H A L M A
A n n u a l R e p o r t
& A c c o u n t s 2 0 0 4
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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
Halma p.l.c.
Annual Repor t and Accounts 2004
Financial Highlights
Halma at a glance
Chairman’s Statement
Chief Executive’s Review
Financial Review
Operating Review
Shareholder Information
Directors and Advisers
Management Team
Report of the Directors
Corporate Responsibility Report
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 1995 to 2004
Group Directory
1
2
4
7
10
14
26
27
28
30
33
36
40
46
47
48
49
50
50
51
52
53
55
74
76
78
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H A L M A
Financial Highlights
Turnover
Overseas sales
Profit before taxation(1)
Earnings per share(2)
Earnings per share – statutory
Dividend per share
Change
+9%
+10%
+8%
+10%
+7%
2004
£m
292.6
206.1
50.3
9.44p
6.09p
6.19p
2003
£m
267.3
188.2
46.5
8.55p
7.76p
5.812p
Return on sales(3)
17.2%
17.4%
Turnover to net tangible assets
Return on capital employed(4)
1 Before goodwill amortisation of £4,220,000 (2003: £3,235,000) and exceptional items on disposal of non-core businesses of £9,149,000
3.05 times
3.08 times
52.4%
53.5%
(2003: £nil).
2 Before goodwill amortisation of 1.07p (2003: 0.79p) and exceptional items of 2.28p (2003: nil) per share.
3 Return on sales is defined as profit before taxation(1) expressed as a percentage of turnover.
4 Return on capital employed is defined as profit before taxation(1) expressed as a percentage of net tangible assets (being equity shareholders’
funds less intangible assets).
Highlights
– Organic and acquisition growth contribute to record pre-tax profit(1)
– Widespread improvement in sales performance across the Group’s businesses
and regions produced 9% turnover growth
– Return on capital employed(4) above 50% delivered cash generation of £22m
during the year
– Quality of Halma’s operations strengthened by the sale of three non-core
businesses in the year followed by two acquisitions since the year end
– Progressive dividend policy maintained with 7% growth
Halma p.l.c. 2004
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 and Door Safety
Bursting discs and sequential locking for Process Safety
High power electrical Resistors
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. 2004
H A L M A
Halma at a glance continued
Dividend growth
£25m
£15m
£5m
0
95
98
01
04
Profit growth
(before goodwill
amortisation and
exceptional items)*
£60m
£40m
£20m
Sales
ROCE*
0
95
98
01
04
£300m
£200m
£100m
0
95
98
01
04
60%
40%
20%
An exceptional record of unbroken
dividend growth over more than
20 years
Long-term profit growth
accompanied by excellent cash
generation.
Growing sales in tough
world markets.
ROCE consistently
above 40% delivering
real shareholder value.
*see Financial Highlights
0
95
98
01
04
Halma p.l.c. 2004
3
H A L M A
Chairman’s Statement
‘‘. . . no shortage of
ideas, determination
or actions . . .’’
Geoff Unwin,
Chairman
In my first year as Chairman of Halma, I am delighted to announce record profit
before tax* of £50.3 million.
Observations from a new Chairman
However, before turning to more of the headline numbers, I thought it might be
useful, as a new boy to the Group, to share some of my initial observations, and to
glimpse behind the scenes at some of the issues we have been tackling.
Firstly let me say that I was attracted to Halma by its extraordinary track record (one
of the top performing stocks on the London Stock Exchange over 20 years), its
management style and the robustness of demand for its products even under
difficult market conditions. I was intrigued. My induction into the Group, guided by
David Barber, was exemplary. He left me alone to go where I wanted, ask whatever
I wished, yet was always available to discuss, debate and question what I had
observed.
Over the first few months I visited operations accounting for about half our profits.
I saw companies both large and small; some fighting in tough markets, many
successful – the picture became clearer. The strengths were evident:
* demand related to health and safety provided a driver or (at least) support to
demand.
* high market shares gave some protection to pricing.
* autonomously run companies gave clarity of responsibility and ownership of
performance.
* high returns on sales and capital.
* financial control was tight.
* a track record of which to be proud.
* many truly excellent and dedicated people.
*see Financial Highlights
4
Halma p.l.c. 2004
H A L M A
Chairman’s Statement continued
However, over the last few years, performance as measured by our high historic
standards had not moved ahead as we would have wished. This was undoubtedly
due, to a certain extent, to the tough economic conditions we have seen recently,
but had other factors crept in that were holding us back?
Our Response
This was the question that was posed to the Board and senior management.
Extremely thoughtful answers came in followed by very lively debates – no factor
remained unexamined, no cow, sacred or otherwise, undisturbed. The outcome?
Work was accelerated on a number of potential bottlenecks:
* management: much strengthening (from both within and outside) and
training programmes increased.
* incentives: new bonus schemes to explicitly align performance to shareholder
value.
* knowledge transfer: ‘‘wiring up’’ the Group to facilitate transfer of knowledge
without destroying the foundations of autonomy.
* reduced span of control: remarkably, senior management felt they could be
more effective if they had fewer companies to manage and could therefore
implement necessary change faster. Done.
* sales: renewed emphasis on all aspects of selling and sharing of the best ideas
for tackling new markets across the Group.
* innovation: more funds allocated to innovation and new techniques introduced
to get improved or new products to market, faster.
* resource allocation: the beginnings (more to come) of a more rigorous
allocation of resources (capital and management) to higher growth areas. This
year we have made three non-core disposals.
Have the actions on these issues had some effect on performance? Impossible to
quantify but no one is in any doubt we are the better for focusing on these priorities.
However, what is undeniable is that the results from these actions are due to the
hard work and single-mindedness of the management team together with the
dedication from all our employees towards our customers.
The Results
Profit before tax* was a record £50.3 million and earnings per share*, also a record,
increased by 10% to 9.44p. Return on capital* was 52.4% and net cash at the year
end was £22 million.
Turnover grew by 9% to a record £292.6 million. During the year we disposed of
three businesses deemed to be non-core, and shortly after the year end acquired
Diba Industries, Inc., strengthening our position in the life sciences market, and
Ocean Optics, Inc., extending our optical technology.
The Board recommend a final dividend of 3.75 pence per share, giving an increase of
7% for the year.
*see Financial Highlights
Halma p.l.c. 2004
5
H A L M A
Chairman’s Statement continued
Prospects
There is no shortage of ideas, determination or actions and these should show
through next year, as they have this year, in our results. We continue to focus on
those areas that are clearly under our control or influence, notwithstanding that
there is still little evidence of any significant uplift in our markets.
Geoff Unwin
6
Halma p.l.c. 2004
H A L M A
Chief Executive’s Review
‘‘strong and active
management delivers
record profits’’
Stephen O’Shea,
Chief Executive
Strong and active management delivers record profits
The Group performance has been strong despite market conditions remaining
difficult. We achieved record profits* of £50.3 million on a lower level of operating
assets, despite a net £1 million profit hit from currency movements. Widespread
improvement in sales performance across the Group’s businesses and regions
produced 9% sales growth. These results reflect our active management approach
through which we achieve growth through focused acquisitions, efficiency
improvements and the organic development of our existing businesses. I am pleased
that excellent efforts from our management teams produced a return on capital
employed* of 52%, outstanding for any engineering and manufacturing company.
In the year we sold three non-core businesses from our Optics and Specialist sector
that were not compatible with our targets for growth and financial returns. Since the
initial sum of
year end we have made two important acquisitions for a total
£22 million, significantly strengthening this sector. Looking forward we expect to
gain useful benefits from our acquisition and disposal activities. Two further
businesses were also consolidated to achieve the benefits of greater integration.
We remain strongly cash generative, creating net cash of £22 million during the
year. We funded our acquisitions from profits and also paid a record sum in
dividends to our shareholders.
Well positioned for growth
Our growth has come primarily from new products, the new customers they attract
and new applications for long-term repeat ordering customers. We spent a record
amount on research and development which now accounts for 4% of sales and
launched many new products. Our cost base has been well managed so that we
maintained our 17% return on sales* for yet another year. The Group is in a strong
position to benefit from improvements in our end markets although we saw no
upturn in the 2003/04 financial year and are not reliant on a market recovery for our
future growth.
*see Financial Highlights
Halma p.l.c. 2004
7
H A L M A
Chief Executive’s Review continued
Management team strengthened
There has been a seamless transition with our Chairman, Geoff Unwin, stepping up
from his previous role as Deputy Chairman in July 2003 and with the appointment of
a new non-executive Director, Stephen Pettit, in September 2003. The management
team has been further strengthened with the recruitment of two additional senior
managers, Nigel Trodd and Andy Richardson, whom we welcome into the Group. We
said goodbye to David Barber, the founder and architect of the Halma culture who
served the Group over an outstanding tenure of 31 years. We owe much to him and
all of us wish him well in his retirement.
Widespread sales and profit growth
I am encouraged by the number of countries where we have built up stronger
positions. Territorial sales were grown to the UK, Europe, USA, Middle and Far East
and Other Countries. The US Dollar weakened considerably during the year so that
although sales in the USA grew by 12% in local currency, this translated to a 2%
increase in Sterling terms. We make over a quarter of our profits from our US based
companies. They increased US Dollar profits although in Sterling terms this converts
to a small decline of 5%, £0.7 million. We were helped in the early part of the year by
the strength of the Euro.
Sales from our European companies grew by 42% to £43.7 million. We owned BEA,
the world market leading supplier of automatic door sensors, for the whole of the
year (compared to a 6 month contribution last year). This very successful acquisition
continues to deliver impressive results by producing excellent products and growing
its customer base across the world. We have rolled out one of BEA’s innovation
techniques across the whole of the Group, demonstrating our commitment to
transferring best practice.
Just over half our sales and profits are made by the UK companies. Continuing
operations earned profits of £26.6 million, reflecting organic growth of £1.9 million,
and increased sales by £10.6 million. Profits from our companies outside of the
UK and USA, helped by £2.7 million from BEA, rose by £3.2 million.
New Elevator safety products
Our Elevator and Door Safety sector performed particularly well demonstrating both
organic and acquisition growth. Its profits are now £12.1 million, 24% of the Group’s
total. The Far East and Asia are increasingly important territories and we extended
our premises in Beijing and our manufacturing facilities in Shanghai and Beijing, as
well as growing in Singapore.
innovations include new
emergency communication equipment, demand for which is likely to grow following
new European legislation in this area.
Important product
Repositioning in Optics and Specialist sector
We are increasing the focus on higher technology products and more technically
advanced customers. Evidence of this can be seen in both the disposals made this
year and in the acquisitions of Diba and Ocean Optics since the year end, both of
which significantly broaden our capabilities in our Optics and Specialist sector. Diba
products extend our product range offered to instrument makers in the growing field
of life sciences. Ocean Optics make spectrometers that help analyse substances via
their reaction to light. They are closely related to our water purity measuring
photometers and other optical diagnostic equipment. Our trading in this sector
8
Halma p.l.c. 2004
H A L M A
Chief Executive’s Review continued
produced increased profits. However within the sector we report our Head Office
companies and the improved trading was more than offset by the costs of increasing
senior management and lower income from subsidiaries who reduced their capital
employed whilst growing profits. The net effect was a reduction in profits of
£0.4 million to £7.1 million.
Organic growth in Fire and Gas sector
The Fire and Gas sector increased both sales and profits with new fire detectors and
personal gas warning monitors. They earned £1.6 million of organic profit growth.
This sector increased its already effective use of assets, producing a return on
capital employed of 85%, exceeding even the Group’s strong ratios.
Resistors sector as predicted
As expected, our Resistors sector continued to suffer a depressed market,
particularly in US heavy industry. There are some indications of improvement in
one of our customer areas, mass transit systems. The sector has been managed
vigorously in terms of both cost and working capital reductions though we have yet
to reverse the decline in profits.
Investment in new products
Our Process Safety sector did not quite match last year’s sales and profits. The UK
market proved difficult although there are now improving conditions in the
petrochemical sector, which look likely to continue. New applications and specially
in this sector. New products
developed products are particularly important
introduced late in the year that improve safety at delivery bays and provide
enhanced emergency pressure relief, are examples of increasing innovation in this
otherwise stable sector.
Product leadership helps Water sector to increased profits
Our Water sector increased both sales and profits this year. We believe we are now
offering customers the best UV sterilisation systems for drinking water on the
market. Sales of water leak detection and control equipment are growing in the USA
and there are prospects of capital spending by UK water utilities beginning to rise.
We see this as a long-term growth sector.
Sustained growth based on sustained innovation
Our focus on innovation and investment in research and development is bringing
forward increasing numbers of new products and accelerating the acquisition of new
customers. The free cash generated by our businesses and through disposals has
been invested in maintaining this momentum and building our range of products
through judicious acquisitions. We will benefit significantly once our markets
improve but we are not dependant on this. We have the talent and the resources
we need to build on our progress through our own efforts. The evidence for this is the
record sales and profits earned this year and the confidence we have in continuing
our rapid rate of dividend increase. I look forward to the coming year.
Stephen R O’Shea
Halma p.l.c. 2004
9
H A L M A
Financial Review
‘‘. . .a resilient group in
excellent shape . . .’’
Kevin Thompson,
Finance Director
Record profit with organic growth despite adverse currency movements
I am pleased to report that turnover for the year was 9% higher than last year at
£293 million (2002/03: £267 million). Turnover on continuing operations was
increased by 10%. Profit before tax* set a new record at £50.3 million (2002/03:
£46.5 million). Return on sales* exceeded 17%, as it has now done every year for
more than a decade.
Currency translation, with about one-third of our profits linked to the currently weak
US Dollar, offset slightly by profits earned in stronger Euros, reduced 2003/04
reported sales and profits by around 2%. Looking ahead, if the US Dollar and Euro
were to stay at their level so far in this new financial year and with the current mix of
results we might expect a further 3% adverse translation impact on our 2004/05
profits.
The extra £1.7 million of UK National Insurance, pension and general insurance
costs which I anticipated in my review last year have arisen and have been funded
within this year’s profits. These extra costs are ongoing. However, their effects are
mitigated by our success in producing consistently high net and gross margins
through continuous improvements in procurement and processes.
6% of the turnover increase over last year came from acquisitions. Stripping out the
currency effect and the incremental impact of acquisitions and disposals, I am very
pleased to report that these figures show 6% organic growth in turnover, and profits
show the same trend.
Consistently high returns generate strong cash flow
Each year I comment on our key metric, return on capital employed (profit before
tax* expressed as a percentage of net tangible assets). This key indicator guides our
operations, combining both return on sales and asset turns. We have generated
£22 million of cash in the year and despite its inclusion in the Group’s return on
capital employed calculation we still produced a figure of 52% – remarkable by any
measure.
*see Financial Highlights
10
Halma p.l.c. 2004
H A L M A
Financial Review continued
On my regular visits to our businesses I see the benefits we obtain from a deep
understanding of the importance of producing high returns from the minimum
possible level of assets. This efficient use of assets benefits our customers and
shows through in our return on capital* which has exceeded 40% for well over
20 years. We grew this year and used less operating assets to do it. The result of
these outstanding returns is a strong flow of cash available to us for further
investment in our businesses, to pay dividends and to make acquisitions.
Investing for the future
New products and innovation in our processes underpin our future growth. This year
we invested a record amount of £11.2 million, about 4% of turnover, in research and
development. We have maintained the investment in the capital assets used across
our businesses with capital expenditure once again at a typical level of around 125%
of depreciation. We have used the tougher market conditions which we have
experienced in the recent years to strengthen our businesses with this type of
investment, to gain market share and put ourselves in the best shape for the future.
A progressive dividend policy with dividend cover edging up
The Board recommends a final dividend of 3.75p per share, giving a full year
dividend of 6.19p per share, 7% up on last year’s record level. This dividend
represents a continuation of Halma’s progressive dividend policy and also makes a
small contribution toward increasing the dividend cover which is our intention over
the medium term.
If approved, this final dividend will be paid on 23 August 2004 to shareholders on the
register at the close of business on 23 July 2004. Together with the interim dividend
this will give a total of £23 million paid to shareholders in relation to the 2003/04
year financed by our strong cash flow, with a total of £88 million distributed as
dividends in the past five years.
Prudent approach to treasury, tax and pensions
With three-quarters of the Group’s sales made overseas and half the profits made by
companies based outside the UK, the Group’s results are sensitive to movements in
exchange rates, particularly the US Dollar and Euro. Currency movements in the
year affect our results through the translation into Sterling of profits earned in local
currencies as well as affecting the underlying transactions. We have an element of
natural hedging, in particular through the purchase of components in US Dollars.
Our operating companies hedge their trading transactions back into their local
reporting currency. We do hedge the majority of our US Dollar and Euro net assets
using currency loans. The objective of our treasury activities is risk management
and control, no speculative transactions are undertaken.
The effective tax rate on profits* was 31.3% compared with 32.9% in 2002/03. We
benefited from higher profits earned in lower tax jurisdictions, including China.
We have continued to adopt the transitional provisions of FRS 17 (Retirement
Benefits) pending the introduction of International Accounting Standards. The value
of the pension plans’ assets have increased since the last balance sheet date as can
be seen from the FRS 17 disclosures, however revised inflation assumptions have
increased the calculated liabilities. The net deficit on an FRS 17 basis has reduced by
7% to £29 million after the related deferred tax.
*see Financial Highlights
Halma p.l.c. 2004 11
H A L M A
Financial Review continued
As noted last year, we have closed our defined benefit schemes to new members
and established a defined contribution scheme. Contributions into the defined
benefit schemes are in line with the actuaries’ recommendations, following the
triennial actuarial valuations last year and are fully reflected in the Consolidated
Profit and Loss Account, with no further increases necessary at this time.
I note that the funding of pension obligations is a long-term issue, even though
scheme assets are subject to short-term fluctuations. Our long-term funding basis is
solid and the currently reported deficit, by any set of rules, is small relative to the
Group’s market capitalisation.
Compliance and control continue at a high level
I remain committed to maintaining strong internal control across the Group. For
many years we have successfully used our senior finance staff to carry out reviews
of our operating companies at half year and year end, making rotational visits at
other times to assess internal controls. During the year we have enhanced these
procedures and in particular those relating to internal control visits by the
introduction of independent reporting lines. In 2004/05 we intend to confirm that
our procedures amount to a formal internal audit function.
Through close monitoring of our businesses, the use of simple relevant systems and
involvement of high quality finance executives based at each operating company,
we continue to have a strong control environment whilst providing value to our
entrepreneurial operations.
Active management of our operations
We have taken a number of actions to improve our businesses and make good use of
our cash. Shortly before the end of the year we sold three non-core businesses for
£5 million. They accounted for turnover of £13 million and in aggregate were
operating around breakeven. If these discontinued operations are excluded the
Group’s return on sales is 18%. After deducting the costs of sale and pension and
property obligations retained within the Group, the net result was an exceptional
charge of £9.1 million including goodwill of £5.8 million. The goodwill adjustment is
a non-cash item and includes £5.6 million previously written off to reserves and now
recycled. The net effect of the disposals will be a net cash inflow to the Group having
met all necessary costs.
Combining the proceeds from the above transactions with our existing self-
generated cash, we spent £22 million just after the year end on two high-quality
acquisitions, Diba Industries, Inc., and Ocean Optics, Inc. This active management
produces an even stronger base for future growth.
International Accounting Standards on the horizon
International Accounting Standards will be in full effect for the first time in our
2005/06 accounts, although preparations are in progress now to collect data for use
in the comparative figures. Other than the additional disclosures which will be
required, we anticipate that these new Standards will have most impact in the
following areas: accounting for share options, pensions and accounting for research
and development.
12
Halma p.l.c. 2004
H A L M A
Financial Review continued
Continuously creating value
Our returns and cash flow performance this year have been up to the high standards
we have established over many years. The business has been strengthened by
investment in new product innovation, prudent acquisitions, the disposal of non-
core assets and by further process improvement. The objective remains unchanged,
to maintain a resilient group in excellent shape to create even more value for our
shareholders.
Kevin J Thompson
Halma p.l.c. 2004 13
H A L M A
Operating Review – Fire and Gas
Fire and Gas turnover
2004
2003
£75.0m
£70.0m
Fire and Gas profit*
2004
2003
£16.6m
£15.0m
Segmental turnover, 2004
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
75.0
Segmental profit, 2004*
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
20.0
*before interest, tax and goodwill
amortisation – see note 1 on the
Accounts
14
Halma p.l.c. 2004
Sector Overview
Our Fire and Gas sector companies
lead the world in sensor technologies
that detect hazards before they
become life-threatening and give
people warning to get out of harm’s
way. Our commercial quality fire
detection products, sold to 70
countries, protect both people and
buildings from the risk of fire.
Workers in many industries rely on
our gas detectors to safeguard their
lives and protect them from exposure
to toxic or explosive gases. We also
make specialist products for
conditioning gas samples before they
are analysed.
The principal sales channels for fire
detectors are distributors and fire
alarm installers, whereas customers
for gas detectors range from lone
contractors to multinational oil
companies. During 2003/04 our Fire
and Gas sector companies produced
27% of continuing Group turnover
and 33% of operating profit*.
We achieved significant advances in
both sales and profits throughout this
sector. All of our fire products
companies raised profits during
2003/04, coupled with increased
market shares. Most growth in fire
detector sales came from the UK,
Europe, the Middle East and the US. We
also grew gas detector sales and profits
significantly, aided by the recruitment of
a direct sales force in the US.
Increased co-operation between our fire
product companies on research and
development, marketing and shared
sales channels enhanced our competitive
advantage. Development of new smoke
detectors and electronic fire sounders
benefited from inter-company
collaboration. New microprocessor-
based smoke detectors were
successfully launched, opening new
markets in Eastern Europe and the
Middle East. In total, twenty new fire
products were launched during 2003/04.
Despite fierce price competition in the
global fire products market, and
dropping prices, our companies
achieved improved gross margins. This
was due to continued manufacturing
investment, improved supplier
relationships and skilful marketing.
The regulatory burden on fire safety
product manufacturers continues to
increase. New standards were imposed
in all major markets during 2003/04.
Through regular presentations, the
Group educates customers, regulatory
bodies and government departments on
the impact of new regulations.
Restructuring of European gas detector
sales through directly controlled branch
operations in Holland, Germany, Poland
and France led to significant European
sales growth. Prices of portable gas
detectors declined as manufacturers cut
production costs through improved
manufacturing and offshore sourcing.
However, lower pricing is creating
greater demand and increasing the use
of personal protection products,
particularly in developing countries.
Certification of our gas detectors by the
principal marine approvals organisation
has created new sales opportunities in
the high growth marine market. We
expect to reach many new customers
via a new distribution agreement with a
leading multinational marine support
business. A new multi-gas portable
detector was successfully launched with
ease of maintenance, leading to low cost
of ownership, proving critical.
For several years we have been working
closely with US developers of fuel cells.
These are electro-chemical devices that
function like batteries or electric
generators but run on hydrogen gas as
fuel. Until now, this has mainly been a
prototyping market. However, in 2003/
04 we began to sell gas conditioning
components used in fully commercial
fuel cell systems for small-scale power
generation.
Our latest gas detectors
protect workers from four
different gas hazards
simultaneously.
Halma p.l.c. 2004 15
The world market for UV water
treatment technology is predicted to
double within 5 years, mainly driven by
environmental concerns. There is a shift
away from chemical techniques in
treating drinking water, wastewater and
swimming pool water towards the UV
process which greatly reduces or
eliminates the use of chemicals.
Major progress has been made in the US
in supplying UV drinking water
treatment plants that comply with new,
stringent US Environmental Protection
Agency requirements. A 15 million
gallons per day treatment plant that we
supplied to the city of Henderson,
Nevada was the first major project in the
US which met the new regulations.
Sales of water analysis instruments
were buoyant, particularly in Europe and
Australia. A new photometer water
analyser, launched during 2003/04, is
already the laboratory sector market
leader. We will soon launch a low cost
water analyser for monitoring private
swimming pools and spas, transferring
technology developed for the public pool
market into the domestic arena. A large
UK water company has chosen our
ammonia monitoring system to control
its wastewater plants, which will
positively impact on sales in 2004/05.
H A L M A
Operating Review – Water
Water turnover
2004
2003
£34.5m
£33.1m
Water profit*
2004
2003
£5.8m
£5.5m
Segmental turnover, 2004
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
75.0
Segmental profit, 2004*
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
20.0
*before interest, tax and goodwill
amortisation – see note 1 on the
Accounts
16
Halma p.l.c. 2004
Sector Overview
We have world class companies
operating in three areas of water
technology: ultraviolet (UV) light
water treatment, instruments for
conserving water in distribution
networks and water analysis
products. All of these markets are
global and exports account for a high
proportion of sales in this sector.
Our principal customers in this sector
are drinking water supply companies
and municipal authorities together
with food and process industry
manufacturers. Based in the UK, the
Netherlands, France and the US,
during 2003/04 our Water sector
companies produced 12% of
continuing Group turnover and 11%
of operating profit*.
Worldwide growth in demand for clean
drinking water, industrial process water
and wastewater treatment results from
continuing industrialisation, urbanisation
and population growth. Other factors,
such as tighter water quality and waste
regulations, environmental issues and
water shortages, also stimulate the
need for our water technology products.
During 2003/04 we saw sales and
profits grow in this sector.
We won significant new leak
instrumentation business in the US and
South-East Asia. In the American mid-
west there is growing interest in
managing and conserving existing water
supplies, instead of further depletion of
natural sources. US sales of water
conservation instruments doubled.
We won a major contract for leak
detection equipment from the city
authority in Las Vegas, Nevada. Las
Vegas has the fastest growing
population of any US city with 20,000
new homes built each year. Nevada’s
water supplies are under pressure and
may hit crisis point without new supplies
and conservation measures.
Las Vegas, Nevada, where
our leak detection technology
helps to conserve the city’s
water supplies.
Halma p.l.c. 2004 17
H A L M A
Operating Review – Elevator and Door Safety
Elevator and Door Safety turnover
2004
2003
£46.3m
£65.1m
Sector Overview
One fundamental driver affecting
demand for door automation products is
the global trend towards urbanisation.
Increasing population densities in cities
require high rise office and residential
buildings, and also large public access
buildings where automatic doors are
commonly used.
Population growth is declining in many
countries. This demographic shift is
creating an ageing population more
likely to benefit from elevators and
automated doors. New legislation that
improves access to public buildings for
people with disabilities continually
raises demand for our door safety and
emergency communication products.
We are the clear leader in the US market
for automatic door sensors. A new
elevator intercom product was
introduced mid-year designed to meet
new US building codes and sales have
been very promising.
New European regulations covering
elevator door safety and emergency
communications should also help drive
up demand in 2004/05. European sales
of elevator emergency telephones
almost doubled last year and we are
rapidly establishing market leadership
for these products in the UK.
One in ten of our employees in this
sector works on research and
development. Innovative new products
protect market share where we are
dominant and provide leverage into new
markets. An entirely new type of visual
safety product launched recently warns
when elevator doors are closing. This is
a unique product that is creating a new
market. Another new product that
controls pedestrian access barriers in
retail and transport facilities is already
selling well in Europe.
We are world leaders in infrared and
microwave sensors for controlling the
opening and closing of elevator doors
and automatic doors. Our door sensor
products have three functions. They
ensure public safety, make buildings
more accessible to people with
disabilities and optimise traffic within
buildings. We also make control
systems, voice communication and
visual display equipment for
elevators. These businesses are
based in Belgium, the UK, New
Zealand, the US, Singapore and
China.
Both the elevator and automatic door
markets split into new-build and
refurbishment sectors. The new-build
sector is dominated by a small
number of multinational elevator and
door manufacturers, whereas
refurbishment projects are usually
handled by relatively small local
contractors. During 2003/04, this
sector produced 23% of continuing
Group turnover and 24% of operating
profit*.
We saw a large rise in both sales and
profits from the Elevator and Door
sector in 2003/04. This followed
inclusion of the first full year of trading
at Belgian door sensor specialist BEA,
which we acquired in October 2002. Our
other companies in this sector delivered
good overall organic growth despite
adverse currency movements,
reinforcing BEA’s excellent progress.
Sales growth in Asia was exceptionally
strong, with major volume increases in
China, Japan and Australia. We now
have two manufacturing facilities in
China and satisfy half of the entire
Chinese market for both elevator door
sensors and automatic door sensors.
Sales of in-elevator LCD display panels
also achieved substantial growth aided
by the Group’s worldwide distribution
network.
Elevator and Door Safety profit*
2004
2003
£12.1m
£8.1m
Segmental turnover, 2004
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
75.0
Segmental profit, 2004*
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
20.0
*before interest, tax and goodwill
amortisation – see note 1 on the
Accounts
18
Halma p.l.c. 2004
Visitors to The Louvre
Museum, Paris, are
protected by our elevator
safety and door control
products.
Halma p.l.c. 2004 19
H A L M A
Operating Review – Process Safety
and pressurised process plant.
Sales of safety interlocks for controlling
valves in the petrochemicals sector
increased significantly. However, sector
performance overall was flat. Increased
UK export sales to the enlarged EU
offset a decline in UK demand. We
responded by developing new,
technically innovative products, due for
launch in 2004/05, and through
diversification.
We have recently launched a unique,
patented product, targeted at the
growing retail logistics market, which
prevents accidents to fork lift truck
operators. The initial reaction from
some of the UK’s largest retailers and
logistics companies is very positive.
During 2004/05 we will also launch a
new generation of industrial access and
control products, with benefits far ahead
of any competitor, and create sales
opportunities in new areas of
manufacturing industry worldwide.
Our two bursting disc manufacturers
maintained market share during 2003/
04. Over the past 3 years, our bursting
disc businesses have been restructured;
production costs have been cut, new
managers have been recruited and new
methods of servicing the European
market are now in place. The end result
is higher product quality, lower cost
products, improved delivery and a
stream of innovative new products that
should increase market share.
Process Safety turnover
2004
2003
£36.0m
£35.2m
Process Safety profit*
2004
2003
£6.6m
£6.8m
Segmental turnover, 2004
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
75.0
Segmental profit, 2004*
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
20.0
*before interest, tax and goodwill
amortisation – see note 1 on the
Accounts
20
Halma p.l.c. 2004
Sector Overview
In this sector we make two types of
industrial safety products. Our
companies are world leaders in safety
interlocks, products that safeguard
dangerous machinery and process
equipment. They protect industrial
workers from death or injury and
prevent damage to plant. Our second
process safety speciality is bursting
discs. These devices prevent
excessive pressure and protect
people, the environment and process
equipment from the risk of explosion.
Process safety markets are global,
but demand varies from one country
to another due to wide variation in
safety legislation. Customers for our
process safety systems range from
very small businesses up to the
world’s largest corporations.
Operating from the UK, the US and
France, Process Safety generated
13% of continuing Group turnover
and 13% of operating profit* in
2003/04.
During 2003/04 buoyancy of the
petrochemicals market has been at an
all time high, and is still rising. Growth is
fuelled by the quest for new energy
sources, particularly by China, Japan
and the US. High oil prices encourage
capital expenditure in petrochemicals
exploration and processing which, in
turn, creates demand for our process
safety products.
We are seeing a worldwide trend
towards raising local safety standards to
match the best international practice.
Oil companies are increasingly adopting
the best practices from their worldwide
exploration and production sites and
applying them globally. This raises
safety standards in many territories and
strengthens underlying demand for our
products. Recent UK and EU safety
legislation also continues to exert a
positive influence on demand,
particularly in the operation of pipelines
Our process safety products
prevent accidents and
explosions at chemical and
petrochemical plants
worldwide.
Halma p.l.c. 2004 21
H A L M A
Operating Review – Resistors
locomotive builders. Predictions of
higher fuel costs for cars, together with
increased government spending on
mass transport infrastructure, also
suggest that transit sector demand will
rise.
New US safety legislation designed to
protect industrial workers from
electrical arc flash hazards should
stimulate demand for high resistance
grounding systems in the future. This
technology protects workers from
injury. It also cuts costs by reducing
production stoppages caused by
electrical faults. As the market leader in
high resistance grounding equipment in
North America, we expect to benefit
from the new regulations.
We have continued to rationalise
manufacturing between production
centres to gain efficiency benefits.
Manufacture of transit resistors has
been concentrated in the US, creating a
true world player, well positioned to
exploit the huge Chinese market for
urban transit systems.
During 2003/04 our resistor businesses
took advantage of the growing
commercial opportunities in China.
Increased raw materials sourcing from
Chinese suppliers has helped shield
margins from erosion. At the same time,
resistor sales into the Chinese market
rose substantially. A new partnership
project to manufacture our resistors in
Shenzhen, China, will add impetus to
Asian regional sales growth in 2004/05
and also deliver highly competitive
products to sell into our traditional
markets.
Resistors turnover
2004
2003
£27.2m
£27.5m
Resistors profit*
2004
2003
£2.2m
£3.1m
Segmental turnover, 2004
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
75.0
Segmental profit, 2004*
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
20.0
*before interest, tax and goodwill
amortisation – see note 1 on the
Accounts
22
Halma p.l.c. 2004
Sector Overview
The high power resistor market is
global, with demand subject to
macroeconomic trends. The principal
applications are in rail transport, the
process industries and power
distribution where our products are
used to safely dissipate electrical
energy. Our strategy to maintain
world leadership in this sector is to
continuously innovate and develop
resistor products with global sales
potential.
Our six resistor makers, based in the
US, Canada, Australia and the UK,
contributed 10% of continuing Group
sales and 5% of operating profit* in
2003/04.
We succeeded in growing exports in this
sector and saw strong sales growth in
transit and power filtration markets
during 2003/04. However, overall
resistor sales were flat and profits
declined. The impact of Dollar/Sterling
exchange rate movements disguises our
North American performance; an
8% Dollar increase in resistor sales
translated into a 1% Sterling decline.
Competition in this sector is tougher
than it has ever been. We are protecting
market share and margins through
innovation, overhead cost reduction and
raised productivity. With a US economic
upturn, the trend of declining demand
could reverse. Expansion in key resistor
markets, notably mining, metals
refining and oil and gas processing,
should lead to rising demand.
Sales of filter resistors increased due to
rising capital investment by metals
processing industries in response to
commodity price rises. Tighter US
emissions regulations for diesel
locomotives, coming into force in 2005,
could stimulate rolling stock
replacement and restore transit resistor
demand to the normal historical level.
We supply both of the US diesel
In the energy sector, our
resistor products protect
electrical power distribution
networks from damage when
faults occur.
Halma p.l.c. 2004 23
H A L M A
Operating Review – Optics and Specialist
Optics and Specialist turnover
2004
2003
£42.8m
£42.7m
Optics and Specialist profit*
2004
2003
£7.1m
£7.5m
Segmental turnover, 2004
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
75.0
Segmental profit, 2004*
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m
20.0
*before interest, tax and goodwill
amortisation – see note 1 on the
Accounts
24
Halma p.l.c. 2004
Sector Overview
We own two world leading optical
technology businesses. We make
ophthalmic instruments and lenses,
for examining eyesight and
diagnosing visual defects, and optical
sensing systems for measuring
colour, brightness and chemical
properties. Our secondary focus in
this sector is on high precision fluid
control products for use in clinical and
analytical instrumentation. Both
areas have been strengthened by
acquisitions since the year end. We
have made several changes in this
sector, including selling three
non-core businesses.
The market for our optical products is
global and exports account for a high
proportion of sales. Customers for our
fluid technology products are
primarily high-tech instrument
manufacturers, mostly based in the
US or Europe. The companies in this
sector are based in the UK and the
US, and in 2003/04 contributed 15%
of continuing Group turnover and
14% of operating profit*.
Improved sales and profits at our core
optics and fluid technology companies
were offset by slightly disappointing
performances from some of the
specialist businesses in this sector.
Head Office company results are
reported within this sector, and their
income reduced this year. As a result,
the Optics and Specialist sector sales
performance was flat in 2003/04 and its
profit contribution declined.
Both of our ophthalmic optics companies
pushed up export sales, with significant
growth in the US, Japan and Australia.
Our US ophthalmic lens business has
been increasingly successful at
developing OEM business. Several
manufacturers of electro-optical
instruments now design our optical
components into their products. Two
new types of surgical lens will help
protect patients from disease
transmission; one format will withstand
high temperature sterilisation and
another is disposable.
Sales of ophthalmic instruments
benefited from a series of new and
improved products. The most significant
were cordless, battery-powered
versions of our indirect
ophthalmoscopes, world market leading
products. These instruments offer
significant benefits to ophthalmologists
and initial sales have been encouraging,
particularly in the US.
In May 2004 we acquired Ocean Optics,
Inc., a manufacturer of optical sensing
systems. A world market leader in
miniature fibre-optic spectrometers, its
specialist measurement instruments are
used in consumer electronics, process
control, environmental monitoring, life
sciences and medical diagnostics. Like
other Halma businesses, Ocean Optics
has strong positions in niche markets
and significant growth opportunities
exist for its optical sensor-based
products.
Three non-core subsidiaries were sold
during 2003/04. They did not achieve
our profit growth or return on
investment targets due to long-term
market changes.
We extended our interests in fluid
technology with the acquisition of Diba
Industries, Inc. in May 2004. Our
specialist fluid technology companies
grew sales in two high-tech markets:
bio-hazard detection and clinical
diagnostics. We won contracts for
critical components built into biological
hazard detection equipment, a new
emerging market. These systems
analyse air samples from mail sorting
machines and identify anthrax or other
terrorist biological threats. The United
States Postal Service will use this
equipment in mail distribution centres
across the US.
Biological hazard detection
is an emerging market
for our high-precision fluid
control and optical sensing
products.
Halma p.l.c. 2004 25
H A L M A
Shareholder Information
Financial calendar
2003/04 Interim results
9 December 2003
2003/04 Interim dividend paid
9 February 2004
Trading update
2003/04 Preliminary results
29 April 2004
22 June 2004
2003/04 Report and Accounts issued
5 July 2004
Annual General Meeting
4 August 2004
2003/04 Final dividend payable
23 August 2004
Trading update
2004/05 Interim results
end October 2004
7 December 2004
2004/05 Interim dividend payable
February 2005
Trading update
2004/05 Preliminary results
end April 2005
June 2005
Analysis of shareholders
at 2 June 2004
Shareholders
Shares
Number
%
Number
%
Number of shares held
1 - 7,500
5,439
78.4
11,105,243
3.0
3.1
4.8
0.3
9.2
7,501 - 25,000
25,001 - 100,000
100,001 - 750,000
750,000 and over
866
366
191
63
12.5
11,446,651
5.3
17,792,427
2.8
57,086,667
15.6
1.0 269,588,043
73.5
A A AA A
A A AA A
6,925
100.0 367,019,031 100.0
Category of shareholders
Notifiable shareholders
Directors
3
8
0.1 103,099,183
28.1
0.1
1,166,163
Private shareholders 5,091
73.5
33,709,943
Others
1,823
26.3 229,043,742
62.4
A A AA A
A A AA A
6,925
100.0 367,019,031 100.0
Share price
London Stock Exchange, pence per 10p share
2004
2003
2002
2001 2000
Highest
Lowest
Year end
151
109
149
166
97
114
175
126
164
145
137
82
129
94
95
Dividends
Pence per 10p share
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
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 EC3P 3DB
Tel:
Fax:
E-mail: halma@drkw.com
+44 (0)20 7475 7319
+44 (0)20 7283 4667
2004
2003
2002
2001 2000
Interim
2.44
2.285
2.077
1.806 1.570
Final
Total
3.75
3.527
3.206
2.787 2.423
6.19
5.812
5.283
4.593 3.993
Annual General Meeting
The 110th Annual General Meeting of Halma p.l.c. will be
held at The Ballroom, The Berkeley Hotel, Wilton Place,
London SW1X 7RL on Wednesday, 4 August 2004 at 12 noon.
The Notice convening the Meeting is on page 74.
26
Halma p.l.c. 2004
H A L M A
Directors and Advisers
Board of Directors
Secretary
Executive Board
Registered Office
E Geoffrey Unwin Chairman*
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*
Stephen R Pettit MSc*
Carol T Chesney BA FCA
*Non-executive
Stephen R O’Shea Chief Executive
Nigel J Young Specialist Products
Neil Quinn Fire
Kevin J Thompson Group Finance Director
John S Campbell Resistors
Keith J Roy Water and Gas
William J Seymour Elevator and Door Safety
Andrew J Williams Optics
Adam J Meyers Fluid Technology
Nigel J B Trodd Process Safety
Andrew J Richardson Water Management
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
Brokers and Joint
Financial Advisers
Solicitors
Registrars
Deloitte & Touche LLP
Abbots House Abbey Street
Reading Berks RG1 3BD
The Royal Bank of Scotland plc
15 Bishopsgate
London EC2P 2AP
Lazard Brothers & Co., Limited
50 Stratton Street
London W1J 8LL
Dresdner Kleinwort Wasserstein Limited
20 Fenchurch Street
London EC3P 3DB
CMS Cameron McKenna
Mitre House 160 Aldersgate Street
London EC1A 4DD
Computershare Investor Services PLC
PO Box 82
The Pavilions Bridgwater Road
Bristol BS99 7NH
Telephone: +44 (0)870 702 0000
Halma p.l.c. 2004 27
H A L M A
Halma Management Team
1 Geoff Unwin
(aged 61) is non-executive Chairman of the Halma Group
and serves on the Audit Committee, Remuneration
Committee and the Nomination Committee (Chairman).
He was appointed Deputy Chairman and Chairman Elect in
September 2002 and Chairman in July 2003. He is Chairman
of United Business Media plc, Trigenix Limited and
Liberata plc and a non-voting board director of Capgemini
Group. He is also an advisory Board member of Hartwell plc
and Palamon Capital Partners LLP.
3 Stephen Pettit
(aged 53) was appointed a non-executive Director of Halma
in September 2003 and serves on the Audit Committee and
Remuneration Committee. He is a non-executive Director of
Norwood Systems, National Grid Transco plc, National Air
Traffic Services and KBC Advanced Technologies plc.
5 Andrew Williams
(aged 37) is Chief Executive of the Optics 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 Chartered Engineer
and a production engineering graduate of Birmingham
University.
7 Carol Chesney
(aged 41) 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.
9 Bill Seymour
(aged 44) is Chief Executive of the Elevator and Door Safety
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.
11 Andrew Walker
(aged 52) was appointed a non-executive Director of Halma
in May 2003 and serves on the Audit Committee (Chairman)
and Remuneration Committee. He is a non-executive
Director of Ultra Electronics Holdings plc, Manganese Bronze
plc and API Group plc.
13 Andrew Richardson
(aged 39) is Chief Executive of the Water Management
Division. He joined Halma in April 2004 and is a member of
the Executive Board. Andrew is an engineering graduate of
Cambridge University. Prior to joining Halma he was
Divisional Managing Director of the Clutch Division for the
Automotive Products Group.
15 Richard Stone
(aged 61) was appointed a non-executive Director of Halma
in January 2001. He serves on the Audit Committee,
Remuneration Committee (Chairman) and Nomination
Committee and is the Senior Independent Director. He is
Chairman of Shearings Group Limited and CSW Group
Limited, a non-executive Director of British Nuclear Fuels
plc, Gartmore Global Trust p.l.c., Trust Union Finance
(1991) plc, Engandscot Limited and TR Property Investment
Trust plc.
2 Stephen O’Shea
(aged 58) 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.
4 Kevin Thompson
(aged 44) 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.
6 Nigel Young
(aged 54) is Chief Executive of the Specialist Products
Division. He joined Halma as Managing Director of Fortress
Interlocks Limited when the company joined the Group in
1987. Nigel was appointed Assistant Divisional Chief
Executive 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.
8 Adam Meyers
(aged 42) is Chief Executive of the Fluid Technology Division.
He joined Halma in 1996 as President of Bio-Chem Valve Inc.
He was appointed Assistant Divisional Chief Executive 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.
10 Neil Quinn
(aged 54) is Chief Executive of the Fire 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.
12 Keith Roy
(aged 54) is Chief Executive of the Water and Gas 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).
14 John Campbell
(aged 45) 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.
16 Nigel Trodd
(aged 46) is Chief Executive of the Process Safety Division.
He joined Halma in July 2003 and is a member of the
Executive Board. Prior to joining Halma he was V.P. Europe,
Middle East and Africa for Tyco Suppression Systems based
in Frankfurt. Nigel is a business studies graduate of Thames
Valley University and is a member of the Chartered Institute
of Marketing.
28
Halma p.l.c. 2004
2
7
12
1
3
8
9
4
11
13
15
16
5
10
6
14
Halma p.l.c. 2004 29
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 53 weeks to 3 April
2004.
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
The Consolidated Profit and Loss Account for the 53 weeks to 3 April 2004 is set out
on page 48. The Group profit before taxation, goodwill amortisation and exceptional
items is £50,284,000 (2003: £46,508,000). The profit after taxation, goodwill
amortisation and exceptional items amounts to £22,322,000 (2003: £28,359,000).
Ordinary dividends
The Directors will submit a resolution at the Annual General Meeting proposing a
final dividend of 3.75p per share and if approved this dividend will be paid on
23 August 2004 to ordinary shareholders on the register at the close of business on
23 July 2004. Together with the interim dividend of 2.44p per share already paid,
this will make a total of 6.19p per share for the financial year.
Review
A review of activities together with business and future developments is included on
pages 7 to 25 inclusive.
Share capital
Details of share capital issued in the financial year are set out in note 19 on the
Accounts.
Allotment authority
Articles of Association
30
Halma p.l.c. 2004
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.
In accordance with the Electronic Communications Act 2000 and in accordance with
the Institute of Chartered Secretaries and Administrators’ recommendations, the
Company is proposing to amend its Articles to allow it the flexibility to introduce the
use of electronic communications in circumstances where the Directors think fit and
where agreed between the members and the Company. This includes the use of
electronic communications for proxy voting (Articles 85 to 90) and for the sending of
notices to an address notified by the member for that purpose or the posting of such
notices on a website with corresponding notification to the members (Articles 150 to
156). There are also consequential amendments in relation to the deemed date of
delivery of an e-mail (Article 155).
The amended Articles also allow for minor changes to the conduct of meetings of the
Board and to the appointment of directors and alternate directors (Articles 101, 109,
119 and 123). There are also amendments in relation to: the definitions and
interpretations of words and phrases (Article 2); the method of consent for a
variation of class rights (Article 11.1); the effects of omission to send or non-receipt
of a notice (Article 59); amendments to resolutions (Article 69); votes of incapable
members (Article 81); and the authentication of documents (Article 130).
H A L M A
Report of the Directors continued
Purchase of own shares
Supplier payment policy
Employees
It is the Board’s intention, with the personal consent of each member, to gradually
introduce electronic communications with members upon the adoption of the
amended Articles of Association.
Copies of the proposed new Articles of Association and interlined copies of the
current Articles of Association are available for inspection at CMS Cameron
McKenna, Mitre House, 160 Aldersgate Street, London EC1A 4DD until the close of
the Annual General Meeting and will also be available at The Ballroom, The Berkeley
Hotel, Wilton Place, London SW1X 7RL for fifteen minutes preceding, and then
during, the Annual General Meeting.
The Company was authorised at the 2003 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 2004 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 3 April 2004
the Company’s trade creditors represented 35 days (2003: 38 days) of annual
purchases.
Matters which affect the Group are communicated to employees through formal and
informal meetings, internal announcements, the Group Intranet, the Group bulletin
board on our 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 with particular reference to
non-discrimination and non-harassment on the basis of ethnic origin, religion,
gender, age, disability and sexual orientation. Halma gives disabled people the
same consideration as other individuals.
Directors’ remuneration
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 40 to 45. The special business of the Annual General Meeting contains an
ordinary resolution seeking such shareholder approval.
Corporate responsibility
The Group’s Corporate Responsibility report is set out on pages 33 to 35.
Research and
development
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.
Halma p.l.c. 2004 31
H A L M A
Report of the Directors continued
Donations
Directors
Group companies made charitable donations amounting to £9,923 (2003: £1,308)
during the financial year. There were no political donations (2003: £nil).
The Directors of the Company are listed on page 27. Brief biographies are set out on
page 28.
Mr A J Walker was appointed to the Board as a non-executive Director on 8 May
2003.
Mr D S Barber retired from service with the Group and resigned as Chairman of the
Board immediately after the 2003 Annual General Meeting on 29 July 2003.
Following the resignation of Mr Barber, Mr E G Unwin, who was appointed Deputy
Chairman (Chairman Elect) on 2 September 2002, was appointed Chairman of the
Board with effect from the close of the 2003 Annual General Meeting.
Mr S R Pettit was appointed to the Board as a non-executive Director on
16 September 2003.
Lord McGowan, who joined the Board in 1997, died on 7 May 2003.
Directors proposed
for re-election
Mr R A Stone, Mr K J Roy and Mr S R O’Shea retire by rotation and being eligible offer
themselves for re-election.
Mr S R Pettit, who joined the Board since the last Annual General Meeting, retires
under Clause 95 of the Articles of Association and being eligible offers himself for
re-election.
Shareholdings
As at 11 June 2004 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
Sprucegrove Investment Management Limited
Legal & General Investment Management Limited
shares
65,511,005
25,267,545
12,320,633
per cent
17.8
6.8
3.3
No other notification has been received in respect of a holding of 3% or more of the
Company’s ordinary share capital.
Auditors
Resolutions will be proposed at the Annual General Meeting to re-appoint Deloitte &
Touche LLP as Auditors and to authorise the Directors to determine their
remuneration.
By Order of the Board
C T Chesney
Misbourne Court Rectory Way Amersham Bucks HP7 0DE
22 June 2004
Secretary
32
Halma p.l.c. 2004
H A L M A
Corporate Responsibility Report
Socially responsible
investment
Investing in Halma shares meets the criteria of many professional and private
investors who base their decisions on environmental, ethical and social
considerations. The Group is a world leader in several key environmental
technologies and has a reputation for honesty and integrity in its relationships
with employees, customers and business partners.
Social conditions can be improved for all through the creation of wealth. Halma
creates wealth responsibly allowing our employees, customers, business partners
and shareholders to determine where this wealth is best distributed.
In each of the following areas, the regulatory demands upon us vary considerably
around the world, so Halma establishes the core structure to ensure that Group
companies fully comply with regulatory requirements while permitting them to tailor
the solutions to their particular needs.
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.
During the past year, Perma
Pure LLC elected to purchase
a state-of-the-art extrusion
system for precision tubing
to replace its existing
extruder. Perma Pure
anticipated that the new
extruder would reduce
consumptionofanexpensive
fluoropolymer Nafion(cid:1),
which it uses as a key
component, by reducing
rejected material and
permitting extrusion of finer
walled tubing, saving
material as well. Sixmonths
after installing the new
extruder at a cost of
$250,000, Perma Pure has
already observed not only
increased production
capacity but also a
considerable reduction in
rejected material,
amounting to more than
$50,000 per annum.
Additional savings are
anticipated as the
dimensions of the extruded
tubing are refined to benefit
from the narrow tolerances
of the new extruder.
Our products
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.
technologies are water
Our principal environmental
leakage detection, gas
emissions monitoring, water and effluent analysis and UV water treatment. 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.
Our commitment to the development of equipment for measuring environmental
changes and controlling the damaging impact of industrial activities is long-term.
For example, Palmer Environmental’s Permalog(cid:1) is an acoustic leak noise logger
which transmits leakage information to a radio receiver to enable leaks in water
supply pipes to be located for prompt repair thereby reducing the loss of clean water.
Atmospheric levels of highly flammable hydrogen can be precisely monitored in
locations such as laboratories, refineries, battery rooms and fuel cell facilities with
Crowcon’s TXgard-IS+.
We make safety equipment for use at work, in public places and in transportation
systems that contribute to increased personal safety by ensuring safe practice at
work, protecting people from fire and making elevators and automatic doors safe
and effective. We are the major world supplier in several of these areas. Volk Optical
has developed a new autoclavable vitrectomy lens for use in retinal surgery which
means that ethylene oxide gas is not required for sterilisation.
Environmental policy
The Group’s policy on environmental issues is published on our website and has
been distributed and explained to all Halma business units.
A 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.
Halma p.l.c. 2004 33
H A L M A
Corporate Responsibility Report continued
Environmental management system
We are committed to developing and implementing an environmental management
system (‘EMS’) throughout the Group to measure, control and, where practical,
reduce our environmental impacts. We are developing performance indicators that
will assist local management in implementing the policy and developing an EMS. The
requirement for an EMS and the related reporting has been rolled out to all UK
business units, which represent over 50% of Group production facilities in terms of
external turnover. All Group companies are encouraged to undertake ISO 14001,
the international environmental standard, accreditation where warranted. The
requirement to implement an EMS will be extended to the rest of the Group in the
medium term.
None of the UK Group companies has incurred a Health and Safety Executive fine,
received a notification of a breach or been prosecuted during the year under review.
Equivalent information is not currently collected for the rest of the world.
Our impacts
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.
The Group is sponsoring an Innovation Initiative which encourages the research and
development teams at each Group company to re-examine their product designs
with a view to being more efficient and effective using components which are more
environmentally acceptable.
Group companies are encouraged to improve energy efficiency, reduce waste and
emissions and to reduce the use of materials in order to reduce our environmental
impact. The Group is carrying out an audit in 2004/05 to establish baseline data on
emissions to air and water, water and energy consumption and waste production.
The data collected will enable the Group to set objectives for reducing its
environmental impacts in those areas and to look at setting targets for reduction
in key areas. The Group plans to report shortly on CO2 emission and water
consumption as well as waste disposal.
The baseline data is expected to confirm that the main areas of impact on the
environment are energy consumption and waste disposal. The Group does not
operate a fleet of distribution vehicles although we do own a number of company
cars. Few of our assembly processes require water, so there are not large quantities
of waste water to manage.
After the 2004/05 data collection exercise is completed and targets have been set in
key areas of environmental
impact, the Group is committed to examining the
establishment of green procurement policies.
The Group’s environmental performance will continue to be reported in both the
Annual Report and on our website.
Demonstrating the Group’s
commitment to ensure all
companies comply with
applicable regulations,
Apollo Fire Detectors Limited
is workingon complying with
the requirements of the
Restriction of Hazardous
Substances Directive
removing cadmium,
chromium, mercury and
certain flame-retardants
from their products even
though fire detectors are
currently exempt from the
EU legislation. Apollo has
also commenced its
compliance plan for the
Waste Electrical and
Electronic Equipment
Directive that comes into
force in August 2005.
Across the Group we also
operate programmes, where
commercially viable, to
ensure the responsible
disposal of packaging,
including the re-use and
recycling of all packaging
types and, where necessary,
the use of licensed
contractors to dispose of
non-recyclable waste
packaging safely. In
addition, the use of
biodegradable packaging
material is on the increase in
Group companies. One
Group company, Memco
Limited has invested in a
cardboard compactor, which
reduces the volume of their
cardboard waste
considerably. The waste is
now collected, free of
charge, by a local company
who recycles the cardboard.
34
Halma p.l.c. 2004
H A L M A
Corporate Responsibility Report continued
Health and safety
Ethics
FTSE4Good index
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 and comfortable
working environment for employees, visitors and the public. The Group has a health
and safety policy, which is set out on the Company’s website. It is the Group’s policy
to manage its activities to avoid causing any unnecessary or unacceptable risks to
health and safety. The policy is understood by all Group companies. Given the
autonomous structure of the Group, operational responsibility for compliance with
relevant local health and safety regulations is delegated to the board of directors of
each Group company. Health and safety training is carried out within companies as
appropriate and we intend to commence collecting data on accident rates with a
view to publishing them in the medium term. Adequate internal reporting exists in
order that the Group Finance Director may monitor each company’s compliance with
this policy.
Halma encourages its employees to act fairly in their dealings with fellow
employees, customers, suppliers and business partners. Our suppliers are of high
quality and operate to acceptable international standards. Halma operates a
confidential ‘‘whistleblowing’’ policy, which enables all Group employees to raise
any concerns they may have.
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.
Halma p.l.c. 2004 35
H A L M A
Corporate 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 in June 1998.
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. The Board recognises that the revised Combined Code
considers that a non-executive director ceases to be independent upon appointment
as chairman, however the Board believes that Mr Unwin’s Chairmanship of the Board
does not interfere with his independence as regards, in particular, membership of
the Audit and Remuneration Committees. In assessing independence, the Board
considers that the Chairman and non-executive Directors are independent of
management and free from business and other relationships which could interfere
with the exercise of independent judgement now and in the future. 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 with further ad hoc meetings as required. 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.
Mr Stone chairs the Remuneration Committee of which each of the non-executive
Directors is a member. Mr Walker and Mr Pettit joined the Committee during the
year. Mr Barber was a member until his retirement in July 2003 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 and are available on
request from the Company Secretary. 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. The
Committee meets at least twice per year.
Following Lord McGowan’s death, Mr Unwin chaired the Audit Committee. In October
2003, Mr Walker assumed the Chairmanship of 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 and are available on
request from the Company Secretary. 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, Group Finance
Director and representatives from the Auditors attend Committee meetings by
invitation in order to provide appropriate advice. The Committee meets at least
three times per year.
Mr Barber chaired the Nomination Committee until his retirement at which
point Mr Unwin assumed the role of Chairman. Mr Stone and Mr O’Shea are also
members of the Committee. Formal terms of reference exist which follow the
Application of the
principles of good
governance
36
Halma p.l.c. 2004
H A L M A
Corporate Governance continued
recommendations of the Combined Code and are available on request from the
Company Secretary. The Committee makes recommendations to the Board on the
appointment of new Directors. External search consultancies are retained when
recruiting non-executive Directors. The Committee meets at least annually.
Control of divisional operating matters is delegated to the Executive Board of which
the Group Chief Executive, Group Finance Director and all of the Divisional Chief
Executives are members. Biographies of Executive Board members appear on
page 28. The Group Chief Executive chairs the Executive Board, which meets
regularly, thereby ensuring the Board’s strategies are communicated to those
overseeing operations.
The Executive Board reviews operational activities, trading results, budgets, policy
matters, investment opportunities, resource allocation and risk exposures. Any
matters arising out of the Executive Board meetings are reported to the Board via
the Group Chief Executive’s report to the Board.
The Group Chief Executive and Group Finance Director also 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 26.
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. The website also contains the facility to request
e-mail alerts relating to announcements made by the Group.
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 by the Board, and the Group accords with the
Turnbull guidance.
Halma p.l.c. 2004 37
Investor relations
Going concern
Internal control
H A L M A
Corporate Governance continued
The Group’s external auditors, Deloitte & Touche LLP, 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.
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 each year and
identify mitigating actions in place or proposed for each significant risk. A risk
register is compiled from this information, against which action is monitored
through to resolution. In addition, Divisional Chief Executives carry out an
independent risk assessment for each operating company. A review of Group
risks is also 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.
* Internal control visits are carried out by senior finance staff resulting in actions
fed back to each company and followed up by Divisional Finance Directors; visit
reports are coded in terms of risk with any significant control failings reported
directly to the Audit Committee and a summary of all such visits reported to the
Audit Committee regularly; senior finance staff also carry out financial reviews
at each operating company prior to publication of half year and year end figures.
38
Halma p.l.c. 2004
H A L M A
Corporate Governance continued
* 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.
As noted above, a programme of internal control visits is conducted. Following its
review of internal control activities in 2004, the Audit Committee has now put in
place procedures for independent reporting of the outcome of these visits to the
Audit Committee. Whilst internal audit is not a separate function within the Group,
the Board anticipates that the procedures now in place will allow it to report in
2004/05 that it has procedures which amount to an internal audit function.
The Audit Committee has responsibility for reviewing auditor independence and
objectivity annually. During the year, the Committee set down the ‘‘Policy on Auditor
Independence and Services provided by the External Auditor’’. This policy states
that the Group will only use the appointed external auditor for non-audit services in
cases where these services do not conflict with the auditor’s independence. The
policy also sets a fee level above which non-audit services are subject to a tendering
process.
Auditor independence
Compliance with the
code of best practice
The Company complied with the provisions of the Combined Code throughout the
financial year.
Halma p.l.c. 2004 39
H A L M A
Report on Remuneration
Remuneration policy
The following sections of the Report on Remuneration have been audited: the table
of Directors’ remuneration; pension benefits; 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 run the
Group successfully, 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 2003/04 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 E G Unwin,
Mr A J Walker and Mr S R Pettit. Messrs Walker and Pettit were appointed to the
Committee during the past year. Mr D S Barber was a member of the Committee
prior to his retirement and Lord McGowan was a member prior to his death. The
Board has considered and confirmed Mr Stone’s independence following the third
anniversary of his appointment to the Board. The Board has also affirmed its
decision to appoint Mr Unwin to the Committee as the Board believes that his
Chairmanship of the Board does not interfere with his independence as regards
membership of the Committee. Mr Unwin does not take part in discussions
concerning his own remuneration.
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. The Committee’s Terms of Reference are available
from the Company Secretary on request.
Basic salary and benefits In determining recommended basic salary levels for each individual, the Committee
does not currently employ remuneration consultants but uses independent surveys,
compiled by New Bridge Street Consultants, IDS and Deloitte & Touche LLP, 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
40
Halma p.l.c. 2004
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 Committee recognises the need to
continually assess and evaluate such incentives and therefore has asked Ernst &
Young LLP to assist them in developing the next phase of incentive arrangements to
introduce across the Group.
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. The exercise criteria for
these two plans are noted in Note 19 on the Accounts. No further grants may be
made from either of these plans.
H A L M A
Report on Remuneration continued
Performance related
bonus scheme
Directors’ remuneration
Options under the 1999 Company Share Option Plan have more stringent exercise
criteria than the 1990 and 1996 Share Option Plans. 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.
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.
This scheme, which applies only to executive Directors and Divisional Chief
Executives, is reviewed annually by the Remuneration Committee and approved
by the Board. Without approval of this scheme there is no alternative bonus
arrangement for Directors and Divisional Chief Executives. During 2003/04 the
Remuneration Committee carefully considered existing bonus arrangements and
determined that incentive levels are appropriately set.
In the case of a Divisional Chief Executive a bonus would be earned if the profit of the
Division for which he is responsible exceeds a target calculated from the profits of
the three preceding 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.
For the Group Chief Executive and Group Finance Director, bonuses are based on the
aggregated profit of the Divisions exceeding 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. The
percentage payable in cash commences at a low level for modest growth increasing,
in percentage terms, as performance improves. The maximum cash bonus payable
to any one Director or Divisional Chief Executive is capped at 100% of his salary.
D S Barber
E G Unwin
S R O’Shea
C Q Summerhayes
Lord McGowan
H M J Ritchie
K J Thompson
N Quinn
R A Stone
K J Roy
A J Walker
S R Pettit
Salaries
and fees
£000
52
112
315
–
8
–
160
160
32
135
27
16
Bonus
£000
–
–
90
–
–
–
46
81
–
2
–
–
Benefits
£000
–
12
24
–
–
–
9
18
–
18
–
–
2004
Total
£000
52
124
429
–
8
–
215
259
32
155
27
16
2003
Total
£000
81
65
314
16
22
10
158
162
22
143
–
–
A A A A A
1,017
219
81
1,317
993
A A A A A
The fees paid in relation to Mr E G Unwin were paid to Gunwin Limited.
Halma p.l.c. 2004 41
H A L M A
Report on Remuneration continued
Pension benefits
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 executive 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%.
Details of the value of individual pension entitlements are shown below.
Age at
3.4.04
58
44
54
53
Years of
service at
3.4.04
28
16
16
11
Accrued
pension
Increase
2003 in the year
£000
£000
16
145
6
44
6
52
9
23
Accrued
pension
2004
£000
165
51
60
33
S R O’Shea
K J Thompson
N Quinn
K J Roy
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
29.3.03
£000
2,279
363
674
297
Directors’
contributions
£000
25
12
12
10
Increase
in transfer
value net of
contributions
£000
418
69
126
132
Transfer
value
3.4.04
£000
2,722
444
812
439
S R O’Shea
K J Thompson
N Quinn
K J Roy
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.
Total shareholder return The graph below shows the Company’s total shareholder return performance over
the five years to 3 April 2004 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 95% compared to 33% for the FTSE 250 and 8% for the FTSE Engineering &
Machinery sector.
42
Halma p.l.c. 2004
H A L M A
Report on Remuneration continued
At the commencement of the five-year period depicted in the graph, the Halma p.l.c.
ordinary share price was 92p and the total of dividends in respect of the year ended
3 April 1999 was 3.327p per share. The Halma p.l.c. ordinary share price at 3 April
2004 was 149.25p and the total of dividends in respect of the year then ended was
6.19p 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:
E G Unwin
S R O’Shea
K J Thompson
N Quinn
R A Stone
K J Roy
A J Walker
S R Pettit
Shares
3.4.04
38,250
258,075
49,749
33,788
5,000
744,587
35,714
1,000
Shares
29.3.03
38,250
242,482
47,786
25,596
5,000
744,587
–*
–*
*as at date of appointment
There are no non-beneficial interests of Directors.
There were no changes in Directors’ interests from 3 April 2004 to 22 June 2004.
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
29.3.03
1,458,328
579,346
731,358
436,992
Granted
94,030
167,164
167,164
40,299
Exercised
142,398
8,354
34,442
16,177
Lapsed
As at
3.4.04
– 1,409,960
738,156
–
864,080
–
461,114
–
The total gains on options exercised by Directors during the financial year amounted
to £39,853. 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.
Halma p.l.c. 2004 43
H A L M A
Report on Remuneration continued
Options granted to Directors during the financial year were at an exercise price of
134p. The closing middle market price of the Company’s ordinary shares on Friday,
2 April 2004, the last trading day preceding the financial year end, was 149.25p per
share and the range during the year was 109p to 151.25p.
Details of Directors’ options outstanding at 3 April 2004 are set out in the table
below. The status of the options can be summarised as follows:
1 Exercisable at that date at a price less than 149.25p.
2 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
149.25p.
3 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
149.25p.
S R O’Shea
K J Thompson
N Quinn
K J Roy
Status of
options
(see above)
1
2
3
1
2
3
1
2
3
1
2
3
Year of
grant
1994-99
1997-00; 2002-03
2001
1994-98
1997-00; 2002-03
2001
1994-99
1997-00; 2002-03
2001
1994-99
1997-00; 2002-03
2001
Number of
shares
690,131
619,029
100,800
260,206
429,550
48,400
297,630
469,550
96,900
169,565
236,849
54,700
Weighted average
exercise price
(p) per share
126.34
132.68
163.50
121.73
125.15
163.50
120.38
123.64
163.50
120.78
132.61
163.50
Service contracts
All options lapse if not exercised within 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 reduces monthly in the two
years preceding normal retirement. At the date of this report, Mr O’Shea’s notice
period is, effectively, 18 months. The Board reviewed this contract term during the
year and confirmed its appropriateness. All other executive Directors have contracts
with a notice period of one year. None of the contracts has 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.
Non-executive Directors
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
fees for membership and/or
receive a basic fee supplemented by additional
chairmanship of the Audit and Remuneration Committees.
44 Halma p.l.c. 2004
H A L M A
Report on Remuneration continued
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 2003/04
was set at £108,000 per annum excluding Committee membership fees, 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 by the Board of Directors in April
2004.
By Order of the Board
R A Stone Chairman of the Remuneration Committee
Misbourne Court Rectory Way Amersham Bucks HP7 0DE
22 June 2004
Halma p.l.c. 2004
45
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 at any time 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 48 to 73
and the disclosures on pages 40 to 45 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.
46 Halma p.l.c. 2004
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 53 weeks to 3 April
2004 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 3 April 2004 and of the profit of the Group for the 53 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 LLP
Chartered Accountants and Registered Auditors
Reading
22 June 2004
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. 2004 47
H A L M A
Consolidated Profit and Loss Account
£000
53 weeks to 3 April 2004
52 weeks to 29 March 2003
Before
goodwill
Goodwill
amortisation amortisation
and
exceptional exceptional
items
items
and
s
e
t
o
N
Total
Before
goodwill
Goodwill
amortisation amortisation
and
exceptional exceptional
items
items
and
Total
A
Turnover
1
A
Continuing operations
279,611
–
279,611
254,001
–
254,001
A
Discontinued operations
13,029
–
13,029
13,292
–
13,292
A A A A A A A
A A A A A A A
292,640
–
292,640
267,293
–
267,293
Operating profit
3
A
Continuing operations
50,422
(4,209)
46,213
46,023
(3,224)
42,799
A
Discontinued operations
(370)
(11)
(381)
77
(11)
66
A
A A A A A A A
50,052
(4,220)
45,832
46,100
(3,235)
42,865
Exceptional items
4
A
Loss on sale of businesses
–
(3,394)
(3,394)
–
–
–
A
Associated goodwill
–
(5,755)
(5,755)
–
–
–
A
Loss on disposal of
discontinued operations
–
(9,149)
(9,149)
–
–
–
A A A A A A A
Profit on ordinary
activities before interest
and taxation
50,052
(13,369)
36,683
46,100
(3,235)
42,865
A
Interest
7
232
–
232
408
–
408
A A A A A A A
Profit on ordinary
activities before taxation
1
50,284
(13,369)
36,915
46,508
(3,235)
43,273
A
Taxation
8
(15,727)
1,134
(14,593)
(15,279)
365
(14,914)
A A A A A A A
Profit for the financial
year
34,557
(12,235)
22,322
31,229
(2,870)
28,359
A A A A A A A
Ordinary dividends
9
(22,725)
(21,246)
A A
A
(Loss)/profit transferred
(from)/to reserves
10
(403)
7,113
A A
A
Earnings per ordinary
share before goodwill
amortisation and
exceptional items
2
9.44p
8.55p
A
Earnings per ordinary
share
2
6.09p
7.76p
A
Diluted earnings per
ordinary share
2
6.09p
7.75p
A
The notes on pages 55 to 73 form part of these Accounts.
48
Halma p.l.c. 2004
Consolidated Balance Sheet
£000
H A L M A
s
e
t
o
N
At 3 April
2004
At 29 March
2003
A
Fixed assets
A
Intangible assets
11
71,425
76,592
A
Tangible assets
12
47,139
49,883
A A A
A A A
118,564
126,475
Current assets
A
Stocks
13
31,208
35,186
A
Debtors
14
67,080
73,076
A
Short-term deposits
33,898
14,309
A
Cash at bank and in hand
14,584
13,265
A A A
A A A
Creditors: amounts falling due within one year
A
Borrowings
15
26,934
27,667
A
Creditors
16
44,394
46,090
A
Current taxation
5,563
5,286
A
Dividends payable
13,762
12,892
A A A
146,770
135,836
90,653
91,935
A A A
Net current assets
56,117
43,901
A A A
Total assets less current liabilities
174,681
170,376
A A A
Creditors: amounts falling due after one year
17
1,254
1,665
A
Provisions for liabilities and charges
18
6,067
5,265
A A A
167,360
163,446
A A A
Capital and reserves
A
Called up share capital
19
36,677
36,549
A
Share premium account
10
7,768
6,375
A
Capital redemption reserve
10
185
185
A
Profit and loss account
10
122,730
120,337
A A A
Equity shareholders’ funds
167,360
163,446
A A A
Approved by the Board of Directors on 22 June 2004
E G Unwin K J Thompson Directors
Halma p.l.c. 2004 49
H A L M A
Statement of Total Recognised Gains and Losses £000
2004
53 weeks
2003
52 weeks
A
Profit for the financial year
22,322
28,359
A A A
Other recognised gains and losses
A
Exchange adjustments
(2,799)
(2,408)
A
Related corporation tax
–
364
A A A
A A A
Recognised gains and losses relating to the year
19,523
26,315
A A A
(2,799)
(2,044)
Movements in Equity Shareholders’ Funds
s
e
t
o
N
2004
53 weeks
2003
52 weeks
A
Profit for the financial year
22,322
28,359
A
Dividends
(22,725)
(21,246)
AA A
(Loss)/profit transferred (from)/to reserves
10
(403)
7,113
A
Total other recognised gains and losses
(2,799)
(2,044)
A
Net proceeds of shares issued
1,521
820
A
Goodwill transferred to the Consolidated Profit and
Loss Account in respect of businesses sold
5,595
–
AA A
Increase in equity shareholders’ funds
A
Equity shareholders’ funds brought forward
3,914
5,889
163,446
157,557
A A A
Equity shareholders’ funds carried forward
167,360
163,446
A A A
50
Halma p.l.c. 2004
Consolidated Cash Flow Statement
£000
H A L M A
s
e
t
o
N
2004
53 weeks
2003
52 weeks
A
Cash flow from operating activities
22
59,782
60,309
A
Return on investments and servicing of finance
A
Interest received
952
1,280
A
Interest paid
(731)
(622)
A A A
A A A
221
658
Taxation
A
Current taxation paid
(14,093)
(15,498)
A A A
Capital expenditure
A
Purchase of tangible fixed assets
(9,686)
(11,257)
A
Sale of tangible fixed assets
1,004
1,872
A A A
A A A
Acquisitions and disposals
A
Acquisition of businesses
22
(2,947)
(49,857)
A
Cash and overdrafts acquired
–
2,655
A
Disposal of businesses
4,567
–
A A A
(8,682)
(9,385)
A A A
Equity dividends paid
(21,855)
(20,066)
A A A
1,620
(47,202)
A A A
Management of liquid resources
A
(Increase)/decrease in short-term deposits
22
(19,662)
20,064
A A A
16,993
(31,184)
Financing
A
Issue of ordinary share capital
1,521
820
A
Increase in loans
2,683
13,399
A A A
A A A
Increase in cash
22
1,535
3,099
A A A
4,204
14,219
Halma p.l.c. 2004 51
H A L M A
Halma p.l.c. Balance Sheet
£000
s
e
t
o
N
At 3 April
2004
At 29 March
2003
A
Fixed assets
A
Tangible assets
12
3,136
3,663
A
Investments
20
40,959
42,760
A A A
A A A
44,095
46,423
Current assets
A
Debtors
14
124,042
119,983
A
Short-term deposits
32,410
14,000
A
Cash at bank and in hand
–
57
A A A
A A A
Creditors: amounts falling due within one year
A
Borrowings
15
26,758
27,506
A
Creditors
16
21,376
17,084
A
Current taxation
1,138
1,462
A
Dividends payable
13,762
12,892
A A A
156,452
134,040
63,034
58,944
A A A
Net current assets
93,418
75,096
A A A
Total assets less current liabilities
137,513
121,519
A A A
Creditors: amounts falling due after one year
17
1,157
143
A
Provisions for liabilities and charges
18
294
534
A A A
A A A
136,062
120,842
Capital and reserves
A
Called up share capital
19
36,677
36,549
A
Share premium account
10
7,768
6,375
A
Capital redemption reserve
10
185
185
A
Profit and loss account
21
91,432
77,733
A A A
Equity shareholders’ funds
136,062
120,842
A A A
Approved by the Board of Directors on 22 June 2004
E G Unwin K J Thompson Directors
52
Halma p.l.c. 2004
Accounting Policies
H A L M A
Basis of accounting
The accounts set out on pages 48 to 73 are prepared under the historical cost
convention and comply with applicable United Kingdom Accounting Standards. The
principal Group accounting policies have been applied consistently throughout the
current and preceding year and are described below. 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 3 April 2004. 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. Transactions are recorded as sales when
the delivery of products or performance of services takes place in accordance with
the contracted terms of sale.
Investments
Investments are stated at cost less provision for impairment.
Halma p.l.c. 2004 53
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 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.
54
Halma p.l.c. 2004
Notes on the Accounts
£000
H A L M A
1
Segmental analysis
Geographical analysis
Turnover
United Kingdom
United States of America
Europe excluding UK
Far East and Australasia
Africa, Near and Middle East
Other
Inter-segmental sales
By destination
By origin
2004
2003
2004
2003
77,534
84,047
70,730
28,054
9,944
9,302
–
70,503
159,462
148,902
82,003
58,941
24,385
9,576
8,593
87,958
43,690
14,133
–
84,724
30,823
10,199
–
2,853
2,840
–
(28,485)
(23,487)
Turnover from continuing operations
279,611
254,001
279,611
254,001
A A A A
Discontinued operations
13,029
13,292
13,029
13,292
Group turnover
Profit before taxation
United Kingdom
United States of America
Europe excluding UK
Other countries
Continuing operations
Discontinued operations
Segmental profit
A A A A
292,640
267,293
292,640
267,293
A A A A
26,601
13,617
7,111
3,093
24,691
14,366
5,228
1,738
A A
50,422
46,023
(370)
77
A A
50,052
46,100
Goodwill amortisation and exceptional items
(13,369)
(3,235)
Interest
Profit on ordinary activities before taxation
232
408
A A
36,915
43,273
A A
Net assets
United Kingdom
United States of America
Europe excluding UK
Other countries
Continuing operations
Discontinued operations
Net cash/(debt)
Net tangible assets
Intangible assets
Equity shareholders’ funds
41,348
16,873
11,494
4,672
43,745
22,916
12,659
4,609
A A
74,387
83,929
A A
–
3,018
74,387
21,548
86,947
(93)
A A
95,935
71,425
86,854
76,592
A A
167,360
163,446
A A
Halma p.l.c. 2004 55
H A L M A
Notes on the Accounts continued
£000
1
Segmental analysis continued
Sector analysis
Turnover
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
Inter-segmental sales
Turnover from continuing operations
Discontinued operations
Group turnover
Profit before taxation
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist including holding companies
Continuing operations
Discontinued operations
Segmental profit
2004
2003
74,998
34,485
65,070
36,030
27,195
42,824
70,026
33,090
46,308
35,241
27,493
42,704
(991)
(861)
A A
279,611
254,001
13,029
13,292
A A
292,640
267,293
A A
16,621
15,028
5,767
12,102
6,579
2,218
7,135
5,517
8,126
6,753
3,067
7,532
A A
50,422
46,023
(370)
77
A A
50,052
46,100
Goodwill amortisation and exceptional items
(13,369)
(3,235)
Interest
Profit on ordinary activities before taxation
Net assets
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist including holding companies
Continuing operations
Discontinued operations
Net cash/(debt)
Net tangible assets
Intangible assets
Equity shareholders’ funds
232
408
A A
36,915
43,273
A A
19,578
14,279
16,130
10,504
7,347
6,549
18,239
14,747
16,416
11,176
8,483
14,868
A A
74,387
83,929
A A
–
3,018
74,387
21,548
86,947
(93)
A A
95,935
71,425
86,854
76,592
A A
167,360
163,446
A A
56
Halma p.l.c. 2004
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.
Notes on the Accounts continued
£000
H A L M A
2
Earnings per ordinary share
Earnings per ordinary share on a statutory basis are calculated by dividing the profit for the
financial year of £22,322,000 (2003: £28,359,000) by the weighted average of 366,237,803
shares in issue during the year (2003: 365,411,453).
Diluted earnings per ordinary share are calculated using the same earnings as for earnings per
ordinary share, divided by 366,686,599 shares (2003: 365,809,420) which includes dilutive
potential ordinary shares of 448,796 (2003: 397,967). 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.
Earnings per ordinary share before goodwill amortisation and exceptional items as presented
on the Consolidated 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:
Earnings
Add back: goodwill amortisation (after tax)
exceptional items (after tax)
Earnings before goodwill amortisation
2004
2003
22,322
28,359
3,880
8,355
2,870
–
Per ordinary share
2004
p
6.09
1.07
2.28
2003
p
7.76
0.79
–
A A A A
and exceptional items
34,557
31,229
9.44
8.55
A A A A
3 Operating profit
Operating profit comprises:
Turnover
Cost of sales
Gross profit
Distribution costs
2004
2003
292,640
267,293
(205,118)
(187,006)
A A
87,522
80,287
(7,545)
(6,725)
Administrative expenses (including goodwill amortisation)
(34,320)
(31,092)
Other operating income
175
395
A A
45,832
42,865
A A
Included in the above are the following amounts related to discontinued operations: cost of
sales £11,679,000 (2003: £11,499,000); gross profit £1,350,000 (2003: £1,793,000);
distribution costs £416,000 (2003: £430,000); administrative expenses £1,315,000 (2003:
£1,297,000) (including goodwill amortisation £11,000 (2003: £11,000)).
Halma p.l.c. 2004 57
H A L M A
Notes on the Accounts continued
£000
3 Operating profit continued
Operating profit is arrived at after charging:
Depreciation
Goodwill amortisation
Research and development
Auditors’ remuneration: Audit services
Non-audit services
Operating lease rents
property
other
2004
2003
7,879
4,220
11,242
463
44
3,138
300
7,554
3,235
9,623
430
3
3,129
132
Auditors’ remuneration includes £65,000 (2003: £60,000) in respect of the Company.
4
Exceptional items
Exceptional items arose on the sale of the entire share capital of Thames Side-Maywood
Limited, Kerry Ultrasonics Limited and S&P Coil Products Limited in March and April 2004.
Of the loss on disposal of £9,149,000, £5,755,000 related to goodwill, of which £5,595,000 had
been previously written off directly to reserves on acquisition. Cash of £4,567,000 has been
received by 3 April 2004 and, after settlement of costs, the net cash inflow on disposal is
expected to be £3,687,000.
5
Employee information
The average number of persons employed by the Group during the year was:
2004
Number
2003
Number
United Kingdom
Overseas
Group employee costs comprise:
Wages and salaries
Social security costs
Other pension costs (note 25)
1,788
1,137
1,801
992
A A
2,925
2,793
A A
£000
68,207
10,137
5,095
£000
63,334
8,485
3,859
A A
83,439
75,678
A A
6 Directors’ remuneration
Details of Directors’ remuneration are set out on pages 40 to 45 within the Report on
Remuneration and form part of these financial statements.
7
Interest
Interest receivable on short-term deposits
Interest payable on bank loans and overdrafts
Other interest
2004
995
(700)
(63)
2003
1,220
(717)
(95)
A A
232
408
A A
58
Halma p.l.c. 2004
Notes on the Accounts continued
£000
H A L M A
8
Taxation
Current tax
UK corporation tax at 30% (2003: 30%)
Overseas taxation
Adjustments in respect of prior years
Total current tax
Deferred tax
Origination and reversal of timing differences
Adjustments in respect of prior years
Total deferred tax (credit)/charge
2004
2003
7,573
7,434
(383)
7,114
6,829
203
A A
14,624
14,146
A A
(49)
18
738
30
A A
(31)
768
A A
14,593
14,914
A A
Reconciliation of effective tax rate
on profit on ordinary activities:
Before goodwill amortisation
and exceptional items
After goodwill amortisation
and exceptional items
UK corporation tax rate
Higher tax rates on overseas profits
Adjustments in respect of prior years
Other timing differences
Effective tax rate
9 Ordinary Dividends
Interim paid
Final proposed
Balance of final dividend
2004
%
30.0
2.7
(0.7)
(0.7)
2003
%
30.0
3.3
0.5
(0.9)
2004
%
30.0
3.5
(1.0)
7.0
2003
%
30.0
3.6
0.5
0.4
A A A A
31.3
32.9
39.5
34.5
A A A A
2004
p
2.44
3.75
–
2003
p
2.285
3.527
–
2004
8,945
2003
8,352
13,762
12,892
18
2
A A A A
6.19
5.812
22,725
21,246
A A A A
The accrual for the 2003/04 final dividend takes into account shares issued since 3 April 2004.
10 Reserves
At 29 March 2003
Loss transferred from reserves
Share options exercised
Exchange adjustments
Goodwill transferred to the Consolidated Profit and Loss
Account in respect of businesses sold
At 3 April 2004
Share
premium
account
6,375
–
1,393
–
–
Capital
redemption
reserve
Profit
and loss
account
185
120,337
–
–
–
–
(403)
–
(2,799)
5,595
A A A
7,768
185
122,730
A A A
Halma p.l.c. 2004 59
H A L M A
Notes on the Accounts continued
£000
11 Fixed assets – intangible assets
Cost
At 29 March 2003
Adjustments
Disposals
At 3 April 2004
Amortisation
At 29 March 2003
Charge for the year
Disposals
At 3 April 2004
Net book amounts
At 3 April 2004
At 29 March 2003
Goodwill
85,602
(787)
(213)
A
84,602
A
9,010
4,220
(53)
A
13,177
A
71,425
76,592
The adjustments to goodwill comprise revisions to the estimate of contingent deferred
purchase consideration payable in respect of prior years’ acquisitions.
Cumulative goodwill written off against reserves on acquisitions prior to 28 March 1998, net of
that attributable to closures and sales, amounts to £70,931,000 (2003: £76,526,000).
12 Fixed assets – tangible assets
Group
Cost
Land and buildings
Freehold
properties
Long
leases
Short
leases
Plant
equipment
& vehicles
Total
At 29 March 2003
27,503
1,448
2,623
67,090
98,664
Assets of businesses sold
Additions at cost
Disposals
(345)
717
(437)
Exchange adjustments
(1,032)
–
–
–
–
(141)
(3,802)
(4,288)
303
(82)
8,666
9,686
(5,082)
(5,601)
(110)
(2,500)
(3,642)
At 3 April 2004
26,406
1,448
2,593
64,372
94,819
A A A A A
A A A A A
Accumulated depreciation
At 29 March 2003
4,420
319
1,357
42,685
48,781
Assets of businesses sold
Charge for the year
Disposals
Exchange adjustments
(112)
543
(63)
(162)
–
31
–
–
(44)
253
(59)
(55)
(2,607)
(2,763)
7,052
7,879
(4,366)
(4,488)
(1,512)
(1,729)
At 3 April 2004
4,626
350
1,452
41,252
47,680
A A A A A
A A A A A
Net book amounts
At 3 April 2004
At 29 March 2003
21,780
23,083
1,098
1,129
1,141
1,266
23,120
24,405
47,139
49,883
60
Halma p.l.c. 2004
Notes on the Accounts continued
£000
H A L M A
12 Fixed assets – tangible assets continued
Halma p.l.c.
Cost
At 29 March 2003
Additions at cost
Disposals
At 3 April 2004
Accumulated depreciation
At 29 March 2003
Charge for the year
Disposals
At 3 April 2004
Net book amounts
At 3 April 2004
At 29 March 2003
13 Stocks
Raw materials and consumables
Work in progress
Finished goods and goods for resale
14 Debtors
Falling due within one year:
Land and buildings
Freehold
properties
Short
leases
Plant
equipment
& vehicles
Total
3,778
37
(772)
167
1,012
4,957
–
–
288
(116)
325
(888)
A A A A
3,043
167
1,184
4,394
A A A A
670
45
(172)
51
6
–
573
159
(74)
1,294
210
(246)
A A A A
543
57
658
1,258
A A A A
2,500
3,108
110
116
526
439
3,136
3,663
2004
2003
15,337
15,231
6,000
9,871
8,024
11,931
A A
31,208
35,186
A A
Group
Halma p.l.c.
2004
2003
2004
2003
Trade debtors
61,772
65,578
–
–
Amounts due from Group companies
Prepayments and accrued income
Other debtors
–
3,603
1,705
–
122,857
117,588
3,979
3,519
1,096
89
1,259
1,136
A A A A
67,080
73,076
124,042
119,983
A A A A
Halma p.l.c. 2004 61
H A L M A
Notes on the Accounts continued
£000
15 Borrowings
Falling due within one year:
Group
Halma p.l.c.
2004
2003
2004
2003
Unsecured bank loans and overdrafts
26,934
26,584
26,758
26,423
Other unsecured loans
A A A A
–
1,083
–
1,083
26,934
27,667
26,758
27,506
A A A A
16 Creditors
Trade creditors
Group
2004
2003
26,971
28,878
Halma p.l.c.
2004
428
2003
375
Other taxation and social security
3,574
3,842
1,208
1,197
Amounts owing to Group companies
Accruals and deferred income
Other creditors
–
9,089
4,760
–
15,163
13,609
8,778
4,592
1,813
2,764
1,144
759
A A A A
44,394
46,090
21,376
17,084
A A A A
17 Creditors: amounts falling due after one year
Deferred purchase consideration
Other creditors
Group
Halma p.l.c.
2004
159
1,095
2003
1,665
2004
62
–
1,095
2003
143
–
A A A A
1,254
1,665
1,157
143
A A A A
18 Provisions for liabilities and charges
Deferred taxation
Group
Halma p.l.c.
2004
6,067
2003
5,265
2004
294
2003
534
A
Analysis of Group deferred tax provided is as follows:
Accelerated capital allowances
Short-term timing differences
Goodwill timing differences
Net deferred tax liability
2004
3,098
2003
3,186
(2,468)
(2,223)
5,437
4,302
A A
6,067
5,265
A A
62
Halma p.l.c. 2004
Notes on the Accounts continued
£000
H A L M A
18 Provisions for liabilities and charges continued
Movement in deferred tax liability
At 29 March 2003
Charge/(credit) to profit and loss account:
UK
Overseas
Disposals
Exchange adjustments
At 3 April 2004
Group
Halma p.l.c.
5,265
534
(821)
(240)
790
(55)
888
–
–
–
A A
6,067
294
A A
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.
19 Called up share capital
Ordinary shares of 10p each
43,656
43,656
36,677
36,549
Authorised
2004
2003
Issued and fully paid
2003
2004
The number of ordinary shares in issue at 3 April 2004 was 366,773,945.
Changes during the year in the issued ordinary share capital were as follows:
At 29 March 2003
Share options exercised
At 3 April 2004
Issued and fully paid
36,549
128
A
36,677
A
The total consideration received in respect of share options exercised amounted to
£1,521,000.
Options in respect of 1,136,639 ordinary shares remained outstanding at 3 April 2004 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:
Number of shares
Option price
Five years from
Seven years from
307,903
185,598
52,665
122,200
22,200
91,600
167,013
178,794
3,866
4,800
122.63p – 130.52p
111.75p – 126p
138p – 144.76p
122.5p – 126.5p
101.5p – 116.5p
120p – 137p
104.24p – 124.88p
111.75p – 126p
138.02p
120p
1997
1998
1999
2000
2001
2002
1999
2000
2001
2004
Halma p.l.c. 2004 63
H A L M A
Notes on the Accounts continued
£000
19 Called up share capital continued
Options in respect of 4,348,758 ordinary shares remained outstanding at 3 April 2004 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:
Number of shares
Option price
Five years from
Seven years from
341,594
767,600
331,600
1,025,800
302,264
394,200
394,500
791,200
138p – 144.75p
122.5p – 138.5p
101.5p – 123.5p
120p – 137p
138p – 144.75p
122.5p – 137p
101.5p – 123.5p
120p – 136p
1999
2000
2001
2002
2001
2002
2003
2004
Options in respect of 11,094,816 ordinary shares remained outstanding at 3 April 2004 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:
Number of shares
Option price
Five years from
Seven years from
2,035,900
1,205,000
1,801,170
2,474,804
906,900
688,600
963,671
1,018,771
111p
163.5p
132p – 144.33p
134p
111p
163.5p
144.33p
134p
2003
2004
2005
2006
2005
2006
2007
2008
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 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.
64
Halma p.l.c. 2004
Notes on the Accounts continued
£000
H A L M A
20 Investments
Shares in Group companies
At cost less amounts written off at 29 March 2003
Additions
Disposals
At cost less amounts written off at 3 April 2004
2004
2003
42,760
40,119
–
2,641
(1,801)
–
A A
40,959
42,760
A A
The disposals relate to the sale of the whole of the issued share capital of Kerry Ultrasonics
Limited, Thames Side-Maywood Limited and S&P Coil Products Limited, all of which were
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 Se´curite´ S.A.S.
*Hydreka S.A.S.
*S.E.R.V. Trayvou Interverrouillage S.A.S.
*Apollo Gesellschaft fu¨r Meldetechnologie mbH
*Berson Milieutechniek B.V.
*Bureau D’Electronique Applique´e 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.
Diba Industries, Inc.(cid:1)
*Electronic Micro Systems Inc.
*IPC Power Resistors Inc.
*Janus Elevator Products Inc.
*Marathon Sensors Inc.
*Monitor Controls Inc.
*Mosebach Manufacturing Company
*Ocean Optics, Inc.(cid:1)
*Oklahoma Safety Equipment Co. Inc.
*Perma Pure LLC
*Post Glover Resistors Inc.
*Volk Optical Inc.
*Interests held by subsidiary companies.
(cid:1)Acquired since year end.
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
USA
USA
Halma p.l.c. 2004 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:
At 29 March 2003
Profit after taxation
Dividends
Exchange adjustments
At 3 April 2004
22 Consolidated cash flow statement
Reconciliation of operating profit to net cash inflow from
operating activities
Operating profit
Depreciation
Goodwill amortisation
Loss/(profit) on sale of tangible fixed assets
Decrease/(increase) in SSAP 24 pension prepayment
Property sale receivable
Decrease in stocks
(Increase)/decrease in debtors
Increase in creditors
Net cash inflow from operating activities
2004
2003
77,733
34,094
82,041
18,152
(22,725)
(21,246)
2,330
(1,214)
A A
91,432
77,733
A A
2004
2003
45,832
42,865
7,879
4,220
109
112
1,100
744
(1,404)
1,190
7,554
3,235
(155)
(916)
(1,100)
3,288
122
5,416
A A
59,782
60,309
A A
Included in the Consolidated Cash Flow Statement are the following amounts related to
discontinued operations: net cash inflow from operating activities £270,000 (2003:
£1,073,000); net interest paid £49,000 (2003: £17,000 received); taxation paid £79,000
(2003: £248,000); net capital expenditure £287,000 (2003: £378,000).
The cash outflow of £2,947,000 on the acquisition of businesses relates to the payment of
deferred purchase consideration which arose from acquisitions made in earlier years, and
where provision was made in prior years’ financial statements.
Reconciliation of net cash flow to movement in net cash/(debt)
Increase in cash
Increase/(decrease) in liquid resources
Loan notes issued
Cash inflow from loans
Exchange adjustments
Net (debt)/cash brought forward
Net cash/(debt) carried forward
2004
2003
1,535
3,099
19,662
(20,064)
–
(1,083)
(2,683)
(13,399)
3,127
744
A A
21,641
(30,703)
(93)
30,610
A A
21,548
(93)
A A
66
Halma p.l.c. 2004
Notes on the Accounts continued
£000
H A L M A
22 Consolidated cash flow statement continued
At
29 March
2003
Cash
flow
Other
non-cash
changes
Exchange
adjustments
At
3 April
2004
Analysis of net cash/(debt):
Cash
Overdrafts
13,265
(162)
1,639
(104)
A
1,535
Short-term deposits
14,309
19,662
Bank loans
(26,422)
(3,766)
Other unsecured loans
(1,083)
1,083
–
–
–
–
–
(320)
14,584
8
(258)
(73)
33,898
3,512
(26,676)
–
–
A A A A A
(93)
18,514
–
3,127
21,548
A A A A A
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 loan facilities
and have fixed interest rates with maturities of not more than one year.
Halma p.l.c. 2004 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 renewed 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. They 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:
2004
Functional currency
of operation
Sterling
US Dollar
Euro
Other
Total
2003
Net foreign currency monetary assets/(liabilities)
Sterling
US Dollar
–
5
(79)
79
747
–
1,509
1,249
Euro
1,850
(3)
–
13
Other
(115)
–
77
(2)
Total
2,482
2
1,507
1,339
A A A A A
A A A A A
5
3,505
1,860
(40)
5,330
Net foreign currency monetary assets/(liabilities)
Functional currency
of operation
Sterling
US Dollar
Sterling
US Dollar
Euro
Other
Total
–
(45)
20
129
1,345
–
666
798
Euro
2,593
19
–
1
Other
146
–
40
53
Total
4,084
(26)
726
981
A A A A A
104
2,809
2,613
239
5,765
A A A A A
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 comprise cash
deposits which totalled £33,898,000 at 3 April 2004 (2003: £14,309,000). These comprised
Sterling denominated deposits of £32,531,000 (2003: £14,022,000), US Dollar denominated
deposits of £nil (2003: £58,000), Euro and other currency deposits of £1,367,000 (2003:
£229,000) which are placed on local money markets and earn interest at market rates.
68
Halma p.l.c. 2004
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 £26,934,000 at 3 April 2004 (2003:
£27,667,000). All are subject to floating rates of
interest. These comprise US Dollar
denominated bank loans of £20,218,000 (2003: £19,745,000) which bear interest with
reference to the US Dollar LIBOR rates, US Dollar denominated bank overdrafts of £76,000
(2003: £152,000) which bear interest at rates referenced to US Dollar base rates, Euro
denominated bank loans of £6,458,000 (2003: £6,678,000) which bear interest with reference
to the Euro LIBOR rates, Euro denominated bank overdrafts of £142,000 (2003: £nil) which
bear interest at rates referenced to Euro base rates and Sterling denominated bank overdrafts
of £40,000 (2003: £9,000) and Sterling loan notes of £nil (2003: £1,083,000) which bear
interest at rates referenced to UK base rates.
Maturity of financial liabilities
With the exception of the deferred purchase consideration and other creditors 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 £44,000 (2003: £1,492,000) due
between one and two years, with the balance of £115,000 (2003: £173,000) due between two
and five years. Other creditors due after more than one year include £105,000 (2003: £nil) due
between one and two years, £379,000 (2003: £nil) due between two and five years, with the
balance of £611,000 (2003: £nil) due after more than 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 3 April 2004 committed facilities of this type amounted to
£57,219,000 of which £26,676,000 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 3 April 2004 there was no significant difference between the book value and fair value (as
determined by market value) of the Group’s financial assets and liabilities.
Hedging
As explained above, the Group’s policy is to hedge significant sales and 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 3 April 2004 and 29 March 2003 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 3 April 2004 but not provided in these
accounts amounts to £523,000 (2003: £2,101,000).
Halma p.l.c. 2004 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:
Within one year
Within two to five years
After five years
Land and buildings
Other
2004
352
1,482
930
2003
380
1,594
1,229
2004
39
193
8
2003
44
254
–
A A A A
2,764
3,203
240
298
A A A A
Total annual commitments under non-cancellable operating leases amount to £3,004,000
(2003: £3,501,000).
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
previous 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 £5,095,000 (2003: £3,859,000) of which £812,000
(2003: £757,000) 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 third year transitional disclosures are required.
70
Halma p.l.c. 2004
Notes on the Accounts continued
£000
H A L M A
25 Pensions continued
The financial assumptions used to calculate scheme liabilities at 3 April 2004 under FRS 17 are:
Rate of increase in salaries
Rate of increase in pensions in payment (pre April 1997)
Rate of increase of pensions in payment (post April 1997)
Discount rate
Inflation assumption
2004
2003
2002
4.25%
2.75%
2.75%
5.50%
2.75%
4.00%
3.00%
2.50%
5.50%
2.50%
4.25%
3.00%
2.75%
6.00%
2.75%
The expected rates of return and the aggregated assets in the UK defined benefit schemes
were:
Equities
Bonds
Property
Expected
rate
of return
2004
Market
value
2004
Expected
rate
of return
2003
Market
value
2003
Expected
rate
of return
2002
Market
value
2002
7.75%
51,323
7.50%
37,301
8.25%
45,407
4.75%
8,349
4.50%
7,569
5.25%
6.25%
1,755
6.00%
1,704
6.75%
8,128
1,609
A A A
Total market value of assets
61,427
46,574
55,144
Present value of scheme
liabilities
Deficit in schemes
Related deferred tax asset
(102,196)
(90,545)
(67,705)
A A A
(40,769)
12,231
(43,971)
13,191
(12,561)
3,768
A A A
(28,538)
(30,780)
(8,793)
A A A
Analysis of the amount that would have been charged to operating profit under FRS 17 in
respect of the UK defined benefit schemes:
Current service cost
Curtailment gain
Total operating charge
2004
3,160
(979)
2003
2,924
–
A A
2,181
2,924
A A
Analysis of the amount that would have been (charged)/credited to net finance income under
FRS 17:
Expected return on pension scheme assets
Interest on scheme liabilities
Net finance (cost)/income
2004
3,377
2003
4,438
(5,032)
(4,153)
A A
(1,655)
285
A A
Halma p.l.c. 2004 71
H A L M A
Notes on the Accounts continued
£000
25 Pensions continued
Analysis of the actuarial gain/(loss) that would have been recognised in the statement of total
recognised gains and losses:
Actual return less expected return on scheme assets
Experience losses arising on scheme liabilities
Changes in assumptions
Net gain/(loss) recognised
Movement in deficit during the year:
Deficit at beginning of year
Current service cost
Contributions paid
Curtailment gain
Net finance (cost)/income
Actuarial gain/(loss)
Deficit at end of year
History of experience gains/(losses):
2004
2003
7,717
(17,042)
–
(3,260)
(4,731)
(12,427)
A A
2,986
(32,729)
A A
2004
2003
(43,971)
(12,561)
(3,160)
(2,924)
4,052
979
(1,655)
3,958
–
285
2,986
(32,729)
A A
(40,769)
(43,971)
A A
2004
2003
Difference between expected and actual return on scheme
7,717
(17,042)
Percentage of scheme assets
Experience losses on scheme liabilities
Percentage of scheme liabilities
Total actuarial gain/(loss) recognised in the statement of total recognised
gains and losses
Percentage of scheme liabilities
13%
(37)%
–
–%
(3,260)
(4)%
2,986
(32,729)
3%
(36)%
72
Halma p.l.c. 2004
Notes on the Accounts continued
£000
H A L M A
25 Pensions continued
If the above amount were recognised in the Accounts, the Group’s net assets and profit and
loss account reserve would be as follows:
Net assets excluding pension liability
SSAP 24 pension prepayment
SSAP 24 accrual in respect of discontinued operations
Pension liability
Net assets including pension liability
2004
2003
167,360
163,446
(930)
(1,042)
1,557
–
(28,538)
(30,780)
A A
139,449
131,624
A A
Profit and loss account reserve excluding pension liability
122,730
120,337
SSAP 24 pension prepayment
SSAP 24 accrual in respect of discontinued operations
Pension liability
Profit and loss account reserve including pension liability
(930)
(1,042)
1,557
–
(28,538)
(30,780)
A A
94,819
88,515
A A
Other post retirement benefits liabilities are already fully included in net assets.
Halma p.l.c. 2004 73
H A L M A
Notice of Meeting
Notice is hereby given that the one hundred and tenth Annual General Meeting of
Halma p.l.c. will be held at The Ballroom, The Berkeley Hotel, Wilton Place, London
SW1X 7RL on Wednesday, 4 August 2004 at 12 noon for the following purposes:
Ordinary business
1
2
3
4
5
6
7
8
To approve the Report of the Directors, the audited part of the Report on
Remuneration and the Accounts for the period of 53 weeks to 3 April 2004.
To declare a dividend on the ordinary shares.
To re-elect as a Director Mr R A Stone* who retires from the Board by rotation
and being eligible offers himself for re-election.
To re-elect as a Director Mr K J Roy who retires from the Board by rotation and
being eligible offers himself for re-election.
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 S R Pettit** who was appointed in September 2003
and who retires in accordance with the Articles of Association.
To re-appoint Deloitte & Touche LLP 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:
9
That the Report on Remuneration as set out on pages 40 to 45 of the Report and
Accounts for the 53 weeks to 3 April 2004 be approved.
To consider, and if thought fit, pass the following special resolutions:
10 That the draft Articles of Association as set out in the document produced to the
meeting and, for the purposes of identification, signed by the Chairman, be and
are hereby adopted as the new Articles of Association of the Company.
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 £1,835,000,
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. 2004
Notice of Meeting continued
H A L M A
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) 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;
(b) 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
(c) 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 personalised 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
Misbourne Court Rectory Way Amersham Bucks HP7 0DE
5 July 2004
Secretary
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 4 August 2004 and at The Berkeley Hotel from 11:45 am on the day of the
meeting until the close of the meeting.
In addition, in accordance with the Listing Rules, copies of the draft Articles of
Association referred to in resolution 10 are available for inspection at the offices of
CMS Cameron McKenna, Mitre House, 160 Aldersgate Street, London EC1A 4DD
from the date of the above notice until the close of the meeting and will also be
available for inspection at the Berkeley Hotel 15 minutes prior to and during 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 Remuneration and Audit Committees of the
Board
Halma p.l.c. 2004 75
H A L M A
Summary 1995 to 2004
A
94/95
95/96
96/97
97/98
98/99
99/00
Turnover
153,739
173,652
200,140
213,777
217,758
233,485
A
Overseas sales
90,045
104,432
119,235
126,863
134,189
150,727
A
Profit before taxation,
goodwill amortisation and
exceptional items
29,234
33,619
37,076
42,391
41,823
43,751
A
A
A
Net tangible assets
63,833
77,650
81,209
98,249
102,101
89,755
A
Borrowings
7,096
8,350
3,763
2,784
7,730
14,700
A
Cash and short-term deposits
19,759
27,459
13,447
22,639
29,894
21,900
A
Employees
2,226
2,384
2,677
2,861
2,827
2,975
A
A
A
Earnings per ordinary share
(Note 1)
5.59p
6.44p
7.01p
6.87p
7.91p
6.08p
A
Earnings per ordinary share
before goodwill amortisation
and exceptional items (Note 1)
5.59p
6.44p
7.01p
8.26p
7.99p
8.41p
A
Year on year increase/(decrease)
in earnings per ordinary share
before goodwill amortisation and
exceptional items
16.7%
15.2%
8.9%
17.8% (3.3)%
5.3%
A
Net tangible assets per ordinary
share (Note 1)
17.9p
21.7p
22.5p
27.1p
28.2p
24.9p
A
Year on year increase/(decrease)
in net tangible assets per ordinary
share
14.7%
21.2%
3.7%
20.4%
4.1% (11.7%)
A
Return on sales (Note 2)
19.0%
19.4%
18.5%
19.8%
19.2%
18.7%
A
Return on capital employed
(Note 3)
45.8%
43.3%
45.7%
43.1%
41.0%
48.7%
A
Year on year increase in dividends
per ordinary share
20%
20%
20%
20%
20%
20%
A
Ordinary share price at financial
year end (Note 1)
113p
138p
134p
124p
92p
95p
A
Market capitalisation at financial
year end
£401.5m £492.1m £479.2m £447.3m £330.6m £340.1m
A
Notes:
1. Restated for the capitalisation issues made in 1995 and 1997.
2. Return on sales is defined as profit before taxation, goodwill amortisation and exceptional items as a % of turnover.
3. Return on capital employed is defined as profit before taxation, goodwill amortisation and exceptional items expressed as a % of net tangible
assets (being equity shareholders’ funds less intangible assets).
4. Figures prior to 2000/01 have not been restated for the adoption of FRS 19.
76
Halma p.l.c. 2004
£000
H A L M A
00/01
01/02
02/03
03/04
A
268,322
267,597
267,293
292,640
A
181,831
183,259
188,161
206,102
A
49,698
48,255
46,508
50,284
A
A
A
99,991
117,515
86,854
95,935
A
7,758
15,047
27,667
26,934
A
21,484
45,657
27,574
48,482
A
3,059
2,859
2,793
2,925
A
A
A
Earnings per share
(before goodwill amortisation
and exceptional items)
10p
6p
2p
0p
95
98
01
04
8.91p
8.58p
7.76p
6.09p
Overseas sales
A
£250m
£150m
£50m
£0m
9.34p
9.10p
8.55p
9.44p
A
11.1%
(2.6%)
(6.0%)
10.4%
A
27.7p
32.2p
23.8p
26.2p
A
11.2%
16.2% (26.1%)
10.1%
A
18.5%
18.0%
17.4%
17.2%
A
49.7%
41.1%
53.5%
52.4%
A
95
98
01
04
15%
15%
10%
7%
A
Net tangible assets
per share
129p
164p
114p
149p
A
£465.7m £598.2m £416.7m £546.5m
A
35p
25p
15p
5p
0p
95
98
01
04
Halma p.l.c. 2004 77
Halma Group Directory
Main products
A
Air Products and Controls Inc.
Duct detectors and control relays for smoke control systems
A
Apollo Fire Detectors Limited
Smoke and heat detectors for commercial fire alarm systems
A
Apollo Gesellschaft fu¨r Meldetechnologie mbH
Smoke and heat detectors for commercial fire alarm systems
A
Aquionics Inc.
Ultraviolet light equipment for water sterilisation
A
B.E.A. Inc.
Sensors for automatic doors
A
Berson Milieutechniek B.V.
Ultraviolet light equipment for treating waste water and process water used in the
manufacture of food and drinks
A
Bio-Chem Valve Inc.
Miniature valves, micro pumps and fluid components for medical, life science and scientific
instruments
A
Bureau D’Electronique Applique´e S.A.
Sensors for automatic doors
A
Castell Safety International Limited
Safety systems for controlling the use of and access to dangerous machines
A
Cressall Resistors Limited
High power electrical resistors
A
Crowcon Detection Instruments Limited
Gas detection instruments for personnel and plant safety
A
Diba Industries, Inc.
Specialist components and complete fluid transfer subassemblies for medical, life science and
scientific instruments
A
Electronic Micro Systems Inc.
Elevator controls and emergency communication systems
A
Elfab Limited
Pressure sensitive relief devices to protect process plant
A
E-Motive Display Pte Limited
Electronic displays for providing information to elevator passengers
A
Fire Fighting Enterprises Limited
Beam smoke detectors and specialist fire extinguishing systems
A
Fortress Interlocks Limited
Safety systems for controlling access to dangerous machines
A
Fortress Systems Pty. Limited
Machinery and process safety systems and high power electrical resistors
A
Halma Holdings Inc.
American holding company
A
Hanovia Limited
Ultraviolet light equipment for treating drinking water and water used in the manufacture
of food, drinks, pharmaceuticals and electronic components
A
HF Se´curite´ S.A.S.
Safety systems and high security locks
A
Hydreka S.A.S.
Equipment and software for flow analysis of water and sewerage systems and leak
detection systems
A
IPC Power Resistors Inc.
High power electrical resistors
A
IPC Resistors Inc.
High power electrical resistors and ground fault detection equipment
A
Janus Elevator Products Inc.
Infrared safety systems for elevator doors and elevator electronic displays
A
Keeler Limited
Ophthalmic instruments for diagnostic assessment of eye conditions
A
Klaxon Signals Limited
Audio/visual warning systems for industrial security
A
Marathon Sensors Inc.
Sensors and instruments for combustion control and heat treatment processes
A
Memco Limited
Infrared safety systems for elevator doors and elevator emergency communications
A
Monitor Controls Inc.
Elevator signal fixtures
A
Mosebach Manufacturing Company
High power electrical resistors
A
Ocean Optics, Inc.
Miniature fibre optic spectrometers for consumer electronics, process control, environmental
monitoring, life sciences and medical diagnostics
A
Oklahoma Safety Equipment Co. Inc.
Pressure sensitive relief devices to protect process plant
A
Palintest Limited
Instruments for analysing water and measuring environmental pollution
A
Palmer Environmental Limited
Instrumentation for quantifying, detecting and controlling leakage in underground water
pipelines
A
Perma Pure LLC
Gas dryers and humidifiers for fuel cell, medical, scientific and industrial use
A
Post Glover Resistors Inc.
High power electrical resistors
A
Post Glover Lifelink
Electrical isolation panels and electrical raceways for hospital, laboratory and
industrial facilities
A
Radcom (Technologies) Limited
Instrumentation for recording data, and detecting and controlling leakage, in water
distribution pipelines
A
SEAC Limited
Specialist fasteners for the building trade
A
Secomak Limited
Industrial heaters, fans, drying systems, heat tunnels, loudspeakers and microphones
A
S.E.R.V. Trayvou Interverrouillage S.A.S.
Safety systems for controlling access to dangerous machines
A
Smith Flow Control Limited
Process safety systems for petrochemical and industrial applications
A
TL Jones Limited
Infrared safety systems for elevator doors
A
Volk Optical Inc.
Ophthalmic lenses as aids to diagnosis and surgery
A
Volumatic Limited
Cash security and handling from point-of-sale to cash office
A
78
Halma p.l.c. 2004
www.halma.com visit the Halma website and register for e-mail news alerts
Location
Contact
Telephone
E-mail
Website
A
Pontiac, Michigan
Jim Ludwig
+1 (1)248 332 3900
info@ap-c.com
www.ap-c.cc
A
Havant, Hampshire
Michael Hamilton +44 (0)23 9249 2412
enquiries@apollo-fire.co.uk
www.apollo-fire.co.uk
A
Gu¨tersloh, Germany
Falk Blo¨dorn
+49 (0)524 133060
info@apollo-feuer.de
www.apollo-feuer.de
A
Erlanger, Kentucky
John Murta
+1 (1)859 341 0710
sales@aquionics.com
www.aquionics.com
A
Pittsburgh, Pennsylvania
Patrick Mercier
+1 (1)412 249 4100
sales@beainc.com
www.beainc.com
A
Eindhoven, The Netherlands
Sjors van Gaalen
+31 (0)40 290 7777
sales@bersonuv.com
www.bersonuv.com
A
Boonton, New Jersey
George Gaydos
+1 (1)973 263 3001
info@bio-chemvalve.com
www.bio-chemvalve.com
A
Lie`ge, Belgium
Philipe van Genechten +32 (0)4361 6565
info@bea.be
www.beasensors.com
A
Kingsbury, London
David Milner
+44 (0)20 8200 1200
sales@castell.co.uk
www.castell.com
A
Leicester
David Boughey
+44 (0)116 273 3633
info@cressall.com
www.cressall.com
A
Abingdon, Oxfordshire
Allan Stamper
+44 (0)1235 553057
crowcon@crowcon.com
www.crowcon.com
A
Danbury, Connecticut
Jack Olich
+1(1)203 744 0773
salesdept@dibaind.com
www.dibaind.com
A
Hauppauge, New York
Mike Ryan
+1 (1)631 864 4742
sales@emscomm.com
www.emscomm.com
A
North Shields, Tyne & Wear
Simon Keenan
+44 (0)191 293 1234
sales@elfab.com
www.elfab.com
A
Singapore
Steven Black
+65 6776 4111
sales@emotive.com.sg
www.emotive.com.sg
A
Stevenage, Hertfordshire
Warren Rees
+44 (0)1438 317216
info@ffeuk.com
www.ffeuk.com
A
Wolverhampton, West Midlands Mike Golding
+44 (0)1902 499600
sales@fortress-interlocks.co.uk www.fortress-interlocks.co.uk
A
Melbourne, Australia
David Atkin
+61 (0)3 9587 4099
fortress@fortress.com.au
www.fortress.com.au
A
Cincinnati, Ohio
Steve Sowell
+1 (1)513 772 5501 halmaholdings@halmaholdings.com
www.halmaholdings.com
A
Slough, Berkshire
Jon McClean
+44 (0)1753 515300
sales@hanovia.com
www.hanovia.com
A
Cluses, France
Ge´rard Denis
+33 (0)4 50 98 96 71
hfsecurite@hfsecurite.com
www.hfsecurite.com
A
Lyon, France
Alain Soulie´
+33 (0)4 72 53 11 53
hydreka@hydreka.fr
www.hydreka.com
A
Erlanger, Kentucky
Richard Field
+1 (1)859 282 2900
eng@ipcresistors.com
www.ipcresistors.com
A
Toronto, Canada
Andy Cochran
+1 (1)905 673 1553
info@ipc-resistors.com
www.ipc-resistors.com
A
Hauppauge, New York
Mike Byrne
+1 (1)631 864 3699
sales@januselevator.com
www.januselevator.com
A
Windsor, Berkshire
Mark Lavelle
+44 (0)1753 857177
info@keeler.co.uk
www.keeler.co.uk
A
Oldham, Lancashire
Barry Coughlan
+44 (0)161 287 5555
sales@klaxonsignals.com
www.klaxonsignals.com
A
Cincinnati, Ohio
Eric Boltz
+1 (1)513 772 1000
sales@marathonsensors.com
www.marathonsensors.com
A
Maidenhead, Berkshire
Peter Bailey
+44 (0)1628 770734
sales@memco.co.uk
www.memco.co.uk
A
Hauppauge, New York
John Farella
+1 (1)631 543 4334
sales@mcontrols.com
www.mcontrols.com
A
Pittsburgh, Pennsylvania
Gordon Denny
+1 (1)412 220 0200
info@mosebachresistors.com www.mosebachresistors.com
A
Dunedin, Florida
Mike Morris
+1(1)727 733 2447
info@oceanoptics.com
www.oceanoptics.com
A
Broken Arrow, Oklahoma
Joe Ragosta
+1 (1)918 258 5626
info@oseco.com
www.oseco.com
A
Gateshead, Tyne & Wear
John Lever
+44 (0)191 491 0808
palintest@palintest.com
www.palintest.com
A
Cwmbran, South Wales
Neil Summers
+44 (0)1633 489479
sales@palmer.co.uk
www.palmer.co.uk
A
Toms River, New Jersey
David Leighty
+1 (1)732 244 0010
info@permapure.com
www.permapure.com
A
Erlanger, Kentucky
John Whincup
+1 (1)859 283 0778
sales@postglover.com
www.postglover.com
A
Erlanger, Kentucky
Judy Kathman
+1(1)859 283 5900
sales@postgloverlifelink.com
www.postgloverlifelink.com
A
Romsey, Hampshire
Mick Merrick
+44 (0)1794 528 700
sales@radcom.co.uk
www.radcom.co.uk
A
Leicester
David Buckley
+44 (0)116 273 9501
enquiries@seac.uk.com
www.seac.uk.com
A
Stanmore, Middlesex
Ian Roffe
+44 (0)20 8952 5566
sales@secomak.com
www.secomak.com
A
Paris, France
Ste´phane Majerus +33 (0)1 48 18 15 15
enquiries@servtrayvou.com
www.servtrayvou.com
A
Witham, Essex
Mike D’Anzieri
+44 (0)1376 517901
sales@smithflowcontrol
www.smithflowcontrol.com
A
Christchurch, New Zealand
Chris Stoelhorst
+64 (0)3 349 4456
info@tljonesltd.com
www.tljonesltd.com
A
Mentor, Ohio
Pete Mastores
+1 (1)440 942 6161
volk@volk.com
www.volk.com
A
Coventry, West Midlands
Paul Bonne´
+44 (0)247 668 4217
info@volumatic.com
www.volumatic.com
A
Halma p.l.c. 2004 79
Pillans & Waddies, Edinburgh. 76306
H A L M A
A n n u a l R e p o r t
& A c c o u n t s 2 0 0 4
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4
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