Halma
Annual Report 2003

Plain-text annual report

H A L M A A n n u a l R e p o r t a n d A c c o u n t s 2 0 0 3 Halma p.l.c. Annual Report and Accounts 2003 Financial Highlights Halma at a glance Chairman’s Statement Chief Executive’s Review Financial Review Shareholder Information Operating Review Management Team Directors and Advisers Report of the Directors Corporate Governance Report on Remuneration Responsibilities of the Directors Independent Auditors’ Report Consolidated Profit and Loss Account Consolidated Balance Sheet Statement of Total Recognised Gains and Losses Movements in Equity Shareholders’ Funds Consolidated Cash Flow Statement Halma p.l.c. Balance Sheet Accounting Policies Notes on the Accounts Notice of Meeting Summary 1994 to 2003 Group Directory 1 2 4 7 12 15 16 28 30 31 35 38 44 45 46 47 48 48 49 50 51 53 74 76 78 Halma online news Keep up to date with the latest Halma news by visiting our investor relations website: www.halma.com. Register online for news alerts and you will be e-mailed whenever significant announcements are made. H A L M A Financial Highlights £m 0% 2003 Change 55555555555555555555555555555 2002 55555555555555555555555555555 £m 55555555555555555555555555555 Turnover 267.6 55555555555555555555555555555 Overseas sales 183.3 55555555555555555555555555555 48.3 Profit before taxation* 55555555555555555555555555555 Dividend per share 5.283p 55555555555555555555555555555 Profit before taxation* as a 55555555555555555555555555555 18.0% percentage of turnover 55555555555555555555555555555 Turnover to net tangible assets 2.28 times 55555555555555555555555555555 41.1% Return on capital employed** 3.08 times +10% 5.812p 53.5% 17.4% 188.2 267.3 +3% -4% 46.5 * Before goodwill amortisation of £3,235,000 (2002: £2,297,000) **Return on capital employed is defined as profit before taxation* expressed as a percentage of net tangible assets Highlights of the year – – – – – – Highest ever return on capital employed of 54% Sales held at £267m with profit before taxation and goodwill amortisation of £46.5m (2002: £48.3m) Record free cash flow of £36m 10% increase in dividend for the year BEA, our largest acquisition to date, performing well R&D investment increased to 3.6% of sales, driving strong product pipeline and more profitable product mix Halma p.l.c. 2003 1 H A L M A Halma at a glance Business profile Halma is a strongly cash generative and highly profitable group which develops, makes and markets products worldwide that are used to enhance public safety and minimise hazards at work. Our six specialist business groupings are: Fire and Gas detection Water leak detection and UV treatment Elevator Electronics Bursting discs and sequential locking for Process Safety High power electrical Resistors Ophthalmic Optics and Specialist technology Value creation strategy Our over-riding objective is to create shareholder value by: Building global businesses that sustain a leading position in specialised markets in areas of long-term sales growth Concentrating on high margin activities where products and services are differentiated on the basis of performance, not price, and where barriers to entry are high Tightly managing our asset base in order to maintain our outstanding operating ratios and powerful cash generation Investing in marketing, new product development and innovation to maintain high organic growth Acquiring businesses and intellectual assets that extend our existing activities, add value, contribute to growth and will produce our exceptional operating ratios Maintaining a high return on capital employed to self-fund organic growth, acquisition activity and rising dividends Recruiting and retaining top quality management by preserving an entrepreneurial culture within a framework of rigorous financial planning, reporting and control 2 Halma p.l.c. 2003 H A L M A Halma at a glance continued Dividend growth £25m £15m £5m 0 94 97 00 03 An exceptional record of unbroken dividend growth over more than 20 years. Profit growth (before goodwill amortisation) £60m £40m £20m Long-term profit growth accompanied by excellent cash generation. Sales ROCE 0 94 97 00 03 £300m £200m £100m 0 94 97 00 03 60% 40% 20% 0 94 97 00 03 Stable sales in tough world markets. ROCE consistently above 40% delivering real shareholder value. Halma p.l.c. 2003 3 H A L M A Chairman’s Statement “Halma’s remarkable progress over thirty-year period” David Barber, Chairman My normal pattern in these statements, as our long-term shareholders will recognise, has been to focus very specifically on the Group’s financial results in such a way that readers can easily and accurately measure our progress within the year under review. However, this will be my last Statement as Chairman of Halma. With this in mind, I have chosen not to comment on the year’s results or on our immediate prospects. These are all covered in sufficient detail elsewhere within this Annual Report. My first Statement as Chairman of Halma was written thirty years ago, in 1973, against a political and financial background dramatically different to the one we now see. Halma was then a tiny and unknown company. I trust that shareholders will forgive me if I use this particular Statement to review the whole of that thirty- year span and give one or two examples of what has been achieved by the Group over that period. I have been privileged throughout my time as Halma Chairman to lead a quite outstanding body of people. This team has changed and developed over the years. Some are now retired. However, the increasing size of the Group means that most are still with us and still have many years of service ahead of them. To all of this team is due the credit and the praise for what has been achieved. Specific Achievements Out of many possible examples of Halma’s remarkable progress over this thirty- year period I have selected the following: ● A consistently high rate of return on capital employed. The year-end rate of return has been in excess of 40% throughout the whole of the last twenty years, and, during the year under review, it rose to 54%. ● The compound growth rate in earnings per share over the whole of the thirty 4 Halma p.l.c. 2003 H A L M A Chairman’s Statement continued years since 1972/73 now averages 19% per annum. Few, if any, UK companies can match this record. ● Halma’s growth has been virtually self-financed. Since August 1972, having adjusted for scrip issues and for issues under the share option schemes, the total number of Halma shares in issue has increased by less than 1.3% per annum. ● Meanwhile, profit before taxation has risen by a compound increase of 20% per annum. ● ● ● The Group has a record of unbroken dividend growth since the 1970’s. During the whole of a twenty-year period to March 2000, the dividend per share was increased by not less than 20% per annum, possibly the longest such sequence ever recorded by any UK quoted company. £10,000 invested in Halma shares at the average share price obtaining during 1974, 1975 or 1976, including gross dividend income, would be worth, as at the end of March 2003, over £4.8 million. It is interesting to illustrate this by way of example. Jack Welch, on his retirement from GE, was very proud to claim that during his twenty-year tenure as Chief Executive their share price increased by 2,876%. It would be folie de grandeur for me to compare Halma with GE, one of the most successful companies in the world in recent decades. Nonetheless, it is worthy of note that, taking our 1974, 1975 or 1976 share price as a base, the share price of Halma (as at end March 2003) has increased by 37,850%. All of us, management and investors alike, can surely take quiet pride in such exceptional results, and I know that all my fellow shareholders would wish me to record our appreciation and thanks to everyone in Halma for what has been achieved. Board Changes In the interim accounts I reported the resignation of Hamish Ritchie after his distinguished service as a non-executive Director. Then in May 2003 we were shocked and saddened by the sudden death of another non-executive Director, Lord McGowan. Duncan was a quite exceptional individual, a delightful colleague, wise and well-loved. Our deepest sympathies go out to his widow and to his family. We will very much miss the contribution and companionship of both Duncan and Hamish. I am very pleased, therefore, that Andrew Walker, who has a wealth of relevant Boardroom experience, joined us in May 2003, and we warmly welcome him to the Board. Action is, of course, already in hand to recruit a further additional non-executive Director to bring us back to full strength. I have left until last the pleasurable task of welcoming Geoff Unwin as my successor as Chairman of the Halma Group. I need hardly comment on the crucial importance of this succession, especially in a Group like Halma which has had a consistent management team over many years. Geoff, of course, joined us after Halma p.l.c. 2003 5 H A L M A Chairman’s Statement continued a brilliant executive career, latterly as the Chief Executive of Cap Gemini, one of the world’s largest and most successful Information Technology companies. He has worked very closely with me during the past twelve months, and I have had ample opportunity to observe his skills and his ability. With this background and with my own, I believe unique, appreciation of the qualities needed for this position, I can assure shareholders that we have a Chairman with exactly the right combination of experience, sensitivity and drive and who I believe can provide us with a future of consistent and substantial growth. I wish him every good fortune. In conclusion, may I thank everyone in the Halma Group and all of our shareholders for their unfailing support and friendship to me over the years. It has been an exciting and immensely satisfying experience for me, and I trust that, as the song says, the best is yet to come. David S Barber 6 Halma p.l.c. 2003 H A L M A Chief Executive’s Review “Provided markets remain stable we expect profit growth” Stephen O’Shea, Chief Executive Summary Results in the second half of the year moved ahead of the first half not only in organic terms but also from the success of the acquisitions of BEA and Radcom. We have produced good results even though improvements in markets did not occur. Our operations made pre-tax pre-goodwill profit of £46.5 million* (2001/02: £48.3 million) on sales of £267 million (2001/02: £268 million). Our very strong operating cash generation, 110% of operating profit, funded a further dividend growth of 10% at the interim and subject to shareholder approval, a final dividend growth also of 10%. This cash is generated by our remarkably high return on sales and return on capital employed, which this year reached 54% (2001/02: 41%). This is the highest level ever achieved in the Group. This is a testament to the quality of management in our subsidiaries who have made more effective use of their resources, controlled costs, developed new products and in a number of cases improved their market shares. For the first time the USA became our largest market, representing 31% of the Group’s sales. However, movements in the value of the US dollar reduced the Sterling value of our American earnings. We made our greatest growth in mainland Europe where sales grew by 10%. Sales increased to Africa and the Middle East, and to the Far East and Australasia. There is a trend towards increased manufacturing migration from Europe and the USA towards the Far East and Eastern Europe. Indeed an increasing proportion of components and sub-assemblies used in the Group are sourced from these territories as we continue to keep our product costs low. I am pleased but not surprised by the success of BEA. This was our largest acquisition so far at £46 million net of cash but including earn-out payments for * see Consolidated Profit and Loss Account Halma p.l.c. 2003 7 H A L M A Chief Executive’s Review continued results to the end of March 2003. In the six months we have owned it, net of interest on the cash we used, BEA delivered £2.1 million to Group profits. Operating profits at £2.9 million reached our target levels. The acquisition was fully funded from cash accumulated from earnings in operating companies so that even after a further small acquisition the Group was cash neutral at the end of the year. In the year we invested record amounts in product development. This produces growth opportunities and refreshes our offering to customers. Together with the acquisitions we have a stronger set of products to start the new year. Sectoral Performance Despite challenging conditions in the markets we serve, three of our six business groups – Fire and Gas, Elevator Electronics and Process Safety – achieved an improved profit performance. Profits were increased in our FIRE & GAS sector as the mix of products sold was moved towards more profitable products, causing the return on sales to improve. Apollo, our professional smoke detector business, increased sales to almost all territories with particularly impressive sales growth into mainland Europe. R&D has been continuing at a high pace with several new products launched at the beginning of the new financial year. This will lead to a short-term increase in marketing costs, but will allow us to grow market share by providing our customers with a larger range of products and training them in their use. This reinforces customer loyalty which is a strong feature of our fire detection business. We have been growing sales of gas detectors in the USA and in mainland Europe but experienced reduced volume of sales into the UK. We are concentrating on products with a high ease of use, usually single button operation, that are tough enough to survive the aggressive and hazardous environments where they are used. We also launched new products in May 2003. These include a new range of personal gas monitors for hostile environments. These are potentially life-saving products. Our customers include water, electricity and gas utilities and also telecoms, construction and chemical companies. Our two strengths in the WATER sector are leak detection and water sterilisation using ultraviolet (UV) light technology. Our leak detection and flow management business is based in the UK and France and is affected by the spending patterns of the water utilities. They have been deferring capital expenditure and the UK water regulator has reduced the emphasis on cutting leakage. Our efforts have therefore increasingly been directed towards the USA where sales are growing, and to other countries where, because of shortages, the wastage of large amounts of clean water through leaks is unacceptable. We are offering technology that is new to some of these territories and we are confident of long-term development even though the start up phase can be relatively slow and resource intensive. At the end of the financial year we further strengthened our flow measurement activities by the purchase of Radcom which added a strength in measuring flows of dirty water and reporting results by using satellite communications. In UV sterilisation we take contaminated water and make it fit for use in a variety of applications including for drinking, in swimming pools, as water used for 8 Halma p.l.c. 2003 H A L M A Chief Executive’s Review continued irrigation, and also to improve the quality and shelf-life of food and drinks. Chlorination of water is not always effective in eliminating parasites and chlorine by-products have been shown to damage both people and buildings. We minimise or eliminate the use of this poisonous gas in many critical applications thereby making a useful contribution to improving the environment. There is growing recognition of the value of this technology and its use is increasing particularly in the USA. We make a considerable number of products that protect people at work. In our PROCESS SAFETY sector we make pressure relief products and safety systems that ensure machines are safe before people can gain access. We specialise in situations where it is critical that an ordered process is carried out correctly to safely manage the plant, protect the operations and to prevent accidents and emissions. Growth in profits during the year has been partly driven by some recovery in spending by the petrochemical companies which includes safety spending with us. We are also operating successfully in the USA where safety expectations are rising towards the high levels demanded in Europe. Automotive applications have had a good year as customers have moved, changed, upgraded or made new production lines. We foresee opportunities to grow our emergency pressure relief operations. We currently have a moderate market share. There are three larger US based competitors, all of whom have a very large installed base, and a big and regular demand for spares. We have a greater dependence on the chemical industry, our largest customer, which has had a slow year for major new process plants. We provide an extraordinarily high level of service and response and thereby are capturing some of our competitors’ spares business. We have also been developing products specifically for the food industry, a niche that we can develop into a strong market for us. As expected, heavy industry in the USA has been slow to improve, such that our RESISTORS sector which is largely based in America, has continued to experience difficult conditions in its biggest market. Accordingly we have moved resource into exports. Sales have grown into the Near, Middle and Far East, and to Africa and Australasia, but this has only partially offset the reductions in US sales. The net effect is a £4 million sales reduction and £1 million profit reduction compared to last year. Work is continuing on controlling our costs, further increasing exports and managing our working capital. In this sector our assets employed have been reduced by £2 million (22%) in the year and the cash generated used, in part, to purchase BEA. The return on sales reduced from 13% to 11% in our resistors sector, but as a result of good resource management the return on capital employed remained at 36%. In many engineering businesses this return would be considered high even in the best of times. Because of our range of technologies and broad customer base, we expect to reverse the current trend in resistor sales. However, we will need better export strength or an improvement in American markets to reach previous levels of profit in this particular sector. Halma p.l.c. 2003 9 H A L M A Chief Executive’s Review continued Within our OPTICS & SPECIALIST sector we include our ophthalmic diagnosis companies, and a grouping of other subsidiaries along with the national and international holding companies. Our optics business has held steady in sales and profits, with new products launched last year making useful contributions. There is an increasing level of cross-fertilisation between these companies. The quality of Research & Development, for us mainly development, has been improving and producing a range of new products. Increasingly our customers are becoming more and more careful about cross-contamination of patients, and recently we introduced a number of unique precision aspheric lenses that can be sterilised regularly by high heat levels. The specialist businesses in this sector have market shares that are lower than elsewhere in the Group. They are more subject to pricing pressures and do not have as much power with suppliers as our market leading companies. To improve profitability we have made a number of changes in the management of several of these companies. As you travel around the world, automatic doors in elevators and in airports, shops and hotels help to maximise the comfortable and safe flow of people. Our businesses lead the world and hold by far the largest market shares in sensors for automatic doors. We have long held this position for elevator doors. In our ELEVATOR ELECTRONICS sector we also provide controls, displays and emergency communications for elevators and other transit applications. Active management of costs has been important, particularly because the major US market has remained both dull and steady. By sourcing extrusions, electrical sub-assemblies and mechanical parts in Eastern Europe we have made valuable material cost savings. There is some consolidation of our smaller customers into our larger ones, which changes the pricing mix and offsets our productivity and material cost gains. In October we purchased BEA. This company is the world market leader in sensors for fixed automatic doors. It is headquartered in Liège, Belgium with a major facility in Pittsburgh USA, an operation in China and offices in Japan and elsewhere. I am very pleased with our managers and BEA’s management in the purchase and integration of this operation. My initial targets have been met. BEA brings some new technologies and techniques into the Group and is being effective in transferring their best practice to other companies in the Group. They use a number of innovation techniques that are being reviewed for use elsewhere in the Group. People The Group’s executive managers would like to associate themselves wholeheartedly with the remarks of David Barber in his Chairman’s Statement. We too were greatly saddened by Lord McGowan’s death and had a very high regard for Hamish Ritchie. We are very pleased to have attracted Geoff Unwin and Andrew Walker to our Board. I have enjoyed working with Geoff over recent months and I am looking forward to working even more closely with him in the future. 10 Halma p.l.c. 2003 H A L M A Chief Executive’s Review continued On a personal note, I have learned hugely from David Barber for every one of the last 20 years. He is by any measure a remarkable man, his vision has guided the development of the Group. His enduring contribution includes the assembly and coaching of a management that is committed to exceptional standards. There is a deep seated, results orientated culture in Halma. David provided an outstanding environment for managers to develop and many of us owe much to him. I would also like to thank executives and managers right the way through the Group, in every country and every company. Most have had to overcome market difficulties, have improved productivity and motivated their staff. Our employees contributed energy, enthusiasm and skill to the companies they work in – many thanks to each of you. Strategy & Prospects Our strategy of building high market shares in safety related markets has proved effective and shows in the Group’s resilience under the current difficult market conditions. We continue to generate exceptional returns on capital employed, at a record level this year, thereby creating wealth for shareholders. We have again demonstrated the ability to find, complete and integrate related acquisitions successfully. We are creating new products for existing customers and also improving our effectiveness in export markets. Provided markets remain stable, even at current levels, we expect to achieve sales and profit growth. We are not relying on markets to improve in order to achieve high profits and high returns. We consider the future is in our own hands. Significant new products are being launched at the start of 2003/04. Initially launch costs are incurred but these are high value units so payback is quite rapid. We are aiming to return to a sequence of record profits. Stephen R O’Shea Halma p.l.c. 2003 11 H A L M A Financial Review “. . . entering the new year in good shape” Kevin Thompson, Finance Director Financial performance The full year’s turnover of £267 million was held at last year’s figure. Profit before taxation and goodwill amortisation was £46.5 million* (2001/02: £48.3 million). Turnover, profit before taxation and return on sales were higher in the second half of the year than the first, without including the benefit of acquisitions. The Group continues to operate at a high rate of profitability with return on sales now exceeding 17% for more than 10 consecutive years. Relative to Sterling, the weak US dollar and stronger Euro have had an impact on these results. Approximately one-third of turnover and profits are made in US dollars and translating these weaker US dollars into Sterling has reduced turnover and profits by 2.4%, offset a little by the benefit of contributions in stronger Euros. Looking ahead, I expect some continuation of the increase in insurance costs which we have seen impact the Group in 2002/03, together with higher UK National Insurance and pension costs. In total, I believe these costs will increase overheads by £1.7 million in 2003/04, however a number of initiatives are continuing which will reduce both overhead and material purchase costs and I expect these to mitigate the increases at least in part. We are managing to offset sales price pressures in some markets through improved product design and even better procurement. Cashflow and Returns Even by Halma standards, the cash flow performance this year was very good. Free cash flow (the cash left over from our operating activities and interest but after funding capital expenditure, working capital and tax) was £36 million, exceeding the record achieved last year. Excluding currency effects and acquisitions made in the year, stocks were reduced by £3.3 million (9%) following a £5.1 million reduction last year, and working capital in total was pushed down * see Consolidated Profit and Loss Account 12 Halma p.l.c. 2003 H A L M A Financial Review continued by £8.8 million (13%). We finished the year with net debt of less than £0.1 million after spending £47 million on acquisitions. Operating cash flow for the year, being cash flow from operating activities less capital expenditure, amounted to £50.9 million. This means that the cash conversion rate (operating cash flow as a percentage of operating profit before goodwill amortisation) was very strong at 110%. A consistently high return on capital employed has long been a feature of Halma. During the year we converted our cash, which earns a relatively low return, into businesses which earn a much higher return. I am very pleased to report a return on capital employed of 54% this year, the twentieth consecutive year over 40%, and the highest ever year-end figure. Dividends Following the 10% increase in the interim dividend, the Directors recommend an increase of 10% in the final dividend per share. If approved, this dividend, amounting to 3.527p per share, will be paid on 18 August 2003 to shareholders on the register at the close of business on 18 July 2003, giving a total dividend for the year of 5.812p. Our excellent cash generation will therefore finance a distribution to shareholders of £21 million for the year. Tax and Treasury The effective tax rate on profit before goodwill amortisation has increased from 31.5% to 32.9%, in part due to the increase in income earned in higher tax jurisdictions and in particular that of the BEA companies. I expect an effective tax rate closer to 32% in 2003/04 depending on the exact mix of profits earned around the world. At 29 March 2003 the Group held currency loans amounting to US dollar 31 million and Euro 10 million. These loans are only for balance sheet hedging purposes, covering the majority of our US dollar and Euro assets. We do not use complex tax planning schemes nor complex derivative financial instruments. No speculative treasury transactions are undertaken. Pensions The triennial valuation of the Group pension schemes was carried out during the year. This showed that the main Group scheme is 69% funded, compared with 97% funding at the 1999 valuation. This reduction arises because of the fall in equity markets and investment returns. We have increased both employer and employee contributions to the schemes during the year in line with the actuary’s recommendations. The charge against profit in 2003/04 will be £1 million higher than this year but there is no need for a further increase in the cash contributions. Under current assumptions the deficit would be eliminated over a 15-year period. Halma p.l.c. 2003 13 H A L M A Financial Review continued As with many companies, the cost of providing a defined benefit promise to employees has increased significantly in the last few years. The effects of increased longevity, loss of ACT relief and of course the fall in equity valuations more recently have led us to close the defined benefit pension scheme to new members and a defined contribution scheme has now been established. We have adopted the transitional provisions of FRS 17 (Retirement Benefits) for the year ended 29 March 2003. There is no material difference between the charge to the Group profit and loss account under FRS 17 compared to SSAP 24 (the existing rules). Full adoption of FRS 17 will mean that the net deficit on the Group’s defined benefit pension schemes is shown as a liability on the consolidated balance sheet. At 29 March 2003, the deficit, net of deferred tax, was £31 million. This figure reflects the prudent assumptions required under FRS 17 and the significant decline in equity values over the period, and represents a relatively small proportion of Halma’s current market capitalisation. Compliance High quality finance executives operate within each business, monitoring and assisting progress. In addition to self-certification, each business is subject to regular, comprehensive financial review, carried out by our senior finance staff. The output from these reviews supports the continued improvement in simple, valuable systems and allows us to address any weaknesses found. I am committed to maintaining the strong control in the Group and to increasing the pace of improvement even further. During the year we carried out a review of our audit services and appointed Deloitte & Touche as our auditors. I am pleased with the quality of service they are able to provide to us. BEA Acquisition The BEA group of companies was acquired in October 2002. At the company level, BEA’s pre-tax return on its operating assets is in excess of 70%. Its contribution to pre-tax profit in the year, net of the cost of financing the acquisition, was £2.1 million and is of course strongly earnings enhancing. Including deferred consideration earned up to March 2003 but not including the cash we acquired, the purchase price is £46 million and the post-tax return on investment for the period we have owned BEA is 8.3%. We bought BEA for its long-term benefits but this figure still compares well with our cost of capital which has been calculated as falling in the range of 7% to 8.5%. This was a strong acquisition. Value Creation We are entering the new year in good shape. Returns and cash flow remain strong and we have minimal net debt. Good financial controls are embedded in the Group. It is against this background that we will push to increase the pace of improvement even further and continue to focus on the creation of value. 14 Halma p.l.c. 2003 Kevin J Thompson H A L M A Shareholder Information Financial calendar 55555555555555 2002/03 Interim results 3 December 2002 55555555555555 2002/03 Interim dividend paid 3 February 2003 55555555555555 Trading update 24 April 2003 55555555555555 2002/03 Preliminary results 17 June 2003 55555555555555 30 June 2003 2002/03 Report and Accounts issued 55555555555555 Annual General Meeting 29 July 2003 55555555555555 2002/03 Final dividend payable 18 August 2003 55555555555555 end October 2003 Trading update 55555555555555 9 December 2003 2003/04 Interim results 55555555555555 2003/04 Interim dividend payable February 2004 55555555555555 end April 2004 Trading update June 2004 2003/04 Preliminary results % % 5,616 Shares Number Number 1 - 7,500 Shareholders Number of shares held Analysis of shareholders at 28 May 2003 55555555555555 55555555555555 55555555555555 55555555555555 55555555555555 55555555555555 55555555555555 55555 5 5 555 5 55555 5 5 555 5 55555555555555 55555555555555 Category of shareholders 100,001 - 750,000 750,001 and over 25,001 - 100,000 7,501 - 25,000 365,493,972 278,208,423 17,933,297 11,334,237 10,766,004 47,252,011 100.0 100.0 7,029 11.6 79.9 76.1 12.9 169 818 352 4.9 5.0 3.1 3.0 1.1 2.4 74 Notifiable shareholders (excluding Directors) 4 0.1 Directors 121,721,457 55555555555555 55555555555555 55555555555555 55555 5 5 555 5 55555 5 5 555 5 Private shareholders 182,045,405 365,493,972 14,156,757 47,570,353 Others 5,240 1,777 100.0 7,029 100.0 33.3 25.3 13.0 49.8 74.5 3.9 0.1 8 Share price 55555555555555 London Stock Exchange, pence per 10p share 55555555555555 1999 55555555555555 144 Highest 55555555555555 92 Lowest 92 Year end 2003 2001 2002 2000 166 114 175 164 145 129 137 126 97 95 94 82 Dividends 55555555555555 Pence per 10p share 55555555555555 1999 55555555555555 Interim 1.308 55555555555555 2.019 Final 3.327 Total 2.285 5.812 3.527 3.993 1.570 2.423 1.806 5.283 2.077 2.787 4.593 3.206 2003 2001 2002 2000 Investor information Visit our website, www.halma.com, for investor information and company news. In addition to accessing financial data, you can view and download Analyst Presentations and find contact details for Halma senior executives and subsidiary companies. E-mail news alert You can subscribe to an e-mail news alert service on our website www.halma.com to automatically receive an e-mail when significant announcements are made. Shareholding information Please contact our registrars directly for all enquiries about your shareholding. Visit www.computershare.com for online information about your shareholding. (You will need your shareholder reference number which can be found on your share certificate). Computershare Investor Services PLC PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH UK Tel: Fax: E-mail: web.queries@computershare.co.uk +44 (0)870 702 0000 +44 (0)870 702 0005 Investor relations contacts Stephen O’Shea, Chief Executive Halma p.l.c. Misbourne Court Rectory Way Amersham Bucks HP7 0DE UK Tel: Fax: E-mail: halma@halma.com +44 (0)1494 721111 +44 (0)1494 728032 Rachel Hirst/Andrew Jaques Hogarth Partnership Limited The Butlers Wharf Building 36 Shad Thames London SE1 2YE Tel: Fax: +44 (0)20 7357 9477 +44 (0)20 7357 8533 Brokers Dresdner Kleinwort Wasserstein Limited 20 Fenchurch Street London EC2P 3DB Tel: Fax: E-mail: halma@drkw.com +44 (0)20 7475 7319 +44 (0)20 7283 4667 Annual General Meeting The 109th Annual General Meeting of Halma p.l.c. will be held at The Ballroom, The Berkeley Hotel, Wilton Place, London SW1X 7RL on Tuesday, 29 July 2003 at 12 noon. The Notice convening the Meeting is on page 74. Halma p.l.c. 2003 15 H A L M A Operating Review – Fire and Gas Fire and Gas turnover 2003 2002 £70.0m £70.4m Fire and Gas profit* 2003 2002 £15.0m £14.8m Segmental turnover, 2003 Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 75.0 Segmental profit, 2003* Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 15.0 *before interest, tax and goodwill amortisation 16 Halma p.l.c. 2003 Sector Overview We own two of the world’s leading fire and gas detector brands – Apollo and Crowcon. Countless millions of people depend on us to protect them, and their properties, from the dangers of fire and gas. We are a world class manufacturer of commercial fire detectors with an international reputation for technical excellence and customer service. Our second key product group in this sector is gas detectors that protect industrial workers from flammable and toxic gases. The principal sales channels for fire products are distributors and system installers; gas detectors are also sold via distributors and direct to end-users, including customers in construction, utilities, chemicals and telecoms. We have distributors in 89 countries; exports account for over 60% of sales in this sector. In 2002/03, fire and gas contributed 26% of Group turnover and 32% of operating profit. We increased fire product sales in both the UK and export markets. The fastest growing territory for fire products was Australia and we grew sales significantly in Germany, despite the market shrinking by 13%. This progress was achieved despite flat worldwide demand. Our fire companies’ ability to grow even during adverse market conditions is mainly due to continuous investment in product innovation and customer service. The anticipated resumption of growth in the fire products market, within the next year, will allow our businesses to capitalise on their increasing market share. China and Russia both offer excellent opportunities for growth in fire safety products. To consolidate our position in China we set up a technical office in Shanghai to liaise with the national organisation which tests and approves fire detectors. In the developed world, the market for gas detection equipment is largely driven by health and safety legislation. The US market, in particular, is still growing at about 4% a year. We see strong growth potential in developing countries as they continue to industrialise and adopt higher health and safety standards. We have excellent growth prospects in this sector. A new portable multi-gas detector, Tetra, was conceived, developed and launched in under 12 months with full European and North American approvals. This will be a major driver to export growth where its ease of service will be very attractive to distributors. To combat an increasing focus on price in gas detection markets, we have developed innovative products with enhanced features, together with new basic specification products that exactly match the needs of some markets, and extended aftermarket services. We set new sales records for gas drying and humidifying products, as demand in the US medical market for breath gas drying has grown strongly. Patient breath monitoring, which is standard practice during anaesthesia, is now increasingly used to monitor critical care patients. There are also good indications that our single-use, disposable medical dryers are becoming the preferred method of breath gas drying in US hospitals. A new range of oxygen humidification products, with better performance and higher flow capacity, has generated significant new sales for medical applications in Japan. Continuing medical market growth is fuelled both by demographics and rising standards of care. Our wide-area smoke detectors protect the Reichstag, seat of the German parliament in Berlin. Halma p.l.c. 2003 17 H A L M A H A L M A Operating Review – Water Water turnover 2003 2002 £33.1m £34.1m Water profit* 2003 £5.5m 2002 £7.7m Segmental turnover, 2003 Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 75.0 Segmental profit, 2003* Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 15.0 *before interest, tax and goodwill amortisation 18 Halma p.l.c. 2003 18 Halma p.l.c. 2003 Sector Overview Our businesses in this sector are world leaders in three important technologies: instruments for monitoring and controlling water distribution, ultraviolet (UV) light water treatment systems, and water analysis equipment. All of these businesses sell to global markets; exports typically make up over 60% of sales. These companies are based in the UK, The Netherlands, France and the US. The principal customers for our advanced water technology products include water supply companies, municipal authorities, and the manufacturing, food and process industries. In the 2002/03 period, this sector generated 12% of Group turnover and 12% of operating profit. Profits from sales of water network instrumentation in France reached record levels on the back of increased exports, despite tough trading conditions in the home market. Instrumentation sales in the US also rose, where emergency drought controls are still imposed in most US states. This has given momentum to discussions with several major water utilities about high capital investment leakage detection and control projects. However, we saw a sharp fall in UK sales and profits as demand weakened, partly as a result of less regulatory pressure to reduce leakage and postponement of capital projects by water utilities. Overall, sales of water conservation instruments fell in 2002/03 but we are continuously introducing new products to exploit changing market opportunities. We acquired Radcom (Technologies) Limited in February and its growing strength in wastewater flow monitoring technology is a perfect complement to our world-leading instruments for drinking water monitoring. The process of making Radcom products available through the Group’s unrivalled worldwide sales distribution channels is already well underway. This should impact positively on profits in 2003/04. Sales of water analysis products were boosted by strong export demand. Improved distribution channels in the US for swimming pool testing kits produced an encouraging upward sales trend that should continue. Reflecting the shifting pattern of investment in the UK water industry towards wastewater, sales to the effluent and sewage treatment markets grew by 19%. An important new water analyser was launched recently which promises to set new performance benchmarks. This product should establish a strong position in the wastewater testing market. Growing concern about toxic by- products produced by chemical treatment of drinking water is boosting sales of our non-chemical treatment systems based on ultraviolet light. Contamination of drinking water by a waterborne parasite called Cryptosporidium is an increasing problem in the US and Europe. This favours our technology because ultraviolet light is much more effective at deactivating this bug than traditional chlorination. New research suggests that chlorine treatment in swimming pools is a major contributor to childhood asthma. Sales of UV water treatment equipment into the large public swimming pools market is already well established in Europe. However, the use of UV for pool water is largely undeveloped in the US and is a potentially valuable growth opportunity. We are the first UV manufacturer to win a crucial US technical approval and sales, in partnership with an established US pool equipment supplier, exceeded expectations. Fully digital, our latest acoustic leak location instrument is used to pinpoint pipe bursts underground. Halma p.l.c. 2003 19 H A L M A Operating Review – Elevator Electronics time information, such as broadcast TV pictures, to the in-elevator displays. Formerly, sales to the local South-East Asian zone dominated, but successful exploitation of the Group’s worldwide sales channels boosted exports by 25% in 2002/03. Global market conditions for elevator products have been difficult, especially in the US, and we took aggressive action to maintain margins. A key element of our strategy has been tight manufacturing cost control. This has been achieved, in particular, by outsourcing more manufacturing to the Czech Republic and China. In the US, implementation of disability legislation plus a trend to cut railway staff, especially platform workers, is creating rising demand for our emergency telephone systems. A good example is the New York City subway, where our vandal-proof platform telephones are replacing manned ticket booths. We also saw strong growth in exports to Europe of our US-made emergency telecoms equipment. The major growth from automatic door sensors came from the US and Japan where new products based on both microwave and infrared sensor technology contributed to increased sales. As part of a programme to improve customer safety, a major US retailer has committed to fit our sensor packages at up to 10,000 entrances to its stores. Elevator Electronics turnover 2003 2002 £46.3m £33.1m Elevator Electronics profit* 2003 £8.1m 2002 £5.6m Segmental turnover, 2003 Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 75.0 Segmental profit, 2003* Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 15.0 *before interest, tax and goodwill amortisation 20 Halma p.l.c. 2003 Sector Overview Our primary products in this sector are safety devices that protect people from harm by making the use of elevators and automatic doors safe and efficient. The key products here are electronic sensors for elevators and automatic doors, plus voice communication and information display panels. These businesses are based in Belgium, the UK, New Zealand, the US and Singapore. We also have manufacturing facilities in China. This market divides into two sub- sectors: new-build, where customers are a small number of multinational and regional manufacturers, and refurbishment, where large numbers of building contractors purchase locally. Our businesses in this sector typically have high export sales. The major development in 2002/03 was the acquisition of BEA, the world leader in sensors for automatic doors. This year, this sector generated 18% of Group turnover and 18% of operating profit. Sales and profit from this sector rose sharply in 2002/03 due to an excellent performance by BEA following its acquisition in October 2002. Our existing elevator businesses maintained sales at a consistent level. Several markets showed strong growth, notably Japan and China where investment in new buildings and infrastructure is continuing at a high level. A new Chinese sales office was set up to market automatic door controls. In the past year we saw a sharp rise in sales and profit from elevator display panels, which we make in Singapore. New LCD screen products were launched that can deliver real- Building operators rely on Legcho alcan medi calcun albis fourtono como als dum our safety sensors to keep sogota elevator passengers moving comparumdium solutic swiftly and safely between comparara alsas floors. legot. Sevra Halma p.l.c. 2003 21 H A L M A Operating Review – Process Safety Operating Review – with Siemens AG to develop new products that ensure safety for operators of automated production machinery. These new access control devices have embedded electronics enabling them to be integrated with the most advanced factory automation technology. Profits from this sector rose while sales fell slightly. Increased exports from the UK and from France more than offset flat demand for interlocking systems in the UK market. Sales and profit grew significantly in the US, despite an unfavourable economic environment. We exploited strong demand for improved safety on vast industrial dust filters called precipitators in the US, and in the automotive sector. The principal drivers for bursting disc sales are capital investment and extra capacity utilisation within the chemical and pharmaceutical industries. New products aimed at the special needs of pharmaceutical production and explosion prevention in bulk powder storage made significant contributions to sales. We currently have a relatively small share of this global market, so there is high growth potential. Growth in this area came from increased exports. Our strategy to grow market share focuses on fast deliveries, product offerings that allow customers to carry less stock, and innovative products that deliver superior performance. Process Safety turnover 2003 £35.2m 2002 £36.7m Process Safety profit* 2003 £6.8m 2002 £6.2m Segmental turnover, 2003 Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 75.0 Segmental profit, 2003* Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 15.0 *before interest, tax and goodwill amortisation 22 Halma p.l.c. 2003 Sector Overview A long-term commitment to developing market-leading applications knowledge and customer service has delivered unrivalled world leadership in specialist areas of industrial health and safety technology. Halma companies are the global brand leaders in trapped key interlocks. These products create a life-saving interface between industrial workers and the dangerous machinery they work with. We are also a global supplier of bursting discs, ranking third largest in Europe and fourth in the US. These high precision pressure control devices protect people, production plant and the environment. They prevent devastating explosions and toxic releases during chemical processing and transit. Our process safety businesses operate from the UK, France and the US, contributing 13% of Group sales and 15% of operating profit in 2002/03, up from 13% in 2001/02. The strengthening of workers’ rights and introduction of more rigorous public health and safety legislation continues worldwide. This legislative pressure creates increasing demand over time for our safety products, particularly in this sector, but also in our fire, gas and elevator businesses. Many European and American companies are transferring their home market safety standards to their satellite operations in the developing world. This has created growth markets for industrial safety products in the Far East. Our response to these global trends has been to develop increasingly sophisticated products, with higher added value, for Western markets, and to commit more resources to marketing to the developing world. For example, we are currently working Legcho alcan medi calcun In the transport of fuels, albis fourtono como als dum potentially catastrophic sogota comparumdium pressure is safely released solutic comparara alsas by our rupture panels. legot. Sevra Halma p.l.c. 2003 23 H A L M A Operating Review – Resistors Operating Review – Resistors turnover 2003 £27.5m 2002 £31.5m Resistors profit* 2003 £3.1m 2002 £4.0m Segmental turnover, 2003 Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 75.0 Segmental profit, 2003* Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 15.0 *before interest, tax and goodwill amortisation 24 Halma p.l.c. 2003 Sector Overview The combined sales and product portfolios of our high power resistor businesses position us as world leader in this specialised electrical power technology. We satisfy over 50% of North American demand. The global market splits three ways: electricity distribution, electric motor control and rail transport. Sales are either to major electrical engineering OEMs or to large projects; success comes from our applications experience and the ability to solve customers’ problems with unique engineering solutions. Our resistor makers specialise in niche applications in their local markets and bid cooperatively for large international projects. Based in the US, Canada, Australia and the UK, the resistor businesses contributed 10% of Group sales and 7% of operating profit in 2002/03. Overall sales and profits from this sector declined in 2002/03, driven by a downturn in our markets. The sales decline was due to lower exports with domestic sales remaining flat. Profit performance was better than many of our peers based on rigorous cost control. The main business driver affecting this product group is capital investment in the industrial and rail infrastructure in our target markets. These are cyclical markets where customers are relatively price- insensitive in busy times and prepared to pay a premium for superior quality and service. Our operations thrive in these conditions, producing strong profit growth, but can also defend market share in tough markets when pricing becomes fiercely competitive. Our strategy to increase global market share is to create greater competitive advantage through applications experience, manufacturing flexibility and product innovation. Although heavy resistors are a well-established technology, and we are the world leader, there are many opportunities to sell into new application areas and to grow market share. Expansion into new markets was a notable feature of 2002/03. While exports were down overall, we saw a sharp rise in sales to South East Asia where basic infrastructure investment is a driver. In the UK, we won a contract from Ford to supply resistors as an automotive component for the first time. The automotive sector will increase in importance to us as electric vehicles become commonplace. Our entry into the US market for resistors to control elevator movement also generated significant new sales and we won new business from manufacturers of fitness treadmills. Other successes included a large US transit resistor contract with train maker Bombardier, assignment of preferred supplier status for the French TGV rail system and the winning of the aftermarket business for Komatsu mining trucks. A prototype ground fault location system installed on commuter rail cars in Toronto has been successful. A fault can now be located in ten minutes in contrast to 8-10 hours previously. This has eliminated the previous need to take the car out of service. As a result, the customer now plans to fit out the whole fleet. A new US test facility lets us self-inspect new products to the requirements of Underwriters Laboratories, the principal US technical approvals organisation. This will help us to better meet customer needs and create technical barriers against competitors. Legcho alcan medi calcun albis fourtono como als dum A major application for sogota comparumdium heavy resistors is in braking solutic comparara alsas systems for mining trucks. legot. Sevra Halma p.l.c. 2003 25 H A L M A Operating Review – Optics and Specialist Operating Review – potential for disease transfer via medical instruments, we have introduced new diagnostic and treatment lenses that can be cleaned in very high temperature hospital sterilisers. This new range has been developed to exploit both US and international markets. In 2002/03 we encouraged more businesses to capitalise on the market strength and distribution networks of sister companies in other countries. This has been put into practice by our two principal optics companies. They have formed a much closer relationship to cooperatively exploit sales opportunities in the UK and US. Joint R&D has already produced some product innovations and more development projects are in progress. The two businesses now share marketing resources and they exhibit jointly at international trade fairs. Optics and Specialist turnover 2003 £56.0m 2002 £62.5m Optics and Specialist profit* 2003 2002 £7.6m £9.6m Segmental turnover, 2003 Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 75.0 Segmental profit, 2003* Fire and Gas Water Elevator Electronics Process Safety Resistors Optics and Specialist £m 15.0 *before interest, tax and goodwill amortisation 26 Halma p.l.c. 2003 Sector Overview Our main focus in the Optics and Specialist sector is the manufacture of ophthalmic instruments and lenses. These products are used by optometrists and surgeons to assess eyesight and diagnose disease, and for laser eye surgery. The market for ophthalmic products is global, exports account for over half of sales and we are world leaders in our niche markets. We also have specialist businesses that manufacture analytical products and cash management systems. Our optics and specialist businesses are based in the US and UK. In 2002/03 this sector contributed 21% of turnover and 17% of Group operating profit. We saw good performances by our optical businesses. However, overall results from this sector were mixed as sales and profit from the specialist companies fell back. The specialist businesses generally sell into single markets and lack global presence. As a result, they are less able to offset the impact of unfavourable local economic conditions. Our optics companies pushed profits ahead of the previous year. These results were achieved through tight manufacturing cost control, a new regional US sales operation for ophthalmic instruments, and a successful export campaign for US- made lenses. Profits from lens sales set a new record. The global market for ophthalmic products has, however, been difficult and demand in the important US market has been flat. Following last year’s launch of the Pulsair Tonometer, an optometrist’s instrument for measuring pressure inside the eye, sales have been very encouraging, especially in the US where our market share increased. In response to rising concern about the Legcho alcan medi calcun albis fourtono como als dum Opticians get a brighter, sogota comparumdium clearer view of the eye with solutic comparara alsas our latest ophthalmoscopes. legot. Sevra Halma p.l.c. 2003 27 H A L M A Halma Management Team 1 Stephen O’Shea (aged 57) is Chief Executive of the Halma Group. He was one of the founders of Apollo Fire Detectors Limited in 1980 and was Managing Director when it joined the Group in 1983. He joined the Halma p.l.c. Board in 1990 and became a Divisional Chief Executive in 1992. He was appointed Deputy Chief Executive in 1994 and Chief Executive in 1995. Telephone +44(0)1494 72111 3 Kevin Thompson (aged 43) is Finance Director of the Halma Group. He joined the Group in 1987 as Group Financial Controller and in 1995 was appointed to the Executive Board as Finance Director. In 1997 he became Group Finance Director and in 1998 was appointed to the Halma p.l.c. Board. An economics and accounting graduate of Bristol University, Kevin qualified as a Chartered Accountant with Price Waterhouse. Telephone +44(0)1494 721111 5 Nigel Young (aged 53) is Chief Executive of the Process Safety Division. He joined Halma as Managing Director of Fortress Interlocks Limited when the company joined the Group in 1987. Nigel was appointed Assistant Chief Executive of the Safety Division in 1990 and took up his current position as Divisional Chief Executive in 1992. He was appointed to the Executive Board in 1994. He has an MBA from Aston University. Telephone +44(0)1902 499640 7 Andrew Walker (aged 51) was appointed a non-executive Director of Halma in May 2003 and serves on the Audit Committee. He is a non-executive Director of Ultra Electronics Holdings plc, Bioganix Ltd and Galileo Innovations plc. 9 Bill Seymour (aged 43) is Chief Executive of the Elevator Electronics Division. He joined Halma on the acquisition of Janus Elevator Products in December 1990 and became Vice President of that company in 1991. In 1993 he was appointed Joint President of Janus and in 1999 became an Assistant Divisional Chief Executive. In 2000 Bill was appointed Divisional Chief Executive of the Elevator Electronics Division and a member of the Executive Board. He is an electrical engineering graduate of Limerick College of Technology. Telephone +1(1)631 864 3699 11 Richard Stone (aged 60) was appointed a non-executive Director of Halma in January 2001. He serves on the Audit Committee, Remuneration Committee and Nomination Committee and is the Senior Independent Director. He is Chairman of Shearings Group Limited, and a non-executive Director of British Nuclear Fuels plc, Gartmore Global Trust p.l.c., Trust Union Finance (1991) plc and TR Property Investment Trust plc. 13 Keith Roy (aged 53) is Chief Executive of the Water and Gas Technology Division. He joined Halma having been joint owner of Reten Acoustics when Halma acquired it in 1992 and was appointed Managing Director and subsequently Chairman of Palmer Environmental Limited. He became an Assistant Divisional Chief Executive in 1998. In 2000 Keith was appointed Divisional Chief Executive of the Water Technology Division and was appointed to the Halma p.l.c. Board in 2001. He is an electronic engineering graduate of both Nottingham University (BSc) and Aston University (MSc). Telephone +44(0)1494 721111 2 David Barber (aged 71) is non-executive Chairman of the Halma Group, serves on the Audit Committee and Remuneration Committee, and chairs the Nomination Committee. He joined the Group in 1972 as Managing Director when its annualised turnover was £1.3 million and annualised profits were £128,000. He was Chairman and Chief Executive from 1973 to 1995 and non-executive Chairman from 1996. 4 Geoff Unwin (aged 60) was appointed as non-executive Deputy Chairman and Chairman Elect of the Halma Group in September 2002 and serves on the Audit Committee, Remuneration Committee and the Nomination Committee. He is Chairman of United Businesss Media plc, Chairman of 3G Lab and a non-voting board director of Cap Gemini Ernst & Young. 6 Neil Quinn (aged 53) is Chief Executive of the Fire and Security Division. He joined the Group as Sales Director of Apollo Fire Detectors Limited in 1987, becoming Managing Director in 1992. In 1994 he was appointed Chief Executive of the Fire Detection Division and was appointed to the Halma p.l.c. Board in 1998. He is a material science graduate from Sheffield University. Telephone +44(0)23 9249 9412 8 Adam Meyers (aged 41) is Chief Executive of the Fluid Technology Division. He joined Halma in 1996 as President of Bio- Chem Valve Inc. He was appointed Assistance Divisional Chief Executive of the Water and Gas Technology Division in April 2001 and became Divisional Chief Executive of the newly formed Fluid Technology Division and a member of the Executive Board in April 2003. He is a systems engineering graduate of the University of Pennsylvania and gained his MBA from Harvard Business School. Telephone +1(1)973 263 3001 10 John Campbell (aged 44) joined the Group in 1995 as President of IPC Resistors Inc. and became Chief Executive of the Resistors Division upon its formation in 1998 and a member of the Executive Board. He is an electrical engineering graduate of the University of Toronto and before joining Halma was a senior sales and marketing executive within the Industrial Power Group of Rolls-Royce p.l.c. Telephone +1(1)513 772 5501 12 Carol Chesney (aged 40) is Company Secretary of Halma p.l.c. She spent three years with English China Clays p.l.c. before joining Halma in 1995 as Group Finance Manager. Carol was appointed Company Secretary in 1998. She is a maths graduate of Randolph-Macon Woman’s College, Virginia and qualified as a Chartered Accountant with Arthur Andersen. Telephone +44(0)1494 721111 14 Andrew Williams (aged 36) is Chief Executive of the Optics and Water Instrumentation Division. He joined Halma in 1994 as Manufacturing Director of Reten Acoustics (now Palmer Environmental) and became Managing Director of that company in 1997. He was appointed Assistant Divisional Chief Executive of the Optics and Water Instrumentation Division in 2001 and became Divisional Chief Executive of that division and a member of the Executive Board in 2002. Andrew is a production engineering graduate of Birmingham University. Telephone +44(0)1633 489479 28 Halma p.l.c. 2003 1 7 8 11 2 3 9 13 14 5 4 10 6 12 H A L M A Directors and Advisers Board of Directors Secretary Executive Board David S Barber Chairman * E Geoffrey Unwin Deputy Chairman and Chairman Elect * Stephen R O’Shea Chief Executive Kevin J Thompson BSc FCA Neil Quinn BSc Richard A Stone MA FCA * Keith J Roy MSc Andrew J Walker MA CEng * Carol T Chesney BA FCA * Non-executive Stephen R O’Shea Chief Executive Nigel J Young Process Safety Neil Quinn Fire and Security Kevin J Thompson Group Finance Director John S Campbell Resistors Keith J Roy Water and Gas Technology William J Seymour Elevator Electronics Andrew J Williams Optics and Water Instrumentation Adam J Meyers Fluid Technology Registered Office Misbourne Court Rectory Way Amersham Bucks HP7 0DE Telephone: +44 (0)1494 721111 Fax: +44 (0)1494 728032 Website: www.halma.com Registered Number 40932 Auditors Bankers Financial Advisers Solicitors Brokers Registrars 30 Halma p.l.c. 2003 Deloitte & Touche Abbots House Abbey Street Reading Berks RG1 3BD The Royal Bank of Scotland plc 15 Bishopsgate London EC2P 2AP Lazard Brothers & Co., Limited 21 Moorfields London EC2P 2HT CMS Cameron McKenna Mitre House 160 Aldersgate Street London EC1A 4DD Dresdner Kleinwort Wasserstein Limited 20 Fenchurch Street London EC3P 3DB Computershare Investor Services PLC PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH Telephone: +44 (0)870 702 0000 H A L M A Report of the Directors The Directors present their annual report on the affairs of the Group, together with the Accounts and the Independent Auditors’ Report, for the 52 weeks to 29 March 2003. Activities Halma p.l.c. is a holding company. A list of its principal subsidiary companies and their activities is set out on pages 78 and 79. Results of the period Ordinary dividends Review Share capital Allotment authority Purchase of own shares Supplier payment policy The Consolidated Profit and Loss Account for the 52 weeks to 29 March 2003 is set out on page 46. The Group profit before taxation and goodwill amortisation is £46,508,000 (2002: £48,255,000). The profit after taxation and goodwill amortisation amounts to £28,359,000 (2002: £31,157,000). The Directors will submit a resolution at the Annual General Meeting proposing a final dividend of 3.527p per share and if approved this dividend will be paid on 18 August 2003 to ordinary shareholders on the register at the close of business on 18 July 2003. Together with the interim dividend of 2.285p per share already paid, this will make a total of 5.812p per share for the financial year. A review of activities together with business and future developments is included on pages 7 to 27 inclusive. Details of share capital issued in the financial year are set out in note 18 on the Accounts. The special business of the Annual General Meeting includes a special resolution to disapply Section 89(1) of the Companies Act 1985 with respect to certain allotments. The effect of this special resolution, if approved, will be to give the Directors authority until the date of the next Annual General Meeting, firstly to issue shares to employees under share schemes previously approved in general meeting, and secondly to allot up to 5% of the issued ordinary share capital for cash otherwise than pro-rata to existing shareholders. The Company was authorised at the 2002 Annual General Meeting to purchase up to 36,000,000 (approximately 10%) of its own 10p ordinary shares in the market. This authority expires at the end of the 2003 Annual General Meeting. In accordance with the Directors’ stated intention to seek annual renewal, a special resolution will be proposed at the Annual General Meeting to renew this authority until the end of the next Annual General Meeting. The Directors consider it desirable that the possibility of making such purchases, under appropriate circumstances, is available. The Directors have no present intention of using this authority. In reaching a decision to purchase shares, the Directors will take into account the Company’s cash resources, capital requirements and the effect of any purchase on the Company’s earnings per share. It is anticipated that renewal of the authority will be requested at subsequent Annual General Meetings. The Company does not follow any particular supplier payment code of practice. The Company has due regard to the payment terms of suppliers and generally settles all undisputed accounts within 30 days of the due date for payment. At 29 March 2003 the Company’s trade creditors represented 38 days (2002: 34 days) of annual purchases. Employees Matters which affect the Group are communicated to employees through formal and informal meetings, internal announcements, the Group bulletin board on our Halma p.l.c. 2003 31 H A L M A Report of the Directors continued secure Virtual Private Network (VPN) and regular contact with Directors and Divisional Chief Executives. An employee share scheme is open to all UK employees of the Group following a qualifying period and has been operating since 1980. The Company is an equal opportunity employer and gives disabled people the same consideration as other individuals. The Directors consider it appropriate that shareholders be given the opportunity to approve the remuneration of Directors as set out in the Report on Remuneration on pages 38 to 43. The special business of the Annual General Meeting contains an ordinary resolution seeking such shareholder approval. The environment Within Halma, we have an excellent long-term record and a clear strategy for addressing environmental issues that affect our businesses and for developing products that protect the environment and improve safety at work and in public places. Many of our innovative products play a very positive role in monitoring and improving the environment. Halma brands lead the world in a number of technologies which help to minimise environmental damage. Our principal environmental technologies are water leakage detection, gas emissions monitoring, water and effluent analysis and UV water treatment. Our commitment to the development of equipment for measuring environmental changes and controlling the damaging impact of industrial activities is long-term. Our contribution to increased personal safety in public places and at work includes protecting people from fire, making elevators and automatic doors safe and effective and providing safety products that ensure safe practices at work. We are the major world supplier in several of these areas. We support the concept of sustainability and recognise that, in common with all businesses, our activities have an environmental impact. Our products do not require capital intensive manufacturing processes, so the environmental effect of our operations is relatively low compared to manufacturers in other sectors. However, Group companies are encouraged to improve energy efficiency, reduce waste and emissions, reduce the use of materials and reduce environmental impact. We tirelessly promote the use of UV water sterilisation which eliminates the need to use dangerous chemicals, as well as products that minimise the waste of clean water. We make equipment that ensures safe practices that prevent accidents, emissions and fires and safety equipment for use in public places and transportation systems. The Group’s policy on environmental issues is published on our website and has been distributed to all Halma business units. The senior executive in each of our business units is responsible for implementing the environmental policy at local level. The Group Finance Director, Mr K J Thompson, has principal responsibility for coordinating and monitoring the policy. Directors’ remuneration Social responsibility 32 Halma p.l.c. 2003 H A L M A Report of the Directors continued We are committed to work towards implementing an environmental management system to measure and control environmental impact. We are working towards measuring, reporting and controlling our environmental impact. We expect to develop performance indicators that will assist local management in implementing the policy. The Group’s environmental performance will be reported via the Annual Report and on our website. Health and safety The Group recognises the necessity of safeguarding the health and safety of our own employees whilst at work and operates so as to provide a safe working environment for employees, visitors and the public. Given the autonomous structure of the Group, operational responsibility for compliance with relevant local environmental and health and safety regulations is delegated to the board of directors of each Group company. Adequate internal reporting exists in order that the Group Finance Director may monitor each company’s stated compliance with such regulations. FTSE4Good index Halma was designated a member of the FTSE4Good UK index on its establishment in July 2001. The FTSE4Good index measures and benchmarks the performance of companies with good records of corporate social responsibility and aids investors who use socially responsible investment criteria. The FTSE4Good Selection Criteria cover three areas: working towards environmental sustainability; developing positive relationships with stakeholders; and upholding and supporting universal human rights. Group companies have continuous research and development programmes established with the objective of the improvement of their product ranges and increasing the profitability of their operations. Group companies made charitable donations amounting to £1,308 during the financial year. There were no political donations. The Directors of the Company are listed on page 30. Brief biographies are set out on page 28. Following the announcement on 28 August 2002 that Mr D S Barber intends to retire from the Board immediately after the 2003 Annual General Meeting, Mr E G Unwin was appointed to the Board as non-executive Deputy Chairman (Chairman Elect) on 2 September 2002. Mr A J Walker was appointed to the Board as a non-executive Director on 8 May 2003. On 30 April 2002 Mr C Q Summerhayes retired from service with the Group and resigned as a Director of the Company. On 8 November 2002 Mr H M J Ritchie resigned as a Director of the Company. Lord McGowan, who joined the Board in 1997, died on 7 May 2003. Halma p.l.c. 2003 33 Research and development Donations Directors H A L M A Report of the Directors continued Directors proposed for re-election Mr S R O’Shea, Mr K J Thompson and Mr N A Quinn retire by rotation and being eligible offer themselves for re-election. Mr E G Unwin and Mr A J Walker, who joined the Board since the last Annual General Meeting, retire under Clause 95 of the Articles of Association and being eligible offer themselves for re-election. Shareholdings As at 5 June 2003 the Company has been notified under Section 198 of the Companies Act 1985 of the following notifiable holdings of the Company’s ordinary shares: Silchester International Investors Limited Oppenheimer Funds, Inc Sprucegrove Investment Management Limited Mr D S Barber Legal & General Investment Management Limited shares 65,511,005 23,300,828 21,897,149 13,053,056 11,012,475 per cent 17.9 6.3 5.9 3.5 3.0 No other notification has been received in respect of a holding of 3% or more of the Company’s ordinary share capital. The Directors appointed Deloitte & Touche as auditors in April 2003 succeeding PricewaterhouseCoopers. Special notice has been received in accordance with Sections 379 and 388(3) of the Companies Act 1985 of a resolution that Deloitte & Touche be re-appointed as auditors of the Company and this will be proposed at the Annual General Meeting along with authority for the Directors to determine their remuneration. By Order of the Board C T Chesney Secretary Misbourne Court Rectory Way Amersham Bucks HP7 0DE 17 June 2003 Auditors 34 Halma p.l.c. 2003 H A L M A Corporate Governance Application of the principles of good governance The Board is committed to the maintenance of high standards of Corporate Governance. The policy of the Board is to manage the affairs of the Company in accordance with the Principles of Good Governance and the Code Provisions set out in Section 1 of the Combined Code on Corporate Governance (“the Combined Code”) issued by the Financial Services Authority. The Group is controlled and directed by a Board consisting of a non-executive Chairman, four executive Directors and three other non-executive Directors. Their biographies appear on page 28. The Board considers each of the non- executive Directors to be independent. In assessing independence, the Board considers that the non-executive Directors are independent of management and free from business and other relationships which could interfere with the exercise of independent judgement. The Board believes that any shareholdings of non- executive Directors serve to align their interests with those of all shareholders. Mr Stone is acknowledged as the Senior Independent Director. Upon appointment and at regular intervals, all Directors are offered appropriate training. Each Director is subject to re-election at least every three years. The Directors retain responsibility for the formulation of corporate strategy, investment decisions, and treasury and risk management policies. There is a formal schedule of matters reserved for the Board’s decision and the Board meets at least eight times each year. Directors are issued an agenda and comprehensive board papers in the week preceding each Board Meeting. All Directors have access to the advice and services of the Company Secretary as well as there being an agreed procedure for obtaining independent professional advice. Lord McGowan chaired the Remuneration Committee until November 2002 when Mr Stone assumed the chair. Mr Barber and Mr Unwin are also members of the Committee, and Lord McGowan remained a member until his death in May 2003. Formal terms of reference exist which follow the recommendations of the Combined Code. The Committee makes recommendations to the Board on the framework for executive Directors’ and senior executives’ remuneration based on proposals formulated by the Group Chief Executive. Mr Ritchie chaired the Audit Committee until his resignation in November 2002 when Lord McGowan assumed the chair. Following Lord McGowan’s death, Mr Unwin chairs the Audit Committee. Each of the non-executive Directors is a member of the Committee. Formal terms of reference exist which follow the recommendations of the Combined Code. The Committee reviews the interim and annual accounts, the statement on internal controls and is responsible for the relationship with the external auditors. The Group Chief Executive and Group Finance Director attend Committee meetings by invitation in order to provide appropriate advice. Mr Barber chairs the Nomination Committee. Mr Unwin, Mr Stone and Mr O’Shea are also members of the Committee. Lord McGowan was also a member of the Committee throughout the financial year. Formal terms of reference exist which follow the recommendations of the Combined Code. The Committee makes recommendations to the Board on the appointment of new Directors. Control of divisional operating matters is delegated to the Divisional Chief Executives all of whom are members of the Executive Board. Biographies of Halma p.l.c. 2003 35 H A L M A Corporate Governance continued Executive Board members appear on page 28. The Group Chief Executive chairs the Executive Board of which the Group Finance Director is also a member thereby ensuring the Board’s strategies are communicated to those overseeing operations. The Group Chief Executive and Group Finance Director meet regularly with each Divisional Chief Executive to monitor progress against key objectives and review operational performance. Individual operating company boards, chaired by the appropriate Divisional Chief Executive, manage operating companies. These boards have clearly defined responsibilities for the operation of their businesses, including compliance with legislation and regulations, and for internal reporting. The system of internal control exercised within the Group is described below. In regular meetings with shareholders and analysts the Group Chief Executive and Group Finance Director communicate the Group’s methods and results. Meetings include the Annual General Meeting and briefings following the interim and annual results. The financial calendar is set out on page 15. The Group website, www.halma.com, contains copies or summaries of all Company announcements, summaries of presentations to analysts, electronic versions of the latest Annual Report and Accounts, biographical information on key Directors and Officers, share price information, and full subsidiary company contact details as well as hotlinks to their own websites. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. The Board of Directors has overall responsibility to the shareholders for the Group’s system of internal control and responsibility for reviewing its effectiveness has been delegated to the Audit Committee. Any system of internal control can provide only reasonable but not absolute assurance against material misstatement or loss. Following publication by the Turnbull Committee of the guidance for directors on internal control (“Internal Control: Guidance for Directors on the Combined Code”), the Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group, that this has been in place for the year under review and up to the date of approval of the Annual Report and Accounts. This process has been reviewed regularly by the Board, and the Group accords with the Turnbull guidance. The Group’s external auditors, Deloitte & Touche, have audited the financial statements and have reviewed the internal financial control systems to the extent they consider necessary to support their audit report. The Board meets regularly throughout the year and has adopted a schedule of matters which are required to be brought to it for decision. This procedure is intended to ensure that the Directors maintain full and effective control over all significant strategic, financial and organisational issues. Investor relations Going concern Internal control 36 Halma p.l.c. 2003 H A L M A Corporate Governance continued Group companies operate under a system of controls which includes but is not limited to: ● ● ● ● ● ● a defined organisational structure with an appropriate delegation of authority to operational management the identification and appraisal of risks both formally, through the annual process of preparing business plans and budgets, and informally through close monitoring of operations a comprehensive financial reporting system within which actual results are compared with approved budgets and previous year’s figures on a monthly basis and reviewed at both local and Group level an investment evaluation procedure to ensure an appropriate level of approval for all capital expenditure self-certification by operating company management of compliance and control issues a prescribed robust structure under which it is appropriate to adopt means of electronic communication and to conduct e-commerce. The processes which the Board has applied in reviewing the effectiveness of the Group’s system of internal control are summarised below. ● ● ● ● Operating companies carry out a detailed risk assessment as part of the annual strategic planning process and identify mitigating actions in place or proposed. Divisional Chief Executives carry out an independent risk assessment for each operating company. A similar review of Group risks is conducted. Each month the board of each operating company meets, discusses and reports on its operating performance, its opportunities, the risks facing it and the resultant actions. The relevant Divisional Chief Executive chairs this meeting. Divisional Chief Executives meet regularly with the Group Chief Executive and Group Finance Director and report progress to the Executive Board. The Group Chief Executive submits a report to each Halma p.l.c. Board meeting which includes financial information, the main features of Group operations and an analysis of the significant risks facing the Group at that time. The Group Finance Director and Group Chief Executive report to the Audit Committee on all aspects of Internal Control for its review. The Board receives the minutes of the Audit Committee meetings and uses these as a basis for its annual review of internal control. The Group does not maintain a formal internal audit function. The need for such a function was last reviewed in 2003 by the Audit Committee, which concluded that it is not appropriate to the Group’s current size and structure. Half-yearly reviews of Group companies’ results are undertaken by senior financial staff as are regular internal control visits. During the year the Audit Committee carried out a full review of the external audit arrangements concluding that Deloitte & Touche be appointed as auditors to the Group. Compliance with the code The Company complied with the Combined Code throughout the financial year. of best practice Halma p.l.c. 2003 37 H A L M A Report on Remuneration Remuneration policy Basic salary and benefits The following sections of the Report on Remuneration have been audited: the table of Directors’ remuneration and subsequent notes; individual pension entitlements; Directors’ interests in shares. The policy on Directors’ Remuneration is to provide the remuneration packages necessary to attract, retain and motivate Directors of the quality required to manage the business of the Group and to align the interests of the Directors with those of the shareholders. In accordance with rule 12.43A(c) of the Listing Rules of the Financial Services Authority the Board presents its Report on Remuneration to the shareholders. The Board confirms that when determining the remuneration policy for executive Directors for 2002/03 full consideration was given to the Combined Code appended to the Listing Rules of the Financial Services Authority. The Remuneration Committee consists entirely of non-executive Directors, the current members being Mr R A Stone (Chairman of the Committee), Mr D S Barber and Mr E G Unwin. Lord McGowan was also a member throughout the financial year. The Committee makes recommendations to the Board on the framework for executive remuneration, based on proposals formulated by the Group Chief Executive, and determines the terms of service and remuneration of executive Directors and senior executives. In determining recommended basic salary levels for each individual, the Committee uses independent surveys and other relevant data to relate remuneration levels to comparable publicly quoted companies. In assessing the data that the Committee utilises, the Committee considers the benefits in comparable companies, the Company’s market capitalisation, the Group’s turnover and the complexity of Group operations in order to determine each Executive’s basic salary level. Basic salary levels are set in order to achieve a balance between fixed and variable remuneration. Share options The Directors have long believed that share option plans are an excellent way to align the interests of senior management with those of shareholders and that share options provide excellent motivation. The 1990 and 1996 Share Option Plans each provide for the grant of two categories of option both of which are subject to performance criteria. No further grants may be made from either of these plans. Section ‘A’ options are exercisable after three years if the Company’s earnings per share growth exceeds, for the 1990 Scheme, the growth in the Retail Price Index and, for the 1996 Scheme, the growth in the Retail Price Index plus 2% per annum. Section ‘B’ options are exercisable after five years if the Company’s earnings per share growth exceeds the earnings per share growth of all but the top quarter of companies which were within the FTSE 100 at the date of grant of any option. Options under the 1999 Company Share Option Plan have more stringent exercise criteria. Section ‘A’ options are exercisable after three years if the Company’s earnings per share growth exceeds the growth in the Retail Price Index plus 3% per annum. Section ‘B’ options are exercisable after five years if the Company’s earnings per share growth exceeds the earnings per share growth of all but the top quarter of companies which were within a peer group at the date of grant of any option. 38 Halma p.l.c. 2003 H A L M A Report on Remuneration continued The granting of options is spread over the life of the plan. Executive Directors receive a triennial award of ‘A’ options, an annual award of ‘B’ options and the possibility of further ‘A’ options under the Performance Related Bonus Scheme. Performance related bonus scheme This scheme, which applies only to executive Directors, is reviewed annually by the Remuneration Committee and approved by the Board. Without such approval there is no alternative bonus arrangement for Directors. In the case of a Divisional Chief Executive, a bonus would be earned for 2002/03 if the profit of the Division for which he is responsible for that year exceeds the previous highest peak of the preceding three financial years. The profits calculated for this purpose regard each Division as a stand-alone group of companies charging it with the cost of capital it utilises including the cost of acquisitions. In order to earn a bonus for 2003/04, the profit of the Division for which a Divisional Chief Executive is responsible must exceed a target calculated from the profits of the three preceding financial years. For the Group Chief Executive and Group Finance Director, bonuses are based on the increase in profits, calculated as above, of the aggregated Divisions for each year. In order to earn a bonus for 2003/04, the aggregated profit of the Divisions must exceed a target calculated from the profits of the Divisions for the three preceding financial years. A pre-determined percentage of the profit improvement is payable in cash and generally a further percentage is granted in the form of Section ‘A’ share options. For 2003/04, the percentage payable in cash will commence at a low level for modest growth increasing, in percentage terms, as performance improves. The maximum bonus payable to any one Director will be capped at 100% of his salary. Directors’ remuneration D S Barber E G Unwin S R O’Shea C Q Summerhayes J C Conacher Lord McGowan H M J Ritchie K J Thompson N Quinn R A Stone K J Roy Salaries and fees £000 81 58 290 15 – 22 10 145 145 22 125 2002 Total £000 61 – 285 197 30 20 20 147 148 20 555 555 555 555 555 104 555 555 555 555 555 1,032 Benefits £000 – 7 24 1 – – – 13 17 – 18 Bonus £000 – – – – – – – – – – – 2003 Total £000 81 65 314 16 – 22 10 158 162 22 143 913 993 80 – The fees paid to Lord McGowan were paid to WestLB Panmure Limited through 31 January 2002 and to himself thereafter. The fees paid to Mr H M J Ritchie were paid to Marsh Europe SA. The fees paid in relation to Mr E G Unwin were paid to Gunwin Limited. Halma p.l.c. 2003 39 H A L M A Report on Remuneration continued After inclusion of gains on the exercise of share options, where applicable, Mr S R O’Shea was the highest paid director in the financial year. The Directors participate in the appropriate section of the Halma Group Pension Plan. This section is a funded, Inland Revenue approved, final salary occupational pension scheme, which provides a pension equal to the lower of two-thirds of final pensionable salary and the Inland Revenue maximum pension at normal pension age (60). Pensionable salary is the greatest salary of the last three complete tax years immediately before retirement or leaving service. Bonuses and other fluctuating emoluments and benefits in kind are not pensionable. The scheme also provides for life cover of three times pensionable salary, pensions in the event of early retirement through ill health and dependants’ pensions of one-half of the member’s prospective pension. Early retirement pensions, possible from age 50 with the consent of the Company and the Trustees of the Halma Group Pension Plan, are subject to actuarial reduction. Pensions in payment increase by 3% per annum for service up to 5 April 1997 and by price inflation thereafter subject to a maximum of 5%. Individual pension entitlements Age at 29.3.03 57 61* 43 53 52 Years of service at 29.3.03 27 28* 15 15 10 Accrued pension 2002 £000 128 109 34 44 21 Increase in the year £000 15 8 9 7 2 Accrued pension 2003 £000 145 117* 44 52 23 S R O’Shea C Q Summerhayes K J Thompson N Quinn K J Roy * as at date of retirement The accrued pension shown is that which would be paid annually on retirement based on service to the end of the year. The increase in accrued pension during the year is the amount in excess of the increase due to inflation. Transfer value 30.3.02 £000 1,744 1,826 229 480 228 Directors’ contributions £000 23 1 11 11 9 Increase in transfer value net of contributions £000 512 150 123 183 60 Transfer value 29.3.03 £000 2,279 1,977* 363 674 297 S R O’Shea C Q Summerhayes K J Thompson N Quinn K J Roy * as at date of retirement The transfer values disclosed above do not represent a sum paid or payable to the individual Director. Instead they represent a potential liability of the pension scheme. These values have been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. Pension benefits 40 Halma p.l.c. 2003 H A L M A Report on Remuneration continued Total shareholder return The graph below shows the Company’s total shareholder return performance over the five years to 29 March 2003 as compared to the FTSE 250 and Engineering & Machinery indices which have been chosen as the Company is a constituent of both of these indices. Over the period indicated, the Company’s total shareholder return was 11% compared to a negative return of 17% for the FTSE 250 and a negative return of 50% for the FTSE Engineering & Machinery sector. x e d n i d e s a b e R 160 140 120 100 80 60 40 March 1999 March 2000 March 2001 March 2002 March 2003 HALMA – TOTAL RETURN INDEX FTSE 250 – TOTAL RETURN INDEX FTSE ENGINEERING.& MACHINERY – TOTAL RETURN INDEX Financial year end Source: DATASTREAM At the commencement of the five-year period depicted in the graph, the Halma p.l.c. ordinary share price was 124p and the total of dividends paid in the year ended 28 March 1998 was 2.491p per share. The Halma p.l.c. ordinary share price at 29 March 2003 was 114p and the total of dividends paid in the year then ended was 5.491p per share. Directors’ interests in shares The beneficial interests of Directors and their families in the ordinary shares of the Company during the financial year were as follows: D S Barber E G Unwin S R O’Shea Lord McGowan K J Thompson N Quinn R A Stone K J Roy *as at date of appointment Shares 29.3.03 13,053,056 38,250 242,482 41,540 47,786 25,596 5,000 744,587 Shares 30.3.02 13,053,056 –* 222,482 41,540 47,786 25,596 5,000 744,587 There are no non-beneficial interests of Directors. There were only two changes in Directors’ interests from 29 March 2003 to 17 June 2003. Lord McGowan’s interest in 41,540 shares ceased upon his death and, at the date of his appointment to the Board, Mr A J Walker was beneficially interested in nil shares of the Company. Halma p.l.c. 2003 41 H A L M A Report on Remuneration continued The movements in share options during the financial year were as follows: S R O’Shea K J Thompson N Quinn K J Roy As at 30.3.02 1,177,029 539,160 691,172 315,742 Granted 281,299 40,186 40,186 121,250 Exercised – – – – Lapsed – – – – As at 29.3.03 1,458,328 579,346 731,358 436,992 The total gains on options exercised by Directors during the financial year amounted to £121,282. The total gains arise on Mr Summerhayes’ exercise of options granted in 1992, 1993, 1994 and 1995. The gains are calculated by deducting the exercise price from the closing middle market price at the date of exercise or the actual gross sales proceeds if appropriate. Options granted to Directors during the financial year were at 144.33p. The closing middle market price of the Company’s ordinary shares on Friday, 28 March 2003, the last trading day preceding the financial year end, was 114p per share and the range during the year was 96.5p to 166p. Details of Directors’ options outstanding at 29 March 2003 are set out in the table below. The status of the options can be summarised as follows: 1 2 3 4 Exercisable at that date at a price less than 114p. Exercisable at that date at a price greater than 114p. Not yet exercisable, will only be exercisable when the performance criteria, set out above, have been met and have an exercise price per share of less than 114p. Not yet exercisable, will only be exercisable when the performance criteria, set out above, have been met and have an exercise price per share of greater than 114p. S R O’Shea K J Thompson N Quinn K J Roy Status of options (see above) 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Year of grant 1993-95 1993-99 2000 1997-02 1993-95 1993-98 2000 1997-02 1993-95 1993-99 2000 1997-02 1994-98 1993-99 1998-00 1997-02 Weighted average exercise price (p) per share 109.76 128.77 111.00 141.89 109.60 125.20 111.00 138.75 108.41 121.11 111.00 143.01 106.60 127.46 107.80 145.87 Number of shares 121,598 710,931 90,100 535,699 67,821 200,739 138,800 171,986 49,262 282,810 175,100 224,186 54,999 130,743 44,600 206,650 42 Halma p.l.c. 2003 H A L M A Report on Remuneration continued Service contracts Non-executive Directors All options lapse if not exercised with 10 years from the date of grant. The Company’s Register of Directors’ Interests, which is open to inspection at the Registered Office, contains full details of Directors’ shareholdings and share options. It is the Company’s policy that executive Directors should have contracts with an indefinite term providing for a maximum of one year’s notice. The service contract of Mr S R O’Shea has a two-year rolling notice period which the Board reviewed during the year and confirmed its appropriateness. All other executive Directors have contracts with a notice period of one year. None of the contracts have pre-determined compensation clauses in the event of early termination. The Board and the Remuneration Committee confirm that these contracts are appropriate having regard, amongst other things, to the individuals’ length of service. All non-executive Directors have specific terms of engagement and their remuneration is determined by the Board based on independent surveys of fees paid to non-executive directors of similar companies. The non-executive Directors receive a basic fee supplemented, from 1 January 2003, by additional fees for membership and/or chairmanship of the Audit and Remuneration Committees. The contract in respect of Mr Unwin’s services provides for termination, by either party, by giving not less than six months’ notice. Mr Unwin’s basic fee for 2002/03 was set at £8,333.33 per month and he received a contribution of £1,000 per month towards his office costs. The other non-executive Directors do not have service contracts. Non-executive Directors’ fees were last reviewed and updated by the Board of Directors in April 2003. By Order of the Board R A Stone Chairman of the Remuneration Committee Misbourne Court Rectory Way Amersham Bucks HP7 0DE 17 June 2003 Halma p.l.c. 2003 43 H A L M A Responsibilities of the Directors United Kingdom Company Law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the profit or loss for that period. The Directors have responsibility for ensuring that proper accounting records are maintained which disclose with reasonable accuracy the financial position of the Company and the Group and which enable them to ensure that the financial statements comply with the Companies Act 1985. The Directors also have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities and are responsible for the system of internal control. The Directors consider that, in preparing the financial statements on pages 46 to 73 and the disclosures on pages 38 to 43 relating to the remuneration of the Directors, appropriate accounting policies have been used, which have been consistently applied and supported by reasonable and prudent judgements and estimates, that all accounting standards which they consider to be applicable have been followed. 44 Halma p.l.c. 2003 H A L M A Independent Auditors’ Report To the Members of Halma p.l.c. We have audited the consolidated financial statements of Halma p.l.c. for the 52 weeks to 29 March 2003 which comprise the Consolidated Profit and Loss Account, the Balance Sheets, the Consolidated Cash Flow Statement, the statement of Accounting Policies and the related Notes numbered 1 to 25, together with the Statement of Total Recognised Gains and Losses and the reconciliation of Movements in Equity Shareholders’ Funds. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the part of the Directors’ remuneration report that is described as having been audited. This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members on those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditors As described in the statement of Directors’ responsibilities, the Company’s Directors are responsible for the preparation of the financial statements in accordance with applicable United Kingdom law and Accounting Standards. They are also responsible for the preparation of the other information contained in the Annual Report including the Directors’ remuneration report. Our responsibility is to audit the financial statements and the part of the Directors’ remuneration report described as having been audited in accordance with relevant United Kingdom legal and regulatory requirements and auditing standards. We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors’ remuneration report described as having been audited have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the Directors’ report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and transactions with the Company and other members of the Group is not disclosed. We review whether the corporate governance statement reflects the Company’s compliance with the seven provisions of the Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. We read the Directors’ report and the other information contained in the Annual Report for the above period as described in the contents section including the unaudited part of the Directors’ remuneration report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Basis of audit opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’ remuneration report described as having been audited. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the circumstances of the Company, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors’ remuneration report described as having been audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Directors’ remuneration report described as having been audited. Opinion In our opinion: ● the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 29 March 2003 and of the profit of the Group for the 52 week period then ended; and ● the financial statements and part of the Directors’ remuneration report described as having been audited have been properly prepared in accordance with the Companies Act 1985. Deloitte & Touche Chartered Accountants and Registered Auditors Reading 17 June 2003 Neither an audit nor a review provides assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular whether any changes may have occurred to the financial information since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions. Halma p.l.c. 2003 45 H A L M A Consolidated Profit and Loss Account £000 52 weeks to 29 March 2003 s e t o N – 1 – – Total 15,134 267,293 252,159 Goodwill amortisation Before Goodwill amortisation 2002 55555555555555555555555555555 52 Weeks Total 55555555555555555555555555555 Turnover 55555555555555555555555555555 Continuing operations 267,597 252,159 55555555555 555 555 555 555 – 15,134 Acquisitions 55555555555555555555555555555 267,597 267,293 Operating profit before 55555555555 goodwill amortisation 55555555555 Continuing operations 55555555555 Acquisitions 2,941 – 55555555555555555555555555555 Operating profit 46,100 45,721 55555555555 555 555 555 555 237 408 Interest Profit on ordinary activities 55555555555555555555555555555 before taxation 46,508 45,958 55555555555 555 555 555 555 Taxation (14,801) (15,279) 55555555555 555 555 555 555 31,157 31,229 Profit for the financial year DDiivviiddeennddss55555555555555555555555555555 55555555555555555555 555 555 Ordinary dividends (19,323) 55555555555555555555 555 555 11,834 Profit transferred to reserves 9 (21,246) (14,914) (3,235) (2,870) (3,235) (2,282) 28,359 42,865 43,273 40,877 43,159 45,721 1,988 7,113 (953) 408 365 3 1 – 7 6 8 Earnings per ordinary share 55555555555555555555555555555 before goodwill amortisation 2 9.10p 55555555555555555555555555555 8.58p Earnings per ordinary share Diluted earnings per ordinary share 8.55p 7.75p 7.76p 8.54p 2 2 Operating profit for the 52 weeks to 30 March 2002 is after charging goodwill amortisation of £2,297,000. The notes on pages 51 to 73 form part of these Accounts. 46 Halma p.l.c. 2003 Consolidated Balance Sheet £000 H A L M A s e t o N 11 10 49,883 76,592 126,475 At 29 March 2003 At 30 March 55555555555555555555555555555 2002 55555555555555555555555555555 Fixed assets 55555555555555555555555555555 Intangible assets 40,042 555555555555555555555 555 555 43,860 Tangible assets 555555555555555555555 555 555 83,902 55555555555555555555555555555 Current assets 55555555555555555555555555555 Stocks 35,212 55555555555555555555555555555 67,993 Debtors 55555555555555555555555555555 Short-term deposits 34,386 555555555555555555555 555 555 Cash at bank and in hand 11,271 555555555555555555555 555 555 148,862 55555555555555555555555555555 Creditors: amounts falling due within one year 55555555555555555555555555555 Borrowings 15,047 55555555555555555555555555555 36,946 Creditors 55555555555555555555555555555 6,844 Current taxation 555555555555555555555 555 555 Dividends payable 11,712 555555555555555555555 555 555 70,549 135,836 46,090 12,892 14,309 73,076 27,667 35,186 13,265 91,935 5,286 15 14 12 13 16 43,901 170,376 555555555555555555555 555 555 Net current assets 78,313 555555555555555555555 555 555 Total assets less current liabilities 162,215 55555555555555555555555555555 Creditors: amounts falling due after one year 491 555555555555555555555 555 555 4,167 Provisions for liabilities and charges 555555555555555555555 555 555 157,557 55555555555555555555555555555 Capital and reserves 55555555555555555555555555555 36,473 Called up share capital 55555555555555555555555555555 5,631 Share premium account 55555555555555555555555555555 Other reserves 185 555555555555555555555 555 555 Profit and loss account 115,268 555555555555555555555 555 555 157,557 Equity shareholders’ funds 120,337 163,446 163,446 36,549 6,375 1,665 5,265 185 18 17 9 9 9 Approved by the Board of Directors on 17 June 2003 D S Barber K J Thompson Directors Halma p.l.c. 2003 47 H A L M A Statement of Total Recognised Gains and Losses £000 2002 55555555555555555555555555555 52 weeks 55555555555555555555555555555 Profit for the financial year 31,157 55555555555555555555555555555 Other recognised gains and losses 55555555555555555555555555555 (102) Exchange adjustments 555555555555555555555 555 555 Related corporation tax (26) 555555555555555555555 555 555 (128) 555555555555555555555 555 555 31,029 Recognised gains and losses relating to the year 2003 52 weeks (2,408) (2,044) 26,315 28,359 364 Movements in Equity Shareholders’ Funds s e t o N 2003 52 weeks 2002 55555555555555555555555555555 52 weeks 55555555555555555555555555555 31,157 Profit for the financial year 555555555555555555555 555 555 Dividends (19,323) 55555555555555555555555555555 Profit transferred to reserves 11,834 55555555555555555555555555555 (128) Total other recognised gains and losses 555555555555555555555 555 555 4,382 Net proceeds of shares issued 55555555555555555555555555555 Increase in equity shareholders’ funds 16,088 555555555555555555555 555 555 Equity shareholders’ funds brought forward 141,469 555555555555555555555 555 555 157,557 Equity shareholders’ funds carried forward (21,246) 157,557 163,446 (2,044) 28,359 5,889 7,113 820 9 48 Halma p.l.c. 2003 Consolidated Cash Flow Statement £000 H A L M A 2002 55555555555555555555555555555 52 weeks 2003 52 weeks s e t o N 22 658 (622) 1,280 60,309 (11,257) (15,498) 555555555555555555555 555 555 Cash flow from operating activities 55,860 55555555555555555555555555555 Return on investments and servicing of finance 55555555555555555555555555555 770 Interest received 555555555555555555555 555 555 Interest paid (522) 55555555555555555555555555555 248 Taxation55555555555555555555555555555 55555555555555555555555555555 (17,023) Current taxation paid 55555555555555555555555555555 Capital expenditure 55555555555555555555555555555 Purchase of tangible fixed assets (8,120) 555555555555555555555 555 555 1,667 Sale of tangible fixed assets 55555555555555555555555555555 (6,453) 55555555555555555555555555555 Acquisitions 55555555555555555555555555555 (2,571) Acquisition of businesses 555555555555555555555 555 555 Cash and overdrafts acquired – 55555555555555555555555555555 (2,571) 555555555555555555555 555 555 Equity dividends paid (17,673) 55555555555555555555555555555 12,388 55555555555555555555555555555 Management of liquid resources 55555555555555555555555555555 Decrease/(increase) in short-term deposits (20,912) Financing55555555555555555555555555555 55555555555555555555555555555 Issue of ordinary share capital 4,382 555555555555555555555 555 555 Increase in loans 8,253 555555555555555555555 555 555 12,635 555555555555555555555 555 555 4,111 Increase in cash (49,857) (20,066) (47,202) (31,184) (9,385) 20,064 13,399 14,219 2,655 1,872 3,099 820 22 22 22 Halma p.l.c. 2003 49 H A L M A Halma p.l.c. Balance Sheet £000 s e t o N 11 20 13 57 3,663 46,423 42,760 14,000 134,040 119,983 2003 52 weeks 2002 55555555555555555555555555555 52 weeks 55555555555555555555555555555 Fixed assets 55555555555555555555555555555 Tangible assets 4,556 555555555555555555555 555 555 40,119 Investments 555555555555555555555 555 555 44,675 55555555555555555555555555555 Current assets 55555555555555555555555555555 Debtors 91,105 55555555555555555555555555555 34,200 Short-term deposits 555555555555555555555 555 555 Cash at bank and in hand – 555555555555555555555 555 555 125,305 55555555555555555555555555555 Creditors: amounts falling due within one year 55555555555555555555555555555 Borrowings 14,668 55555555555555555555555555555 Creditors 15,825 55555555555555555555555555555 2,838 Current taxation 555555555555555555555 555 555 11,712 Dividends payable 555555555555555555555 555 555 45,043 555555555555555555555 555 555 Net current assets 80,262 55555555555555555555555555555 124,937 Total assets less current liabilities 55555555555555555555555555555 Creditors: amounts falling due after one year 131 555555555555555555555 555 555 Provisions for liabilities and charges 476 555555555555555555555 555 555 124,330 55555555555555555555555555555 Capital and reserves 55555555555555555555555555555 Called up share capital 36,473 55555555555555555555555555555 Share premium account 5,631 55555555555555555555555555555 185 Other reserves 555555555555555555555 555 555 Profit and loss account 82,041 555555555555555555555 555 555 124,330 Equity shareholders’ funds Approved by the Board of Directors on 17 June 2003 120,842 120,842 121,519 17,084 12,892 36,549 27,506 77,733 75,096 58,944 1,462 6,375 185 534 143 18 15 21 14 17 16 9 9 D S Barber K J Thompson Directors 50 Halma p.l.c. 2003 Accounting Policies H A L M A Basis of accounting The accounts set out on pages 46 to 73 are prepared under the historical cost convention and comply with applicable UK Accounting Standards. The principal Group accounting policies have been applied consistently throughout the current and preceding year. The accounts also reflect the transitional requirements of FRS 17 (Retirement Benefits). Basis of consolidation The consolidated accounts include the accounts of Halma p.l.c. and its subsidiary companies made up to 29 March 2003. The results of subsidiary companies acquired are included from the month of acquisition. Acquisitions Fair values are ascribed to tangible assets and liabilities of subsidiary companies and businesses at the dates of acquisition and the resultant goodwill is capitalised as an intangible asset. Prior to 28 March 1998 any goodwill surplus or deficiency was taken to reserves as a matter of accounting policy. Intangible assets Goodwill arising on acquisitions after 28 March 1998 is capitalised and is classified as an intangible asset in the Consolidated Balance Sheet. Goodwill arising on acquisitions prior to that date was written off to reserves, and would be included in the determination of profit or loss arising from the sale or closure of the business to which it relates. Capitalised goodwill is amortised through the Consolidated Profit and Loss Account on a straight line basis over its estimated economic life of 20 years. Foreign currencies Transactions in foreign currency are recorded at the rate of exchange at the date of the transaction unless matched by a forward currency contract. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the rates prevailing at that date, or, where appropriate, at the forward currency contract rate. Any gain or loss arising from subsequent exchange rate movements is included as an exchange gain or loss in the Consolidated Profit and Loss Account. 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. Exchange gains or losses arising on these translations, together with those on foreign currency borrowings which are taken out to hedge the Group’s overseas investments, are taken to reserves. Turnover Turnover represents sales, less returns, by subsidiary companies to external customers excluding value added tax. Investments Investments are stated at cost less provision for impairment. Halma p.l.c. 2003 51 H A L M A Accounting Policies continued Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less provisions for impairment and depreciation which, with the exception of freehold land which is not depreciated, is provided on all tangible fixed assets on the straight line method, each item being written off over its estimated life. The principal annual rates used for this purpose are: Freehold buildings Leasehold properties – more than 50 years unexpired less than 50 years unexpired Plant, machinery and equipment Motor vehicles Short-life tooling 2% 2% Period of lease 8% to 20% 20% 331⁄3% Leases The costs of operating leases of property and other assets are charged as incurred. Pensions The Group makes contributions to various pension schemes, covering the majority of its employees, which are charged against profits on a systematic and rational basis over the period during which benefit is derived from the employees’ service. Any differences between this charge and amounts payable to the schemes are recorded as provisions or prepayments as appropriate. Research and development Expenditure on research and development is written off in the financial year in which it is incurred. Stocks Stocks and work in progress of subsidiary companies are included at the lower of cost and net realisable value. Cost includes the appropriate proportion of production and other overheads considered by the Directors to be attributable to bringing the stock to its location and condition at the year end. Deferred taxation The Group provides for taxation deferred because of timing differences between profits as computed for taxation purposes and profits as stated in the accounts, on an undiscounted basis. Deferred taxation is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. The principal timing differences in the Group accounts arise on the excess of tax allowances on tangible fixed assets over the corresponding depreciation charged in the accounts; and on goodwill arising in jurisdictions where it is eligible for deduction against tax, where it has been charged against reserves in the Group accounts but would be accounted for through the Consolidated Profit and Loss Account on a sale or closure of the business to which it relates. 52 Halma p.l.c. 2003 Notes on the Accounts £000 H A L M A 1 Segmental analysis Geographical analysis – – – 2002 2003 9,339 2,840 84,338 55,755 84,724 10,199 11,199 30,823 83,208 23,758 267,597 267,293 162,194 (23,487) By origin By destination 55555555555555555555555555555 55555555555555555555555555555 2003 2002 Turnover55555555555555555555555555555 55555555555555555555555555555 United Kingdom 168,483 79,132 55555555555555555555555555555 United States of America 85,610 82,060 55555555555555555555555555555 20,949 61,145 Europe excluding UK 55555555555555555555555555555 Far East and Australasia 8,319 26,289 55555555555555555555555555555 Africa, Near and Middle East – 10,064 55555555555555555555555555555 3,584 8,603 Other 555555555555 555 555 555 555 Inter-segmental sales (19,348) 555555555555 555 555 555 555 267,597 267,293 55555555555555555555555555555 Profit before taxation 55555555555555555555555555555 29,327 United Kingdom 55555555555555555555555555555 United States of America 13,841 555555555555555555555 555 555 Other countries 4,850 55555555555555555555555555555 48,018 55555555555555555555555555555 Goodwill amortisation (2,297) 555555555555555555555 555 555 Interest 237 555555555555555555555 555 555 45,958 Profit on ordinary activities before taxation 55555555555555555555555555555 55555555555555555555555555555 Net assets 55555555555555555555555555555 United Kingdom 52,493 55555555555555555555555555555 24,957 United States of America 555555555555555555555 555 555 Other countries 9,455 55555555555555555555555555555 86,905 555555555555555555555 555 555 30,610 Net (debt)/cash 55555555555555555555555555555 Net tangible assets 117,515 555555555555555555555 555 555 Intangible assets 40,042 555555555555555555555 555 555 157,557 Equity shareholders’ funds 163,446 (3,235) 86,854 76,592 43,273 46,763 24,768 22,916 14,366 17,268 46,100 86,947 6,966 (93) 408 Halma p.l.c. 2003 53 H A L M A Notes on the Accounts continued £000 1 Segmental analysis continued Sector analysis 2003 (861) 5,517 8,126 27,493 15,028 33,090 70,026 35,241 55,996 46,308 267,293 55555555555555555555555555555 2002 Turnover55555555555555555555555555555 55555555555555555555555555555 70,414 Fire and Gas 55555555555555555555555555555 Water 34,051 55555555555555555555555555555 Elevator Electronics 33,097 55555555555555555555555555555 36,704 Process Safety 55555555555555555555555555555 Resistors 31,461 55555555555555555555555555555 Optics and Specialist 62,462 555555555555555555555 555 555 (592) Inter-segmental sales 555555555555555555555 555 555 267,597 55555555555555555555555555555 Profit before taxation 55555555555555555555555555555 Fire and Gas 14,792 55555555555555555555555555555 7,728 Water 55555555555555555555555555555 Elevator Electronics 5,642 55555555555555555555555555555 Process Safety 6,247 55555555555555555555555555555 4,033 Resistors 555555555555555555555 555 555 Optics and Specialist including holding companies 9,576 55555555555555555555555555555 48,018 55555555555555555555555555555 Goodwill amortisation (2,297) 555555555555555555555 555 555 237 Interest 555555555555555555555 555 555 Profit on ordinary activities before taxation 45,958 55555555555555555555555555555 55555555555555555555555555555 Net assets 55555555555555555555555555555 Fire and Gas 20,392 55555555555555555555555555555 Water 16,512 55555555555555555555555555555 Elevator Electronics 10,292 55555555555555555555555555555 10,964 Process Safety 55555555555555555555555555555 Resistors 10,817 555555555555555555555 555 555 Optics and Specialist including holding companies 17,928 55555555555555555555555555555 86,905 555555555555555555555 555 555 Net (debt)/cash 30,610 55555555555555555555555555555 Net tangible assets 117,515 555555555555555555555 555 555 40,042 Intangible assets 555555555555555555555 555 555 157,557 Equity shareholders’ funds 163,446 (3,235) 43,273 86,854 17,886 76,592 16,416 11,176 18,239 14,747 46,100 86,947 7,609 3,067 8,483 6,753 (93) 408 All of the Group’s land and buildings, dividends payable, taxation (including provisions for deferred taxation) and deferred purchase consideration are included within the net tangible assets of the sector described as Optics and Specialist including holding companies. 54 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 2 Earnings per ordinary share Earnings per ordinary share are calculated by dividing the profit for the financial year of £28,359,000 (2002: £31,157,000) by the weighted average of 365,411,453 shares in issue during the year (2002: 363,099,764). Diluted earnings per ordinary share are calculated using the same earnings as for earnings per ordinary share, divided by 365,809,420 shares (2002: 364,980,744) which includes dilutive potential ordinary shares of 397,967 (2002: 1,880,980). The Company’s dilutive potential ordinary shares are calculated from those exercisable share options where the exercise price is less than the average price of the Company’s ordinary shares during the year. The earnings per ordinary share before goodwill amortisation as presented on the profit and loss account, represents a more consistent measure of underlying performance. A reconciliation of earnings and the effect on per share figures is presented below: Per ordinary share 55555555555555555555555555555 2002 55555555555555555555555555555 2003 p 55555555555555555555555555555 8.58 28,359 Earnings 55 5555555555555 55 0.52 Add back: goodwill amortisation (after tax) 2,870 55 5555555555555 55 9.10 31,229 Earnings before goodwill amortisation 31,157 55 1,902 55 33,059 7.76 55 0.79 55 8.55 2003 p 2002 3 Operating profit 2003 55555555555555555555555555555 2002 55555555555555555555555555555 Operating profit comprises: 55555555555555555555555555555 Turnover 267,597 555555555555555555555 555 555 Cost of sales (189,023) 55555555555555555555555555555 78,574 Gross profit 55555555555555555555555555555 Distribution costs (6,275) 55555555555555555555555555555 Administrative expenses (including goodwill amortisation) (26,905) 555555555555555555555 555 555 327 Other operating income 555555555555555555555 555 555 45,721 (187,006) (31,092) 267,293 (6,725) 80,287 42,865 395 Included in the above for 2003 are the following amounts related to acquired operations: cost of sales £9,825,000; gross profit £5,309,000; distribution costs £520,000; administrative expenses £2,801,000 (including goodwill amortisation £953,000). Halma p.l.c. 2003 55 H A L M A Notes on the Accounts continued £000 3 Operating profit continued 2003 55555555555555555555555555555 2002 55555555555555555555555555555 Operating profit is arrived at after charging: 55555555555555555555555555555 Depreciation 7,371 55555555555555555555555555555 2,297 Goodwill amortisation 55555555555555555555555555555 Research and development 8,206 55555555555555555555555555555 Auditors’ remuneration: Deloitte & Touche – 55555555555555555555555555555 460 55555555555555555555555555555 3,162 Operating lease rents: property 55555555555555555555555555555 97 PricewaterhouseCoopers 3,235 3,129 9,623 7,554 other 430 132 – Auditors’ remuneration includes £60,000 (2002: £59,000) in respect of the Company. In addition, fees amounting to £42,000 (2002: £38,000) were charged by the Group’s former auditors, PricewaterhouseCoopers, and £3,000 (2002: nil) by Deloitte & Touche, the Group’s current auditors, for non-audit services provided to UK Group companies. 4 Employee information 2003 Number 2002 55555555555555555555555555555 Number 55555555555555555555555555555 The average number of persons employed by the group during the year was: 55555555555555555555555555555 1,878 United Kingdom 555555555555555555555 555 555 Overseas 981 555555555555555555555 555 555 2,859 55555555555555555555555555555 £000 Group employee costs comprise: 55555555555555555555555555555 Wages and salaries 63,468 55555555555555555555555555555 Social security costs 8,276 555555555555555555555 555 555 Other pension costs (note 25) 3,676 555555555555555555555 555 555 75,420 63,334 75,678 1,801 8,485 3,859 2,793 £000 992 5 Directors’ remuneration Details of Directors’ remuneration are set out on pages 38 to 43 within the Report on Remuneration and form part of these financial statements. 6 Interest 55555555555555555555555555555 2002 55555555555555555555555555555 Interest receivable on short-term deposits 820 55555555555555555555555555555 Interest payable on bank loans and overdrafts (462) 555555555555555555555 555 555 (121) Other interest 555555555555555555555 555 555 237 1,220 (717) (95) 408 2003 No amounts of interest were capitalised during the year (2002: £70,000 attributable to property additions). 56 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 7 Taxation 2003 203 6,829 7,114 14,146 55555555555555555555555555555 2002 Current tax55555555555555555555555555555 55555555555555555555555555555 UK corporation tax at 30% (2002: 30%) 9,199 55555555555555555555555555555 4,871 Overseas taxation 555555555555555555555 555 555 Adjustments in respect of prior years (268) 555555555555555555555 555 555 Total current tax 13,802 55555555555555555555555555555 Deferred tax 55555555555555555555555555555 1,039 Origination and reversal of timing differences 555555555555555555555 555 555 Adjustments in respect of prior years (40) 555555555555555555555 555 555 Total deferred tax charge 999 555555555555555555555 555 555 14,801 After goodwill amortisation Reconciliation of effective tax rate 2003 2002 55555555555555555555555555555 on profit on ordinary activities: % % 55555555555555555555555555555 30.0 30.0 UK corporation tax rate 55555555555555555555555555555 Higher tax rates on overseas profits 2.6 3.3 55555555555555555555555555555 Adjustments in respect of prior years (0.7) 0.5 555555555555 555 555 555 555 0.3 (0.9) Other timing differences 555555555555 555 555 555 555 32.2 32.9 Effective tax rate Before goodwill amortisation 2002 % 2003 % 14,914 (0.3) (0.7) 34.5 31.5 30.0 30.0 738 768 3.6 0.5 0.4 2.5 30 8 Ordinary dividends 2003 55555555555555555555555555555 2002 p 55555555555555555555555555555 Interim paid 7,564 2.285 55555555555555555555555555555 11,712 3.527 Final proposed 555555555555 555 555 555 555 47 Balance of final dividend 555555555555 555 555 555 555 19,323 5.812 2002 p 12,892 21,246 2.077 3.206 8,352 5.283 2003 2 – – If approved, the final dividend will be paid on 365,493,972 shares in issue. No shares have been issued after 29 March 2003. 9 Reserves Share premium account Profit . and loss 55555555555555555555555555555 account 55555555555555555555555555555 At 30 March 2002 115,268 55555555555555555555555555555 7,113 Profit transferred to reserves 55555555555555555555555555555 Share options exercised – 5555555555555555 555 555 555 Exchange adjustments (2,044) 5555555555555555 555 555 555 120,337 At 29 March 2003 Capital redemption reserve 6,375 5,631 744 185 185 – – – – – Halma p.l.c. 2003 57 H A L M A Notes on the Accounts continued £000 10 Fixed assets – intangible assets 55555555555555555555555555555 Goodwill Cost55555555555555555555555555555 55555555555555555555555555555 At 30 March 2002 45,817 5555555555555555555555555 555 39,785 Additions (Note 19) 5555555555555555555555555 555 At 29 March 2003 85,602 55555555555555555555555555555 Amortisation 55555555555555555555555555555 At 30 March 2002 5,775 5555555555555555555555555 555 3,235 Charge for the year 5555555555555555555555555 555 At 29 March 2003 9,010 55555555555555555555555555555 Net book amounts 55555555555555555555555555555 76,592 At 29 March 2003 55555555555555555555555555555 At 30 March 2002 40,042 11 Fixed assets – tangible assets – – – 51 305 186 (178) 2,478 3,217 8,458 2,401 60,915 21,449 (1,246) Short leases Freehold properties Plant equipment & vehicles Land and buildings Long 55555555555555555555555555555 Group leases Total Cost55555555555555555555555555555 55555555555555555555555555555 At 30 March 2002 86,197 1,355 55555555555555555555555555555 Assets of businesses acquired 4,713 7,981 55555555555555555555555555555 11,257 93 Additions at cost 55555555555555555555555555555 (6,118) Disposals 5555555 555 555 555 555 555 Exchange adjustments (653) 5555555 555 555 555 555 555 At 29 March 2003 98,664 1,448 55555555555555555555555555555 Accumulated depreciation 55555555555555555555555555555 At 30 March 2002 42,337 298 55555555555555555555555555555 Assets of businesses acquired 1,371 3,722 55555555555555555555555555555 7,554 21 Charge for the year 55555555555555555555555555555 (4,401) Disposals 5555555 555 555 555 555 555 Exchange adjustments (431) 5555555 555 555 555 555 555 At 29 March 2003 48,781 319 55555555555555555555555555555 Net book amounts 55555555555555555555555555555 At 29 March 2003 49,883 1,129 55555555555555555555555555555 43,860 1,057 At 30 March 2002 (3,929) (4,694) 18,535 37,903 42,685 27,503 23,083 23,012 67,090 24,405 2,341 4,420 2,914 6,823 1,256 1,266 2,623 1,357 1,222 (366) (453) (806) (106) (19) (33) 460 250 41 10 – – – 58 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 11 Fixed assets – tangible assets continued Land and buildings Plant equipment & vehicles 76 Short leases Freehold 55555555555555555555555555555 Halma p.l.c. properties Total Cost55555555555555555555555555555 55555555555555555555555555555 5,868 4,811 At 30 March 2002 55555555555555555555555555555 Additions at cost 308 34 555555555555 555 555 555 555 Disposals (1,219) (1,067) 555555555555 555 555 555 555 4,957 3,778 At 29 March 2003 55555555555555555555555555555 Accumulated depreciation 55555555555555555555555555555 At 30 March 2002 1,312 730 55555555555555555555555555555 Charge for the year 215 65 555555555555 555 555 555 555 (233) (125) Disposals 555555555555 555 555 555 555 At 29 March 2003 1,294 670 1,012 (152) (108) 183 537 573 981 144 167 91 51 45 – 6 – 55555555555555555555555555555 Net book amounts 55555555555555555555555555555 3,663 3,108 At 29 March 2003 55555555555555555555555555555 At 30 March 2002 4,556 4,081 444 439 116 31 12 Stocks 55555555555555555555555555555 2002 55555555555555555555555555555 14,566 Raw materials and consumables 55555555555555555555555555555 Work in progress 7,481 555555555555555555555 555 555 Finished goods and goods for resale 13,165 555555555555555555555 555 555 35,212 15,231 11,931 35,186 8,024 2003 13 Debtors Group Halma p.l.c. 2002 55555555555555555555555555555 2003 2002 55555555555555555555555555555 Falling due within one year: 55555555555555555555555555555 Trade debtors – 65,578 55555555555555555555555555555 90,678 Amounts due from group companies 55555555555555555555555555555 423 3,979 Prepayments and accrued income 555555555555 555 555 555 555 Other debtors 4 3,519 555555555555 555 555 555 555 91,105 73,076 119,983 117,588 67,993 64,059 1,376 1,136 2,558 1,259 2003 – – – Halma p.l.c. 2003 59 H A L M A Notes on the Accounts continued £000 14 Borrowings Group Halma p.l.c. 55555555555555555555555555555 2003 2002 55555555555555555555555555555 Falling due within one year: 55555555555555555555555555555 Unsecured bank loans and overdrafts 14,668 26,584 555555555555 555 555 555 555 – 1,083 Other unsecured loans 555555555555 555 555 555 555 14,668 27,667 15,047 27,506 26,423 15,047 1,083 2002 2003 – 15 Creditors Group Halma p.l.c. 2002 55555555555555555555555555555 2003 2002 55555555555555555555555555555 411 28,878 Trade creditors 55555555555555555555555555555 1,244 3,842 Other taxation and social security 55555555555555555555555555555 Amounts owing to group companies 11,704 55555555555555555555555555555 Accruals and deferred income 1,060 8,778 555555555555 555 555 555 555 1,406 4,592 Other creditors 555555555555 555 555 555 555 15,825 46,090 13,609 17,084 36,946 23,606 2,230 3,976 1,197 1,144 7,134 375 759 2003 – – 16 Creditors: amounts falling due after one year 55555555555555555555555555555 2003 2002 55555555555555555555555555555 131 1,665 Deferred purchase consideration 491 143 2003 2002 Group Halma p.l.c. 17 Provisions for liabilities and charges 55555555555555555555555555555 2003 2002 55555555555555555555555555555 Deferred taxation 476 5,265 4,167 534 2002 2003 Group Halma p.l.c. Analysis of Group deferred tax provided is as follows: 55555555555555555555555555555 2002 55555555555555555555555555555 Accelerated capital allowances 2,784 55555555555555555555555555555 (1,762) Short-term timing differences 555555555555555555555 555 555 Goodwill timing differences 3,145 555555555555555555555 555 555 4,167 Net deferred tax liability (2,223) 4,302 3,186 5,265 2003 60 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 17 Provisions for liabilities and charges continued Movement in deferred tax liability: UK Group 55555555555555555555555555555 Halma p.l.c. 55555555555555555555555555555 At 30 March 2002 476 55555555555555555555555555555 Charge to profit and loss account: 55555555555555555555555555555 227 55555555555555555555555555555 – 55555555555555555555555555555 (169) Deferred tax on exchange differences 55555555555555555555555555555 Acquired (Note 19) – 555555555555555555555 555 555 Exchange adjustments – 555555555555555555555 555 555 534 At 29 March 2003 Overseas 4,167 5,265 (217) (169) 716 573 195 No provision is made for taxation which might become payable if profits retained by overseas subsidiary companies are distributed as dividends. There are no plans to pay such dividends. 18 Called up share capital Issued and fully paid 55555555555555555555555555555 2003 2002 55555555555555555555555555555 Ordinary shares of 10p each 36,473 43,656 Authorised 36,549 43,656 2003 2002 The number of ordinary shares in issue at 29 March 2003 was 365,493,972. Changes during the year in the issued ordinary share capital were as follows: 55555555555555555555555555555 Issued and fully paid 55555555555555555555555555555 36,473 At 30 March 2002 5555555555555555555555555 555 76 Share options exercised 5555555555555555555555555 555 36,549 At 29 March 2003 The total consideration received in respect of share options exercised amounted to £820,000. Halma p.l.c. 2003 61 H A L M A Notes on the Accounts continued £000 18 Called up share capital continued Options in respect of 2,091,445 ordinary shares remained outstanding at 29 March 2003 under the share option plan approved by shareholders in 1990. Subject to the performance restrictions on the exercise of options granted under this plan, options are exercisable for the periods and at the prices set out below: Option price Five years from 138p – 144.76p 111.75p – 126p 122.63p – 130.52p 117.57p – 128.81p 55555555555555555555555555555 Number of shares Seven years from 55555555555555555555555555555 160,885 1996 55555555555555555555555555555 458,475 1997 55555555555555555555555555555 1998 238,797 55555555555555555555555555555 52,665 1999 55555555555555555555555555555 154,000 2000 55555555555555555555555555555 2001 22,200 55555555555555555555555555555 171,500 2002 55555555555555555555555555555 244,776 55555555555555555555555555555 269,492 55555555555555555555555555555 309,989 55555555555555555555555555555 3,866 55555555555555555555555555555 4,800 104.23p – 124.94p 98.05p – 128.36p 122.5p – 126.5p 101.5p – 116.5p 111.75p – 126p 120p – 137p 138.02p 2000 1998 2001 2004 1999 120p Options in respect of 4,852,224 ordinary shares remained outstanding at 29 March 2003 under the share option plan approved by shareholders in 1996. Subject to the performance restrictions on the exercise of options granted under this plan, options are exercisable for the periods and at the prices set out below: Option price Five years from 138p – 144.75p 122.5p – 138.5p 55555555555555555555555555555 Number of shares Seven years from 55555555555555555555555555555 366,660 1999 55555555555555555555555555555 2000 964,000 55555555555555555555555555555 380,500 2001 55555555555555555555555555555 1,173,200 2002 55555555555555555555555555555 302,264 55555555555555555555555555555 415,800 55555555555555555555555555555 414,400 55555555555555555555555555555 835,400 101.5p – 123.5p 101.5p – 123.5p 138p – 144.75p 122.5p – 137p 120p – 136p 120p – 137p 2003 2002 2004 2001 62 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 18 Called up share capital continued Options in respect of 8,486,380 ordinary shares remained outstanding at 29 March 2003 under the share option plan approved by shareholders in 1999. Subject to the performance restrictions on the exercise of options granted under this plan, options are exercisable for the periods and at the prices set out below: 111p Option price Five years from 55555555555555555555555555555 Number of shares Seven years from 55555555555555555555555555555 2,435,100 2003 55555555555555555555555555555 1,259,500 2004 55555555555555555555555555555 2005 1,984,314 55555555555555555555555555555 999,800 55555555555555555555555555555 766,300 55555555555555555555555555555 1,041,366 132p – 144.33p 144.33p 163.5p 163.5p 2005 2007 2006 111p The 1990, 1996 and 1999 Share Option Plans provide for the grant of two categories of option, both of which are subject to performance criteria. Section A options are exercisable after three years if the Company’s earnings per share growth exceeds, for the 1990 Plan, the growth in the Retail Price Index, for the 1996 Plan, the growth in the Retail Price Index plus 2% per annum and, for the 1999 Plan, the growth in the Retail Price Index plus 3% per annum. Section B options are exercisable after five years if the Company’s earnings per share growth exceeds the earnings per share growth of, for the 1990 and 1996 Plans, all but the top quarter of companies which were within the FTSE 100 at the date of grant of any option and for the 1999 Plan, all but the top quarter of companies which were within a peer group at the date of grant of any option. All options lapse if not exercised within 10 years from the date of grant. Halma p.l.c. 2003 63 H A L M A Notes on the Accounts continued £000 19 Goodwill arising on acquisition Book value Fair value adjustments – Cash (185) (816) 5,084 2,655 5,254 5,075 Stocks 18,068 (1,026) Debtors Creditors 55555555555555555555555555555 Total 55555555555555555555555555555 Tangible fixed assets 4,259 55555555555555555555555555555 Current assets: 55555555555555555555555555555 4,228 55555555555555555555555555555 4,899 5555555555555555 555 555 555 2,655 5555555555555555 555 555 555 16,041 Total assets 55555555555555555555555555555 Current liabilities: 55555555555555555555555555555 (3,152) 55555555555555555555555555555 (24) 5555555555555555 555 555 555 217 5555555555555555 555 555 555 Total liabilities (2,959) 5555555555555555 555 555 555 Net assets of businesses acquired 13,082 55555555555555555555555555555 (3,404) Deferred purchase consideration 5555555555555555555555555 555 Cash consideration (49,530) 5555555555555555555555555 555 Total consideration (52,934) 55555555555555555555555555555 (39,852) Goodwill arising on current year acquisitions 5555555555555555555555555 555 67 Adjustments relating to prior years’ acquisitions 5555555555555555555555555 555 (39,785) Goodwill arising on acquisition (note 10) Corporation tax Deferred tax (3,235) (2,908) (1,751) (2,027) 14,833 (244) (366) (63) 276 583 39 The goodwill on current year acquisitions arose on the purchase, in October 2002, of the whole of the issued share capital of Bureau D’Electronique Appliquée S.A. and B.E.R. Group S.A. (‘BEA Group’), and of the whole of the issued share capital of Radcom (Technologies) Limited in February 2003. In the year to December 2001 BEA Group made sales of Euro 42 million and earnings before interest, tax and amortisation (EBITA) of Euro 7 million and in the period from January 2002 to acquisition, sales of Euro 32 million and EBITA of Euro 6 million. Total purchase consideration, including deferred amounts, was £49,470,000 for BEA Group and £3,464,000 for Radcom (Technologies) Limited. Adjustments were made to the book value of the net assets acquired to reflect their fair value to the Group. Acquired stocks were valued at the lower of cost and net realisable value adopting Group bases; freehold properties were adjusted to their market value at the date of acquisition; any liabilities for warranties relating to past trading were recognised. Other previously unrecognised assets and liabilities at acquisition were included; and accounting policies were aligned with those of the Group where appropriate. Deferred purchase consideration is payable in cash and comprises both fixed and contingent elements. The contingent element relates to the acquisition of BEA Group and has been provided at the estimated amount payable. The amount ultimately payable is dependent on the profit achieved by BEA Group for the period to March 2004. The adjustments to goodwill relating to prior years’ acquisitions comprise revisions to the estimate of deferred purchase consideration payable. Cumulative goodwill written off against reserves on acquisitions prior to 28 March 1998, net of that attributable to closures and sales, amounts to £76,526,000 (2002: £76,526,000). 64 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 20 Investments 55555555555555555555555555555 Shares in Group companies 2002 55555555555555555555555555555 At cost less amounts written off at 30 March 2002 38,428 555555555555555555555 555 555 Additions 1,691 555555555555555555555 555 555 40,119 At cost less amounts written off at 29 March 2003 42,760 40,119 2,641 2003 The principal movement in the year relates to the acquisition of the whole of the issued share capital of Radcom (Technologies) Limited, a company incorporated in Great Britain. Details of principal subsidiary companies are set out on pages 78 and 79. All these subsidiaries are wholly owned and, apart from the following, are subsidiaries of Halma p.l.c. and are incorporated in Great Britain where they principally operate. Name of company Country of incorporation Fortress Systems Pty. Limited *IPC Resistors Inc. *HF Sécurité S.A.S. *Hydreka S.A.S. *S.E.R.V. Trayvou Interverrouillage S.A.S. *Apollo Gesellschaft für Meldetechnologie mbH *Berson Milieutechniek B.V. *Bureau D’Electronique Appliquée S.A. *TL Jones Limited *E-Motive Display Pte Limited *Halma Holdings Inc. *Air Products and Controls Inc. *Aquionics Inc. *B.E.A. Inc. *Bio-Chem Valve Inc. *Electronic Micro Systems Inc. *IPC Power Resistors International Inc. *Janus Elevator Products Inc. *Marathon Sensors Inc. *Monitor Controls Inc. *Mosebach Manufacturing Company *Oklahoma Safety Equipment Co. Inc. *Perma Pure LLC *Post Glover Resistors Inc. *Volk Optical Inc. *Interests held by subsidiary companies. Australia Canada France France France Germany The Netherlands Belgium New Zealand Singapore USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA Halma p.l.c. 2003 65 H A L M A Notes on the Accounts continued £000 21 Profit and loss account of Halma p.l.c. As permitted by Section 230 of the Companies Act 1985, the Profit and Loss Account of Halma p.l.c. is not presented as part of these accounts. The movements on that account during the year were: 55555555555555555555555555555 2002 55555555555555555555555555555 At 30 March 2002 79,008 55555555555555555555555555555 Profit after taxation 22,445 55555555555555555555555555555 Dividends (19,323) 555555555555555555555 555 555 (89) Exchange adjustments 555555555555555555555 555 555 At 29 March 2003 82,041 (21,246) (1,214) 18,152 82,041 77,733 2003 22 Consolidated cash flow statement 2003 42,865 55555555555555555555555555555 2002 Reconciliation of operating profit to net cash inflow from 55555555555555555555555555555 operating activities 55555555555555555555555555555 Operating profit 45,721 55555555555555555555555555555 Depreciation 7,371 55555555555555555555555555555 2,297 Goodwill amortisation 55555555555555555555555555555 48 (Profit)/loss on sale of tangible fixed assets 55555555555555555555555555555 Increase in SSAP 24 pension prepayment (126) 55555555555555555555555555555 Property sale receivable – 55555555555555555555555555555 5,097 Decrease in stocks 55555555555555555555555555555 Decrease in debtors 1,825 555555555555555555555 555 555 Increase/(decrease) in creditors (6,373) 555555555555555555555 555 555 55,860 Net cash inflow from operating activities (1,100) 60,309 3,235 5,416 3,288 7,554 (155) (916) 122 Included in the Consolidated Cash Flow Statement are the following amounts related to acquired operations: net cash inflow from operating activities £2,428,000; net interest received £3,000; taxation paid £375,000; net capital expenditure £2,678,000. The cash outflow of £49,857,000 on the acquisition of businesses includes the payment of £327,000 of deferred purchase consideration which arose from acquisitions made in earlier years, and where provision was made in prior years’ financial statements. 2003 55555555555555555555555555555 2002 55555555555555555555555555555 Reconciliation of net cash flow to movement in net (debt)/cash 55555555555555555555555555555 Increase in cash 4,111 55555555555555555555555555555 20,912 (Decrease)/increase in liquid resources 55555555555555555555555555555 – Loan notes issued 55555555555555555555555555555 Cash inflow from loans (8,253) 555555555555555555555 555 555 Exchange adjustments 114 55555555555555555555555555555 16,884 555555555555555555555 555 555 Net cash brought forward 13,726 555555555555555555555 555 555 30,610 Net (debt)/cash carried forward (13,399) (20,064) (30,703) (1,083) 30,610 3,099 (93) 744 66 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 22 Consolidated cash flow statement continued 11,271 Exchange adjustments Other non-cash changes At 30 March 2002 At Cash 29 March 55555555555555555555555555555 flow 2003 55555555555555555555555555555 Analysis of net (debt)/cash: 55555555555555555555555555555 13,265 2,647 Cash 555555555555 555 55555555555555 (162) 452 Overdrafts 55555555555555555555555555555 3,099 55555555555555555555555555555 Short-term deposits 14,309 (20,064) 55555555555555555555555555555 (26,422) (13,399) Bank loans 5555555 555 555 555 555 555 Other unsecured loans (1,083) 5555555 555 555 555 555 555 (93) (30,364) (14,432) (1,083) (1,083) 30,610 34,386 1,409 (615) (653) (13) 744 – – – – 1 – – – 23 Financial instruments Policy The Group does not use complex derivative financial instruments. No trading or speculative transactions in financial instruments are undertaken. Where it does use financial instruments these are mainly to manage the currency risks arising from normal operations and its financing. Operations are financed mainly through retained profits and in certain geographical locations, bank borrowings. Foreign currency risk is the most significant aspect for the Group in the area of financial instruments. It is exposed to a lesser extent to other risks such as interest rate risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and these policies are summarised below. Policies have remained unchanged since the beginning of the financial year. Foreign currency risk The Group has transactional currency exposures. These arise on sales or purchases by operating companies in currencies other than the companies’ operating (or ‘functional’) currency. Significant sales are hedged at the date of invoicing by means of matched borrowings and forward currency contracts. Significant purchases are hedged by means of forward currency contracts. The Group which is based in the UK and reports in Sterling, has a significant investment in overseas operations in the USA and Europe, with further investments in Australia, New Zealand, Canada, Malaysia, Singapore and China. As a result, the Group’s balance sheet can be affected by movements in these countries’ exchange rates. Where significant and appropriate, currency denominated net assets are hedged by currency borrowings. These currency exposures are reviewed regularly. The Group does not hedge future currency profits, so the Sterling value of overseas profits earned during the year is sensitive to the strength of Sterling, particularly against the US dollar and the Euro. Finance and interest rate risk The Group does not have significant exposure to interest rate fluctuations. Where bank borrowings are used to finance operations they tend to be short term with floating interest rates. Borrowings used to manage foreign currency risk are drawn on the Group’s revolving loan facilities and have fixed interest rates with maturities of not more than one year. Halma p.l.c. 2003 67 H A L M A Notes on the Accounts continued £000 23 Financial instruments continued Surplus funds are placed on short-term fixed rate deposit or in floating rate deposit accounts. Liquidity risk The Group has a strong cash flow and the funds generated by operating companies are managed regionally based on geographic location. Funds are placed on deposit with secure, highly-rated banks. For short-term working capital purposes, most operating companies utilise local bank overdrafts. These practices allow a balance to be maintained between continuity of funding, security and flexibility. Because of the nature of their use, the facilities are typically “on demand” and as such uncommitted. Borrowing facilities, including the Group’s revolving loan facilities, are typically reviewed annually. Currency exposures The table below shows the Group’s net foreign currency monetary assets and liabilities. These are the assets and liabilities of Group companies which are not denominated in the functional currency of the company involved. These comprise cash and overdrafts, and certain debtors and creditors. These foreign currency monetary assets and liabilities give rise to the net currency gains and losses recognised in the profit and loss account as a result of movement in exchange rates. As at year end these exposures were as follows: 2003 55555555555555555555555555555 Net foreign currency monetary assets/(liabilities) Sterling Functional currency 55555555555555555555555555555 of operation US dollar Total 55555555555555555555555555555 4,084 1,345 Sterling 55555555555555555555555555555 US dollar (26) 55555555555555555555555555555 Euro 726 666 5555555 555 555 555 555 555 981 798 Other 5555555 555 555 555 555 555 Total 5,765 2,809 2,613 2,593 (45) Other 146 239 129 104 Euro 20 40 19 53 1 – – – – 2002 55555555555555555555555555555 Net foreign currency monetary assets/(liabilities) Sterling Functional currency 55555555555555555555555555555 of operation US dollar Total 55555555555555555555555555555 Sterling 4,413 1,455 55555555555555555555555555555 (14) US dollar 55555555555555555555555555555 Euro (377) (297) 5555555 555 555 555 555 555 Other 1,428 1,141 5555555 555 555 555 555 555 5,450 2,299 Total 2,778 2,750 (167) (13) (73) Other 446 208 155 107 Euro (4) 25 87 – – – 3 The amounts shown in the tables above take into account the effect of any forward currency contracts entered into to manage these currency exposures. Interest rate risk profile The Group’s financial assets which are subject to interest rate fluctuations are short-term cash deposits which totalled £14,309,000 at 29 March 2003 (2002: £34,386,000). These comprised Sterling denominated deposits of £14,022,000 (2002: £34,200,000), US dollar denominated deposits of £58,000 (2002: £3,000), Euro and other currency deposits of £229,000 (2002: £183,000) which are placed on local money markets and earn interest at market rates. 68 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 23 Financial instruments continued The financial liabilities which are subject to interest rate fluctuations are bank loans, bank overdrafts and certain unsecured loans, which totalled £27,667,000 at 29 March 2003 (2002: £15,047,000). All are subject to floating rates of interest. These comprise US dollar denominated bank loans of £19,745,000 (2002: £8,450,000) which bear interest with reference to the US dollar LIBOR rates, US dollar denominated bank overdrafts of £152,000 (2002: £8,000) which bear interest at rates referenced to US dollar base rates, Euro denominated bank loans of £6,678,000 (2002: £5,982,000) which bear interest with reference to the Euro LIBOR rates, Euro denominated bank overdrafts of £nil (2002: £245,000) which bear interest at rates referenced to Euro base rates and Sterling denominated bank overdrafts of £9,000 (2002: £362,000) and loan notes of £1,083,000 (2002: nil) which bear interest at rates referenced to UK base rates. Maturity of financial liabilities With the exception of the deferred purchase consideration due after one year, all of the Group’s financial liabilities mature in one year or less or on demand. The total of deferred purchase consideration due after one year includes £1,492,000 (2002: £92,000) due between one and two years, with the balance of £173,000 (2002: £399,000) due between two and five years. Borrowing facilities The Group’s principal source of borrowing facilities is through ‘on demand’ bank overdrafts which are, by definition, uncommitted. These facilities are generally reviewed on an annual or ongoing basis and hence the facilities expire within one year or less. The Group also has committed borrowing facilities which are used for the purpose of managing foreign currency risk. At 29 March 2003 committed facilities of this type amounted to £43,822,000 of which £26,423,000 was drawn down. The borrowing facilities are reviewed annually, and as such the weighted average maturity of the facilities is less than one year. Fair values of financial assets and financial liabilities As at 29 March 2003 there was no significant difference between the book value and fair value (as determined by market value) of the Group’s financial assets and financial liabilities. Hedging As explained above, the Group’s policy is to hedge significant sales and purchases denominated in foreign currency using forward currency contracts. The gains and losses on these instruments are recognised upon recognition of the underlying exposure. The amounts of unrecognised gains or losses on instruments used for hedging at 29 March 2003 and 30 March 2002 are not significant. With the exception of currency exposures, the disclosures in this note exclude short-term debtors and creditors. 24 Commitments Capital commitments Capital expenditure authorised and contracted at 29 March 2003 but not provided in these accounts amounts to £2,101,000 (2002: £719,000). Halma p.l.c. 2003 69 H A L M A Notes on the Accounts continued £000 24 Commitments continued Commitments under operating leases Annual commitments under non-cancellable operating leases expire as follows: Land and buildings 55555555555555555555555555555 55555555555555555555555555555 2003 2002 55555555555555555555555555555 Within one year 17 380 55555555555555555555555555555 Within two to five years 66 1,594 555555555555 555 555 555 555 – 1,229 After five years 555555555555 555 555 555 555 83 3,203 3,112 1,258 1,630 Other 254 298 224 2002 2003 44 – Total annual commitments under non-cancellable operating leases amount to £3,501,000 (2002: £3,195,000). 25 Pensions Group companies operate both defined benefit and defined contribution pension schemes. The Halma Group Pension Plan and the Apollo Pension and Life Assurance Plan have sections of the defined benefit type with assets held in separate trustee administered funds. During the financial year, both of these defined benefit sections were closed to new entrants and a defined contribution section was established within the Halma Group Pension Plan. Defined contribution schemes are mainly adopted in overseas subsidiaries. Pension contributions for the Group are paid in accordance with the advice of professionally qualified actuaries. The total pension cost for the Group was £3,859,000 (2002: £3,676,000) of which £757,000 (2002: £875,000) relates to overseas schemes. The Halma Group Pension Plan was last assessed as at 1 December 2002, and the Apollo Pension and Life Assurance Plan as at 1 April 2002, using the projected unit method. The principal actuarial assumptions adopted in both valuations were firstly that the investment return would exceed the rate of salary growth by 3.25% per annum dependent on the scheme membership category, and secondly that pensions in the course of payment would increase at 2.5% per annum or, for future service, in accordance with the requirements of the Pension Act 1995. At 1 December 2002 the market value of the Halma Group Pension Plan’s assets was £42,533,000. The actuarial value of the scheme’s assets represented 69% of the benefits that had accrued to members after allowing for expected future increases in earnings. The shortfall is being addressed by increased company contributions. At 1 April 2002 the market value of the Apollo Pension and Life Assurance Plan’s assets was £7,283,000. The actuarial value of the scheme’s assets represented 77% of the benefits that had accrued to members after allowing for expected future increases in earnings. The shortfall is being addressed by increased company contributions. Financial Reporting Standard 17 (Retirement Benefits) The Group has adopted the transitional provisions of FRS 17 (Retirement Benefits), and the following second year transitional disclosures are required. 70 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 25 Pensions continued The financial assumptions used to calculate scheme liabilities at 29 March 2003 under FRS 17 are: 55555555555555555555555555555 2002 55555555555555555555555555555 4.25% Rate of increase in salaries 55555555555555555555555555555 Rate of increase of pensions in payment (pre April 1997) 3.00% 55555555555555555555555555555 Rate of increase of pensions in payment (post April 1997) 2.75% 55555555555555555555555555555 6.00% Discount rate 55555555555555555555555555555 Inflation assumption 2.75% 2.50% 4.00% 2.50% 3.00% 5.50% 2003 The expected rates of return and the aggregated assets in the UK defined benefit schemes were: 37,301 Market value 2003 Expected rate of return 2002 Expected rate Market of return value 55555555555555555555555555555 2003 2002 55555555555555555555555555555 45,407 7.50% Equities 55555555555555555555555555555 Bonds 8,128 4.50% 5555555555555555 555 55555 555 Property 1,609 6.00% 55555555555555555555555555555 55,144 Total market value of assets 5555555555555555 555 55555 555 Present value of scheme liabilities (67,705) 55555555555555555555555555555 Deficit in schemes (12,561) 5555555555555555 555 55555 555 Related deferred tax asset 3,768 5555555555555555 555 55555 555 (8,793) Net pension liability (30,780) (90,545) (43,971) 46,574 13,191 5.25% 6.75% 8.25% 1,704 7,569 The total market value of assets in the UK defined benefit schemes under FRS 17 differs from that disclosed under SSAP 24 as at the latest actuarial valuation dates primarily due to changes in stock market values since the dates of the actuarial valuations. Analysis of the amount that would have been charged to operating profit under FRS 17 in respect of the UK defined benefit schemes: 55555555555555555555555555555 2003 55555555555555555555555555555 Current service cost 2,924 5555555555555555555555555 555 Past service cost – 5555555555555555555555555 555 2,924 Analysis of the amount that would have been credited to net finance income under FRS 17: 55555555555555555555555555555 2003 55555555555555555555555555555 Expected return on pension scheme assets 4,438 5555555555555555555555555 555 Interest on scheme liabilities (4,153) 5555555555555555555555555 555 285 Halma p.l.c. 2003 71 H A L M A Notes on the Accounts continued £000 25 Pensions continued Analysis of the total actuarial loss that would have been recognised in the statement of total recognised gains and losses: 55555555555555555555555555555 2003 55555555555555555555555555555 (17,042) Actual return less expected return on scheme assets 55555555555555555555555555555 Experience losses arising on scheme liabilities (3,260) 5555555555555555555555555 555 Changes in assumptions (12,427) 5555555555555555555555555 555 (32,729) Movement in deficit during the year: 55555555555555555555555555555 2003 55555555555555555555555555555 (12,561) Deficit at beginning of year 55555555555555555555555555555 Current service cost (2,924) 55555555555555555555555555555 Contributions paid 3,958 55555555555555555555555555555 – Past service costs 55555555555555555555555555555 285 Net finance income 5555555555555555555555555 555 Actuarial loss (32,729) 5555555555555555555555555 555 (43,971) Deficit at end of year History of experience losses: 55555555555555555555555555555 2003 55555555555555555555555555555 (17,042) Actual return less expected return on scheme assets 55555555555555555555555555555 Percentage of scheme assets (37)% 55555555555555555555555555555 Experience losses arising on scheme liabilities (3,260) 55555555555555555555555555555 (4)% Percentage of scheme liabilities 55555555555555555555555555555 (32,729) Total actuarial loss recognised in the statement of total recognised gains and losses 55555555555555555555555555555 (36)% Percentage of scheme liabilities 72 Halma p.l.c. 2003 Notes on the Accounts continued £000 H A L M A 25 Pensions continued If the above amount was recognised in the Accounts, the Group’s net assets and profit and loss account reserve at 29 March 2003 would be as follows: 2003 163,446 55555555555555555555555555555 2002 55555555555555555555555555555 157,557 Net assets excluding pension liability 55555555555555555555555555555 less SSAP 24 pension prepayment (126) 555555555555555555555 555 555 Pension liability (8,793) 555555555555555555555 555 555 Net assets including pension liability 148,638 55555555555555555555555555555 55555555555555555555555555555 Profit and loss account reserve excluding pension liability 115,268 55555555555555555555555555555 less SSAP 24 pension prepayment (126) 555555555555555555555 555 555 (8,793) Pension liability 555555555555555555555 555 555 Profit and loss account reserve including pension liability 106,349 (30,780) (30,780) 120,337 131,624 (1,042) (1,042) 88,515 Other post retirement benefits liabilities are already fully included in net assets. Halma p.l.c. 2003 73 H A L M A Notice of Meeting Notice is hereby given that the one hundred and ninth Annual General Meeting of Halma p.l.c. will be held at The Ballroom, The Berkeley Hotel, Wilton Place, London SW1X 7RL on Tuesday, 29 July 2003 at 12 noon for the following purposes: Ordinary business 1 To approve the Report of the Directors, the audited part of the Report on Remuneration and the Accounts for the period of 52 weeks to 29 March 2003. 2 3 4 5 6 7 8 9 To declare a dividend on the ordinary shares. To re-elect as a Director Mr S R O’Shea who retires from the Board by rotation and being eligible offers himself for re-election. To re-elect as a Director Mr K J Thompson who retires from the Board by rotation and being eligible offers himself for re-election. To re-elect as a Director Mr N Quinn who retires from the Board by rotation and being eligible offers himself for re-election. To re-elect as a Director Mr E G Unwin* who was appointed in September 2002 and who retires in accordance with the Articles of Association and being eligible offers himself for re-election. To re-elect as a Director Mr A J Walker** who was appointed in May 2003 and who retires in accordance with the Articles of Association and being eligible offers himself for re-election. To re-appoint Deloitte & Touche as Auditors. To authorise the Directors to determine the remuneration of the Auditors. Special business To consider, and if thought fit, pass the following ordinary resolution: 10 That the Report on Remuneration as set out on pages 38 to 43 of the Report and Accounts for the 52 weeks to 29 March 2003 be approved. To consider, and if thought fit, pass the following special resolutions: 11 That the Directors be and are hereby empowered pursuant to Section 95 of the Companies Act 1985 to allot or to make any offer or agreement to allot equity securities of the Company pursuant to the authority contained in Resolution 10 passed at the Company’s Annual General Meeting on 1 August 2002 as if Section 89(1) of the Companies Act 1985 did not apply to any such allotment, provided that such power shall be limited to the allotment of equity securities: (a) pursuant to the terms of any share scheme for employees approved by the Company in general meeting; and (b) otherwise than pursuant to sub-paragraph (a) above, up to an aggregate nominal amount of £1,825,000, and shall expire at the conclusion of the next Annual General Meeting of the Company, save that the Company may make any offer or agreement before such expiry which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding that the power conferred hereby has expired; words and expressions defined in or for the purposes of Section 89 to 96 inclusive of the Companies Act 1985 shall bear the same meanings in this resolution. 74 Halma p.l.c. 2003 H A L M A Notice of Meeting continued 12 That the Company be and is hereby generally and unconditionally authorised to make market purchases (within the meaning of Section 163(3) of the Companies Act 1985) of ordinary shares of 10p each (“ordinary shares”) provided that: (a) (b) (c) the maximum number of shares hereby authorised to be acquired is 36,000,000 ordinary shares, having an aggregate nominal value of £3,600,000; the maximum price which may be paid for any ordinary share is an amount equal to 105 per cent of the average of the middle market quotations for such an ordinary share as derived from the London Stock Exchange’s Daily Official List for the five business days immediately preceding the day on which the share is contracted to be purchased and the minimum price which may be paid for any such ordinary share shall be the nominal value of that share; and the authority hereby conferred shall expire at the conclusion of the Company’s next Annual General Meeting (except in relation to the purchase of ordinary shares the contract for which was concluded before such date and which would or might be executed wholly or partly after such date), unless such authority is renewed prior to such time. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and on a poll, vote instead of him. A proxy need not be a member. A form of proxy is enclosed. By signing and returning the form of proxy, a shareholder will not be precluded from attending and voting in person should he subsequently find it possible to be present. By Order of the Board C T Chesney Secretary Misbourne Court Rectory Way Amersham Bucks HP7 0DE 30 June 2003 In accordance with the requirements of the Companies Act 1985, a summary of any transactions during the past year by the Directors and their family interests in the Company’s shares and copies of Directors’ service contracts will be available for inspection at the registered office of the Company from the date of the above notice until 29 July 2003 and at The Berkeley Hotel from 11:45 am on the day of the meeting until the close of the meeting. Full biographical information of the Directors proposed for re-election appears on page 28 of the Report and Accounts. * denotes non-executive Director and membership of the Remuneration, Audit and Nomination Committees of the Board ** denotes non-executive Director and membership of the Audit Committee of the Board Halma p.l.c. 2003 75 Summary 1994 to 2003 8,350 3,763 2,677 2,861 2,784 2,226 7,096 2,384 2,099 6,898 94/95 96/97 97/98 93/94 95/96 90,045 74,976 25,075 16,794 19,759 29,234 63,833 55,518 37,076 98,249 77,650 27,459 13,447 42,391 33,619 22,639 81,209 126,863 173,652 200,140 119,235 104,432 213,777 153,739 135,318 5555555555555555555555555555555555555555 98/99 5555555555555555555555555555555555555555 217,758 Turnover 5555555555555555555555555555555555555555 Overseas sales 134,189 Profit before taxation, goodwill amortisation 5555555555555555555555555555555555555555 41,823 and exceptional items 5555555555555555555555555555555555555555 5555555555555555555555555555555555555555 5555555555555555555555555555555555555555 102,101 Net tangible assets 5555555555555555555555555555555555555555 7,730 Borrowings 5555555555555555555555555555555555555555 Cash and short-term deposits 29,894 5555555555555555555555555555555555555555 2,827 Employees 5555555555555555555555555555555555555555 5555555555555555555555555555555555555555 5555555555555555555555555555555555555555 7.91p Earnings per ordinary share (Note 1) Earnings per ordinary share before goodwill amortisation and exceptional 5555555555555555555555555555555555555555 items (Note 1) 7.99p Year on year increase/(decrease) in earnings per ordinary share before goodwill 5555555555555555555555555555555555555555 amortisation and exceptional items (3.3%) Net tangible assets per ordinary 5555555555555555555555555555555555555555 28.2p share (Note 1) Year on year increase/(decrease) in net 5555555555555555555555555555555555555555 4.1% tangible assets per ordinary share Profit before taxation, goodwill amortisation 5555555555555555555555555555555555555555 19.2% and exceptional items as a % of turnover 5555555555555555555555555555555555555555 41.0% Return on capital employed (Note 2) Year on year increase in dividends 5555555555555555555555555555555555555555 20% per ordinary share 5555555555555555555555555555555555555555 Ordinary share price at financial 5555555555555555555555555555555555555555 year end (Note 1) 92p 5555555555555555555555555555555555555555 £446.9m £401.5m £492.1m £479.2m £447.3m £330.6m Market capitalisation at financial year end 19.4% 19.8% 43.1% 45.7% 21.2% 43.3% 20.4% 17.8% 15.2% 18.5% 14.7% 45.8% 19.0% 18.5% 45.2% 16.7% 14.3% 18.2% 7.01p 8.26p 6.44p 6.44p 7.01p 5.59p 4.79p 4.79p 5.59p 6.87p 15.6p 17.9p 22.5p 21.7p 27.1p 8.9% 3.7% 127p 124p 134p 138p 113p 20% 20% 20% 20% 20% Notes: 1. Restated for the capitalisation issues made in 1995 and 1997. 2. Return on capital employed is defined as profit before taxation, goodwill amortisation and exceptional items expressed as a % of net tangible assets. Figures prior to 2001/02 have not been restated for the adoption of FRS 19. 3. 76 Halma p.l.c. 2003 £000 99/00 00/01 233,485 555555555555555 02/03 5555555555555555 267,293 5555555555555555 188,161 268,322 183,259 181,831 267,597 150,727 01/02 49,698 99,991 48,255 43,751 89,755 14,700 117,515 5555555555555555 46,508 5555555555555555 5555555555555555 5555555555555555 86,854 5555555555555555 27,667 5555555555555555 27,574 5555555555555555 2,793 5555555555555555 5555555555555555 5555555555555555 7.76p 21,900 15,047 45,657 21,484 2,975 3,059 2,859 7,758 8.58p 6.08p 8.91p 5555555555555555 8.55p 9.10p 8.41p 9.34p 5555555555555555 (6.0%) (2.6%) 11.1% 5.3% 5555555555555555 23.8p 24.9p 32.2p 27.7p 5555555555555555 16.2% (26.1%) (11.7%) 11.2% 18.7% 5555555555555555 17.4% 5555555555555555 53.5% 18.5% 41.1% 49.7% 18.0% 48.7% 20% 5555555555555555 10% 5555555555555555 15% 15% 95p 5555555555555555 114p 5555555555555555 £340.1m £465.7m £598.2m £416.7m 164p 129p Earnings per share (before goodwill amortisation and exceptional items) 10p 8p 6p 4p 2p 0 94 97 00 03 Overseas sales £200m £160m £120m £80m £40m 0 94 97 00 03 Net tangible assets per share 35p 25p 15p 5p 0 94 97 00 03 Halma p.l.c. 2003 77 Halma Group Directory Air Products and Controls Inc. Duct detectors and control relays for smoke control systems Apollo Fire Detectors Limited Smoke and heat detectors for commercial fire alarm systems Apollo Gesellschaft für Meldetechnologie mbH Smoke and heat detectors for commercial fire alarm systems Main products Aquionics Inc. B.E.A. Inc. Berson Milieutechniek B.V. Ultraviolet light equipment for water sterilisation Sensors for automatic doors Ultraviolet light equipment for treating drinking water and water used in the manufacture of food, drinks, pharmaceuticals and electronic components Bio-Chem Valve Inc. Miniature valves and micro pumps for scientific instruments Bureau D’Electronique Appliquée S.A. Sensors for automatic doors Castell Safety International Limited Safety systems for controlling the use of and access to dangerous machines Cressall Resistors Limited High power electrical resistors Crowcon Detection Instruments Limited Gas detection instruments for personnel and plant safety Electronic Micro Systems Inc. Elevator controls and emergency communication systems Elfab Limited Pressure sensitive relief devices to protect process plant E-Motive Display Pte Limited Electronic displays for providing information to elevator passengers Fire Fighting Enterprises Limited Beam smoke detectors and specialist fire extinguishing systems Fortress Interlocks Limited Safety systems for controlling access to dangerous machines Fortress Systems Pty. Limited Machinery and process safety systems and high power electrical resistors Halma Holdings Inc. Hanovia Limited HF Sécurité S.A.S. Hydreka S.A.S. American holding company Ultraviolet light equipment for treating drinking water and water used in the manufacture of food, drinks, pharmaceuticals and electronic components Safety systems and high security locks Equipment and software for flow analysis of water and sewerage systems and leak detection systems IPC Power Resistors International Inc. High power electrical resistors IPC Resistors Inc. High power electrical resistors and ground fault detection equipment Janus Elevator Products Inc. Infrared safety systems for elevator doors and elevator electronic displays Keeler Limited Ophthalmic instruments for diagnostic assessment of eye conditions Kerry Ultrasonics Limited Ultrasonic cleaning systems for electronic and precision-engineered products Klaxon Signals Limited Marathon Sensors Inc. Memco Limited Monitor Controls Inc. Audio/visual warning systems for industrial security Sensors and instruments for combustion control and heat treatment processes Infrared safety systems for elevator doors and elevator emergency communications Elevator signal fixtures Mosebach Manufacturing Company High power electrical resistors Oklahoma Safety Equipment Co. Inc. Pressure sensitive relief devices to protect process plant Palintest Limited Instruments for analysing water and measuring environmental pollution Palmer Environmental Limited Instrumentation for quantifying, detecting and controlling leakage in underground water pipelines Perma Pure LLC Gas dryers and humidifiers for fuel cell, medical, scientific and industrial use Post Glover Resistors Inc. High power electrical resistors and isolated power products Radcom (Technologies) Limited Instrumentation for recording data, and detecting and controlling leakage, in water distribution pipelines S & P Coil Products Limited Heat exchange coils, heat pipes and specialist heating equipment SEAC Limited Secomak Limited Specialist fasteners for the building trade Industrial heaters, fans, drying systems, heat tunnels, loudspeakers and microphones S.E.R.V. Trayvou Interverrouillage S.A.S. Safety systems for controlling access to dangerous machines Smith Flow Control Limited Safety systems for controlling valves on oil rigs and at chemical plants Thames Side-Maywood Limited Load cells for industrial weighing systems and force measurement TL Jones Limited Volk Optical Inc. Volumatic Limited 78 Halma p.l.c. 2003 Infrared safety systems for elevator doors Ophthalmic lenses as aids to diagnosis and surgery Cash security and handling from point-of-sale to cash office www.halma.com visit the Halma website and register for e-mail news alerts Location Pontiac, Michigan Contact Jim Ludwig Telephone E-mail +1 (1)248 332 3900 info@ap-c.com Website www.ap-c.cc Havant, Hampshire Michael Hamilton +44 (0)23 9249 2412 enquiries@apollo-fire.co.uk www.apollo-fire.co.uk Gütersloh, Germany Falk Blödorn +49 (0)524 133060 info@apollo-feuer.de www.apollo-feuer.de Erlanger, Kentucky Dave McCarty +1 (1)859 341 0710 sales@aquionics.com www.aquionics.com Pittsburgh, Pennsylvania Patrick Mercier +1 (1)412 249 4100 sales@beainc.com www.beainc.com Eindhoven, The Netherlands Sjors van Gaalen +31 (0)40 290 7777 sales@bersonuv.com www.bersonuv.com Boonton, New Jersey George Gaydos +1 (1)973 263 3001 info@biochemvalve.com www.bio-chemvalve.com Liège, Belgium Philipe van Genechten +32 (0)4361 6565 info@bea.be www.beasensors.com Kingsbury, London David Milner +44 (0)20 8200 1200 sales@castell.co.uk www.castell.com Leicester Colin Whitehead +44 (0)116 273 3633 sales@cressall.com www.cressall.com Abingdon, Oxfordshire Allan Stamper +44 (0)1235 553057 crowcon@crowcon.com www.crowcon.com Hauppauge, New York Mike Ryan +1 (1)631 864 4742 sales@emscomm.com www.emscomm.com North Shields, Tyne & Wear Simon Keenan +44 (0)191 293 1234 enquiries@elfab.com www.elfab.com Singapore Steven Black +65 6776 4111 sales@emotive.com.sg www.emotive.com.sg Stevenage, Hertfordshire Warren Rees +44 (0)1438 317216 info@ffeuk.com www.ffeuk.com Wolverhampton, West Midlands Mike Golding +44 (0)1902 499600 sales@fortress-interlocks.co.uk www.fortress-interlocks.co.uk Melbourne, Australia David Atkin +61 (0)3 9587 4099 fortress@fortress.com.au www.fortress.com.au Cincinnati, Ohio Steve Sowell +1 (1)513 772 5501 halmaholdings@halmaholdings.com www.halmaholdings.com Slough, Berkshire Jon McClean +44 (0)1753 515300 sales@hanovia.com www.hanovia.com Cluses, France Lyon, France Gérard Denis +33 (0)4 50 98 96 71 hfsecurite@hfsecurite.com www.hfsecurite.com Alain Soulié +33 (0)4 72 53 11 53 hydreka@hydreka.fr www.hydreka.com Erlanger, Kentucky Richard Field +1 (1)859 282 2900 sales@ipcresistors.com www.ipcresistors.com Toronto, Canada Andy Cochran +1 (1)905 673 1553 info@ipc-resistors.com www.ipc-resistors.com Hauppauge, New York Mike Byrne +1 (1)631 864 3699 sales@januselevator.com www.januselevator.com Windsor, Berkshire Mark Lavelle +44 (0)1753 857177 info@keeler.co.uk www.keeler.co.uk Hitchin, Hertfordshire David Grime +44 (0)1462 450761 sales@kerry.co.uk www.kerry.co.uk Oldham, Lancashire Barry Coughlan +44 (0)161 287 5555 sales@klaxonsignals.com www.klaxonsignals.com Cincinnati, Ohio Eric Boltz +1 (1)513 772 1000 sales@marathonsensors.com www.marathonsensors.com Maidenhead, Berkshire Peter Bailey +44 (0)1628 770734 sales@memco.co.uk www.memco.co.uk Hauppauge, New York John Farella +1 (1)631 543 4334 sales@mcontrols.com www.mcontrols.com Pittsburgh, Pennsylvania Gordon Denny +1 (1)412 220 0200 info@mosebachresistors.com www.mosebachresistors.com Broken Arrow, Oklahoma Joe Ragosta +1 (1)918 258 5626 info@oseco.com www.oseco.com Gateshead, Tyne & Wear John Lever +44 (0)191 491 0808 palintest@palintest.com www.palintest.com Cwmbran, South Wales Neil Summers +44 (0)1633 489479 sales@palmer.co.uk www.palmer.co.uk Toms River, New Jersey David Leighty +1 (1)732 244 0010 info@permapure.com www.permapure.com Erlanger, Kentucky John Whincup +1 (1)859 283 0778 sales@postglover.com www.postglover.com Southampton, Hampshire Mike Gilham +44 (0)2380 682 300 sales@radcom.co.uk www.radcom.co.uk Leicester Leicester Allan Westbury +44 (0)116 249 0044 spc@spcoils.co.uk www.spcoils.co.uk David Buckley +44 (0)116 273 9501 enquiries@seac.uk.com www.seac.uk.com Stanmore, Middlesex Dick Shepherd +44 (0)20 8952 5566 sales@secomak.com www.secomak.com Paris, France Witham, Essex Thiérry Laigle +33 (0)1 48 18 15 15 enquiries@servtrayvou.com www.servtrayvou.com Mike D’Anzieri +44 (0)1376 517901 sales@smithflowcontrol.com www.smithflowcontrol.com Reading, Berkshire Mike Bailey +44 (0)118 945 8200 sales@thames-side.co.uk www.thames-side-maywood.com Christchurch, New Zealand Chris Stoelhorst +64 (0)3 349 4456 info@tljonesltd.com www.tljonesltd.com Mentor, Ohio Pete Mastores +1 (1)440 942 6161 volk@volk.com www.volk.com Coventry, West Midlands Paul Bonné +44 (0)247 668 4217 info@volumatic.com www.volumatic.com Halma p.l.c. 2003 79 Perivan Group 103441 Halma p.l.c. Misbourne Court Rectory Way Amersham Bucks HP7 0DE Tel: +44 (0) 1494 721111 Fax: +44 (0) 1494 728032 www.halma.com 

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