Strategic Communications and Brand 

Risk and impact

-- Failing to innovate to create new high-quality products to meet customer needs, or failure to adequately protect intellectual property, resulting in a loss of market share and poor financial performance.

How do we manage the risk?

   --    Product development is devolved to our companies who are closest to the customer. 

-- Chief Innovation and Digital Officer promotes and accelerates innovation by our companies, supporting sector management.

-- Digital innovation strategy focuses on incubation and acceleration of innovation. Supported by a champions network and partnerships.

-- Education of our companies around customer centricity and voice of the customer to feed our innovation ideation.

   --    Promotion of active collaboration of ideas and best practices between companies. 

-- Conferences and development programmes help spread ideas and best practice across the Group. Innovation awards reward and encourage innovation.

-- Review of R&D budgets and projects by sectors to ensure they are being spent most effectively in the markets where we want to participate.

   --    Halma senior management approval of all large R&D projects to ensure alignment with strategy. 
   --    Companies are encouraged to develop and protect intellectual property. 
   --    Focus on talent and retention to ensure there is sufficient expertise within the business. 

-- M&A activity is targeted to help address innovation and R&D gaps, in line with sector specific initiatives.

   --    Monitoring of key R&D and innovation metrics. 

-- Regular promotion, training and monitoring of agile or lean start-up ways of working in companies.

6. Non-compliance with Laws and Regulations

Risk Owner: Funmi Adegoke

Gross risk level: High

Change: No Change

Risk appetite: Averse

Growth enablers

   --    Finance, Legal & Risk 
   --    International Expansion 
   --    Strategic Communications and Brand 
   --    Talent & Culture 

Risk and impact

-- We are not fully compliant with relevant laws and regulations, resulting in fines, reputational damage and possible criminal liability for Halma senior management.

How do we manage the risk?

-- The board of each company is accountable for identifying and tracking what laws are relevant to their business, including any emerging or changing legislation.

   --    Group Legal identifies and tracks the most significant laws facing Halma companies. 

-- Halma policies, procedures and guidance notes created by Group Legal, setting out the Group's requirements from a compliance and regulatory perspective.

-- All employees are required to sign to confirm that they have read and understood the Halma Code of Conduct.

   --    Ongoing training and advisory programme for companies. 

-- Requirement for companies to self-report if something goes wrong in terms of legal or regulatory compliance, or if they need help.

   --    A third party whistleblowing procedure and hotline exists for all employees and contractors. 

-- Six monthly Internal Control Certifications submitted by companies include the most critical legal and regulatory compliance controls.

-- Thorough legal due diligence and acquisition support process in place. Integration process for acquisitions includes legal requirements.

   --    Appropriate levels of Group insurance cover are maintained. 

-- A crisis management plan exists to manage communications and the reputational risk for Halma and/or its companies.

   --    Periodic assurance reviews by Internal Audit. 

7. Cyber

Risk Owner: Catherine Michel

Gross risk level: High

Change: Increased

Risk appetite: Averse

Growth enablers

   --    Digital Growth Engines 
   --    Finance, Legal & Risk 
   --    International Expansion 
   --    Talent & Culture 

Risk and impact

-- Loss of digital intellectual property/data or ability to operate systems or connected devices due to internal failure or external attack. There is resulting loss of information or ability to continue operations, and therefore financial and reputational damage. The continued increase in this risk reflects the growing threat generally from cyber-crime around the world.

How do we manage the risk?

-- Clear ownership of cyber risk, with Board level expertise. The IT function reports into the Chief Technology Officer.

-- Digital control framework in place including digital growth, cyber, data protection and incident response.

   --    Halma approved services available to all companies to help them manage their cyber risks. 
   --    Monthly cyber threat reporting for all parts of the Group. 
   --    IT disaster recovery and back-up plans in place, required to be tested regularly. 
   --    Regular online IT awareness training provided for all employees who use computers. 

-- Six monthly Internal Control Certifications submitted by companies include the most critical IT controls.

   --    All employees are required to read and sign up to the IT Acceptable Use policy. 
   --    Periodic assurance reviews by Internal Audit. 
   --    Crisis communications plan and access to cyber expertise should a cyber-attack occur. 

8. Economic and Geopolitical Uncertainty

Risk Owner: Andrew Williams

Gross risk level: High

Change: No Change

Risk appetite: Cautious

Growth enablers

   --    Finance, Legal & Risk 
   --    International Expansion 
   --    Talent & Culture 

Risk and impact

-- Failure to anticipate or adapt to geopolitical changes or a recession, resulting in a decline in financial performance and an impact on the carrying value of goodwill and other assets. This risk remains elevated in certain geographies due to COVID-19 and also USA/China trade relations. Any residual risks related to Brexit are now significantly reduced.

How do we manage the risk?

-- Diverse portfolio of companies across the sectors, in multiple countries and in relatively non-cyclical global niche markets help to minimise the impact of any single event operating in one market.

-- Regular monitoring and assessment of potential risks and opportunities relating to economic or geopolitical uncertainties.

   --    Identification of any wider trends by the Halma Executive Board that require action. 
   --    Risk managed at local company level and they have the autonomy to rapidly adjust to changing circumstances. 

-- Financial strength and availability of pooled resources in Group as well as robust credit management processes in place across the Group.

   --    Knowledge of regulatory requirements that are gradually being extended globally. 
   --    Financial warning signs give earlier indications of problems. 

-- Active reduction of key customer or market concentration through new product and market diversification for both core and acquired businesses.

-- Monitoring of any changes in corporate and government investment due to macroeconomic factors.

   --    Periodic assessment of the carrying value of goodwill and other assets. 

9. Financial Controls

Risk Owner: Marc Ronchetti

Gross risk level: Medium

Change: No Change

Risk appetite: Averse

Growth enablers

   --    Finance, Legal & Risk 
   --    International Expansion 
   --    Talent & Culture 

Risk and impact

-- Failure in financial controls either on its own or via a fraud which takes advantage of a weakness, resulting in financial loss and/or misstated reported financial results.

How do we manage the risk?

-- Local directors have legal, as well as operational, responsibility as they are statutory directors of their companies. This fits with Halma's decentralised model to ensure an effective financial control environment is in place.

   --    Formal policies and procedures are in place for expected financial controls. 

-- Companies certify every six months that the most critical of these controls are operating effectively. These include segregation of duties, delegation of authorities and financial accounts preparation checks.

   --    Sector and Group Finance teams perform regular reviews of financial reporting and indicators. 

-- Six-monthly peer reviews of reported results for each company are performed to provide independent challenge.

   --    Periodic assurance reviews by Internal Audit. 
   --    A third party whistleblowing procedure and hotline exists for all employees and contractors. 

10. Climate Change and Natural Hazards

Risk Owner: Marc Ronchetti

Gross risk level: Medium

Change: Increased

Risk appetite: Averse

Growth enablers

   --    Finance, Legal & Risk 
   --    M&A 
   --    International Expansion 
   --    Strategic Communications and Brand 
   --    Talent & Culture 

Risk and impact

-- Climate change has the potential to impact the long-term success and reputation of our business in a variety of ways, from the changing macroeconomic landscape and market regulation to changes in technology and potential increased costs. We have therefore decided to include climate change for the first time this year.

-- More widely, there is a risk we are unable to respond to large scale natural hazards such as hurricanes, floods, fires or pandemics, resulting in the inability of one or more of our businesses to operate, causing financial loss and reputational damage. COVID-19 required significant focus during the year. Our companies were able to adapt quickly, make decisions locally and ensure a safe working environment for our employees.

How do we manage the risk?

-- Halma operates in end markets with strong long-term growth drivers and lower risks of shocks due to natural hazards.

   --    Sustainability is a regular agenda item for the Executive and plc Boards. 

-- Sustainability Network in place which raises the awareness of sustainability issues, including climate change, in our companies.

-- TCFD compliance work is helping to evaluate the potential impacts of climate-related risks and opportunities and determine the appropriate strategic actions.

-- All parts of the Group are required to have business continuity plans in place which are tailored to manage the specific risks they are most likely to face and these are required to be tested periodically.

-- The geographical diversity of Halma's companies reduces the impact of any single event and Halma has manufacturing capability in multiple locations which provides flexibility.

-- There is a culture of support to affected businesses from other Halma companies if the need arises.

   --    Group level oversight of IT communications infrastructure. 

-- A crisis management plan exists to manage communications and the reputational risk for Halma and/or its companies.

-- Business interruption insurance is in place where possible and appropriate to limit any financial loss that may occur.

11. Product Failure

Risk Owner: Andrew Williams

Gross risk level: Medium

Change: No Change

Risk appetite: Averse

Growth enablers

   --    Innovation Network 
   --    Strategic Communications and Brand 
   --    Talent & Culture 

Risk and impact

-- A failure in one of our products results in serious injury, death or damage to property, including due to non-compliance with product regulations, resulting in financial loss and reputational damage.

How do we manage the risk?

-- Analysis of market requirements, including safety, are made during a product design phase to ensure compliance with all regulatory requirements and customer needs.

-- Companies have strict product development and testing procedures in place to ensure quality of products and compliance with appropriate regulations.

   --    Rigorous testing of products during development and also during the manufacturing process. 

-- Clear quality requirements imposed on suppliers to ensure safety and quality checks are performed on product received.

-- Monitoring of defects and warranty returns to identify any potential safety defect which can then be rectified.

   --    Traceability of product so that batches can be identified where appropriate. 
   --    Product compliance with regulations is checked as part of due diligence for any acquisition. 

-- Terms and conditions of sale limit liability as much as practically possible and liability insurance is in place.

-- A crisis management plan exists to manage communications and the reputational risk for Halma and/or its companies.

12. Liquidity

Risk Owner: Marc Ronchetti

Gross risk level: Medium

Change: Decreased

Risk appetite: Averse

Growth enablers

   --    Finance, Legal & Risk 
   --    International Expansion 

Risk and impact

-- There is a risk that the Group's cash/funding resources are inadequate to support its activities or there is a breach of funding terms.

-- The risk was higher at this time last year as there was increased uncertainty around the impact of the COVID-19 pandemic and leverage was higher.

-- Our previous Treasury risk included both liquidity and foreign exchange. Whilst foreign exchange risk will continue to be managed as currently, we have decided that it is a well understood and expected area for financial reporting and no longer needs to be a principal risk.

How do we manage the risk?

   --    A clear financial model and conservative balance sheet strategy exists. 

-- The strong cash flow generated by the Group provides financial flexibility, together with a revolving credit facility.

-- Cash needs are monitored regularly through review of the Group cash position and a 12-month rolling forecast.

-- Liquidity forecasts are prepared covering the next three years and are updated and reviewed at least every six months.

   --    A Treasury policy provides comprehensive guidance to companies on banking and transactions. 
   --    Monthly monitoring of current and forecast covenant compliance. 

-- All drawdowns and all new or renewed sources of funding are subject to approval by the Chief Financial Officer and Head of Treasury.

   --    The currency mix of debt is reviewed annually, and on acquiring or disposing of a business. 

Going Concern Statement

The Group's business activities, together with the main trends and factors likely to affect its future development, performance and position, and the financial position of the Group as at 31 March 2021, its cash flows, liquidity position and borrowing facilities are set out in the Strategic Review. In addition, note 27 of the Annual Report and Accounts 2021 contains further information concerning the security, currency, interest rates and maturity of the Group's borrowings.

The financial statements have been prepared on a going concern basis. In adopting the going concern basis the Directors have considered all of the above factors, including potential scenarios and its principal risks as set out above. Under the potential scenarios considered, which includes a severe but plausible downside scenario, the Group remains within its debt facilities and the attached financial covenants for the foreseeable future and the Directors therefore believe, at the time of approving the financial statements, that the Company is well placed to manage its business risks successfully and remains a going concern. The key facts and assumptions in reaching this determination are summarised below.

Our financial position remains robust with committed facilities totalling approximately GBP670m which includes a GBP550m Revolving Credit Facility maturing in November 2023 of which GBP333.4m remains undrawn at the date of this report. The earliest maturity in these facilities is for GBP70.0m in January 2023. The financial covenants on these facilities are for leverage (net debt/adjusted EBITDA*) of not more than three times and for adjusted interest cover of not less than four times.

* net debt and adjusted EBITDA are on a pre-IFRS 16 basis for covenant purposes

Our base case scenario has been prepared using forecasts from each of our operating companies as well as cash outflows on acquisitions and dividends in line with pre COVID-19 levels. In addition, a severe but plausible downside scenario has been modelled showing trading at similar levels to those in the year ended 31 March 2021. This reduction in trading to that currently forecasted could be caused by further significant, unexpected COVID-19 impacts or another significant downside event. In mitigating the impacts of the downside scenario there are actions that can be taken which are entirely discretionary to the business such as acquisitions spend and dividend growth rates. In addition, the Group has demonstrated strong resilience and flexibility in the first half of the year in managing overheads which could be used to further mitigate the impacts of the downside scenario.

Neither of these scenarios result in a breach of the Group's available debt facilities or the attached covenants and accordingly the Directors believe there is no material uncertainty in the use of the going concern assumption.

Viability Statement

During the year, the Board carried out a robust assessment of the principal risks affecting the Group, including those that would threaten its business model, future performance, solvency or liquidity. The principal risks and uncertainties, including an analysis of the potential impact and mitigating actions are set out above.

The Board has assessed the viability of the Group over a three-year period, taking into account the Group's current position and the potential impact of the principal risks and uncertainties. While the Board has no reason to believe that the Group will not be viable over a longer period, it has determined that three years is an appropriate period. In drawing its conclusion, the Board has aligned the period of viability assessment with the Group's strategic planning process (a three-year period). The Board believes that this approach provides greater certainty over forecasting and, therefore, increases reliability in the modelling and stress testing of the Company's viability. In addition, a three-year horizon is typically the period over which we review our external bank facilities and is also the performance-based period over which awards granted under Halma's share-based inventive plan are measured.

In reviewing the Company's viability, the Board has identified the following factors which they believe support their assessment:

1. The Group operates in diverse and relatively non-cyclical markets.

2. There is considerable financial capacity under current facilities and the ability to raise further funds if required.

3. The decentralised nature of our Group ensures that risk is spread across our businesses and sectors, with limited exposure to any particular industry, market, geography, customer or supplier.

4. There is a strong culture of local responsibility and accountability within a robust governance and control framework.

5. An ethical approach to business is set from the top and flows throughout our business.

In making their assessment, the Board carried out a comprehensive exercise of financial modelling and stress-tested the model with a downside scenario based on the principal risks identified in the Group's annual risk assessment process. The scenarios modelled used the same assumptions as for the going concern review, as set out above, for the years ending 31 March 2022 and 31 March 2023 with further assumptions applied for the year ending 31 March 2024. The downside scenario included a reduction in trading which could be caused by a significant downside event with the addition of impacts from the Group's other principal risks such as litigation or product failure.

In both scenarios, the effect on the Group's KPls and borrowing covenants was considered, along with any mitigating factors. The Board also considered the renewal of the Revolving Credit Facility, which is due to expire in November 2023, and have assumed for the purposes of assessing the viability of the Group that this will be renewed with the same facility and covenant requirements. Based on this assessment, the Board confirms that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period to 31 March 2024.

Shareholders and stakeholder engagement

The Board oversees the Company's dialogue with shareholders. The Group Chief Executive and Chief Financial Officer have regular contact with investors and analysts. Reports prepared for the Board by the Head of Investor Relations outline the Company's dialogue with investors and analysts. The Chair is available to meet with shareholders throughout the year and the Senior Independent Director provides an alternative channel for shareholders to raise concerns, independent of executive management and the Chair. The Board attends the AGM which gives individual shareholders the opportunity to engage directly with them and raise questions about the Company. The Board's engagement with other stakeholders is set out in the Annual Report and Accounts 2021.

Responsibility Statement of the Directors on the Annual Report and Accounts

The responsibility statement below has been prepared in connection with the Company's full Annual Report and Accounts for the year to 31 March 2021. Certain parts thereof are not included within these Results.

Each of the Directors, whose names and functions are listed in the Annual Report and Accounts 2021, confirm that, to the best of their knowledge:

- The Company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 101, give a true and fair view of the assets, liabilities, financial position and profit of the Company.

- The Group financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group.

- The Directors' Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces.

This responsibility statement was approved by the Board of Directors on 10 June 2021.

 
 Andrew Williams                                                  Marc Ronchetti 
  Group Chief Executive                                            Chief Financial Officer 
 

Results for the year to 31 March 2021

Consolidated Income Statement

 
                                                     Year ended 31 March                   Year ended 31 March 
                                                                    2021                                  2020 
                                    ------------------------------------  ------------------------------------ 
                                                   Adjustments*                          Adjustments* 
                                           Before         (note                  Before         (note 
                                     adjustments*            1)    Total   adjustments*            1)    Total 
                             Notes           GBPm          GBPm     GBPm           GBPm          GBPm     GBPm 
---------------------------  -----  -------------  ------------  -------  -------------  ------------  ------- 
Continuing operations 
Revenue                          1        1,318.2             -  1,318.2        1,338.4             -  1,338.4 
---------------------------  -----  -------------  ------------  -------  -------------  ------------  ------- 
Operating profit                            288.3        (47.5)    240.8          279.2        (45.8)    233.4 
Share of loss of associate                      -             -        -          (0.1)             -    (0.1) 
Profit on disposal 
 of operations                  10              -          22.1     22.1              -           2.9      2.9 
Finance income                   4            1.0             -      1.0            0.6             -      0.6 
Finance expense                  5         (11.0)             -   (11.0)         (12.7)             -   (12.7) 
---------------------------  -----  -------------  ------------  -------  -------------  ------------  ------- 
Profit before taxation                      278.3        (25.4)    252.9          267.0        (42.9)    224.1 
Taxation                         6         (55.8)           6.2   (49.6)         (49.4)           9.7   (39.7) 
---------------------------  -----  -------------  ------------  -------  -------------  ------------  ------- 
Profit for the year              1          222.5        (19.2)    203.3          217.6        (33.2)    184.4 
---------------------------  -----  -------------  ------------  -------  -------------  ------------  ------- 
Attributable to: 
Owners of the parent                                               203.4                                 184.4 
Non-controlling interests                                          (0.1)                                     - 
---------------------------  -----  -------------  ------------  -------  -------------  ------------  ------- 
Earnings per share               2 
From continuing operations 
Basic and diluted                          58.67p                 53.61p         57.39p                 48.66p 
 
Dividends in respect 
 of the year                     7 
Paid and proposed (GBPm)                                            66.8                                  62.5 
Paid and proposed per 
 share                                                            17.65p                                16.50p 
---------------------------  -----  -------------  ------------  -------  -------------  ------------  ------- 
 

* Adjustments include the amortisation of acquired intangible assets; acquisition items; significant restructuring costs, and profit or loss on disposal of operations; and the associated taxation thereon. Note 3 provides more information on alternative performance measures.

Consolidated Statement of Comprehensive Income and Expenditure

 
                                                           Year ended  Year ended 
                                                             31 March    31 March 
                                                                 2021        2020 
                                                    Notes        GBPm        GBPm 
--------------------------------------------------  -----  ----------  ---------- 
Profit for the year                                            203 .3       184.4 
Items that will not be reclassified subsequently 
 to the Consolidated Income Statement: 
Actuarial (losses)/gains on defined benefit 
 pension plans                                                 (30.6)        22.5 
Tax relating to components of other comprehensive 
 income that will not be reclassified                   6         5.9       (4.0) 
Items that may be reclassified subsequently 
 to the Consolidated Income Statement: 
Effective portion of changes in fair value of 
 cash flow hedges                                                 1.0       (0.5) 
Deferred tax in respect of cash flow hedges 
 accounted for in the hedging reserve                   6       (0.2)         0.1 
Exchange (losses)/gains on translation of foreign 
 operations and net investment hedge                           (72.7)        29.1 
Exchange (gains)/losses on translation of foreign 
 operations recycled to the income statement 
 on disposal                                                    (2.8)         0.1 
Other comprehensive (expense)/income for the 
 year                                                          (99.4)        47.3 
--------------------------------------------------  -----  ----------  ---------- 
 
Total comprehensive income for the year                         103.9       231.7 
--------------------------------------------------  -----  ----------  ---------- 
Attributable to 
Owners of the parent                                            104.0       231.7 
Non-controlling interests                                       (0.1)           - 
--------------------------------------------------  -----  ----------  ---------- 
 

The exchange losses of GBP72.7m (2020: gains of GBP29.1m) includes gains of GBP19.9m (2020: losses of GBP11.9m) which relate to net investment hedges .

Consolidated Balance Sheet

 
                                                      31 March  31 March 
                                                          2021      2020 
                                               Notes      GBPm      GBPm 
---------------------------------------------  -----  --------  -------- 
Non-current assets 
Goodwill                                                 808.5     838.4 
Other intangible assets                                  290.0     328.4 
Property, plant and equipment                            180.8     184.3 
Interest in associates and other investments               9.3       4.8 
Retirement benefit asset                                     -       5.4 
Tax receivable                                    11      13.9         - 
Deferred tax asset                                         1.3       1.3 
---------------------------------------------  -----  --------  -------- 
                                                       1,303.8   1,362.6 
---------------------------------------------  -----  --------  -------- 
Current assets 
Inventories                                              167.8     170.6 
Trade and other receivables                              268.0     286.6 
Tax receivable                                             2.5      10.7 
Cash and bank balances                                   134.1     106.3 
Derivative financial instruments                           1.7       1.0 
---------------------------------------------  -----  --------  -------- 
                                                         574.1     575.2 
---------------------------------------------  -----  --------  -------- 
Total assets                                           1,877.9   1,937.8 
---------------------------------------------  -----  --------  -------- 
Current liabilities 
Trade and other payables                                 186.7     186.7 
Borrowings                                                 3.0      75.1 
Lease liabilities                                         13.3      13.0 
Provisions                                                35.4      28.0 
Tax liabilities                                            8.9       9.4 
Derivative financial instruments                           0.7       1.0 
---------------------------------------------  -----  --------  -------- 
                                                         248.0     313.2 
---------------------------------------------  -----  --------  -------- 
Net current assets                                       326.1     262.0 
---------------------------------------------  -----  --------  -------- 
Non-current liabilities 
Borrowings                                               322.3     345.0 
Lease liabilities                                         51.7      48.5 
Retirement benefit obligations                            22.5      10.6 
Trade and other payables                                  16.8      13.3 
Provisions                                                 8.4      21.6 
Deferred tax liabilities                                  40.6      48.7 
---------------------------------------------  -----  --------  -------- 
                                                         462.3     487.7 
---------------------------------------------  -----  --------  -------- 
Total liabilities                                        710.3     800.9 
---------------------------------------------  -----  --------  -------- 
Net assets                                             1,167.6   1,136.9 
---------------------------------------------  -----  --------  -------- 
Equity 
Share capital                                             38.0      38.0 
Share premium account                                     23.6      23.6 
Own shares                                              (20.9)    (14.3) 
Capital redemption reserve                                 0.2       0.2 
Hedging reserve                                            0.7     (0.1) 
Translation reserve                                       73.2     148.7 
Other reserves                                          (13.6)     (7.7) 
Retained earnings                                      1,065.8     949.2 
---------------------------------------------  -----  --------  -------- 
Equity attributable to owners of the Company           1,167.0   1,137.6 
---------------------------------------------  -----  --------  -------- 
Non-controlling interests                                  0.6     (0.7) 
---------------------------------------------  -----  --------  -------- 
Total equity                                           1,167.6   1,136.9 
---------------------------------------------  -----  --------  -------- 
 

The financial statements of Halma plc, company number 00040932, were approved by the Board of Directors on 10 June 2021.

 
Andrew Williams  Marc Ronchetti 
Director         Director 
 

Consolidated Statement of Changes in Equity

 
                             Share             Capital 
                    Share  premium     Own  redemption  Hedging  Translation     Other  Retained  Non-controlling 
                  capital  account  shares     reserve  reserve      reserve  reserves  earnings         interest    Total 
                     GBPm     GBPm    GBPm        GBPm     GBPm         GBPm      GBPm      GBPm             GBPm     GBPm 
----------------  -------  -------  ------  ----------  -------  -----------  --------  --------  ---------------  ------- 
At 1 April 2020      38.0     23.6  (14.3)         0.2    (0.1)        148.7     (7.7)     949.2            (0.7)  1,136.9 
Profit for the 
 year                   -        -       -           -        -            -         -     203.4            (0.1)    203.3 
Other 
comprehensive 
income and 
expense: 
Exchange loss on 
 translation of 
 foreign 
 operations and 
 net 
 investment 
 hedge                  -        -       -           -        -       (72.7)         -         -                -   (72.7) 
Exchange gains 
 on 
 translation of 
 foreign 
 operations 
 recycled 
 to income 
 statement 
 on disposal            -        -       -           -        -        (2.8)         -         -                -    (2.8) 
Actuarial losses 
 on defined 
 benefit 
 pension plans          -        -       -           -        -            -         -    (30.6)                    (30.6) 
Effective 
 portion 
 of changes in 
 fair 
 value of cash 
 flow 
 hedges                 -        -       -           -      1.0            -         -         -                -      1.0 
Tax relating to 
 components of 
 other 
 comprehensive 
 income 
 and expense            -        -       -           -    (0.2)            -         -       5.9                -      5.7 
----------------  -------  -------  ------  ----------  -------  -----------  --------  --------  ---------------  ------- 
Total other 
 comprehensive 
 income and 
 expense                -        -       -           -      0.8       (75.5)         -    (24.7)                -   (99.4) 
Dividends paid          -        -       -           -        -            -         -    (63.7)                -   (63.7) 
Share-based 
 payment 
 charge                 -        -       -           -        -            -      11.9         -                -     11.9 
Deferred tax on 
 share-based 
 payment 
 transactions           -        -       -           -        -            -     (0.4)         -                -    (0.4) 
Excess tax 
 deductions 
 related to 
 share-based 
 payments on 
 exercised 
 awards                 -        -       -           -        -            -         -       1.6                -      1.6 
Purchase of own 
 shares                 -        -  (16.2)           -        -            -         -         -                -   (16.2) 
Performance 
 share 
 plan awards 
 vested                 -        -     9.6           -        -            -    (17.4)         -                -    (7.8) 
Adjustments to 
 non-controlling 
 interest 
 arising 
 on acquisition         -        -       -           -        -            -         -         -              1.4      1.4 
----------------  -------  -------  ------  ----------  -------  -----------  --------  --------  ---------------  ------- 
At 31 March 2021     38.0     23.6  (20.9)         0.2      0.7         73.2    (13.6)   1,065.8              0.6  1,167.6 
----------------  -------  -------  ------  ----------  -------  -----------  --------  --------  ---------------  ------- 
 

Own shares are ordinary shares in Halma plc purchased by the Company and held to fulfil the Company's obligations under the Group's share plans. At 31 March 2021 the number of shares held by the Employee Benefit Trust was 891,622 (2020: 760,894). The market value of own shares was GBP21.2m (2020: GBP14.6m).

The Translation reserve is used to record the difference arising from the retranslation of the financial statements of foreign operations. The Hedging reserve is used to record the portion of the cumulative net change in fair value of cash flow hedging instruments that are deemed to be an effective hedge.

The Capital redemption reserve was created on repurchase and cancellation of the Company's own shares. The Other reserves represent the provision for the value of the Group's equity-settled share plans.

 
                             Share             Capital 
                    Share  premium     Own  redemption  Hedging  Translation     Other  Retained  Non-controlling 
                  capital  account  shares     reserve  reserve      reserve  reserves  earnings         interest    Total 
                     GBPm     GBPm    GBPm        GBPm     GBPm         GBPm      GBPm      GBPm             GBPm     GBPm 
----------------  -------  -------  ------  ----------  -------  -----------  --------  --------  ---------------  ------- 
At 1 April 2019      38.0     23.6   (4.7)         0.2      0.3        119.5     (5.6)     810.1                -    981.4 
Impact of 
changes 
in 
Accounting 
policies: 
IFRS 16 'Leases'        -        -       -           -        -            -         -     (4.0)                -    (4.0) 
----------------  -------  -------  ------  ----------  -------  -----------  --------  --------  ---------------  ------- 
Restated balance 
 at 
 1 April 2019        38.0     23.6   (4.7)         0.2      0.3        119.5     (5.6)     806.1                -    977.4 
Profit for the 
 year                   -        -       -           -        -            -         -     184.4                -    184.4 
Other 
comprehensive 
income and 
expense: 
Exchange gain on 
 translation of 
 foreign 
 operations and 
 net 
 investment 
 hedge                  -        -       -           -        -         29.1         -         -                -     29.1 
Exchange loss on 
 translation of 
 foreign 
 operations 
 recycled 
 to income 
 statement 
 on disposal            -        -       -           -        -          0.1         -         -                -      0.1 
Actuarial gains 
 on 
 defined benefit 
 pension 
 plans                  -        -       -           -        -            -         -      22.5                -     22.5 
Effective 
 portion 
 of changes in 
 fair 
 value of cash 
 flow 
 hedges                 -        -       -           -    (0.5)            -         -         -                -    (0.5) 
Tax relating to 
 components 
 of other 
 comprehensive 
 income and 
 expense                -        -       -           -      0.1            -         -     (4.0)                -    (3.9) 
----------------  -------  -------  ------  ----------  -------  -----------  --------  --------  ---------------  ------- 
Total other 
 comprehensive 
 income and 
 expense                -        -       -           -    (0.4)         29.2         -      18.5                -     47.3 
Dividends paid          -        -       -           -        -            -         -    (61.2)                -   (61.2) 
Share-based 
 payment 
 charge                 -        -       -           -        -            -      10.5         -                -     10.5 
Deferred tax on 
 share-based 
 payment 
 transactions           -        -       -           -        -            -       0.5         -                -      0.5 
Excess tax 
 deductions 
 related to 
 share-based 
 payments on 
 exercised 
 awards                 -        -       -           -        -            -         -       1.4                -      1.4 
Purchase of own 
 shares                 -        -  (16.7)           -        -            -         -         -                -   (16.7) 
Performance 
 share 
 plan awards 
 vested                 -        -     7.1           -        -            -    (13.1)         -                -    (6.0) 
Non-controlling 
 interest 
 arising on 
 acquisition            -        -       -           -        -            -         -         -            (0.7)    (0.7) 
----------------  -------  -------  ------  ----------  -------  -----------  --------  --------  ---------------  ------- 
At 31 March 2020     38.0     23.6  (14.3)         0.2    (0.1)        148.7     (7.7)     949.2            (0.7)  1,136.9 
----------------  -------  -------  ------  ----------  -------  -----------  --------  --------  ---------------  ------- 
 

Consolidated Cash Flow Statement

 
                                                                Year ended  Year ended 
                                                                  31 March    31 March 
                                                                      2021        2020 
                                                         Notes        GBPm        GBPm 
-------------------------------------------------------  -----  ----------  ---------- 
Net cash inflow from operating activities                    9       277.6       255.5 
-------------------------------------------------------  -----  ----------  ---------- 
 
Cash flows from investing activities 
Purchase of property, plant and equipment - owned 
 assets                                                             (22.8)      (31.2) 
Purchase of computer software                                        (2.8)       (2.6) 
Purchase of other intangibles                                        (1.2)       (0.3) 
Proceeds from sale of property, plant and equipment 
 and capitalised development costs                                     0.9         1.9 
Development costs capitalised                                       (15.4)      (14.7) 
Interest received                                                      0.8         0.5 
Acquisition of businesses, net of cash acquired              8      (46.4)     (232.8) 
Disposal of business                                        10        26.1         7.6 
Purchase of equity investments                                       (3.4)       (4.8) 
-------------------------------------------------------  -----  ----------  ---------- 
Net cash used in investing activities                               (64.2)     (276.4) 
-------------------------------------------------------  -----  ----------  ---------- 
 
Cash flows from financing activities 
Dividends paid                                                      (63.7)      (61.2) 
Purchase of own shares                                              (16.2)      (16.7) 
Interest paid                                                       (10.0)      (11.1) 
Proceeds from bank borrowings                                9      -            308.1 
Repayment of bank borrowings                                 9       (7.3)     (151.7) 
Repayment of loan notes                                      9      (72.2)           - 
Repayment of lease liabilities, net of interest                     (14.1)      (13.7) 
-------------------------------------------------------  -----  ----------  ---------- 
Net cash generated (used in)/from financing activities             (183.5)        53.7 
-------------------------------------------------------  -----  ----------  ---------- 
 
Increase in cash and cash equivalents                        9        29.9        32.8 
Cash and cash equivalents brought forward                            105.4        72.1 
Exchange adjustments                                                 (4.2)         0.5 
-------------------------------------------------------  -----  ----------  ---------- 
Cash and cash equivalents carried forward                    9       131.1       105.4 
-------------------------------------------------------  -----  ----------  ---------- 
 
 
                                                             Year ended  Year ended 
                                                               31 March    31 March 
                                                                   2021        2020 
                                                      Notes        GBPm        GBPm 
----------------------------------------------------  -----  ----------  ---------- 
Reconciliation of net cash flow to movement in 
 net debt 
Increase in cash and cash equivalents                              29.9        32.8 
Net cash outflow/(inflow) from repayment/(drawdown) 
 of bank borrowings                                       9         7.3     (156.4) 
Loan notes repaid                                         9        72.2         0.1 
Lease liabilities - additions including interest                 (25.0)      (18.1) 
Lease liabilities - arising on acquisition                        (0.5)       (8.2) 
Lease liabilities - extinguished on disposal                        1.8           - 
Repayment of lease liabilities                            9        16.4        15.8 
Exchange adjustments                                               17.0       (9.3) 
----------------------------------------------------  -----  ----------  ---------- 
Decrease/(increase) in net debt                                   119.1     (143.3) 
----------------------------------------------------  -----  ----------  ---------- 
Net debt brought forward                                        (375.3)     (181.7) 
Impact of changes in accounting policies - IFRS 
 16 'Leases'                                                          -      (50.3) 
----------------------------------------------------  -----  ----------  ---------- 
Restated net debt brought forward                               (375.3)     (232.0) 
----------------------------------------------------  -----  ----------  ---------- 
Net debt carried forward                                        (256.2)     (375.3) 
----------------------------------------------------  -----  ----------  ---------- 
 

Accounting Policies

Basis of presentation

The consolidated financial statements of Halma are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and have also applied International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (EU). The financial statements have also been prepared in accordance with IFRS Interpretations Committee (IFRS IC) interpretations issued and effective at the time of preparing these financial statements.

The principal Group accounting policies are explained below and have been applied consistently throughout the years ended 31 March 2021 and 31 March 2020, other than those noted below.

The Group accounts have been prepared under the historical cost convention, except as described below under the headings 'Derivative financial instruments and hedge accounting', 'Financial assets at fair value through other comprehensive income (FVOCI)', 'Pensions' and 'Business combinations and goodwill'.

New Standards and Interpretations applied for the first time in the year ended 31 March 2021

The following Standards with an effective date of 1 January 2020 have been adopted without any significant impact on the amounts reported in these financial statements:

- Amendments to IFRS 3: Definition of a Business

- Amendments to IAS 1 and IAS 8: Definition of Material

- Interest Rate Benchmark Reform - Amendments to IFRS 9, IAS 39 and IFRS 7

- Conceptual Framework: Amendments to References to the Conceptual Framework in IFRS Standards

In April 2021 the IFRS IC published its final agenda decision on Configuration and Customisation ('CC') costs in a Cloud Computing Arrangement. The agenda decision considers how a customer accounts for configuration or customisation costs where an intangible asset is not recognised in a cloud computing arrangement. The agenda decision does not have a material impact on the Group in respect of the current year or prior years. The Group is evaluating the IFRIC publication in respect of costs expected to be incurred in the next year and will update its accounting policy accordingly in the short term to reflect the agenda decision published.

New Standards and Interpretations not yet applied

At the date of authorisation of these financial statements, the following Standards and Interpretations that are potentially relevant to the Group, and which have not been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU or UK):

- Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16

- Reference to the Conceptual Framework - Amendments to IFRS 3

- Property, Plant and Equipment: Proceeds before Intended Use - Amendments to IAS 16

- Onerous Contracts - Costs of Fulfilling a Contract - Amendments to IAS 37

- Classification of Liabilities as Current or Non-current - Amendments to IAS 1

- COVID-19 Related Rent Concessions - Amendment to IFRS 16

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.

Use of Alternative performance measures (APMs)

In the reporting of the financial information, the Group uses certain measures that are not required under IFRS, the Generally Accepted Accounting Principles (GAAP) under which the Group reports. The Directors believe that Return on Total Invested Capital (ROTIC), Return on Capital Employed (ROCE), Organic growth at constant currency, Adjusted profit and earnings per share measures and Adjusted operating cash flow provide additional and more consistent measures of underlying performance to shareholders by removing non-trading items that are not closely related to the Group's trading or operating cash flows. These and other alternative performance measures are used by the Directors for internal performance analysis and incentive compensation arrangements for employees. The terms ROTIC, ROCE, organic growth at constant currency and 'adjusted' are not defined terms under IFRS and may therefore not be comparable with similarly titled measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.

The principal items which are included in adjusting items are set out below in the Group's accounting policy and in note 1. The term 'adjusted' refers to the relevant measure being reported for continuing operations excluding adjusting items.

Definitions of the Group's material alternative performance measures along with reconciliation to their IFRS equivalent measure are included in note 3.

Key accounting policies

Below we set out our key accounting policies, with a list of all other accounting policies thereafter.

Going concern

The Group's business activities, together with the main trends and factors likely to affect its future development, performance and position, and the financial position of the Group as at 31 March 2021, its cash flows, liquidity position and borrowing facilities are set out in the Strategic Review. In addition, note 27 of the Annual Report and Accounts 2021 contains further information concerning the security, currency, interest rates and maturity of the Group's borrowings.

The financial statements have been prepared on a going concern basis. In adopting the going concern basis the Directors have considered all of the above factors, including potential scenarios and its principal risks as set out above. Under the potential scenarios considered, which includes a severe but plausible downside scenario, the Group remains within its debt facilities and the attached financial covenants for the foreseeable future and the Directors therefore believe, at the time of approving the financial statements, that the Company is well placed to manage its business risks successfully and remains a going concern. The key facts and assumptions in reaching this determination are summarised below.

Our financial position remains robust with committed facilities totalling approximately GBP670m which includes a GBP550m Revolving Credit Facility maturing in November 2023 of which GBP333.4m remains undrawn at the date of this report. The earliest maturity in these facilities is for GBP70.0m in January 2023. The financial covenants on these facilities are for leverage (net debt/adjusted EBITDA*) of not more than three times and for adjusted interest cover of not less than four times.

* Net debt and adjusted EBITDA are on a pre-IFRS 16 basis for covenant purposes.

Our base case scenario has been prepared using forecasts from each of our operating companies as well as cash outflows on acquisitions and dividends in line with pre COVID-19 levels. In addition, a severe but plausible downside scenario has been modelled showing trading at similar levels to those in the year ended 31 March 2021. This reduction in trading to that currently forecasted could be caused by further significant, unexpected COVID-19 impacts or another significant downside event. In mitigating the impacts of the downside scenario there are actions that can be taken which are entirely discretionary to the business such as acquisitions spend and dividend growth rates. In addition, the Group has demonstrated strong resilience and flexibility in the first half of the year in managing overheads which could be used to further mitigate the impacts of the downside scenario.

Neither of these scenarios result in a breach of the Group's available debt facilities or the attached covenants and accordingly the Directors believe there is no material uncertainty in the use of the going concern assumption.

Business combinations and goodwill

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. The Group measures goodwill at the acquisition date as:

   -     the fair value of the consideration transferred; plus 

- the recognised amount of any non-controlling interests in the acquiree measured at the proportionate share of the value of net identifiable assets acquired; plus

   -     the fair value of the existing equity interest in the acquiree; less 

- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, are expensed as incurred. Any contingent consideration payable may be accounted for as either:

a) Consideration transferred, which is recognised at fair value at the acquisition date. If the contingent purchase consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent purchase consideration are recognised in the Consolidated Income Statement; or

b) Remuneration, which is expensed in the Consolidated Income Statement over the associated period of service. An indicator of such treatment includes when payments to employees of the acquired company are contingent on a post-acquisition event, but may be automatically forfeited on termination of employment.

For acquisitions between 4 April 2004 (the date from which the financial statements were reported under IFRS) and 2 April 2010, goodwill represents the difference between the cost of the acquisition, including acquisition costs and the fair value of the net identifiable assets acquired. Goodwill has an indefinite expected useful life and is not amortised, but is tested annually for impairment.

Goodwill is recognised as an intangible asset in the Consolidated Balance Sheet. Goodwill therefore includes non-identified intangible assets including business processes, buyer-specific synergies, know-how and workforce-related industry-specific knowledge and technical skills. Negative goodwill arising on acquisitions would be recognised directly in the Consolidated Income Statement. On closure or disposal of an acquired business, goodwill would be taken into account in determining the profit or loss on closure or disposal.

As permitted by IFRS 1, the Group elected not to apply IFRS 3 'Business Combinations' to acquisitions prior to 4 April 2004 in its consolidated accounts. As a result, the net book value of goodwill recognised as an intangible asset under UK GAAP at 3 April 2004 was brought forward unadjusted as the cost of goodwill recognised under IFRS at 4 April 2004 subject to impairment testing on that date; and goodwill that was written off to reserves prior to 28 March 1998 under UK GAAP will not be taken into account in determining the profit or loss on disposal or closure of previously acquired businesses from 4 April 2004 onwards.

Payments for contingent consideration are classified as investing activities within the consolidated cash flow statement, with movements in contingent consideration provisions after the measurement period included as a reconciling item between operating profit and cash inflow from operating activities.

Intangible assets

(a) Acquired intangible assets

An intangible resource acquired with a subsidiary undertaking is recognised as an intangible asset if it is separable from the acquired business or arises from contractual or legal rights, is expected to generate future economic benefits and its fair value can be measured reliably. Acquired intangible assets, comprising trademarks, technology and know-how and customer relationships, are amortised through the Consolidated Income Statement on a straight-line basis over their estimated economic lives of between four and twenty years. The carrying value of intangible assets is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

(b) Product development costs

Research expenditure is charged to the Consolidated Income Statement in the financial year in which it is incurred.

Development expenditure is expensed in the financial year in which it is incurred, unless it relates to the development of a new or substantially improved product, is incurred after the technical feasibility and economic viability of the product has been proven and the decision to complete the development has been taken, and can be measured reliably. Such expenditure, meeting the recognition criteria of IAS 38 'Intangible Assets', is capitalised as an intangible asset in the Consolidated Balance Sheet at cost and is amortised through the Consolidated Income Statement on a straight-line basis over its estimated economic life of three years.

Pensions

The Group makes contributions to various pension plans.

For defined benefit plans, the asset or liability recorded in the Consolidated Balance Sheet is the difference between the fair value of the plan's assets and the present value of the defined obligation at that date. The defined benefit obligation is calculated separately for each plan on an annual basis by independent actuaries using the projected unit credit method.

Actuarial gains and losses are recognised in full in the period in which they occur and are taken to other comprehensive income.

Current and past service costs, along with the impact of any settlements or curtailments, are charged to the Consolidated Income Statement. The net interest expense on pension plans' liabilities and the expected return on the plans' assets is recognised within finance expense in the Consolidated Income Statement.

Contributions to defined contribution plans are charged to the Consolidated Income Statement in the period the expense relates to.

Impairment of trade and other receivables

The Group assesses on a forward-looking basis the expected credit losses associated with its trade and other receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

The Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. In order to estimate the expected lifetime losses, the Group categorises its customers into groups with similar risk profiles and determines the historic rates of impairment for each of those categories of customer. The Group then adjusts the risk profile for each group of customers by using forward looking information, such as the government risk of default for the country in which those customers are located, and determines an overall probability of impairment for the total trade and other receivables at the balance sheet date.

Critical accounting judgements and key sources of estimation uncertainty

The preparation of Group accounts in conformity with IFRS requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experiences and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The following areas of critical accounting judgement and key estimation uncertainty have been identified as having significant risk of causing a material adjustment to the carrying amounts of assets and liabilities:

Critical accounting judgements

Goodwill impairment CGU groups

Determining whether goodwill is impaired requires management's judgement in assessing cash generating unit (CGU) groups to which goodwill should be allocated. Management allocates a new acquisition to a CGU group based on which one is expected to benefit most from that business combination. The allocation of goodwill to existing CGU groups is generally straightforward and factual, however over time as new businesses are acquired and management reporting structures change management reviews the CGU groups to ensure they are still appropriate. There have been no changes to the CGU groups in the current year.

Recoverability of non-current taxation assets

In the current year, determining the recoverability of tax assets requires management's judgement in assessing the amounts paid in relation to group financing partial exemption applicable to UK controlled foreign companies as a result of the decision by the European Commission that this constitutes state aid. Management's assessment is that this represents a contingent liability and that the GBP13.9m paid to HM Revenue & Customs (HMRC) in the year, included within non-current assets on the balance sheet, will ultimately be recovered ..

Key sources of estimation uncertainty

Contingent consideration changes in estimates

Determining the value of contingent consideration recognised as part of the acquisition of a business requires management to estimate the expected performance of the acquired business and the amount of contingent consideration that will therefore become payable. Initial estimates of expected performance are made by the management responsible for completing the acquisition and form a key component of the financial due diligence that takes place prior to completion. Subsequent measurement of contingent consideration is based on the Directors' appraisal of the acquired business's performance in the post-acquisition period and the agreement of final payments.

Intangible assets

IFRS 3 (revised) 'Business Combinations' requires that goodwill arising on the acquisition of subsidiaries is capitalised and included in intangible assets. IFRS 3 (revised) also requires the identification and valuation of other separable intangible assets at acquisition. The assumptions involved in valuing these intangible assets require the use of management estimates.

IAS 38 'Intangible Assets' requires that development costs, arising from the application of research findings or other technical knowledge to a plan or design of a new or substantially improved product, are capitalised, subject to certain criteria being met. Determining the technical feasibility and estimating the future cash flows generated by the products in development requires the use of management estimates.

The estimates made in relation to both acquired intangible assets and capitalised development costs include identification of relevant assets, future growth rates, expected inflation rates and the discount rate used. Management also make estimates of the useful economic lives of the intangible assets. Management engages third party specialists to assist with the valuation assumption in respect of acquired intangible assets.

Goodwill impairment future cash flows

The value in use calculation used to test for impairment of goodwill involves an estimation of the present value of future cash flows of CGU groups. The future cash flows are based on annual budgets and forecasts of CGUs, as approved by the Board, to which management's expectation of market-share and long-term growth rates are applied. The present value is then calculated based on management's estimate of future discount and growth rates. The Board reviews these key assumptions (market-share, long-term growth rates, and discount rates) and the sensitivity analysis around these assumptions. Management believes that there is no reasonably possible change in any of the key assumptions that would cause the carrying value of any CGU group to exceed its recoverable amount.

Defined benefit pension plan liabilities

Determining the value of the future defined benefit obligation requires estimation in respect of the assumptions used to calculate present values. These include future mortality, discount rate and inflation. Management determines these assumptions in consultation with an independent actuary.

Other accounting policies

Basis of consolidation

The Group accounts include the accounts of Halma plc and all of its subsidiary companies made up to 31 March 2021, adjusted to eliminate intra-Group transactions, balances, income and expenses. The results of subsidiary companies acquired or discontinued are included from the month of their acquisition or to the month of their discontinuation.

Investments in associates

An associate is an entity over which the Group is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee. Significant influence is the power to participate in the financial and operating policy decisions of the investee but without control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Investments in associates are carried in the Consolidated Balance Sheet at cost as adjusted by post-acquisition changes in the Group's share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group's interest in that associate (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group's share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any deficiency of the cost of acquisition below the Group's share of the fair values of the identifiable net assets of the associate at the date of acquisition (i.e. discount on acquisition) is credited in profit or loss in the year of acquisition.

Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provisioning is made for impairment.

Where the Group disposes of its entire interest in an associate a gain or loss is recognised in the income statement on the difference between the amount received on the sale of the associate less the carrying value and costs of disposal.

Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income (FVOCI) comprise equity securities which are not held for trading, and which the Group has irrevocably elected at initial recognition to recognise as FVOCI. The Group considers this classification relevant as these are strategic investments.

Financial assets at FVOCI are adjusted to the fair value of the asset at the balance sheet date with any gain or loss being recognised in other comprehensive income and held as part of other reserves. On disposal any gain or loss is recognised in other comprehensive income and the cumulative gains or losses are transferred from other reserves to retained earnings.

Other intangible assets

(a) Computer software

Computer software that is not integral to an item of property, plant or equipment is recognised separately as an intangible asset, and is amortised through the Consolidated Income Statement on a straight-line basis over its estimated economic life of between three and five years.

(b) Other intangibles

Other intangibles are amortised through the Consolidated Income Statement on a straight-line basis over their estimated economic lives of between three and five years.

Impairment of non-current assets

All non-current assets are tested for impairment whenever events or circumstances indicate that their carrying value may be impaired. Additionally, goodwill and capitalised development expenditure relating to a product that is not yet in full production are subject to an annual impairment test.

An impairment loss is recognised in the Consolidated Income Statement to the extent that an asset's carrying value exceeds its recoverable amount, which represents the higher of the asset's fair value less costs to dispose and its value in use. An asset's value in use represents the present value of the future cash flows expected to be derived from the asset or from the cash generating unit to which it relates. The present value is calculated using a pre-tax discount rate that reflects the current market assessment of the time value of money and the risks specific to the asset concerned.

Impairment losses recognised in previous periods for an asset other than goodwill are reversed if there has been a change in the estimates used to determine the asset's recoverable amount, but only to the extent that the carrying amount of the asset does not exceed its carrying amount had no impairment loss been recognised in previous periods. Such reversals are recognised in the Consolidated Income Statement. Impairment losses in respect of goodwill are not reversed.

Segmental reporting

An operating segment is a distinguishable component of the Group that is engaged in business activities from which it may earn revenues and incur expenses, and whose operating results are reviewed regularly by the Chief Operating Decision Maker (the Group Chief Executive) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Reportable segments are operating segments that either meet the thresholds and conditions set out in IFRS 8 or are considered by the Board to be appropriately designated as reportable segments. Segment result represents operating profits and includes an allocation of Head Office expenses. Segment result excludes tax and financing items. Segment assets comprise goodwill, other intangible assets, property, plant and equipment and Right of Use assets (excluding land and buildings), inventories, trade and other receivables. Segment liabilities comprise trade and other payables, provisions and other payables. Unallocated items represent land and buildings (including Right of Use assets), corporate and deferred taxation balances, defined benefit plan liabilities, contingent purchase consideration, all components of net cash/borrowings, lease liabilities and derivative financial instruments.

Inventories

Inventories and work in progress are included at the lower of cost and net realisable value. Cost is calculated either on a 'first in, first out' or an average cost basis and includes direct materials and the appropriate proportion of production and other overheads considered by the Directors to be attributable to bringing the inventories to their location and condition at the year end. Net realisable value represents the estimated selling price less all estimated costs to complete and costs to be incurred in marketing, selling and distribution.

Revenue

The Group's revenue streams are the sale of goods and services in the specialist safety, environmental technologies and health markets. The revenue streams are disaggregated into four sectors, that serve like markets. Those sectors are Process Safety, Infrastructure Safety, Environmental & Analysis and Medical.

Revenue is recognised to depict the transfer of control over promised goods or services to customers in an amount that reflects the amount of consideration specified in a contract with a customer, to which the Group expects to be entitled in exchange for those goods or services.

It is the Group's judgement that in the majority of sales there is no contract until such time as the Company satisfies its performance obligation, at which point the contract becomes the supplier's purchase order governed by the Company's terms and conditions. Where there are Master Supply Arrangements, these are typically framework agreements and do not contain clauses that would result in a contract forming under IFRS 15 until a Purchase Order is issued by the customer.

Revenue represents sales, net of estimates for variable consideration, including rights to returns, and discounts, and excluding value added tax and other sales related taxes. The amount of variable consideration is not considered to be material to the Group as a whole. The transaction price is allocated to each performance obligation on a relative standalone selling price basis.

Performance obligations are unbundled in each contractual arrangement if they are distinct from one another. There is judgement in identifying distinct performance obligations where the product could be determined to be a system, or where a combination of products and services are provided together. For the majority of the Group's activities the performance obligation is judged to be the component product or service rather than the system or combined products and services. The contract price is allocated to the distinct performance obligations based on the relative standalone selling prices of the goods or services.

The way in which the Group satisfies its performance obligations varies by business and may be on shipment, delivery, as services are rendered or on completion of services depending on the nature of product and service and terms of the contract which govern how control passes to the customer. Revenue is recognised at a point in time or over time as appropriate.

Where the Group offers warranties that are of a service nature, revenue is recognised in relation to these performance obligations over time as the services are rendered. In our judgement we believe the associated performance obligations accrue evenly across the contractual term and therefore revenue is recognised on a pro-rated basis over the length of the service period.

In a small number of instances across the Group, products have been determined to be bespoke in nature, with no alternative use. Where there is also an enforceable right to payment for work completed, the criteria for recognising revenue over time have been deemed to have been met. Revenue is recognised on an input basis as work progresses. Progress is measured with reference to the actual cost incurred as a proportion of the total costs expected to be incurred under the contract. This is not a material part of the Group's business as for the most part, where goods are bespoke in nature, it is the Group's judgement that the product can be broken down to standard component parts with little additional cost and therefore has an alternate use, or there is no enforceable right to payment for work performed. In these cases, the judgement is made that the requirements for recognising revenue over time are not met and revenue is recognised when control of the finished product passes to the customer.

Contract assets and liabilities

A contract asset is recognised when the Group's right to consideration is conditional on something other than the passage of time, for example the completion of future performance obligations under the terms of the contract with the customer.

In some instances, the Group receives payments from customers based on a billing schedule, as established in the contract, which may not match with the pattern of performance under the contract. A contract liability is only recognised on non-cancellable contracts that provide unconditional rights to payment from the customer for products and services that the Group has not yet completed providing or that it will provide in the near future. Where performance obligations are satisfied ahead of billing then a contract asset will be recognised.

Contract assets are recognised within Trade and other receivables and are assessed for impairment on a forward-looking basis using the expected lifetime losses approach, as required by IFRS 9 ('Financial Instruments').

Costs to obtain or fulfil a contract

The incremental costs of obtaining a contract with a customer are capitalised as an asset if the Group expects to recover them. Costs such as sales commissions may be incurred when the Group enters into a new contract. Costs to obtain or fulfil a contract are presented in the Consolidated Balance Sheet as assets until the performance obligation to which they relate has been met. These assets are amortised on consistent basis with how the related revenue is recognised. Costs to obtain or fulfil a contract are immaterial as at 31 March 2021 or 31 March 2020.

The Group applies the practical expedient in IFRS 15 (paragraph 94) and recognises incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset that the Group would otherwise have recognised is one year or less.

Adjusting items

When items of income or expense are material and they are relevant to an understanding of the entity's financial performance, they are disclosed separately within the financial statements. Such adjusting items include costs or reversals arising from acquisitions or disposals of businesses, including acquisition costs, creation or reversals of provisions related to changes in estimates for contingent consideration on acquisition, amortisation of acquired intangible assets, and other significant one-off items that may arise.

Taxation

Taxation comprises current and deferred tax. Tax is recognised in the Consolidated Income Statement except to the extent that it relates to items recognised directly in Total equity, in which case it too is recognised in Total equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, along with any adjustment to tax payable in respect of previous years. Taxable profit differs from net profit as reported in the Consolidated Income Statement because it excludes items that are never taxable or deductible.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes and is accounted for using the balance sheet liability method, apart from the following differences which are not provided for: goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amounts of assets and liabilities, using tax rates and laws, which are expected to apply in the year when the liability is settled, or the asset is realised. Deferred tax assets are only recognised to the extent that recovery is probable.

Foreign currencies

The Group presents its accounts in Sterling. Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates prevailing at that date. Non-monetary assets and liabilities denominated in foreign currencies are measured in terms of historical costs using the exchange rate at the date of the initial transaction. Any gain or loss arising on monetary assets and liabilities from subsequent exchange rate movements is included as an exchange gain or loss in the Consolidated Income Statement.

Net assets of overseas subsidiary companies are expressed in Sterling at the rates of exchange ruling at the end of the financial year, and trading results and cash flows at the average rates of exchange for the financial year. Goodwill arising on the acquisition of a foreign business is treated as an asset of the foreign entity and is translated at the rate of exchange ruling at the end of the financial year. Exchange gains or losses arising on these translations are taken to the Translation reserve within Total equity.

In the event that an overseas subsidiary is disposed of or closed, the profit or loss on disposal or closure will be determined after taking into account the cumulative translation difference held within the Translation reserve attributable to that subsidiary. As permitted by IFRS 1, the Group has elected to deem the translation to be GBPnil at 4 April 2004. Accordingly, the profit or loss on disposal or closure of foreign subsidiaries will not include any currency translation differences which arose before 4 April 2004.

Interest bearing loans and borrowings

Interest bearing loans and borrowings are initially recognised in the balance sheet at fair value less directly attributable transaction costs and are subsequently measured at amortised cost using the effective interest rate method.

Trade payables

Trade payables are non-interest bearing and are stated at amortised cost.

Derivative financial instruments and hedge accounting

The Group enters into derivative financial instruments to manage its exposure to foreign exchange rate risk using forward exchange contracts. The Group continues to apply the requirements of IAS 39 for hedge accounting.

Derivative financial instruments are classified as fair value through profit and loss (held for trading) unless they are in a designated hedge relationship.

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in the Consolidated Income Statement, unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the Consolidated Income Statement depends on the nature of the hedge relationship. The Group designates certain derivatives as hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges), or hedges of net investments in foreign operations.

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Cash flow hedge accounting

The Group designates certain hedging instruments as cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument has been or is expected to be highly effective in offsetting changes in fair values or cash flows of the hedged item.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion as a result of being over hedged is recognised immediately in the Consolidated Income Statement.

Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to the Consolidated Income Statement in the periods when the hedged item is recognised in the Consolidated Income Statement. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income at that time is accumulated in equity and is recognised, when the forecast transaction is ultimately recognised, in the Consolidated Income Statement. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in the Consolidated Income Statement.

Net investment hedge accounting

The Group uses foreign currency denominated borrowings as a hedge against the translation exposure on the Group's net investment in overseas companies. Where the hedge is fully effective at hedging, the variability in the net assets of such companies caused by changes in exchange rates and the changes in value of the borrowings are recognised in the Consolidated Statement of Comprehensive Income and accumulated in the Translation reserve. The ineffective part of any change in value caused by changes in exchange rates is recognised in the Consolidated Income Statement.

Employee share plans

Share-based incentives are provided to employees under the Group's share incentive plan, the performance share plan and the executive share plan.

(a) Share incentive plan

Awards of shares under the share incentive plan are made to qualifying employees depending on salary and service criteria. The shares awarded under this plan are purchased in the market by the plan's trustees at the time of the award, and are then held in trust for a minimum of three years. The costs of this plan are recognised in the Consolidated Income Statement over the three-year vesting period of the awards.

(b) Executive share plan

Under the Executive share plan, awards of shares are made to executive Directors and certain senior employees participate. Grants under this Plan are in the form of Performance Awards or Deferred Share Awards.

Performance Awards are subject to non-market-based vesting criteria, and Deferred Share Awards are subject only to continuing service of the employee. Share awards are equity-settled. The fair value of the awards at the date of grant, which is estimated to be equal to the market value, is charged to the Consolidated Income Statement on a straight-line basis over the vesting period, with appropriate adjustments being made during this period to reflect expected and actual forfeitures. The corresponding credit is to other reserves within Total equity.

(c) Cash-settled

For cash-settled awards, a liability equal to the portion of the services received is recognised at the current fair value determined at each balance sheet date.

Provisions and contingent liabilities

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of the cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received, and the amount of the receivable can be measured reliably.

Contingent liabilities are disclosed where a possible obligation dependent on uncertain future events exists as at the end of the reporting period or a present obligation for which payment either cannot be measured or is not considered to be probable is noted. Contingent liabilities are not accrued for and no contingent liability is disclosed where the possibility of payment is considered to be remote.

Deferred government grant income

Government grant income that is linked to capital expenditure is deferred to the Consolidated Balance Sheet and credited to the Consolidated Income Statement over the life of the related asset. In addition, the Group claims research and development expenditure credits arising on qualifying expenditure in its UK-based subsidiaries and shows these 'above the line' in Operating profit. Where the credits arise on expenditure that is capitalised as part of internally generated capitalised development costs, the income is deferred to the Consolidated Balance Sheet and credited to the Consolidated Income Statement over the life of the related asset in line with the policy stated above.

Operating profit

Operating profit is presented net of direct production costs, production overheads, selling costs, distribution costs and administrative expenditure. Operating profit is stated after charging restructuring costs but before the share of results of associates, profit or loss on disposal of operations, finance income and finance costs.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, deposits with an initial maturity of less than three months, and bank overdrafts that are repayable on demand.

Dividends

Dividends payable to the Company's shareholders are recognised as a liability in the period in which the distribution is approved by the Company's shareholders.

Property, plant and equipment

Property, plant and equipment is stated at historical cost less provisions for accumulated impairment and accumulated depreciation which, with the exception of freehold land which is not depreciated, is provided on a straight-line basis over each asset's estimated economic life. The principal annual rates used for this purpose are:

 
Freehold property                             2% 
--------------------------------------------  --------------- 
Leasehold improvements: 
 Long leases (more than 50 years unexpired)   2% 
Short leases (less than 50 years unexpired)   Period of lease 
--------------------------------------------  --------------- 
Plant, equipment and vehicles                 8% to 33.3% 
--------------------------------------------  --------------- 
 

Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where the Group determines the contract is, or contains, a lease a right-of-use asset and a lease liability is recognised at the lease commencement date.

The lease term is determined from the commencement date of the lease and covers the non-cancellable term. If the Group has an extension option, which it considers reasonably certain to exercise, then the lease term will be considered to extend beyond that non-cancellable period. If the Group has a termination option, which it considers it reasonably certain to exercise, then the lease term will be considered to be until the point the termination option will take effect. The Group deem that it is not reasonably certain to exercise an extension option or a termination option with an exercise date past the planning horizon of five years.

The right-of-use asset is initially measured at cost, comprising the initial amount of the lease liability plus any initial direct costs incurred and an estimate of costs to restore the underlying asset, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term unless the right-of-use asset is deemed to have a useful life shorter than the lease term. The Group has taken the practical expedient to not separate lease and non-lease components and so account for both as a single lease component.

The right-of-use assets are also subject to impairment testing under IAS 36. Refer to the previous section on Impairment of non-current assets for further details.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the incremental borrowing rate. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. Variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees are not material to the Group. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs. The lease liability is measured at amortised cost using the effective interest method by increasing the carrying amount to reflect interest on the lease liability and by reducing the carrying amount to reflect the lease payments made. The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or a rate or a change in the Group's assessment of whether it will exercise an extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the right-of-use asset.

Payments associated with short-term leases or low-value assets are recognised on a straight-line basis as an expense in the Consolidated Income Statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets mostly comprise of IT equipment and small items of office furniture. Lease payments for short-term leases, low-value assets and variable lease payments not included in the measurement of the lease liability are classified as cash flows from operating activities within the Consolidated Cash Flow Statement. The Group has classified the principal and interest portions of lease payments within financing activities.

Finance income and expenses

The Group recognises Interest income or expense using the effective interest rate method. Finance income and finance costs include:

- Interest payable on loans and borrowings.

- Net interest charge on pension plan liabilities.

- Amortisation of finance costs.

- Interest receivable in respect of cash and cash equivalents.

- Unwinding of the discount on provisions.

- Fair value movements on derivative financial instruments.

Notes to the Accounts

1 Segmental analysis and revenue from contracts with customers

Sector analysis and disaggregation of revenue

The Group has four reportable segments (Process Safety, Infrastructure Safety, Environmental & Analysis and Medical) which are defined by markets rather than product type. Each segment includes businesses with similar operating and market characteristics. These segments are consistent with the internal reporting reviewed each month by the Group Chief Executive.

Nature of goods and services

The following is a description of the principal activities - separated by reportable segments, which are defined by markets rather than product type - from which the Group generates its revenue.

Further disaggregation of sector revenue by geography and by the pattern of revenue recognition depicts how economic factors affect the timing and uncertainty of the Group's revenues.

Process Safety sector generates revenue from providing products that protect assets and people at work across a range of critical industrial and logistics operations. Products include: specialised interlocks that control critical processes safely; instruments that detect hazardous gases and analyse air quality; and explosion protection and corrosion monitoring systems. Products are generally sold separately, with contracts less than one year in length. Warranties are typically of an assurance nature. Revenue is typically recognised as control passes on delivery or despatch.

Payment is typically due within 60 days of invoice, except where a retention is held for documentation.

Infrastructure Safety sector generates revenue from providing products that protect people, property and assets and enable safe movement in public spaces. Products include: fire detection systems; specialist fire suppression systems; elevator safety systems; security sensors; and people and vehicle flow technologies. Products are generally sold separately, with contracts typically less than one year in length. Warranties are typically of an assurance nature. Revenue is recognised as control passes on delivery or despatch.

Payment is typically due within 60 days of invoice.

Environmental & Analysis generates revenue providing products and technologies that monitor and protect the environment, ensuring the quality and availability of life-critical resources, and use optical and imaging technologies in materials analysis. Products include: market-leading optical, optoelectronic and spectral imaging systems; water, air and gases monitoring technologies; and systems for water analysis and treatment. Products and services are generally sold separately. Warranties are typically of an assurance nature, but some companies within the Group offer extended warranties. Depending on the nature of the performance obligation, revenue may be recognised as control passes on delivery, despatch or as the service is delivered. Contracts are typically less than one year in length, but some companies have contracts where certain service-related performance obligations are delivered over a number of years; this can result in contract liabilities where those performance obligations are invoiced ahead of performance.

Payment is typically due within 60 days of invoice.

Medical sector generates revenue from providing products and services that enhance the quality of life for patients and improve quality of care delivered by healthcare providers. Products include: critical fluidic components used by medical diagnostics and Original Equipment Manufacturers (OEMs), laboratory devices and systems that provide valuable information to understand patient health and enable providers to make decisions across the continuum of care; technologies and solutions to enable in-vitro diagnostic systems and life-science discoveries and development; and technologies that enable positive outcomes across clinical specialties. Products are generally sold separately, and warranties are typically of an assurance nature. Depending on the nature of the performance obligation, revenue is recognised as control passes on delivery or despatch or as the service is delivered. Contracts are typically less than one year in length, but a limited number of companies have contracts where certain service-related performance obligations are delivered over a number of years; this can result in contract liabilities where those performance obligations are invoiced ahead of performance.

Payment is typically due within 60 days of invoice.

Segment revenue disaggregation (by location of external customer)

 
                                                                                Year ended 31 March 2021 
                                                       Revenue by sector and destination (all continuing 
                                                                                             operations) 
                           ----------------------------------------------------------------------------- 
                                                                            Africa, 
                                United                                     Near and 
                                States  Mainland    United                   Middle       Other 
                            of America    Europe   Kingdom  Asia Pacific       East   countries    Total 
                                  GBPm      GBPm      GBPm          GBPm       GBPm        GBPm     GBPm 
=========================  ===========  ========  ========  ============  =========  ==========  ======= 
Process Safety                    62.5      40.6      27.6          30.5       20.2         7.4    188.8 
Infrastructure Safety             97.4     138.7     111.0          69.9       17.3        16.2    450.5 
Environmental & Analysis         148.9      35.7      56.4          56.4        5.8         5.6    308.8 
Medical                          200.6      61.0      19.2          59.3       10.8        20.4    371.3 
Inter-segmental sales            (0.6)         -     (0.6)             -          -           -    (1.2) 
-------------------------  -----------  --------  --------  ------------  ---------  ----------  ------- 
Revenue for the year             508.8     276.0     213.6         216.1       54.1        49.6  1,318.2 
=========================  ===========  ========  ========  ============  =========  ==========  ======= 
 
 
                                                                                 Year ended 31 March 2020 
                                                        Revenue by sector and destination (all continuing 
                                                                                              operations) 
                           ------------------------------------------------------------------------------ 
                                                                             Africa, 
                                 United                                     Near and 
                                 States  Mainland    United                   Middle       Other 
                             of America    Europe   Kingdom  Asia Pacific       East   countries    Total 
                                   GBPm      GBPm      GBPm          GBPm       GBPm        GBPm     GBPm 
=========================  ============  ========  ========  ============  =========  ==========  ======= 
Process Safety                     67.0      39.7      28.7          33.2       21.8         9.6    200.0 
Infrastructure Safety             105.5     142.9     109.9          70.9       22.6        14.7    466.5 
Environmental & Analysis          157.3      34.3      67.2          51.9        7.1         7.2    325.0 
Medical                           180.7      59.6      15.4          57.3       11.7        22.5    347.2 
Inter-segmental sales             (0.2)     (0.1)         -             -          -           -    (0.3) 
-------------------------  ------------  --------  --------  ------------  ---------  ----------  ------- 
Revenue for the year              510.3     276.4     221.2         213.3       63.2        54.0  1,338.4 
=========================  ============  ========  ========  ============  =========  ==========  ======= 
 

Inter-segmental sales are charged at prevailing market prices and have not been disclosed separately by segment as they are not considered material. Revenue derived from the rendering of services was GBP52.6m (2020: GBP53.1m). All revenue was otherwise derived from the sale of products.

 
                                          Year ended 31 March 
                                                         2021 
=========================  ---------------------------------- 
                                            Revenue 
                               Revenue   recognised 
                            recognised   at a point     Total 
                             over time      in time   Revenue 
                                  GBPm         GBPm      GBPm 
=========================  ===========  ===========  ======== 
Process Safety                     0.6        188.2     188.8 
Infrastructure Safety              3.4        447.1     450.5 
Environmental & Analysis          69.2        239.6     308.8 
Medical                           20.6        350.7     371.3 
Inter-segmental sales                -        (1.2)     (1.2) 
-------------------------  -----------  -----------  -------- 
Revenue for the year              93.8      1,224.4   1,318.2 
=========================  ===========  ===========  ======== 
 
 
                                          Year ended 31 March 
                                                         2020 
                           ================================== 
                                            Revenue 
                               Revenue   recognised 
                            recognised   at a point     Total 
                             over time      in time   Revenue 
                                  GBPm         GBPm      GBPm 
=========================  ===========  ===========  ======== 
Process Safety                     0.7        199.3     200.0 
Infrastructure Safety              1.6        464.9     466.5 
Environmental & Analysis          67.3        257.7     325.0 
Medical                           13.0        334.2     347.2 
Inter-segmental sales                -        (0.3)     (0.3) 
-------------------------  -----------  -----------  -------- 
Revenue for the year              82.6      1,255.8   1,338.4 
=========================  ===========  ===========  ======== 
 
 
                                                     Year ended 31 March 2021 
                           -------------------------------------------------- 
                                Revenue 
                                   from                     Revenue 
                            performance                        from 
                            obligations       Revenue   performance 
                                entered    previously   obligations 
                               into and      included     satisfied 
                              satisfied            as            in 
                                 in the      contract      previous     Total 
                                   year   liabilities       periods   Revenue 
                                   GBPm          GBPm          GBPm      GBPm 
=========================  ============  ============  ============  ======== 
Process Safety                    188.1           0.7             -     188.8 
Infrastructure Safety             449.1           1.4             -     450.5 
Environmental & Analysis          302.8           6.0             -     308.8 
Medical                           365.8           5.2           0.3     371.3 
Inter-segmental sales             (1.2)             -             -     (1.2) 
-------------------------  ------------  ------------  ------------  -------- 
Revenue for the year            1,304.6          13.3           0.3   1,318.2 
=========================  ============  ============  ============  ======== 
 
 
                                                     Year ended 31 March 2020 
                           -------------------------------------------------- 
                                Revenue 
                                   from                     Revenue 
                            performance                        from 
                            obligations       Revenue   performance 
                                entered    previously   obligations 
                               into and      included     satisfied 
                              satisfied            as            in 
                                 in the      contract      previous     Total 
                                   year   liabilities       periods   Revenue 
                                   GBPm          GBPm          GBPm      GBPm 
=========================  ============  ============  ============  ======== 
Process Safety                    199.3           0.7       -           200.0 
Infrastructure Safety             465.3           1.2       -           466.5 
Environmental & Analysis          320.8           4.1           0.1     325.0 
Medical                           336.2          11.0             -     347.2 
Inter-segmental sales             (0.3)             -             -     (0.3) 
-------------------------  ------------  ------------  ------------  -------- 
Revenue for the year            1,321.3          17.0           0.1   1,338.4 
=========================  ============  ============  ============  ======== 
 

The Group has unsatisfied (or partially satisfied) performance obligations at the balance sheet date with an aggregate amount of transaction price as follows. The time bands represented present the expected timing of when the remaining transaction price will be recognised as revenue.

 
                                            Aggregate transaction price 
                                                           allocated to 
                                    unsatisfied performance obligations 
                           ============================================ 
                           31 March 
                               2021  Recognised  Recognised  Recognised 
                              Total    < 1 year   1-2 years   > 2 years 
                               GBPm        GBPm        GBPm        GBPm 
=========================  ========  ==========  ==========  ========== 
Process Safety                  1.0         0.9         0.1           - 
Infrastructure Safety          17.4        12.7         0.5         4.2 
Environmental & Analysis       15.2         6.3         2.9         6.0 
Medical                         6.7         6.3         0.4           - 
Inter-segmental sales             -           -           -           - 
-------------------------  --------  ----------  ----------  ---------- 
Total                          40.3        26.2         3.9        10.2 
=========================  ========  ==========  ==========  ========== 
 
 
                                            Aggregate transaction price 
                                                           allocated to 
                                    unsatisfied performance obligations 
                           ============================================ 
                           31 March 
                               2020  Recognised  Recognised  Recognised 
                              Total    < 1 year   1-2 years   > 2 years 
                               GBPm        GBPm        GBPm        GBPm 
=========================  ========  ==========  ==========  ========== 
Process Safety                  1.9         1.8         0.1           - 
Infrastructure Safety           4.0         3.8         0.2           - 
Environmental & Analysis       15.2         6.1         2.4         6.7 
Medical                         5.8         4.9         0.7         0.2 
Inter-segmental sales             -           -           -           - 
-------------------------  --------  ----------  ----------  ---------- 
Total                          26.9        16.6         3.4         6.9 
=========================  ========  ==========  ==========  ========== 
 
 
                                                     Profit (all continuing 
                                                                operations) 
                                                   ======================== 
                                                    Year ended   Year ended 
                                                      31 March     31 March 
                                                          2021         2020 
                                                          GBPm         GBPm 
-------------------------------------------------  -----------  ----------- 
Segment profit before allocation of adjustments* 
Process Safety                                            36.6         43.9 
Infrastructure Safety                                    110.6        107.7 
Environmental & Analysis                                  77.4         69.4 
Medical                                                   86.6         84.4 
                                                         311.2        305.4 
-------------------------------------------------  -----------  ----------- 
Segment profit after allocation of adjustments* 
Process Safety                                            30.3         38.6 
Infrastructure Safety                                     96.5         83.4 
Environmental & Analysis                                  92.2         62.6 
Medical                                                   66.8         77.9 
Segment profit                                           285.8        262.5 
Central administration costs                            (22.9)       (26.3) 
Net finance expense                                     (10.0)       (12.1) 
-------------------------------------------------  -----------  ----------- 
Group profit before taxation                             252.9        224.1 
Taxation                                                (49.6)       (39.7) 
-------------------------------------------------  -----------  ----------- 
Profit for the year                                      203.3        184.4 
-------------------------------------------------  -----------  ----------- 
 

* Adjustments include the amortisation of acquired intangible assets; acquisition items; and significant restructuring costs and profit or loss on disposal of operations. Note 3 provides more information on alternative performance measures.

The accounting policies of the reportable segments are the same as the Group's accounting policies. Acquisition transaction costs, adjustments to contingent consideration and release of fair value adjustments to inventory (collectively 'acquisition items') are recognised in the Consolidated Income Statement. Segment profit, before these acquisition items and the other adjustments, is disclosed separately on the previous page as this is the measure reported to the Group Chief Executive for the purpose of allocation of resources and assessment of segment performance. These adjustments are analysed as follows:

 
                                                                                                         Year ended 31 
                                                                                                            March 2021 
                   --------------  ------------------------------------------ 
                                                            Acquisition items 
                                   ------------------------------------------ 
                                                                                                      Disposal 
                                                                                       Total                of 
                                                                      Release   amortisation        operations 
                     Amortisation                                          of         charge               and 
                      of acquired                  Adjustments     fair value            and     restructuring 
                       intangible  Transaction   to contingent    adjustments    acquisition             (note 
                           assets        costs   consideration   to inventory          items               10)   Total 
                             GBPm         GBPm            GBPm           GBPm           GBPm              GBPm    GBPm 
-----------------  --------------  -----------  --------------  -------------  -------------  ----------------  ------ 
Process Safety              (5.5)            -               -          (0.8)          (6.3)                 -   (6.3) 
Infrastructure 
 Safety                    (11.7)            -           (2.4)              -         (14.1)                 -  (14.1) 
Environmental & 
 Analysis                   (8.6)            -             1.3              -          (7.3)              22.1    14.8 
Medical                    (16.5)        (1.9)             0.4          (1.8)         (19.8)                 -  (19.8) 
-----------------  --------------  -----------  --------------  -------------  -------------  ----------------  ------ 
Total Segment & 
 Group                     (42.3)        (1.9)           (0.7)          (2.6)         (47.5)              22.1  (25.4) 
-----------------  --------------  -----------  --------------  -------------  -------------  ----------------  ------ 
 

The transaction costs arose on the acquisition of Static Systems (GBP0.5m) during the year and costs relating to Visiometrics (GBP1.4m), both in the Medical sector.

The GBP0.7m adjustment to contingent consideration comprised: a charge of GBP2.4m in Infrastructure Safety arising from an increase in the estimate of the payables for Navtech (GBP1.5m) and FireMate (GBP0.9m); a credit of GBP1.3m in Environmental & Analysis arising from a decrease in estimate of the payables for Invenio (GBP0.8m) and Enoveo (GBP0.5m), and a credit of GBP0.4m in Medical arising from a decrease in the estimated payable for NeoMedix (GBP1.7m), offset by an increase in estimate of the payable for Infowave (GBP0.9m) and Spreo (GBP0.2m), and a charge of GBP0.2m arising from exchange differences on balances denominated in Euros.

The GBP2.6m release of fair value adjustments to inventory relates to Sensit (GBP0.8m) in Process Safety and NovaBone (GBP1.3m), Maxtec (GBP0.2m) and Static Systems (GBP0.3m) in Medical. All amounts have now been released in relation to Sensit, NovaBone, Maxtec and Static Systems.

 
                                                                                                       Year ended 
                                                                                                    31 March 2020 
                   --------------------------  -------------  ---------------------------  ---------------------- 
                                                         Acquisition items 
                                  ---------------------------------------- 
                                                                                                 Disposal 
                                                                                    Total              of 
                                                                   Release   amortisation      operations 
                    Amortisation                                        of         charge             and 
                     of acquired                 Adjustments    fair value            and   restructuring 
                      intangible  Transaction  to contingent   adjustments    acquisition           (note 
                          assets        costs  consideration  to inventory          items             10)   Total 
                            GBPm         GBPm           GBPm          GBPm           GBPm            GBPm    GBPm 
----------------   -------------  -----------  -------------  ------------  -------------  --------------  ------ 
Process Safety             (4.2)        (0.7)              -         (0.4)          (5.3)        -          (5.3) 
Infrastructure 
Safety                    (11.0)        (2.3)          (8.2)         (2.8)         (24.3)        -         (24.3) 
Environmental 
 & Analysis                (9.2)        (0.2)            2.6             -          (6.8)        -          (6.8) 
Medical                   (13.9)        (2.7)            8.1         (0.9)          (9.4)             2.9   (6.5) 
----------------   -------------  -----------  -------------  ------------  -------------  --------------  ------ 
Total Segment 
 & Group                  (38.3)        (5.9)            2.5         (4.1)         (45.8)             2.9  (42.9) 
----------------   -------------  -----------  -------------  ------------  -------------  --------------  ------ 
 
 

In the prior year, the transaction costs arose mainly on the acquisitions during that year. In Process Safety they related to the acquisition of Sensit (GBP0.7m). In Infrastructure Safety, they related to the acquisition of Ampac (GBP2.1m) and FireMate (GBP0.2m). In Environmental & Analysis, they related to the acquisition of Invenio (GBP0.1m) and Enoveo (GBP0.1m). In Medical, they mainly related to the acquisition of Infowave (GBP0.1m), NeoMedix (GBP0.1m), NovaBone (GBP1.7m), Spreo (GBP0.1m) and Maxtec (GBP0.3m).

The GBP2.5m adjustment to contingent consideration comprised: a debit in Infrastructure Safety of GBP8.2m arising from an increase in the estimate of the payable for Navtech; a credit of GBP2.6m in Environmental & Analysis arising from decreases in estimates of the payables for Mini-Cam (GBP2.6m) and Invenio (GBP0.1m), offset by an increase in estimates of the payable for Enoveo (GBP0.1m); and a credit of GBP8.1m in Medical arising from a decrease in estimates of the payables for NovaBone (GBP8.0m) and Infowave (GBP1.1m) offset by an increase in the estimate of the payable for NeoMedix (GBP1.0m).

The GBP4.1m release of fair value adjustments to inventory related to Sensit (GBP0.4m) in Process Safety, Navtech (GBP0.4m) and Ampac (GBP2.4m) in Infrastructure Safety; and NeoMedix (GBP0.3m), NovaBone (GBP0.5m), and Maxtec (GBP0.1m) in Medical. All amounts have now been released in relation to Navtech, Ampac and NeoMedix.

Information about major customers

No single customer accounts for more than 5% (2020: 5%) of the Group's revenue.

2 Earnings per ordinary share

Basic and diluted earnings per ordinary share are calculated using the weighted average of 379,157,495 shares in issue during the year (net of shares purchased by the Company and held as own shares) (2020: 379,086,833). There are no dilutive or potentially dilutive ordinary shares.

Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation of acquired intangible assets; acquisition items; restructuring costs and profit or loss on disposal of operations. The Directors consider that adjusted earnings, which constitute an alternative performance measure, represent a more consistent measure of underlying performance as it excludes amounts not directly linked with trading. A reconciliation of earnings and the effect on basic and diluted earnings per share figures is as follows:

 
                                                                                     Per ordinary 
                                                                                            share 
                                                                           ---------------------- 
                                                   Year ended  Year ended  Year ended  Year ended 
                                                     31 March    31 March    31 March    31 March 
                                                         2021        2020        2021        2020 
                                                         GBPm        GBPm       pence       pence 
-------------------------------------------------  ----------  ----------  ----------  ---------- 
Earnings from continuing operations attributable 
 to owners of the parent                                203.4       184.4       53.61       48.66 
Amortisation of acquired intangible assets 
 (after tax)                                             32.0        30.3        8.44        7.98 
Acquisition transaction costs (after tax)                 1.6         5.3        0.43        1.41 
Adjustments to contingent consideration 
 (after tax)                                              0.7       (2.5)        0.20      (0.66) 
Release of fair value adjustments to inventory 
 (after tax)                                              2.0         3.0        0.52        0.78 
Disposal of operations and restructuring 
 (after tax)                                           (17.1)       (2.9)      (4.53)      (0.78) 
Adjusted earnings attributable to owners 
 of the parent                                          222.6       217.6       58.67       57.39 
-------------------------------------------------  ----------  ----------  ----------  ---------- 
 

3 Alternative performance measures

The Board uses certain alternative performance measures to help it effectively monitor the performance of the Group. The Directors consider that these represent a more consistent measure of underlying performance by removing non-trading items that are not closely related to the Group's trading or operating cash flows. These measures include Return on Total Invested Capital (ROTIC), Return on Capital Employed (ROCE), organic growth at constant currency, Adjusted operating profit and Adjusted operating cash flow. Note 1 provides further analysis of the adjusting items in reaching adjusted profit measures.

Return on Total Invested Capital

 
                                                        31 March  31 March 
                                                            2021      2020 
                                                            GBPm      GBPm 
------------------------------------------------------  --------  -------- 
Profit after tax                                           203.3     184.4 
Adjustments(1)                                              19.2      33.2 
------------------------------------------------------  --------  -------- 
Adjusted profit after tax(1)                               222.5     217.6 
------------------------------------------------------  --------  -------- 
Total equity                                             1,167.6   1,136.9 
Add back net retirement benefit obligations                 22.5       5.2 
Less associated deferred tax assets                        (4.0)     (0.5) 
Cumulative amortisation of acquired intangible assets      297.2     283.5 
Historical adjustments to goodwill(2)                       89.5      89.5 
------------------------------------------------------  --------  -------- 
Total Invested Capital                                   1,572.8   1,514.6 
------------------------------------------------------  --------  -------- 
Average Total Invested Capital(3)                        1,543.7   1,426.5 
------------------------------------------------------  --------  -------- 
Return on Total Invested Capital (ROTIC)(4)                14.4%     15.3% 
------------------------------------------------------  --------  -------- 
 

Return on Capital Employed

 
                                                         31 March  31 March 
                                                             2021      2020 
                                                             GBPm      GBPm 
-------------------------------------------------------  --------  -------- 
Profit before tax                                           252.9     224.1 
Adjustments(1)                                               25.4      42.9 
Net finance costs                                            10.0      12.1 
Lease interest                                              (2.3)     (2.1) 
=======================================================  ========  ======== 
Adjusted operating profit(1) after share of results of 
 associates and lease interest                              286.0     277.0 
-------------------------------------------------------  --------  -------- 
Computer software costs within intangible assets              6.0       5.9 
Capitalised development costs within intangible assets       38.9      36.1 
Other intangibles within intangible assets                    3.4       3.1 
Property, plant and equipment                               180.8     184.3 
Inventories                                                 167.8     170.6 
Trade and other receivables                                 268.0     286.6 
Trade and other payables                                  (186.7)   (186.7) 
Lease liabilities                                          (13.3)    (13.0) 
Provisions                                                 (35.4)    (28.0) 
Net current tax receivable                                    7.5       1.3 
Non-current trade and other payables                       (16.8)    (13.3) 
Non-current provisions                                      (8.4)    (21.6) 
Non-current lease liabilities                              (51.7)    (48.5) 
Add back contingent purchase consideration                   29.4      40.1 
=======================================================  ========  ======== 
Capital Employed                                            389.5     416.9 
-------------------------------------------------------  --------  -------- 
Average Capital Employed(3)                                 403.2     387.9 
-------------------------------------------------------  --------  -------- 
Return on Capital Employed (ROCE)(4)                        70.9%     71.4% 
-------------------------------------------------------  --------  -------- 
 

1 Adjustments include the amortisation of acquired intangible assets; acquisition items; and significant restructuring costs and profit or loss on disposal of operations. Where after-tax measures, these also include the associated taxation on adjusting items. Note 1 provides more information on these items.

2 Includes goodwill amortised prior to 3 April 2004 and goodwill taken to reserves.

3 The ROTIC and ROCE measures are expressed as a percentage of the average of the current and prior year's Total Invested Capital and Capital Employed respectively. Using an average as the denominator is considered to be more representative. The 1 April 2019 Total Invested Capital and Capital Employed balances were GBP1,338.3m and GBP358.9m respectively.

4 The ROTIC and ROCE measures are calculated as Adjusted profit after tax divided by Average Total Invested Capital and Adjusted operating profit after share of results of associates and lease interest divided by Average Capital Employed respectively.

Organic growth at constant currency

Organic growth measures the change in revenue and profit from continuing Group operations. This measure equalises the effect of acquisitions by:

a. removing from the year of acquisition their entire revenue and profit before taxation;

b. in the following year, removing the revenue and profit for the number of months equivalent to the pre-acquisition period in the prior year; and

c. removing from the year prior to acquisition, any revenue generated by sales to the acquired company which would have been eliminated on consolidation had the acquired company been owned for that period.

The results of disposals are removed from the prior period reported revenue and profit before taxation.

Constant currency measures the change in revenue and profit excluding the effects of currency movements. The measure restates the current year's revenue and profit at last year's exchange rates.

Organic growth at constant currency has been calculated for the Group as follows:

Group

 
                                                                                                 Adjusted* 
                                                                                                    profit 
                                                                                                    before 
                                                                Revenue                           taxation 
                                       ----------  ----------  --------  ----------  ----------  --------- 
                                       Year ended  Year ended            Year ended  Year ended 
                                         31 March    31 March              31 March    31 March 
                                             2021        2020                  2021        2020 
                                             GBPm        GBPm  % growth        GBPm        GBPm   % growth 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Continuing operations                     1,318.2     1,338.4    (1.5)%       278.3       267.0       4.2% 
Acquired and disposed revenue/profit       (72.4)       (4.5)                (12.6)       (0.6) 
=====================================  ==========  ==========  ========  ==========  ==========  ========= 
Organic growth                            1,245.8     1,333.9    (6.6)%       265.7       266.4     (0.3)% 
Constant currency adjustment                 14.0           -                   2.6           - 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Organic growth at constant 
 currency                                 1,259.8     1,333.9    (5.6)%       268.3       266.4       0.7% 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
 

Sector Organic growth at constant currency

Organic growth at constant currency is calculated for each segment using the same method as described above.

 
Process Safety                                                                                   Adjusted* 
                                                                                                   segment 
                                                                Revenue                             profit 
                                       ----------  ----------  --------  ----------  ----------  --------- 
                                       Year ended  Year ended            Year ended  Year ended 
                                         31 March    31 March              31 March    31 March 
                                             2021        2020                  2021        2020 
                                             GBPm        GBPm  % growth        GBPm        GBPm   % growth 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Continuing operations                       188.8       200.0    (5.6)%        36.6        43.9    (16.7)% 
Acquisition and currency adjustments       (12.5)           -                 (2.2)           - 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Organic growth at constant 
 currency                                   176.3       200.0   (11.9)%        34.4        43.9    (21.5)% 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
 
 
Infrastructure Safety                                                                            Adjusted* 
                                                                                                   segment 
                                                                Revenue                             profit 
                                       ----------  ----------  --------  ----------  ----------  --------- 
                                       Year ended  Year ended            Year ended  Year ended 
                                         31 March    31 March              31 March    31 March 
                                             2021        2020                  2021        2020 
                                             GBPm        GBPm  % growth        GBPm        GBPm   % growth 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Continuing operations                       450.5       466.5    (3.4)%       110.6       107.7       2.7% 
Acquisition and currency adjustments        (7.4)       (1.6)                 (1.7)           - 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Organic growth at constant 
 currency                                   443.1       464.9    (4.7)%       108.9       107.7       1.2% 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
 
 
Environmental & Analysis                                                                         Adjusted* 
                                                                                                   segment 
                                                                Revenue                             profit 
                                       ----------  ----------  --------  ----------  ----------  --------- 
                                       Year ended  Year ended            Year ended  Year ended 
                                         31 March    31 March              31 March    31 March 
                                             2021        2020                  2021        2020 
                                             GBPm        GBPm  % growth        GBPm        GBPm   % growth 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Continuing operations                       308.8       325.0    (5.0)%        77.4        69.4      11.4% 
Acquisition and currency adjustments          4.5       (2.9)                   1.4       (0.7) 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Organic growth at constant 
 currency                                   313.3       322.1    (2.7)%        78.8        68.7      14.7% 
-------------------------------------  ----------  ----------  --------  ----------  ----------  --------- 
 
 
Medical                                                                                  Adjusted* 
                                                                                           segment 
                                                        Revenue                             profit 
                               ----------  ----------  --------  ----------  ----------  --------- 
                               Year ended  Year ended            Year ended  Year ended 
                                 31 March    31 March              31 March    31 March 
                                     2021        2020                  2021        2020 
                                     GBPm        GBPm  % growth        GBPm        GBPm   % growth 
-----------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Continuing operations               371.3       347.2      7.0%        86.6        84.4       2.6% 
Acquisition and disposal and 
 currency adjustments              (43.0)           -                (11.0)         0.1 
-----------------------------  ----------  ----------  --------  ----------  ----------  --------- 
Organic growth at constant 
 currency                           328.3       347.2    (5.4)%        75.6        84.5    (10.5)% 
-----------------------------  ----------  ----------  --------  ----------  ----------  --------- 
 

* Adjustments include in the current and prior year the amortisation of acquired intangible assets; acquisition items and significant restructuring costs and profit or loss on disposal of operations.

Adjusted operating profit

 
                                             Year ended  Year ended 
                                               31 March    31 March 
                                                   2021        2020 
                                                   GBPm        GBPm 
-------------------------------------------  ----------  ---------- 
Operating profit                                  240.8       233.4 
Add back: 
Acquisition items (note 1)                          5.2         7.5 
Amortisation of acquired intangible assets         42.3        38.3 
Adjusted operating profit                         288.3       279.2 
-------------------------------------------  ----------  ---------- 
 

Adjusted operating cash flow

 
                                                           Year ended  Year ended 
                                                             31 March    31 March 
                                                                 2021        2020 
                                                                 GBPm        GBPm 
---------------------------------------------------------  ----------  ---------- 
Net cash from operating activities (note 9)                     277.6       255.5 
Add back: 
Net acquisition costs paid                                        2.4         5.2 
Taxes paid                                                       53.8        52.4 
Proceeds from sale of property, plant and equipment               0.9         1.9 
Share awards vested not settled by own shares                     7.8         6.0 
Less: 
Purchase of property, plant and equipment                      (22.8)      (31.2) 
Purchase of computer software and other intangibles             (4.0)       (2.9) 
Development costs capitalised                                  (15.4)      (14.7) 
=========================================================  ==========  ========== 
Adjusted operating cash flow                                    300.3       272.2 
---------------------------------------------------------  ----------  ---------- 
Cash conversion % (adjusted operating cash flow/adjusted 
 operating profit)                                               104%         97% 
---------------------------------------------------------  ----------  ---------- 
 

4 Finance income

 
                                                          Year ended  Year ended 
                                                            31 March    31 March 
                                                                2021        2020 
                                                                GBPm        GBPm 
--------------------------------------------------------  ----------  ---------- 
Interest receivable                                              0.8         0.6 
Net interest credit on pension plan liabilities                  0.1           - 
Fair value movement on derivative financial instruments          0.1           - 
--------------------------------------------------------  ----------  ---------- 
                                                                 1.0         0.6 
--------------------------------------------------------  ----------  ---------- 
 

5 Finance expense

 
                                                          Year ended  Year ended 
                                                            31 March    31 March 
                                                                2021        2020 
                                                                GBPm        GBPm 
--------------------------------------------------------  ----------  ---------- 
Interest payable on borrowings                                   7.7         8.7 
Interest payable on lease obligations                            2.3         2.1 
Amortisation of finance costs                                    0.7         0.7 
Net interest charge on pension plan liabilities                    -         0.8 
Other interest payable                                           0.1         0.2 
--------------------------------------------------------  ----------  ---------- 
                                                                10.8        12.5 
Fair value movement on derivative financial instruments          0.2         0.2 
                                                                11.0        12.7 
--------------------------------------------------------  ----------  ---------- 
 

6 Taxation

 
                                                            Year ended  Year ended 
                                                              31 March    31 March 
                                                                  2021        2020 
                                                                  GBPm        GBPm 
----------------------------------------------------------  ----------  ---------- 
Current tax 
UK corporation tax at 19% (2020: 19%)                             11.5        12.3 
Overseas taxation                                                 40.7        30.5 
Adjustments in respect of prior years                              1.7       (2.9) 
----------------------------------------------------------  ----------  ---------- 
Total current tax charge                                          53.9        39.9 
----------------------------------------------------------  ----------  ---------- 
Deferred tax 
Origination and reversal of timing differences                   (4.4)       (0.4) 
Adjustments in respect of prior years                              0.1         0.2 
----------------------------------------------------------  ----------  ---------- 
Total deferred tax credit                                        (4.3)       (0.2) 
----------------------------------------------------------  ----------  ---------- 
Total tax charge recognised in the Consolidated Income 
 Statement                                                        49.6        39.7 
----------------------------------------------------------  ----------  ---------- 
Reconciliation of the effective tax rate: 
Profit before tax                                                252.9       224.1 
Tax at the UK corporation tax rate of 19% (2020: 19%)             48.1        42.6 
Overseas tax rate differences                                      6.3         6.1 
Effect of intra-group financing                                  (6.5)       (6.2) 
Tax incentives, exemptions and credits (including patent 
 box, R&D and High-Tech status)                                  (4.4)       (3.8) 
Permanent differences                                              4.3         3.7 
Adjustments in respect of prior years                              1.8       (2.7) 
----------------------------------------------------------  ----------  ---------- 
Total tax recognised in the Consolidated Income Statement         49.6        39.7 
----------------------------------------------------------  ----------  ---------- 
Effective tax rate                                               19.6%       17.7% 
----------------------------------------------------------  ----------  ---------- 
 
 
                                       Year ended  Year ended 
                                         31 March    31 March 
                                             2021        2020 
                                             GBPm        GBPm 
-------------------------------------  ----------  ---------- 
Adjusted* profit before tax                 278.3       267.0 
Total tax charge on adjusted* profit         55.8        49.4 
-------------------------------------  ----------  ---------- 
Effective tax rate                          20.1%       18.5% 
-------------------------------------  ----------  ---------- 
 

* Adjustments include the amortisation of acquired intangible assets, acquisition items, significant restructuring costs and profit or loss on disposal of operations. Note 3 provides more information on alternative performance measures.

The Group's future Effective Tax Rate (ETR) will mainly depend on the geographic mix of profits and whether there are any changes to tax legislation in the Group's most significant countries of operations. The UK government announced in the Budget on 3 March 2021 an intention to increase the UK corporation tax rate from 19% to 25% with effect from 1 April 2023. This change will impact the value of our UK deferred tax balances as well as the tax charged on UK profits from the effective date.

In addition to the amount charged to the Consolidated Income Statement, the following amounts relating to tax have been recognised directly in the Consolidated Statement of Comprehensive Income and Expenditure:

 
                                                          Year ended  Year ended 
                                                            31 March    31 March 
                                                                2021        2020 
                                                                GBPm        GBPm 
--------------------------------------------------------  ----------  ---------- 
Current tax 
Retirement benefit obligations                                 (2.5)           - 
Deferred tax 
Retirement benefit obligations                                 (3.4)         4.0 
Effective portion of changes in fair value of cash flow 
 hedges                                                          0.2       (0.1) 
                                                               (5.7)         3.9 
--------------------------------------------------------  ----------  ---------- 
 

In addition to the amounts charged to the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income and Expenditure, the following amounts relating to tax have been recognised directly in equity:

 
                                                             Year ended  Year ended 
                                                               31 March    31 March 
                                                                   2021        2020 
                                                                   GBPm        GBPm 
-----------------------------------------------------------  ----------  ---------- 
Current tax 
Excess tax deductions related to share-based payments 
 on exercised awards                                              (1.6)       (1.4) 
Deferred tax 
Change in estimated excess tax deductions related to 
 share-based payments                                               0.4       (0.5) 
Impact of changes in accounting policies: IFRS 16 'Leases'            -       (0.9) 
-----------------------------------------------------------  ----------  ---------- 
                                                                  (1.2)       (2.8) 
-----------------------------------------------------------  ----------  ---------- 
 

7 Dividends

 
                                                                Per ordinary 
                                                                       share 
                                                      ---------------------- 
                                                      Year ended  Year ended  Year ended  Year ended 
                                                        31 March    31 March    31 March    31 March 
                                                            2021        2020        2021        2020 
                                                           pence       pence        GBPm        GBPm 
----------------------------------------------------  ----------  ----------  ----------  ---------- 
Amounts recognised as distributions to shareholders 
 in the year 
Final dividend for the year ended 31 March 
 2020 (31 March 2019)                                       9.96        9.60        37.7        36.4 
Interim dividend for the year ended 31 March 
 2021 (31 March 2020)                                       6.87        6.54        26.0        24.8 
----------------------------------------------------  ----------  ----------  ----------  ---------- 
                                                           16.83       16.14        63.7        61.2 
----------------------------------------------------  ----------  ----------  ----------  ---------- 
Dividends declared in respect of the year 
Interim dividend for the year ended 31 March 
 2021 (31 March 2020)                                       6.87        6.54        26.0        24.8 
Proposed final dividend for the year ended 
 31 March 2021 (31 March 2020)                             10.78        9.96        40.8        37.7 
----------------------------------------------------  ----------  ----------  ----------  ---------- 
                                                           17.65       16.50        66.8        62.5 
----------------------------------------------------  ----------  ----------  ----------  ---------- 
 

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 22 July 2021 and has not been included as a liability in these financial statements.

8 Acquisitions

In accounting for acquisitions, adjustments are made to the book values of the net assets of the companies acquired to reflect their fair values to the Group. Acquired inventories are valued at fair value adopting Group bases and any liabilities for warranties relating to past trading are recognised. Other previously unrecognised assets and liabilities at acquisition are included and accounting policies are aligned with those of the Group where appropriate.

During the year ended 31 March 2021, the Group completed the acquisition of the Static Systems Group.

Below are summaries of the assets acquired and liabilities assumed and the purchase consideration of:

a) the total of acquisitions;

b) Static Systems Group; and

c) the aggregate adjustments arising on prior year acquisitions.

Due to their contractual dates, the fair value of receivables acquired (shown below) approximate to the gross contractual amounts receivable. The amount of gross contractual receivables not expected to be recovered is immaterial.

There are no material contingent liabilities recognised in accordance with paragraph 23 of IFRS 3 (revised).

The combined fair value adjustments made for the acquisitions above under IFRS 3, excluding acquired intangible assets recognised and deferred taxation thereon, decreased the goodwill recognised by GBP1.3m (2020: GBP2.7m increase).

As at the date of approval of the financial statements, the acquisition accounting for all prior year acquisitions is complete. The accounting for the current year acquisitions is provisional; relating to finalisation of certain provisional balances.

a) Total of acquisitions

 
                                                                 Total 
                                                                  GBPm 
--------------------------------------------------------------  ------ 
Non-current assets 
Intangible assets                                                 15.4 
Property, plant and equipment                                      3.5 
Current assets 
Inventories                                                        2.0 
Trade and other receivables                                        2.5 
Cash and cash equivalents                                          7.9 
--------------------------------------------------------------  ------ 
Total assets                                                      31.3 
--------------------------------------------------------------  ------ 
Current liabilities 
Trade and other payables                                         (3.7) 
Lease liabilities                                                (0.2) 
Provisions                                                       (0.1) 
Corporation tax                                                  (0.2) 
Non-current liabilities 
Lease liabilities                                                (0.3) 
Provisions                                                       (3.2) 
Deferred tax                                                     (2.5) 
--------------------------------------------------------------  ------ 
Total liabilities                                               (10.2) 
--------------------------------------------------------------  ------ 
Net assets of businesses acquired                                 21.1 
--------------------------------------------------------------  ------ 
Non-controlling interest                                         (1.4) 
--------------------------------------------------------------  ------ 
 
Initial cash consideration paid                                   37.0 
Additional amounts paid in respect of cash acquired and other 
 adjustments                                                       6.9 
Total consideration                                               43.9 
==============================================================  ====== 
 
Goodwill arising on acquisitions (current year)                   20.6 
Goodwill arising on acquisitions (prior year)                      3.6 
Total goodwill                                                    24.2 
--------------------------------------------------------------  ------ 
 

Analysis of cash outflow in the Consolidated Cash Flow Statement

 
                                                              Year ended  Year ended 
                                                                31 March    31 March 
                                                                    2021        2020 
                                                                    GBPm        GBPm 
------------------------------------------------------------  ----------  ---------- 
Initial cash consideration paid                                     37.0       226.2 
Cash acquired on acquisitions                                      (7.9)       (8.0) 
Initial cash consideration adjustment and other amounts 
 paid to vendors on current year acquisitions                        6.9         4.1 
Contingent consideration paid and loan notes repaid in 
 cash in relation to prior year acquisitions*                       10.4        10.5 
------------------------------------------------------------  ----------  ---------- 
Net cash outflow relating to acquisitions (per Consolidated 
 Cash Flow Statement)                                               46.4       232.8 
------------------------------------------------------------  ----------  ---------- 
 

* The GBP10.4m comprises GBP9.9m contingent consideration paid and GBP0.5m other amounts in respect of prior period acquisitions all of which had been provided in the prior period's financial statements.

b) Static Systems Group

 
                                                                Total 
                                                                 GBPm 
--------------------------------------------------------------  ----- 
Non-current assets 
Intangible assets                                                15.4 
Property, plant and equipment                                     3.6 
Current assets 
Inventories                                                       2.0 
Trade and other receivables                                       2.4 
Cash and cash equivalents                                         7.9 
--------------------------------------------------------------  ----- 
Total assets                                                     31.3 
==============================================================  ===== 
Current liabilities 
Trade and other payables                                        (3.9) 
Lease liabilities                                               (0.2) 
Provisions                                                      (0.1) 
Corporation tax payable                                         (0.2) 
Non-current liabilities 
Lease liabilities                                               (0.3) 
Deferred tax                                                    (3.3) 
--------------------------------------------------------------  ----- 
Total liabilities                                               (8.0) 
--------------------------------------------------------------  ----- 
Net assets of business acquired                                  23.3 
--------------------------------------------------------------  ----- 
 
Initial cash consideration paid                                  37.0 
Additional amounts paid in respect of cash acquired and other 
 adjustments                                                      6.9 
Total consideration                                              43.9 
--------------------------------------------------------------  ----- 
 
Goodwill arising on acquisition                                  20.6 
--------------------------------------------------------------  ----- 
 

On 18 December 2020, the Group acquired the Static Systems Group ('Static Systems') for an initial cash consideration of GBP37.0m adjustable for cash acquired and other adjustments. The adjustment was determined to be GBP6.9m. The acquisition comprised of the entire share capital of Static Systems Holdings Limited and its subsidiary Static Systems Group Limited (formerly Static Systems Group Plc).

Static Systems, based in Wolverhampton, UK, is a designer, manufacturer and installer of critical communication systems, which are central to UK healthcare trusts' patient care infrastructure. Its technology enables hospital patients to alert healthcare specialists in an emergency, protecting lives and decreasing the response time of care provided. The company continues to run under its own management team and has become part of the Group's Medical sector.

The excess of the fair value of the consideration paid over the fair value of the assets acquired is represented by customer related intangibles of GBP7.3m; trade name of GBP2.2m and technology related intangibles of GBP5.9m; with residual goodwill arising of GBP20.6m. The goodwill represents:

a) the technical expertise of the acquired workforce;

b) the opportunity to leverage this expertise across some of Halma's businesses through future technologies; and

c) the ability to provide a route to the UK healthcare market for certain existing products and services within the Group's Medical sector.

Static Systems contributed GBP6.6m of revenue and GBP1.0m of profit after tax for the year ended 31 March 2021.

If this acquisition had been held since the start of the financial year, it is estimated that the Group's reported revenue and profit after tax would have been GBP14.9m higher and GBP1.7m higher respectively.

Acquisition costs totalling GBP0.5m were recorded in the Consolidated Income Statement.

The goodwill arising on the Static Systems acquisition is not expected to be deductible for tax purposes.

c) Adjustments in respect of prior year acquisitions

 
                                                                  Total 
                                                                   GBPm 
----------------------------------------------------------------  ----- 
Current liabilities 
Trade and other payables                                            0.2 
Non-current liabilities 
Provisions                                                        (3.2) 
Deferred tax                                                        0.8 
Total liabilities                                                 (2.2) 
----------------------------------------------------------------  ----- 
Net adjustments to assets of businesses acquired in prior years   (2.2) 
----------------------------------------------------------------  ----- 
Non-controlling interest                                          (1.4) 
----------------------------------------------------------------  ----- 
 
Adjustment to goodwill                                              3.6 
----------------------------------------------------------------  ----- 
 

In finalising the acquisition accounting for the prior year acquisition of NeoMedix, an adjustment of GBP3.2m was made to include a legal provision in relation to a case in existence at the acquisition date. There was an adjustment made to decrease the related deferred tax liability of GBP0.7m. Overall this resulted in an increase in goodwill of GBP2.5m.

In finalising the acquisition accounting for the prior year acquisition of Ampac, an adjustment of GBP0.2m was made to decrease trade and other payables and GBP0.1m was made to reduce deferred tax. Overall this resulted in a corresponding decrease in goodwill of GBP0.3m.

In finalising the acquisition accounting for the prior year acquisition of FireMate, a correction of the calculation of non-controlling interest was made resulting in an increase in goodwill of GBP1.4m.

The adjustments were not material and as such the comparative balance sheet was not restated; instead the adjustments have been made through the current year.

9 Notes to the Consolidated Cash Flow Statement

 
                                                               Year ended  Year ended 
                                                                 31 March    31 March 
                                                                     2021        2020 
                                                                     GBPm        GBPm 
-------------------------------------------------------------  ----------  ---------- 
Reconciliation of profit from operations to net cash 
 inflow from operating activities: 
Profit on continuing operations before finance income 
 and expense, share of results of associate 
 and profit on disposal of operations                               240.8       233.4 
Financial instruments at fair value through profit or 
 loss                                                                   -         0.1 
Depreciation and impairment of property, plant and equipment         37.8        35.8 
Amortisation and impairment of computer software                      2.8         2.2 
Amortisation of capitalised development costs and other 
 intangibles                                                          8.3         8.4 
Impairment of capitalised development costs                           1.9         5.2 
Amortisation of acquired intangible assets                           42.3        38.3 
Share-based payment expense in excess of amounts paid                 3.7         4.8 
Payments to defined benefit pension plans net of charge            (13.1)      (12.5) 
Loss/(profit) on sale of property, plant and equipment 
 and computer software                                                0.7       (0.1) 
-------------------------------------------------------------  ----------  ---------- 
Operating cash flows before movement in working capital             325.2       315.6 
Increase in inventories                                             (6.7)       (5.1) 
Decrease/(increase) in receivables                                    4.3       (9.0) 
Increase in payables and provisions                                   7.9         8.9 
Revision to estimate of, and exchange differences arising 
 on, contingent consideration payable                                 0.7       (2.5) 
-------------------------------------------------------------  ----------  ---------- 
Cash generated from operations                                      331.4       307.9 
Taxation paid                                                      (53.8)      (52.4) 
-------------------------------------------------------------  ----------  ---------- 
Net cash inflow from operating activities                           277.6       255.5 
-------------------------------------------------------------  ----------  ---------- 
 
 
                                              Year ended  Year ended 
                                                31 March    31 March 
                                                    2021        2020 
                                                    GBPm        GBPm 
--------------------------------------------  ----------  ---------- 
Analysis of cash and cash equivalents 
Cash and bank balances                             134.1       106.3 
Overdrafts (included in current borrowings)        (3.0)       (0.9) 
--------------------------------------------  ----------  ---------- 
Cash and cash equivalents                          131.1       105.4 
--------------------------------------------  ----------  ---------- 
 
 
                                            Net cash/ 
                            1 April   Cash     (debt)     Net (cash)/  Loan notes                 Exchange  31 March 
                               2020   flow   acquired   debt disposed      repaid  Additions   adjustments      2021 
                               GBPm   GBPm       GBPm            GBPm        GBPm       GBPm          GBPm      GBPm 
--------------------------  -------  -----  ---------  --------------  ----------  ---------  ------------  -------- 
Analysis of net debt 
Cash and bank balances        106.3   24.5        7.9           (0.4)           -          -         (4.2)     134.1 
Overdrafts                    (0.9)  (2.1)          -               -           -          -             -     (3.0) 
--------------------------  -------  -----  ---------  --------------  ----------  ---------  ------------  -------- 
Cash and cash equivalents     105.4   22.4        7.9           (0.4)           -          -         (4.2)     131.1 
Loan notes falling due 
 within one year             (74.2)      -          -               -        72.2          -           2.0         - 
Loan notes falling due 
 after more than one 
 year                       (108.6)      -          -               -           -          -           3.3   (105.3) 
Bank loans falling due 
 after more than one 
 year                       (236.4)    7.3          -               -           -          -          12.1   (217.0) 
Lease liabilities            (61.5)   16.4      (0.5)             1.8           -     (25.0)           3.8    (65.0) 
--------------------------  -------  -----  ---------  --------------  ----------  ---------  ------------  -------- 
Total net debt              (375.3)   46.1        7.4             1.4        72.2     (25.0)          17.0   (256.2) 
--------------------------  -------  -----  ---------  --------------  ----------  ---------  ------------  -------- 
 

The net increase in cash and cash equivalents of GBP29.9m comprised cash inflow of GBP22.4m, cash acquired of GBP7.9m and cash disposed of GBP0.4m.

The net cash outflow from loan notes of GBP72.2m arose on the maturity of the first tranche of USPP loan notes in January 2021.

The net cash outflow from bank loans of GBP7.3m comprised repayments of GBP7.3m.

Reconciliation of movements of the Group's liabilities from financing activities

Liabilities from financing activities are those for which cash flows were, or will be, classified as cash flows from financing activities in the Consolidated Cash Flow Statement.

 
                                                                                                   Trade and 
                                                                                     Total    other payables 
                                                                               liabilities           falling 
                                                                            from financing        due within 
                                         Borrowings   Leases   Overdraft        activities          one year 
                                               GBPm     GBPm        GBPm              GBPm              GBPm 
--------------------------------------  -----------  -------  ----------  ----------------  ---------------- 
 At 1 April 2019                              253.8     50.3         9.1             313.2             164.8 
 Cash flows from financing activities         156.3   (15.8)           -             140.5             (9.0) 
 Acquisition of subsidiaries                      -      8.2           -               8.2              11.4 
 Exchange adjustments                           9.1      0.7           -               9.8               0.5 
 Other changes*                                   -     18.1       (8.2)               9.9              19.0 
--------------------------------------  -----------  -------  ----------  ----------------  ---------------- 
 At 31 March 2020                             419.2     61.5         0.9             481.6             186.7 
--------------------------------------  -----------  -------  ----------  ----------------  ---------------- 
 Cash flows from financing activities        (79.5)   (16.4)           -            (95.9)             (7.8) 
 Acquisition/disposal of subsidiaries             -    (1.3)           -             (1.3)               2.7 
 Exchange adjustments                        (17.4)    (3.8)           -            (21.2)             (5.2) 
 Other changes*                                   -     25.0         2.1              27.1              10.3 
--------------------------------------  -----------  -------  ----------  ----------------  ---------------- 
 At 31 March 2021                             322.3     65.0         3.0             390.3             186.7 
--------------------------------------  -----------  -------  ----------  ----------------  ---------------- 
 

* Other changes include movements in overdraft which is treated as cash, interest accruals, reclassifications from non-current to current liabilities, lease additions and other movements in working capital balances.

10 Disposal of operations

During the current year the Group recognised a profit on disposal of operations of GBP22.1m (2020: GBP2.9m), which comprised the following:

On 17 December 2020, the Group disposed of its entire interest in Fiberguide Industries, Inc. to a third party for proceeds of US$37.6m (GBP27.6m). This transaction resulted in the recognition of a gain in the Consolidated Income Statement as follows:

 
                                                                  GBPm 
---------------------------------------------------------------  ----- 
Proceeds of disposal                                              27.6 
Less: net assets on disposal (including deferred tax)            (3.9) 
Less: allocation of goodwill disposed                            (3.8) 
Less: costs of disposal                                          (1.1) 
Add: foreign exchange gain recycled to the Consolidated Income 
 Statement on disposal                                             2.8 
---------------------------------------------------------------  ----- 
Profit on disposal                                                21.6 
---------------------------------------------------------------  ----- 
 

On 26 March 2021, OneThird B.V., a company that was incorporated to spin-out the food technology start-up business from Ocean Insight, issued new shares for EUR0.8m (GBP0.7m) to external investors that reduced the Group's ownership interest from 60% to 35.3% resulting in a gain on deemed disposal of GBP0.5m (net of disposal costs of GBP0.4m). Following the partial disposal OneThird B.V. meets the tests to be accounted for as an associate.

Cash received on disposal of operations in the year of GBP26.1m comprised proceeds from the sale of Fiberguide Industries Inc., of GBP27.6m, less GBP1.1m of disposal costs, less disposal costs of GBP0.4m relating to the spin-out and partial disposal of OneThird B.V..

In the prior year, in January 2020, the Group disposed of its entire interest in Optomed Oy to third parties for sale proceeds of GBP7.6m less disposal costs of GBP0.4m. GBP0.8m was also received from escrow relating to the previous sale of Accudynamics.

11 Contingent liabilities

Group financing exemptions applicable to UK controlled foreign companies

On 24 November 2017, the European Commission (EC) published an opening decision that the United Kingdom controlled foreign company ('CFC') group financing partial exemption ('FCPE') constitutes State Aid. On 2 April 2019, the EC's final decision concluded that the FCPE rules, as they applied up to 31 December 2018, constitute State Aid. As previously reported, the Group has benefitted from the FCPE with the total benefit for the periods from 1 April 2013 to 31 December 2018 being approximately GBP15.4m in respect of tax.

Appeals have been made by the UK government, the Group and other UK-based groups to annul the EC decision. Notwithstanding these appeals, under EU law, the UK government is required to commence collection proceedings. In January 2021, the Group received a Charging Notice from HM Revenue & Customs (HMRC) for GBP13.9m assessed for the period from 1 April 2016 to 31 December 2018. The Group has appealed against the notice but as there is no right of postponement the amount charged was paid in full in February 2021. In February 2021, the Group received confirmation from HMRC that it was not a beneficiary of State Aid for the period from 1 April 2013 to 31 March 2016.

The final impact on the Group remains uncertain. However, based on its current assessment, the Group considers that the appeal will be successful and therefore GBP13.9m is included within non-current assets on the Consolidated Balance Sheet to reflect the Group's view that the amount paid will ultimately be recovered.

In April 2021, a Charging Notice for GBP0.8m was received. The GBP0.8m comprised interest on the GBP13.9m assessment noted above and the interest was paid in May 2021.

The Group's maximum potential exposure at 31 March 2021 in respect of recoverability of non-current assets is GBP13.9m.

Other contingent liabilities

The Group has widespread global operations and is consequently a defendant in many legal, tax and customs proceedings incidental to those operations. In addition, there are contingent liabilities arising in the normal course of business in respect of indemnities, warranties and guarantees. These contingent liabilities are not considered to be unusual or material in the context of the normal operating activities of the Group. Provisions have been recognised in accordance with the Group accounting policies where required. None of these claims are expected to result in a material gain or loss to the Group.

12 Events subsequent to end of reporting period

From 1 April 2021, the Group aligned its organisational structure and financial reporting with our purpose and focus on safety, environmental and health markets. The three sectors are called Safety, Environmental & Analysis, and Medical. Each sector is led by a Sector CEO and small sector support team. Process Safety has been combined with Infrastructure Safety to form a single Safety sector, with the exception of the Group's two Gas sensor companies (Crowcon and Sensit), which have moved from Process Safety to Environmental & Analysis. We will report on the basis of this revised structure in the Interim Statement for the six months ending 30 September 2021.

On 27 April 2021, the Group acquired PeriGen, Inc., (PeriGen), based in North Carolina, USA. PeriGen's advanced technology protects mothers and their unborn babies by alerting doctors, midwives and nurses to potential problems during childbirth. The cash consideration for PeriGen was US$58m (approximately GBP42m), on a cash and debt free basis. A detailed purchase price allocation exercise is currently being performed to calculate the goodwill arising on acquisition. The company continues to run under its own management team and has become part of the Group's Medical sector.

The Group has also acquired the following bolt-on acquisitions.

On 1 April 2021, Fortress Interlocks Pty Limited, an industrial access control company in the Group's Safety sector, bought the assets and IP associated with monitored safety valves from FluidSentry Pty in Australia for consideration of A$0.6m (GBP0.3m).

On 26 April 2021, Argus Security S.R.L., a fire safety company in the Group's Safety sector, purchased its Italian distributor for consideration of EUR0.5m (GBP0.4m).

On 30 April 2021, Crowcon Detection Instruments Limited, a company in the Group's Environmental & Analysis sector purchased its UK flue gas analyser distribution partner, Anton Industrial Services Limited, for consideration of GBP1.9m.

On 3 May 2021, the Group acquired Orca GmbH, a German manufacturer of ultraviolet disinfection systems, primarily for the food and beverage sector, for an initial consideration of EUR6.2m (GBP5.3m). T he maximum contingent consideration payable is EUR2.5m (GBP2.2m) based on profit-based targets for the years ending 31 March 2022, 31 March 2023 and 31 March 2024. The company has become part of the Group's Environmental & Analysis sector.

On 7 May 2021 , Rudolf Riester GmbH, a company in the Group's Medical sector acquired RNK, a US-based digital stethoscope company, for an initial consideration of US$2.7m (GBP1.9m).

There were no other known material non-adjusting events which occurred between the end of the reporting period and prior to the authorisation of these financial statements on 10 June 2021.

13 Related party transactions

Trading transactions

 
                                         Year ended  Year ended 
                                           31 March    31 March 
                                               2021        2020 
                                               GBPm        GBPm 
---------------------------------------  ----------  ---------- 
Associated companies 
Transactions with associated companies 
Purchases from associated companies               -         1.0 
Balances with associated companies 
Amounts due to associated companies               -           - 
---------------------------------------  ----------  ---------- 
 
Other related parties 
Balances with other related parties 
Amounts due to other related parties              -           - 
---------------------------------------  ----------  ---------- 
 

All the transactions above are on an arm's length basis and on standard business terms.

Remuneration of key management personnel

The remuneration of the Directors and executive Board members, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 'Related Party Disclosures'. Further information about the remuneration of individual Directors is provided in the audited part of the Annual Remuneration Report in the Annual Report and Accounts 2021.

 
                             Year ended  Year ended 
                               31 March    31 March 
                                   2021        2020 
                                   GBPm        GBPm 
---------------------------  ----------  ---------- 
Wages and salaries                  6.1         7.8 
Pension costs                       0.1         0.2 
Share-based payment charge          4.4         4.3 
---------------------------  ----------  ---------- 
                                   10.6        12.3 
---------------------------  ----------  ---------- 
 

Cautionary note

These Results contain certain forward-looking statements which have been made by the Directors in good faith using information available up until the date they approved the announcement. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events.

LEI number: 2138007FRGLUR9KGBT40

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