RNS Number : 4050J

Halma PLC

12 June 2014

HALMA plc

PRELIMINARY STATEMENT FOR THE 52 WEEKS TO 29 MARCH 2014

12 JUNE 2014

Record results and continued dividend growth

Halma, the leading safety, health and environmental technology group, today announces its preliminary statement for the 52 weeks to 29 March 2014.

Financial Highlights
	2014	2013 restated⁶	Change
Continuing Operations:
Revenue	£676.5m	£619.2m	+9%
Adjusted Profit before Taxation¹	£140.2m	£128.5m	+9%
Statutory Profit before Taxation	£138.7m	£120.1m	+15%

Adjusted Earnings per Share²	28.47p	25.79p	+10%
Statutory Earnings per Share	28.14p	24.79p	+14%
Total Dividend per Share³	11.17p	10.43p	+7%

Return on Sales⁴	20.7%	20.8%
Return on Total Invested Capital⁵	16.1%	15.6%
Return on Capital Employed⁵	76.4%	70.7%

●	Growth in continuing operations: revenue up 9%, adjusted¹ pre-tax profit up 9%. Organic growth⁵ at constant currency: revenue up 6%, profit up 5%.
●	7% increase in total dividend; 35th consecutive year of dividend increases of 5% or more.
●	Widespread revenue growth: Asia Pacific up 11% including China up 26%, USA up 10%, Europe up 8% and UK up 11%. Organic growth in all regions.
●	Revenue and profit growth in all four sectors. Strong growth in Medical supported by prior year acquisitions. Good progress in Process Safety and Infrastructure Safety. Environmental & Analysis showing improved performance, final phase of restructuring on track. Organic constant currency revenue and profit growth in all sectors.
●	Acquisition pipeline remains healthy. Three acquisitions and one disposal completed since year end for a net cost of £78m, in addition to one acquisition in April 2013.
●	Strong cashflow and significant financial capacity for investment in organic growth and value adding acquisitions. Net debt of £74.5m at year end (2013: £110.3m) and increased borrowing facilities of £360m extended until 2018.
●	Simplified management structure in place, capable of scaling up Halma's business model while maintaining our unique operating culture.

Andrew Williams, Chief Executive of Halma, commented:

"Halma has performed strongly, achieving record revenue and profit for the eleventh consecutive year. We achieved revenue and profit growth in all four of our business sectors and in all four major geographic regions even though market conditions were variable.

"We expect this varied trading environment to continue, providing both opportunities and challenges including a currency headwind resulting from the increased strength of Sterling. Our ongoing investment in new products, people development and international expansion will continue to open up new market niches and applications for our businesses. Our proven ability to achieve organic growth and regularly complete good quality acquisitions gives us confidence that Halma will make further progress in the year ahead."

Notes:
1	Adjusted to remove the amortisation of acquired intangible assets, acquisition items, the effects of closure to future benefit accrual of the Defined Benefit pension plans (net of associated costs), and profit or loss on disposal of operations totalling £1.6m (2013: £8.4m). See Note 2 to the Preliminary Statement.
2	Adjusted to remove the amortisation of acquired intangible assets, acquisition items, the effects of closure to future benefit accrual of the Defined Benefit pension plans (net of associated costs), profit or loss on disposal of operations and the associated tax thereon. See Note 6 to the Preliminary Statement.
3	Total dividend paid and proposed per share.
4	Return on Sales is defined as adjusted¹ profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations.
5	Organic growth rates, Return on Total Invested Capital and Return on Capital Employed are non-GAAP performance measures used by management in measuring the returns achieved from the Group's asset base. See Note 11 to the Preliminary Statement.
6	The Group adopted IAS 19 (revised) in 2013/14, which changed the accounting for Defined Benefit pension plans. The prior year has been restated resulting in a £2.1m reduction in its adjusted profit. The consequent change to the prior year's earnings per share² is shown in Note 6 to the Preliminary Statement. Results prior to 2012/13 have not been restated.

For further information, please contact:

Halma plc

Andrew Williams, Chief Executive

Kevin Thompson, Finance Director

+44 (0)1494 721111

MHP Communications
Rachel Hirst/Andrew Jaques

+44 (0)20 3128 8100

A copy of this announcement, together with other information about Halma, may be viewed on its website: www.halma.com.

NOTE TO EDITORS

Halma develops and markets products used worldwide to protect life and improve the quality of life. The Group comprises four business sectors:

	● Process Safety	Products which protect assets and people at work.
	● Infrastructure Safety	Products which detect hazards to protect assets and people in public spaces and commercial buildings.
	● Medical	Products used to improve personal and public health.
	● Environmental & Analysis	Products and technologies for analysis in safety, life sciences and environmental markets.

	The key characteristics of Halma's businesses are that they are based on specialist technology and application knowledge, offering strong growth potential. Many Group businesses are market leaders in their specialist field.
2.	High resolution photos of Halma senior management, including Chief Executive Andrew Williams, and images illustrating Halma business activities can be downloaded from its website: www.halma.com. Click on the 'News & Media' link, then 'Image Library'. Photo queries: David Waller +44 (0)1494 721111, e-mail: dwaller@halmapr.com.
3.	You can view or download copies of this announcement and the latest Half Year and Annual Reports from the website at www.halma.com or request free printed copies by contacting halma@halma.com.
4.	A copy of the Annual Report and Accounts will be made available to shareholders on 24 June 2014 either by post or online at www.halma.com and will be available to the general public online or on written request to the Company's registered office at Misbourne Court, Rectory Way, Amersham, Bucks HP7 0DE, UK.
5.	This announcement contains certain forward-looking statements which have been made by the Directors in good faith using information available up until the date they approved the announcement. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events.

Chairman's Statement

"…a strong dedication to the business model with a large reliance on the autonomy of the operations."

When I was first approached about the opportunity to chair Halma, I have to admit that I knew very little about the Company. That in itself tells you something about the business, as Halma has always been somewhat understated, relying on the natural evolution of its business fundamentals to grow. Halma's ambitions to grow are clearly communicated in its engagement with the investment community. There are no hidden principles guiding the Group, just a strong dedication to the business model with a large reliance on the autonomy of the operations. This approach is rewarded with shareholders who share the same values as Halma and who reinforce our dedication to our business model through their longer-term investment. Therefore in this, my first report as your Chairman, I am delighted to report another strong performance by Halma achieving record revenue and profit for the eleventh consecutive year.

Structured for sustainable growth
During this last year the Board spent time discussing how the business should be organised to maximise the growth opportunities in our marketplaces. We considered the breadth of management control across the Group and concluded that the time had come to align our Executive Board with the four market sectors that we are engaged in. We continue to believe that it is important to maintain the flat management structure that has played a large part in underpinning the operational excellence and control of the Group for many years. Halma's growth in recent years has demonstrated that it is possible to replicate the Group's traditional management structure within each sector - after all, our sectors are now roughly the size that Halma was just 10 years ago!

Structuring management and the businesses in this way will broaden our M&A search activity as well as making Halma a more transparent prospect for the owners and management of potential acquisition opportunities. The ability to identify suitable acquisitions is an important part of our long-term business model. I am satisfied that we have maintained, and indeed enhanced, what makes Halma an attractive home for successful businesses.

These changes also mean that additional internal collaboration opportunities are more likely to be pursued. I plan to report on the additional 'added value' from internal collaboration in next year's annual report.

During the year we created the new role of Group Talent Director reporting to Andrew Williams and with a position on the Executive Board. This will improve the Company's ability to identify talent both internally and externally, ensuring that we have strong teams in all of our businesses coupled with an effective management succession planning culture. I am delighted to welcome Jennifer Ward to Halma who was appointed to this role in March 2014.

Governance
As Chairman of Halma, I am tasked with ensuring that the Board maintains a focused and disciplined approach to governance and I am delighted to say that the task is made easier by the leadership evidenced at all levels of the Group. In saying that, I do acknowledge that we need to improve on our diversity objectives across all of our businesses in the Group and that this will continue to be a focus for both the plc and Executive Boards.

Due to recent changes in their business commitments, Lord Blackwell and Steve Marshall will not be seeking re-election to the Board at the forthcoming AGM. I would like to thank them both for the significant contribution they have made to the Halma Board and also the support that they have provided to me in my first year as Chair.

I am delighted to announce that Roy Twite will be joining the Board following the conclusion of the AGM on 24 July 2014. Roy is an executive director at IMI plc and brings very relevant engineering experience to the Halma Board. Stephen Pettit has agreed to the Board's request to remain on the Halma Board up until the 2015 annual general meeting. The Board is in the process of seeking to identify an additional non-executive Director.

Further information on Corporate Governance is set out in the Annual Report and Accounts.

Acquisitions and disposal
The Group concluded only one acquisition this year after acquiring six businesses in the previous year on which we spent £137m. Our acquisition pipeline remains good. The three acquisitions concluded after our financial year end demonstrate that we cannot predict when our efforts will come to fruition although this also gives me comfort that the disciplines and due diligence surrounding acquisitions are not unduly accelerated, but fully performed and considered. As a Board, we evaluate each investment opportunity on its merits and ensure that each is the right use of our financial resources.

Pensions
During the year, the Board authorised the cessation of future benefit accrual in the two remaining UK Defined Benefit pension plans in operation in the Group. Whilst this provides the Company with a less volatile financial impact in the years ahead, I wanted to let each of the long-serving Group employees affected by this change know that this was not an easy decision to reach. The Board considered the volatility of pension funding and accounting alongside market practice outside Halma, harmonisation of Group benefits and upcoming changes to National Insurance contributions. We concluded that discontinuance of this benefit, balanced with transitional measures, was in the best interests of shareholders.

Performance and dividend
I would like to thank Andrew Williams, the Executive Board and each of Halma's employees around the world; each has played their part this year in delivering value for shareholders in another chapter in the story of Halma.

I am pleased to report that revenue for the year increased by 9% to £677m with adjusted¹ profit before tax increasing by 9% to £140m. In a year in which there were fewer acquisitions, this is a commendable performance.

The Board's confidence in the Group is reflected in us recommending a final dividend of 6.82p per share giving a total dividend for the year of 11.17p, an increase of 7%. The final dividend is subject to approval by shareholders at the AGM on 24 July 2014 and will be paid on 20 August 2014 to shareholders on the register at 18 July 2014. This marks the 35^th consecutive year of dividend increases of 5% or more.

Summary
2014 has been another successful year for Halma with solid organic growth and positive contributions from recent acquisitions helping to achieve record results for the eleventh successive year. The restructuring of our Executive Board, aligning it more closely with our four sectors, will give us a clearer market focus. I believe this will continue to help us to achieve our longer-term strategic objectives as well as continuing to drive organic growth in the business.

Paul Walker, Chairman

¹ See Financial Highlights.

Strategic Review

Record revenue and profit growth

Halma has performed strongly, achieving record revenue and profit for the eleventh consecutive year. We achieved revenue and profit growth in all four of our business sectors demonstrating the benefit of sustained investment in new product innovation and people development. We increased revenue in all major geographic regions, rewarding our commitment to increasing resources in developing countries and reflecting the opportunities for growth in developed markets.

The consistency of Halma's strong performance over a long period is the product of a good strategy together with the creativity, commitment and talent of Halma's employees. Once again, I would like to thank them for their contributions to our continued success.

Good organic revenue and profit growth

Revenue from continuing operations increased by 9% to £676.5m (2013: £619.2m). Organic revenue growth was 6% and also 6% at constant currency. Adjusted¹ profit from continuing operations increased by 9% to £140.2m (2013 restated¹: £128.5m). Organic profit growth was 6% and 5% at constant currency.

There were similar rates of organic revenue growth at constant currency in the first-half and second-half years. Profit growth was stronger in the second half as some 'one-off' reorganisation and quality costs in the first half were not repeated. Product margins remained steady throughout the year reflecting good control of both pricing and manufacturing costs.

High returns and strong cash generation

High returns were maintained with Return on Sales of 20.7% (2013 restated¹: 20.8%) and Return on Capital Employed at the operating level increased to 76% (2013 restated¹: 71%). Return on Total Invested Capital (post-tax) rose to 16.1% (2013 restated¹: 15.6%).

Strong cash generation ensured we ended the period with net debt of £74m (2013: £110m) after spending £17m on capital expenditure, £17m on acquisitions (2013: £148m of which £137m was for businesses acquired in the year) and paying out £40m and £28m on dividends and tax respectively. In November 2013, we increased and extended our revolving credit facilities up to £360m until November 2018 and we are in an excellent financial position to support our future growth.

Growth in all major geographic regions

Widespread growth in all major geographic regions once again showed Halma's ability to succeed amid a range of local economic conditions. This reflects both the benefit to us of the diversity of our end markets and also the agility of our operating structure. Each subsidiary company is able to adjust investment priorities quickly as market conditions vary. We have seen the value of this, particularly during recent years when macro-economic circumstances have been changeable.

Revenue from our largest market, the USA, grew by 10% to £214m (2013: £195m) including organic growth at constant currency of 6%. UK revenue improved by 11% to £128m (2013: £116m) while Mainland Europe revenue was up by 8% to £164m (2013: £152m). Constant currency organic revenue growth in these regions was 6% and 5% respectively. Therefore, total revenue from these three developed markets grew by a very healthy 9%, including 6% organic growth at constant currency.

We maintained strong growth in China: revenue was up by 26% to £47m (2013: £37m), which is 7% of the Group. This included a successful first full year for Longer Pump, our first stand-alone acquisition in China. This excellent performance in China contributed to revenue from Asia Pacific increasing by 11% to £112m, including 7% organic growth at constant currency.

Organic revenue and profit growth in all sectors

Process Safety grew revenue by 1% to £126.7m (2013: £125.7m) and profit² by 8% to £34.9m (2013: £32.3m). Excluding the contribution of Tritech, which was sold in August 2012, revenue increased by 5% and profit by 11%. These were also the sector's organic growth rates.

Return on Sales improved from 25.7% to 27.5% due to continued strong product margins and good operational management. New product introductions contributed to both this margin expansion and to revenue growth through diversification into new application niches. Examples included new pressure relief devices for shale gas production and a wide-area gas detection system which incorporates wireless technology developed by one of our Infrastructure Safety businesses. This combination of focused product innovation and a continued increase in Health & Safety regulation globally is delivering sustained success for our Process Safety sector.

Excluding the prior year disposal, there was growth in all major geographic regions except the UK, where revenue declined by 1%. There was double-digit growth from the USA (up 13%) and Asia Pacific (up 12%). Mainland Europe revenue increased by 1%. The sector hub established in Brazil in 2013 is now firmly established and promises to boost Process Safety revenue from this territory in the future.

Infrastructure Safety performed strongly, growing both revenue and profit² by 7% to £220.3m (2013: £205.3m) and £44.4m (2013 restated: £41.5m) respectively. At constant currency, organic revenue growth was 6% and profit growth was 5% demonstrating the resilience of demand for our products which is underpinned by increasing Health & Safety regulation.

Return on Sales remained strong at 20.2% (2013 restated: 20.2%) due to successful new product launches and an effective balance between investment and cost control to maintain strong product margins. We continue to achieve good growth for our wireless smoke detectors into the home automation market in the USA, while a new safety sensor for automatic swing doors is increasing our market share with global pedestrian door OEMs.

Revenue increased in all major geographic regions, including 12% growth in Mainland Europe. Healthy mid-single digit growth in the UK, USA and Asia Pacific reflected the global reach of our products, whether selling into major multinational OEMs or through local distribution partners. Our strategy of increasing investment in locally based sales and technical resources continues to pay dividends.

Our Medical sector grew revenue by 20% to £163.2m (2013: £136.1m) and profit² by 16% to £41.8m (2013: £35.9m), including a sizeable contribution from acquisitions completed in the prior financial year. Organic revenue growth at constant currency was 7% and organic profit growth was 1%.

Return on Sales remained strong at 25.6%, albeit slightly below last year's record 26.4%. A combination of minor factors contributed to this, including the full-year effect of the new medical device tax in the USA and the acquisitions made in the prior year having lower returns than the sector average. Typically, we increase investment in newly acquired businesses during the first couple of years of ownership to build management strength, international sales resources and new product development capability. In the medium term, this not only increases revenue, but also drives up profitability.

There was strong revenue growth in all geographic regions. Asia Pacific growth of 52% benefited from a good first year's performance from Longer Pump in China and strong organic growth of 22% (constant currency). Our focus on new medical product registrations is slowly paying dividends and is enabling us to build stronger market positions in key developing territories in Asia and South America. Elsewhere, organic revenue growth (constant currency) from the UK was up 8%, Mainland Europe grew by 6% and the USA increased 3%.

Environmental & Analysis achieved a pleasing full-year performance after a disappointing prior year and some reorganisation in the first half. Revenue increased by 9% to £166.5m (2013: £152.4m) and profit² grew by 4% to £31.7m (2013: £30.4m). At constant currency, organic revenue growth was 5% and profit was up 2%.

Return on Sales was 19.1% (2013: 19.9%) which represented a useful improvement from 18.2% at the end of the first half. The consolidation of our two optical coating business facilities has gone to plan with a newly expanded facility now operational in Florida and product lines being transferred from Colorado. In addition, our main photonics business, Ocean Optics, has spun-off a new Halma subsidiary in China while our water UV companies have restructured their distribution channels in the USA. The total cost of these restructuring projects was below £1m in the year.

Revenue grew by 53% in the UK, dominated by large sales of flow/pressure data loggers to UK water utilities as part of their preparation for the deregulation of the UK commercial water market in 2017. There was mid-single digit growth in Mainland Europe and the USA whilst revenue from Asia Pacific declined by 5% as major contracts for certain water and photonics businesses last year came to an end. Restructuring completed during the year and additional senior management changes made shortly after year end should improve the consistency of this sector's performance in the medium term.

Executive Board changes enhance the scalability of Halma's business model

In April 2014, Halma's Executive Board was reorganised to be more clearly aligned with our four reporting sectors and provide a management structure which gives each sector the potential to become as large as the whole of Halma today. Each of our four sectors is now led by a Sector Chief Executive (SCE), each of whom has already proven successful in delivering both organic and acquisition growth as a Halma Divisional Chief Executive (DCE). As each sector grows, the SCEs will appoint Sector Vice Presidents to chair small groups of companies in much the same way as Halma DCEs did successfully for many years in the past.

Halma's long track record of success is built on careful selection of markets and product niches complemented by an unstinting commitment to improve the quality of management. This need to have a strong talent pipeline to support future growth is an ever-increasing challenge and, with that in mind, we recruited Jennifer Ward to the Halma Executive Board as Group Talent Director. Jennifer will lead the development of a more rigorous approach to identifying, assessing, developing and attracting diverse management talent working in a partnership with the SCEs.

This new management structure will result in clearer growth strategies for each sector, clarifying the investment, collaboration and acquisition priorities. As Group CEO, I will maintain a close relationship with both the SCEs and our individual operating subsidiaries through their regular reporting, meetings and my ongoing programme of company visits. I am confident that we have a management structure which is capable of scaling up Halma's successful business model over the next decade (or more) while maintaining our unique operating culture.

Three acquisitions completed recently; pipeline is good

Following a very busy 2012/13, when Halma spent £137m on six businesses (excluding net cash acquired of £5m), we completed one acquisition this financial year. Talentum, a flame detector manufacturer, was acquired by our Infrastructure Safety sector in April 2013 for £3m (excluding net cash acquired).

Despite a quiet year, we remain confident about acquisition prospects, having come close to completing a number of additional deals during the year. Although the current M&A market is more competitive than it has been for the past few years, we are still finding high quality companies in good markets at sensible prices. To support this confidence, we have completed three acquisitions since the period end:

- Plasticspritzerei AG was acquired in May 2014 for a net cash consideration of CHF4.8m (£3.2m). Plasticspritzerei manufactures plastic components including critical parts for Medicel's ophthalmic products and joins our Medical sector.

- Advanced Electronics Limited (Advanced) was acquired in May 2014 for an initial cash consideration of £14.1m. Advanced manufactures networked fire detection and control systems and joins our Infrastructure Safety sector.

- Rohrback Cosasco Systems Inc. (RCS) was acquired in May 2014 for a cash consideration of $108m (£64.7m) excluding cash acquired. RCS is a world leader in the design, manufacture and sale of pipeline corrosion monitoring products and systems and is a strong addition to our Process Safety sector.

We made one disposal following the year end, selling our US-based elevator control panel manufacturing business, Monitor Elevator Products Inc., to another industry player, Innovation Industries for $6m (£3.6m). Halma will record a gain before tax of approximately £1m on this transaction in 2014/15.

The net spend on the acquisitions and disposal in May 2014 was £78.4m.

Creating growth through strategic investment

Our strategy is to sustain consistent rates of organic growth by focusing on three areas of investment: innovation, people development and international expansion.

We are strongly cash generative and our medium-term organic growth rate determines our ability to fund the acquisition of new businesses and increase dividends each year. These cash resources are supplemented by income from disposals and external financing facilities, although our strategy is always to maintain a strong balance sheet with modest levels of debt. In the longer term, our ability to shift our portfolio mix also ensures that we can change our exposure to particular end markets as economic circumstances evolve.

Increased investment in innovation

Halma businesses build market leadership, gain market share and create opportunities in new markets through innovation of products and processes. This innovation comes from leveraging the deep market knowledge and application know-how residing within each Halma business.

There is a significant benefit to be gained from Halma companies collaborating and sharing know-how with their sister companies. We are building a culture which encourages these behaviours in a variety of ways including diverse company representation at Halma training programmes and holding a biennial Halma Innovation and Technology Exposition (HITE). Network groups focused on functional areas such as manufacturing, HR and IT also foster regular benchmarking and drive continuous improvement.

In May 2013, we held our third HITE event in Florida, USA. HITE brings together senior managers from all Halma companies and acts as a catalyst for collaboration and sharing know-how thereby increasing subsidiaries' rates of innovation and competitive advantage. Plans are already underway for HITE 2015 which will be held during April 2015 in Barcelona, Spain and, once again, we intend to invite institutional investors and analysts to join us.

Innovation is formally recognised in Halma through the annual Halma Innovation Award which includes a first prize of £20,000 for the winning employees.

The Halma Innovation Award 2014 was won by a collaboration between two of our US-based Environmental & Analysis sector businesses, Avo Photonics and Aquionics. Avo's expertise in electro-optics and Aquionics' knowledge of UV light disinfection of water were combined to develop PearlSenseT. This is the first product to use UV LED lamps instead of mercury-based lamps to monitor the effectiveness of UV disinfection systems in real-time. Compared to older technology, PearlSenseT offers customers a smaller device footprint, a more robust design, lower operating costs and, through the elimination of mercury, an environmentally friendly solution.

Both runners-up prizes were won by teams from Oseco, which manufactures pressure relief devices for safety-critical processes. Their winning innovations were a new pressure safety system for shale gas production and a high pressure, high temperature bursting disk used in chemical manufacturing. Both of these products provide a level of technical performance and reliability way beyond that achieved by the competition, creating two new market niches for Oseco's business.

During the year, R&D expenditure grew by 5% to £32.1m (2013: £30.5m excluding disposal). There was higher R&D investment in all sectors.

In April 2013, we introduced a programme to encourage our companies to increase R&D resources in China in order to develop more products for the local market. Subsequently, 10 Halma businesses have been granted a subsidy to support the cost of engineers in China and we expect the first new products to be launched in 2014. This is another good example of how being in Halma can accelerate the growth and development of individual businesses.

People development

A key component of Halma's success is to build and develop company management teams who thrive on the opportunity to devise their own growth strategy and take management action as market needs dictate. Each Halma company board manages their own R&D, manufacturing, sales, marketing and financial control resources.

Halma's Executive Board ensures that, collectively, the subsidiary companies' strategic plans, financial goals and incentive programmes are aligned with Halma's, supported by a relentless commitment to attract and develop high quality talent.

We continue to offer a range of training for employees including the Halma Executive Development Programmes (HEDP and HEDP+), Halma Management Development Programmes (HMDP and HMDP+) and Halma Certificate in Applied Technology (HCAT). All programme content is continuously reviewed and upgraded as the needs of our business evolve. During 2013/14, 104 employees attended these Halma run programmes and many more attended locally organised in-house training or externally run programmes. In recent years, Executive Board members have attended Advanced Management Programmes at Harvard, Wharton, INSEAD and IESE Business Schools.

The Halma Graduate Development Programme (HGDP) continues to go from strength to strength and our first intake of graduates are securing their first permanent jobs with Halma companies. Of the nine graduates who joined this first programme in 2012, seven are still with us and all have proved that they have the potential to make a significant contribution to Halma's future success. The HGDP 2013 group is also showing high potential and we are close to completing recruitment into the HGDP 2014 programme.

We believe that Halma is an attractive employer for new graduates, offering them the chance to work in different functional roles, diverse markets, gain international experience and demonstrate their potential for significant early career progression. We aim to use HGDP to increase the depth and quality of talent coming through our management ranks. We believe it will also contribute to increasing the diversity of our senior management at subsidiary company and Group levels.

International expansion contributing strongly to our growth

We choose to operate in niches within markets which have growth potential in both developed and developing markets. This global opportunity derives from targeting long-term market growth drivers which have worldwide significance. For example, demand for healthcare is driven by ageing population in developed regions and the broader social development and increasing personal healthcare expectations in developing countries.

When we buy businesses, they often have untapped potential for significant international expansion. Frequently, these opportunities are not limited to developing countries as many US-based businesses still need to build a stronger market position in Europe and vice versa. Wherever the growth opportunities are, Halma can provide expertise and an infrastructure to support our companies, either through regional Halma hub offices or collaboration with sister companies.

Our strategic objective is for 30% of revenue to come from outside the UK, Mainland Europe and the USA by 2015. Since setting this goal in 2010, revenue from outside these developed markets has increased from £98m (21% of Group) to £170m (25% of Group), which represents a compound growth rate of 15% p.a. Although this has contributed a third of all revenue growth during the four-year period, a combination of higher than anticipated growth in Europe and the USA and new acquisitions, has made achieving this strategic objective more challenging. However, we remain committed to investing in international expansion and will review our mid-term objectives once again in 2015.

Delivering corporate responsibility and sustainability

Our primary market growth drivers mean that Halma companies operate in markets in which their products contribute positively to the wider community. These market characteristics and our commitment to health and safety, the environment and people development are reflected in the values held by our employees and our operating culture. We regularly review our responsibility and sustainability reporting in accordance with best practice. Legislative changes, particularly concerning the environment and bribery and corruption, have provided an opportunity to review and ensure that our procedures in these important areas are accessible, compliant and firmly embedded within our business.

A detailed report on Corporate Responsibility is set out in the Annual Report and Accounts.

Outlook

We achieved growth in all four Halma business sectors and in all major geographic regions even though market conditions were variable. This widespread growth once again demonstrates the agility of our organisation and the benefit of senior management being close to customers and empowered to allocate resources according to market needs.

We expect this varied trading environment to continue, providing both opportunities and challenges including a currency headwind resulting from the increased strength of Sterling. Our ongoing investment in new products, people development and international expansion will also continue to open up new market niches and applications for our businesses. Our proven ability to achieve organic growth and regularly complete good quality acquisitions gives us confidence that Halma will make further progress in the year ahead.

Andrew Williams, Chief Executive

¹See Financial Highlights.
² See Note 2 to the Preliminary Statement.

Financial Review

Long-term model delivering widespread growth

This is another set of record results with widespread growth in all sectors and all regions. High returns were maintained and good cash generation supported the continuation of our long-term record of dividend increases. Halma's financial position remains strong.

Record results

Halma has increased revenue in 38 of the last 40 years. This year we increased revenue by 9.3% to £676.5m (2013: £619.2m), up £57.3m. Our long-term objective is to achieve a balance between acquired and organic growth. It was weighted a little more to organic growth in this year. There was minimal net currency translation effect on the results. Acquisition growth came mainly from acquisitions made in 2012/13. Organic revenue growth at constant currency was 5.7%.

This is the eleventh consecutive year of record results. Adjusted¹ profit increased by 9.1% to £140.2m (2013 restated³: £128.5m). Again there was minimal net currency impact. Organic profit growth at constant currency was 5.3%.

Statutory profit before taxation increased by 15% to £138.7m (2013 restated³: £120.1m). Statutory profit is calculated after charging the amortisation of acquired intangible assets of £17.5m (2013: £14.2m), disposal costs of £0.5m (2013: £8.1m gain on sale of Tritech) and after crediting acquisition transaction items and movements on acquisition contingent consideration including related foreign exchange movements of £12.5m (2013: charge of £2.3m). In addition statutory profit includes a curtailment gain, net of costs, of £4.0m recorded following the decision to close the two UK Defined Benefit pension plans to future accrual from 1 December 2014. Further information on movements in acquisition contingent consideration and changes to pension plans is provided later on.

Revenue growth was 12% in the first half and 7% in the second half, with the first half benefiting more from acquisitions made later in the prior year. Organic revenue growth at constant currency was similar in both periods. Adjusted¹ profit grew by 9% in the second half, as in the first half, giving a first half/second half profit split of 46%/54%, the same as in the prior year. Higher revenue and profitability in the second half is quite typical for Halma, as is revenue and profit growing very much in line with each other.

All four sectors grew both revenue and profit. The Medical sector grew fastest benefiting from prior year acquisitions. The highest rates of underlying organic profit growth came from the two safety sectors: Process Safety and Infrastructure Safety. Environmental & Analysis delivered profit growth in the full year after a small reduction in the first half, growing profit by 12% in the second half. As anticipated, the costs of reorganisation in our photonics business, charged against adjusted¹ profit, was less than £1m.

Central administration costs totalling £7.9m (2013: £6.7m) were higher this year due to the costs of the biennial HITE conference as well as increased investment in our graduate programme and in international expansion.

Revenue and profit growth					Percentage growth
	2014 £m	2013 £m	Increase £m	Total		Organic growth²	Organic growth² at constant currency
Revenue	676.5	619.2	57.3	9.3%		5.9%	5.7%
Adjusted¹ profit (restated)³	140.2	128.5	11.7	9.1%		5.7%	5.3%

Widespread geographic growth

There was good growth in all regions throughout the year. The USA is our largest sales destination at 32% (2013: 31%) of total revenue. US revenue grew by 10% in the year, with all sectors growing, supported by acquisitions made in the prior year. Mainland Europe showed strong growth of 8% despite a tough economic environment, with Infrastructure Safety growing fastest and with underlying growth in each sector. The UK increased by 11% due in particular to a strong performance by the water businesses within Environmental & Analysis. Asia Pacific continued to grow well, up 11%, with China up 26% (16% excluding last year's Chinese acquisition) and now accounting for 7% (2013: 6%) of Group revenue.

We targeted 30% of Group revenue coming from outside the UK/Mainland Europe/USA by 2015. This year we achieved 25.2% (2013: 25.4%). This KPI sets an important direction for the Group to increase its penetration of global markets. The task has been made tougher as despite having achieved 74% revenue growth since 2010 in these 'rest of world' territories, the revenue to UK/Mainland Europe/USA has grown by 40%. Over the coming years we will continue to maintain this focus on international expansion.

Geographic revenue growth
	2014		2013
	£m	% of total	£m	% of total	Change £m	% growth
United States of America	214.5	32%	195.0	31%	19.5	10%
Mainland Europe	163.7	24%	151.6	25%	12.1	8%
United Kingdom	127.9	19%	115.6	19%	12.3	11%
Asia Pacific	111.6	16%	100.5	16%	11.1	11%
Africa, Near and Middle East	33.0	5%	31.4	5%	1.6	5%
Other countries	25.8	4%	25.1	4%	0.7	3%
	676.5	100%	619.2	100%	57.3	9%

High returns

We aim to operate with a Group Return on Sales in the range of 18-22%. It has been above 16% every year for 29 consecutive years. This year Return on Sales was 20.7% (2013 restated: 20.8%), a reflection of the value customers place on our products and on our good management of costs. Process Safety increased Return on Sales in the year. Medical and Environmental & Analysis saw modest reductions in Return on Sales, although both recorded an increase in profitability in the second half over the first half, and over the second half of the prior year. The Group's increasing profitability during the year resulted in a second half Return on Sales of 21.9% (2013 second half: 21.4%).

Gross Margin (revenue less direct material and direct labour costs) is a key contributor to our profitability and increased to 64.4% (2013: 64.0%). This was a good performance in what continued to be a competitive operating environment with cost and price pressures.

Return on Capital Employed² (ROCE), the pre-tax return on the Group's operating assets increased to 76.4% (2013 restated: 70.7%) reflecting the efficiency of our 'asset light' operating model. Return on Total Invested Capital² (ROTIC), the post-tax return on the Group's total assets including all historic goodwill, also increased to 16.1% (2013 restated: 15.6%).

Currency translation had minimal effect

Halma reports its results in Sterling. The other key trading currencies are the US Dollar and Euro. Approximately 40% of Group revenue is denominated in US Dollars and 15% in Euros.

The Group has both translational and transactional currency exposure. Translational exposures arise on the consolidation of overseas company results into Sterling. Transactional exposures arise where the currency of sale or purchase transactions differs from the functional currency in which each company prepares its local accounts.

	Weighted average rates used in Income Statement		Year end exchange rates used to translate Balance Sheet
	2014	2013	2014	2013
US Dollar	1.59	1.58	1.66	1.52
Euro	1.19	1.23	1.21	1.19

We take a neutral view of the future movements of currencies. After matching currency of revenue with currency costs wherever practical, forward exchange contracts are used to hedge a proportion (up to 75%) of the remaining forecast net transaction flows where there is a reasonable certainty of an exposure. We hedge up to 12 months and in certain specific circumstances 24 months, forward. At 29 March 2014 over 50% of our next 12 months' currency trading transactions were hedged. There is a good degree of natural hedging within the Group in US Dollars but we typically buy fewer products in Euros than we sell and so have a net exposure of approximately €35m at any time.

Favourable currency translation gains in the first half of 2014 were progressively eroded by the strengthening of Sterling relative to the US Dollar and Euro in particular. This strengthening has produced a tougher trading environment for our UK exporting businesses. Currency translation had a minimal effect on Group results for the year with the net currency translation impact of 0.2% favourable on revenue and 0.4% favourable on profit. By the financial year end Sterling was 9% stronger relative to the US Dollar than at the start of the year. If currencies continue at current levels relative to Sterling (assuming a constant mix of currency results) then we might expect approximately 3% adverse impact on revenue and profit due to currency translation in 2014/15 compared with 2013/14. The adverse impact in these circumstances would be greater in the first half of 2014/15 than in the second half.

Based on the current mix of currency denominated revenue and profit, a 1% movement in the US Dollar relative to Sterling changes revenue by £2.7m and profit by £0.5m. Similarly, a 1% movement in the Euro changes revenue by £0.9m and profit by £0.2m.

Consistent financing cost

Net financing cost in the Income Statement at £4.7m was in line with the prior year (2013 restated: £4.9m). The average cost of bank financing remained in line with 2013 with higher levels of average debt for the year, following acquisitions made in the second half of 2012/13, but a slightly lower cost of funding (see the 'Average debt and interest rates' table below for more information).

Interest cover (EBITDA as a multiple of net interest expense as defined by the revolving credit facility) was 53 times (2013: 54 times) well in excess of the 4 times minimum required in our banking covenants.

The net pension financing charge is included within the net financing cost, and this year increased to £1.9m (2013 restated: £1.5m). The restatement of the prior year results from a change in the accounting for Defined Benefit pension costs under IAS 19 (Revised). The main change is the new requirement to use the pension plans' discount rate to calculate the return on pension related assets, rather than using a rate of return appropriate to the various asset classes. The total restatement for IAS 19 in the 2013 Income Statement is a reduction in profit of £2.1m being the £1.0m revision to net pension finance cost plus the charge against profit of pension administration costs not previously included. 2014 and future years' profits are expected to be impacted by similar amounts so that overall Group reported growth rates are largely unaffected.

Stable Group tax rate

The Group has major operating subsidiaries in 10 countries so the Group's effective tax rate is a blend of these different national rates applied to locally generated profits. Tax arrangements are driven by commercial transactions. We manage these tax arrangements in a responsible manner, keeping good relationships with tax authorities based on legal compliance, transparency and cooperation. Intercompany trading is set on a commercial arm's length basis.

The effective tax rate on adjusted1 profit reduced to 23.3% (2013: 24.2%). Approximately one-third of Group profit is generated and taxed in the UK and the UK Corporation tax rate fell from 24% to 23% this year, with it forecast to drop to 20% in 2016. Halma also benefited from the new UK 'Patent Box' rules, resulting in lower tax on profits generated from the use of patents. We anticipate that the effective tax rate in 2015 will be similar to that in 2014.

Increasing earnings per share and dividends

For many years we have delivered value to shareholders through growth in earnings per share and dividend increases. Adjusted1 earnings per share increased by 10.4% to 28.47p, above the rate of increase in adjusted1 profit, due to the lower effective tax rate compared with the prior year. Statutory earnings per share increased by 13.5% due primarily to the factors noted earlier which are included in the calculation of statutory profit.

An increase in the final dividend of 7.1% to 6.82p per share (2013: 6.37p) is recommended which, together with the 7.1% increase in the interim dividend, gives a total dividend of 11.17p per share (2013: 10.43p). Halma has a very long record of growing its dividend and with this latest rise will have increased the dividend by 5% or more for every one of the last 35 years. We have paid out more than £300m to shareholders in the last decade. The final dividend for 2013/14 is subject to approval by shareholders at the AGM on 24 July 2014 and will be paid on 20 August 2014 to shareholders on the register at 18 July 2014.

We have maintained a progressive dividend policy balancing dividend increases with organic growth rates achieved, taking into account potential acquisition spend and the maintenance of moderate debt levels. Dividend cover (the ratio of adjusted profit after tax to dividends paid and proposed) is slightly higher than last year at 2.55 times (2013 restated: 2.47 times). Our policy is to maintain dividend cover above two times and we will continue to determine dividend payout each year based on the factors noted above.

Good cash generation

Strong cash generation is an important feature of the Halma model. Our cash performance in 2013/14 was good. Adjusted operating cash flow was £129.0m (2013: £113.7m) and represents 89% (2013 restated: 85%) of adjusted operating profit, ahead of our KPI target of 85% cash conversion.

Operating cash flow summary	2014 £m	2013 £m
Operating profit (restated)	143.6	117.3
Net acquisition costs and contingent consideration fair value adjustments	(12.5)	2.2
Defined Benefit pension plan closure costs/curtailment gain	(4.0)	-
Amortisation of acquisition-related acquired intangibles	17.5	14.2
Adjusted operating profit	144.6	133.7
Depreciation and other amortisation	18.8	17.7
Working capital movements	(10.9)	(10.9)
Capital expenditure net of disposal proceeds	(15.6)	(14.6)
Additional payments to pension plans (restated)	(5.9)	(7.2)
Other adjustments	(2.0)	(5.0)
Adjusted operating cash flow	129.0	113.7
Cash conversion %	89%	85%

Non-operating cash flow and reconciliation to net debt	2014 £m	2013 £m
Adjusted operating cash flow	129.0	113.7
Tax paid	(28.3)	(25.5)
Acquisition of businesses and shares of associates including cash/debt acquired	(16.9)	(153.7)
Net finance costs and arrangement fees	(2.5)	(2.3)
Dividends paid	(40.5)	(37.8)
Issue of shares/treasury shares purchased	(7.3)	(5.1)
Disposal of businesses	1.9	19.6
Effects of foreign exchange	0.4	(0.5)
Movement in net debt	35.8	(91.6)

Opening net debt	(110.3)	(18.7)

Closing net debt	(74.5)	(110.3)

Net debt to EBITDA	2014 £m	2013 £m
Operating profit (restated)	143.6	117.3
Depreciation and amortisation	36.3	31.9
EBITDA	179.9	149.2

Net debt to EBITDA (restated)	0.41	0.74

A summary of the year's cash flow is shown in the table above. The largest outflows in the year were in relation to dividends and taxation paid. Working capital movements, comprising changes in inventory, receivables and creditors, totalled £10.9m (2013: £10.9m). This year's increase reflects not just the growth in our business but also our wider geographic footprint and higher sales in the final quarter. Working capital management is the responsibility of each individual subsidiary board and therefore will continue to receive close attention.

Capital expenditure on property, plant and computer software this year was 12% above last year at £17.4m (2013: £15.5m), maintaining investment in our operating capability. This year's spend represents 117% of depreciation, falling within the 100% to 125% range we expect.

Dividends totalling £40.5m (2013: £37.8m) were paid to shareholders in the year. Taxation paid increased to £28.3m (2013: £25.5m).

Strong financial position maintained

Halma operations are cash generative and the Group has substantial bank facilities. We have access to competitively priced finance at short notice and spread our risks to provide good liquidity for the Group. Group treasury policy is conservative and no speculative transactions are undertaken.

We use debt to accelerate the Group's development, reviewing our funding needs and the structure of borrowing facilities regularly to ensure we have ample headroom. In November 2013 we increased and extended our syndicated revolving credit facility with the existing core group of banks. The facility was increased to £360m (from £260m) and the term extended to November 2018 (from October 2016). This increase in facilities provides Halma with the financial resources to operate within its existing business model for the medium term, continuing investment in our business and with capacity for further value-adding acquisitions. The Group continues to operate well within its banking covenants with significant headroom under each financial ratio.

At the year end net debt was £74.5m (2013: £110.3m), a combination of £109.0m of debt and £34.5m of cash held around the world to finance local operations. The ratio of net debt to EBITDA was 0.41 times (2013 restated: 0.74 times), well below the level of 1.25 times within which we feel comfortable operating. Net debt represents 3% (2013: 6%) of the Group's year end market capitalisation.

Average debt and interest rates	2014	2013
Average gross debt (£m)	150.9	133.7
Weighted average interest rate on gross debt	1.26%	1.34%
Average cash balances (£m)	47.1	45.2
Weighted average interest rate on cash	0.54%	0.43%
Average net debt (£m)	103.8	88.5
Weighted average interest rate on net debt	1.59%	1.80%

Acquisition and disposal activity

Acquisitions and disposals are an important part of our operating model and strategy, ensuring the portfolio of companies in the Group can sustain growth and high returns. We buy businesses already successful in, or adjacent to, the niches in which we operate.

Following a record acquisition spend in 2012/13 (£137m spent on acquiring six businesses (excluding net cash acquired of £5m)) we made only one acquisition in 2013/14. In April 2013 we acquired Talentum, a small technology bolt-on for one of our Infrastructure Safety businesses, for £2.6m excluding cash acquired. In addition £14m was paid out in deferred contingent consideration for acquisitions made in prior years.

Despite continued growth from MicroSurgical Technologies (MST), we have revised our estimate of deferred contingent consideration payable on the acquisition down from £16m to £4m due to slower than expected new product adoption. The change in deferred contingent consideration is accounted for as a credit in the Income Statement but is not included in adjusted profit.

Following the year end we made the following acquisitions:

- Plasticspritzerei AG, a supplier to one of our businesses in the Medical sector, was acquired on 2 May 2014 for a net cash consideration of CHF4.8m (£3.2m).

- Advanced Electronics Limited, a manufacturer of networked fire detection and control systems which will form part of our Infrastructure Safety sector, on 14 May 2014 for an initial cash consideration of £14.1m. Contingent consideration of up to £10.1m is payable based on earnings growth for the period to March 2015.

- Rohrback Cosasco Systems Inc. (RCS), a manufacturer of pipeline corrosion monitoring products and systems, acquired on 30 May 2014 for $108m (£64.7m) (excluding cash acquired) and which will be included in the Process Safety sector.

Given the short period between these acquisitions and completion of these accounts we have included more limited disclosure (see Note 12 to the Preliminary Statement) and full disclosure will be included in the 2014/15 Half Year Report.

Also in May 2014 we sold Monitor Elevator Products Inc., a business within the Infrastructure Safety sector, for a consideration of $6m (£3.6m). We expect a gain of approximately £1m before tax to result from the transaction.

The business acquired in 2013/14 and those acquired in 2014/15 to date, net of the disposal made, are expected to add a net amount of £29m to revenue and £6.4m (after financing costs) to profit in 2014/15, based on their run rate at the time of acquisition/disposal.

Pension plans cease future accrual

The Defined Benefit (DB) sections of the Group's UK pension plans were closed to new entrants in 2003. Following consultation during the year, we announced in March 2014 that the DB pension plans will cease future accrual as at 1 December 2014. Members will earn future benefits within the Group's Defined Contribution (DC) pension plan under agreed transitional arrangements. This change reduces risk for the future and we will work with the plans' trustees to achieve a balanced asset investment strategy and to ensure Halma meets all pension obligations.

On an IAS 19 basis the deficit on the UK DB plans at March 2014 was £36.5m (2013: £47.2m) before the related deferred tax asset. Plan assets increased to £187.5m (2013: £176.3m) due to some further recovery in equity values and cash contributions by Halma and the plan members. In total, 54% of plan assets are invested in return seeking assets: 32% in equities and 22% in diversified growth funds providing a higher expected level of return over the longer term. Plan liabilities were at a very similar level to the prior year at £224.0m (2013: £223.4m) having benefited from a curtailment gain of £4.2m (before costs) arising from the cessation of future DB accrual noted above.

We continue to make extra cash contributions to the UK pension plans as agreed with the trustees and expect this to be at the rate of £7m per year for the immediate future with the objective of eliminating the pension deficit over the next five years.

R&D Investment

R&D expenditure increased by 5% to £32.1m (2013 excluding disposal: £30.6m). In 2012/13 we increased R&D spend by 13% on a 7% revenue increase including some larger projects, and this year there were fewer such projects. Investment in new products remains an important strategic priority and in the medium term we expect R&D to increase broadly in line with revenue growth.

We are required under IFRS to capitalise certain development expenditure and amortise it over an appropriate period, for us three years. R&D by its nature carries risk and all R&D projects, particularly those requiring capitalisation, are subject to close scrutiny and a rigorous approval and review process. In 2013/14 we capitalised £5.2m (2013: £5.4m) and amortised £3.9m (2013: £3.5m). This results in an asset carried on the Consolidated Balance Sheet, after £0.3m of foreign exchange movements, of £13.0m (2013: £12.0m).

Risk management and the year ahead

Halma has a well established business and financial model delivering success consistently over the long term. The model is based on considerable autonomy and accountability at operating company level, within a clear strategic framework with strong policies and procedures.

Risk is managed closely and is spread across the well-resourced companies, each of which manages risk to its individual level of materiality. There are extensive review processes in place including peer financial review and Internal Audit. The key Group risks have been referenced in the Strategic Review and Sector Reviews.

We have an ethical approach to business and this is reflected in our Code of Conduct which is adopted internationally. This year we have increased our focus on cyber security with enhanced IT monitoring systems in place and security awareness programmes being rolled out across the Group.

The Board considers all of the above factors in its review of 'Going Concern' as described in this Preliminary Statement and has been able to conclude its review satisfactorily.

The Annual Report and Accounts is prepared in line with the latest requirements for integrated reporting and the Board has taken care to ensure that it is 'fair, balanced and understandable'. The Audit Committee took a key role in assessing compliance with reporting requirements supported by robust management processes.

The key performance indicators (KPIs) we choose reflect the importance of investment, growth and returns. These externally reported KPIs are an important part of our day to day management of the business. In the year ahead we will focus on successful integration of the recent acquisitions, search for further opportunities and continue to emphasise strong cash generation to fund investment and increasing dividends. In this way we aim to continue to deliver significant long-term value to shareholders.

Kevin Thompson, Finance Director

¹In addition to those figures reported under IFRS Halma uses adjusted figures as key performance indicators. The Directors believe the adjusted figures give a more representative view of underlying performance. Adjusted profit figures exclude the amortisation of acquired intangible assets; acquisition items; the effects of closure to future benefit accrual of the Defined Benefit pension plans (net of associated costs) and profit or loss on disposal of operations. All of these are included in the statutory figures. More details are given in Note 11.

²See Financial Highlights.

³ In this financial review, and where appropriate, the 2013 comparative figures have been restated to reflect the adoption of IAS 19 (Revised) in relation to the accounting for the Group's Defined Benefit pension plans. This has no impact on revenue but leads to restatement of profit figures. Results prior to 2012/13 have not been restated.

Process Safety Sector Review

Products which protect assets and people at work. Specialised interlocks which safely control critical processes. Instruments which detect flammable and hazardous gases. Explosion protection and corrosion monitoring products.

Neil Quinn, Sector Chief Executive, Process Safety

Another year of continued strong organic growth in our Process Safety businesses resulted from further extensions to our global reach through establishing additional regional sales operations and new routes to market. Momentum on new product introductions was maintained and investment in our manufacturing operations ensured that our customers received the levels of product quality and on-time delivery to meet their needs. The acquisition of Rohrback Cosasco Systems in May 2014 expands our portfolio of critical safety products.

Market trends

Long-term growth in Process Safety markets is supported by two key drivers:

- rising expectations of workplace safety and more stringent safety and environmental legislation

- rising demand for life-critical resources, such as energy

The continuous introduction of new safety regulations and tougher enforcement of occupational safety and environmental protection laws drives growth in both developed and developing markets.

The global process safety market is forecast to grow by over 11% annually for the next two years. A key factor is rising demand for safety systems in the oil and gas industry.

Population growth and rising global incomes drive increasing demand for energy. By 2030 world population is expected to reach 8.3 billion. Compared to today, this will add an extra 1.3 billion energy consumers. Global income levels in 2030 are forecast to be about double what they were in 2011. World primary energy consumption is forecast to grow 1.6% annually between 2011 and 2030.

Because onshore oil reserves are maturing, the oil and gas industry's focus is shifting to deepwater offshore platforms. Sustained rising energy demand coupled with high oil prices is expected to increase offshore oil and gas investment at over 10% per year until 2018.

Throughout the world, governments continue to impose stricter safety regulations to protect industrial workers and our environment. Following the Deepwater Horizon incident in the Gulf of Mexico in 2010, the European Commission concluded that existing oil and gas industry safety practices did not provide adequate risk protection. In response, in 2013 a new EU Directive came into force which will implement higher offshore safety standards in Europe.

Continuing investment in new oil and gas exploration techniques, and delivery of conventional, unconventional and renewable energy resources, has supported our sales growth. Sustained investment in hydraulic fracturing (fracking) in the fast-growing shale oil and gas market, deep sea drilling and LNG production and storage ensures that we are operating in vibrant markets.

The global market for gas detection equipment is forecast to grow at over 4% annually until 2018. This is driven by increasing regulations to protect workers from harmful gases. The International Organization for Standardization (ISO) is working on a new global standard for occupational health and safety which may prompt new safety legislation in many countries.

Geographic trends

Worldwide growth in demand for energy, chemicals, food and metals continues to increase with the USA, Middle East and Asia Pacific very buoyant. European process safety markets are returning to growth and emerging markets are performing well. Economic conditions have reduced demand in India and Australia but we expect these areas to recover slowly.

The main existing areas of offshore activity, such as the 'golden triangle' including Brazil, US Gulf of Mexico, and West Africa, are the key markets where offshore investment is focused. Asia Pacific is the key emerging market in terms of energy demand and offshore drilling activities.

Awareness of process safety in China has increased following a pipeline explosion last year that cost 62 lives. A large number of government officials were dismissed and a nationwide survey of 3,000 petrochemical sites revealed 20,000 disaster risk points.

Strategy

In the Process Safety sector, our strategy for growth focuses on:

- geographic market diversification via shared hubs

- investment in new product development to meet local market needs

- acquisitions in adjacent markets

Our commitment to new product development R&D investment has seen sales of products designed in the last three years make up over 30% of total sales in this sector. New technology and shorter product lifecycles, together with industry-leading quality and customer service, ensures that we maintain competitive advantage with sales growth ahead of market growth.

Our safety product companies now have 21 manufacturing sites across four continents. In addition to 22 existing regional sales and service centres, during 2013/14 we opened three new regional hubs in Brazil, the Middle East and Poland. R&D resources are increasingly localised to ensure that products meet local market needs.

To optimise customer service we continue to develop internal collaboration and strategic alliances between our businesses. More long-term customer partnerships to maintain market leadership in our process safety market niches remains a key strategic goal.

Performance

Process Safety grew revenue by 1% to £126.7m (2013: £125.7m) and profit¹ by 8% to £34.9m (2013: £32.3m). Excluding the contribution of Tritech, which was sold in August 2012, revenue increased by 5% and profit by 11%. These were also the sector's organic growth rates.

Excluding the prior year disposal, there was growth in all major geographic regions except the UK, where revenue declined by 1%. There was double-digit growth from the USA (up 13%) and Asia Pacific (up 12%). Mainland Europe revenue increased by 1%. The sector hub set up in Brazil in 2013 is now firmly established and promises to boost Process Safety revenue from this territory in the future.

Outlook

Growth prospects in the Process Safety sector remain positive supported by rising investment forecasts in our targeted oil, gas and energy markets. We plan to extend further into the transport and logistics market where the latest forecasts also suggest a positive growth outlook.

In May 2014 we acquired Rohrback Cosasco Systems Inc. (RCS) for a cash consideration of $108m (see Note 12 to the Preliminary Statement). As a world leader in the design, manufacture and sale of pipeline corrosion monitoring products and systems, RCS expands our portfolio of critical safety products which are sold into the energy and utility markets to protect life and operational assets.

We continue to search for further acquisitions in the Process Safety sector, particularly in complementary markets, to expand our technology portfolio and access new sales channels.

¹See Note 2 to the Preliminary Statement.

Infrastructure Safety Sector Review

Products which detect hazards to protect assets and people in public spaces and commercial buildings. Fire and smoke detectors, fire detection systems, security sensors and audible/visual warning devices. Sensors used on automatic doors and elevators in buildings and transportation.

Nigel Trodd, Sector Chief Executive, Infrastructure Safety

All major businesses within the sector contributed to a strong year. Increasing investment in new products is driving growth above market rates in both developed and developing regions. The acquisition of Talentum in April 2013 and Advanced Electronics in May 2014 demonstrates our strategy to acquire synergistic businesses which broaden our product range across our chosen markets.

Market trends

Increasing health and safety regulation remains the primary driver in our Infrastructure Safety sector.

The global trend of increasing urbanisation also stimulates demand for our building safety and security products. In China, for example, the government has recently announced plans to move 100 million people from rural areas to cities by 2020. Global construction output is forecast to grow by 70% between 2012 and 2025. More than half of that growth will probably take place in just three countries: China, India and the United States.

Tougher fire regulations continue to be introduced in Asia and Europe; we now maintain over 3,000 international fire product approvals to give us access to world markets. New European fire safety legislation, introduced last year, sets new standards for visual fire alarm devices that alert people who cannot hear warning sounders. We launched new visual fire warning products in 2013 compliant with the new regulations to protect people with hearing disabilities.

The global market for our elevator safety and communications equipment is divided into two segments of almost equal size: new building installations, mainly in developing markets, and elevator modernisation and service in Europe and the USA. Ageing populations, urbanisation, rising safety awareness and tighter building safety regulations continue to underpin global growth in the new-build elevator market.

Elevator equipment demand is projected to grow worldwide by almost 6% annually until 2017, despite slowing demand in China. China still accounts for over half of the world's new elevator installations and high single-digit growth is set to continue, driven by China's extensive social housing programme. Elevator equipment sales are growing steadily in Asia and Latin America, the US market is recovering well and Europe is starting to recover.

Door sensor revenue and profits grew due to innovative new products and new European safety regulations that protect pedestrians from automatic door accidents. Door sensor demand grew in North and South America, and Asia, during 2013/14 but was weaker in Europe. Sales of sensors for use on train doors grew strongly in both China and Europe. New laser technology, developed for people detection, has opened new markets in security and industrial automation.

The electronic access control systems market, the target for our intruder alarm business, is forecast to grow by 7% per year until 2017. Growth drivers are rising security concerns in many countries plus increasing regulation. New wireless intruder detection sensors, plus greater UK market share, delivered significant revenue and profit growth this year. Sales of intruder detectors and emergency signalling devices grew due to new products that enable customers to comply with the latest UK and European burglar alarm regulations. A new security product undergoing EU approvals will open additional markets in 2014/15.

Geographic trends

The home automation and controls market is growing quickly, particularly in the USA where sales of our wireless carbon monoxide home safety detectors grew strongly in 2013/14.

We relocated our existing elevator safety product manufacture within China to a new factory with more sophisticated manufacturing capability. The China elevator sales team was strengthened and a new local R&D unit will develop localised products to meet the needs of Chinese customers. The resulting elevator sales performance in China was very strong. Last year China passed the new Special Equipment Safety Law to reduce accidents, including deaths and injuries caused by elevators. This stricter safety law is expected to create favourable growth conditions and stimulate demand from the growing Chinese elevator service and modernisation market.

Our door sensor business grew in all territories, even in Europe where we increased market share in a flat market. In China the slowing pace of construction stabilised demand but revenue growth was still strong throughout the Asia Pacific region.

Strategy

Our primary growth strategy in the Infrastructure Safety sector is to penetrate new markets. We will develop our presence in high growth areas, such as Russia and Eastern Europe, ASEAN nations and Brazil. Other key target markets are those with commercial barriers-to-entry such as Japan, France and the USA.

We have developed a dual channel strategy for fire detection products. In some markets we sell directly under our own brand. However, OEM sales now make up 50% of international fire detection revenue. We will target fire detector sales growth in Russia during 2014 after gaining new technical product approvals.

We aim to grow elevator equipment market share with a dual brand strategy. We now sell highly specified door sensors with global support to international elevator manufacturers in developed markets. Lower specification sensors made in China are sold to cost-focused customers in developing economies. Global branding was strengthened by reorganising our elevator equipment businesses into a single organisation called Avire during 2013.

Investment in our elevator emergency telephone business centres on products to penetrate new European markets. R&D activity at our elevator display business will add advanced viewing features for high-end building projects. China will continue to be a strategic focus for elevator product R&D, sales and manufacture.

During 2013/14 we entered adjacent pedestrian automatic doors markets with new sensors to activate sliding and swinging doors. We aim to extend our door sensor customer base beyond the pedestrian segment where we are market leader. Organic profit growth will centre on new products for industrial and transport sector customers. To precisely meet customer needs, door sensor R&D and manufacture is increasingly based in target markets. In 2013/14 we increased new product development spending in the USA and China.

Performance

Infrastructure Safety performed strongly, growing both revenue and profit¹ by 7% to £220.3m (2013: £205.3m) and £44.4m (2013 restated: £41.5m) respectively. At constant currency, organic revenue growth was 6% and profit growth was 5% demonstrating the resilience of demand for our products which is underpinned by increasing Health & Safety regulation.

Return on Sales remained strong at 20.2% (2013 restated: 20.2%) due to successful new product launches and an effective balance between investment and cost control to maintain strong product margins.

The Talentum flame detector business, acquired in 2013, extended our fire detection technology offering and has been successfully integrated.

Outlook

We expect continued Infrastructure Safety growth due to technology advances, regulatory pressure and products that are increasingly developed and manufactured locally within target markets.

A significant amount of emerging market infrastructure cannot accommodate rising urbanisation and population growth trends. To combat this, a number of emerging countries' governments have committed to substantial urban infrastructure stimulus plans.

Demand for certified products in Europe will be a strong driver and we expect to benefit from adoption of integrated building monitoring systems and intruder alarms based on wireless communication over time.

Mature market growth is expected to be modest, while developing economies should grow well. Russia, Eastern Europe, Middle East, Latin America, ASEAN nations and China all offer good growth potential. In the USA and Western Europe legislation-driven adjacent markets and the rising use of home automation technology offers good growth prospects.

In May 2014 we sold Monitor Elevator Products, Inc which manufactures customised control panels for elevators focused in north-eastern USA and no longer fits with our global market-leading door safety sensor and display product business.

In May 2014 we acquired Advanced Electronics Limited (Advanced) for an initial cash consideration of £14.1m. Advanced manufactures networked fire detection and control systems adding complementary products that will help capture the international growth opportunities in the increasingly regulated fire market.

¹See Note 2 to the Preliminary Statement.

Medical Sector Review

Products used to improve personal and public health. Devices used to assess eye health, assist with eye surgery and primary care applications. Fluidic components such as pumps, probes, valves and connectors used by medical diagnostic OEMs.

Adam Meyers, Sector Chief Executive, Medical

The Medical sector continued its record of producing both revenue and profit growth due to a combination of prior year acquisitions and organic growth.

Returns remain high and continue well above Group targets. Although Return on Sales was down slightly on the prior year, ROCE improved, leading to good cash generation.

We continue to invest in new products and process innovation and in expanding our resources in developing economies. Revenue from these markets is increasing as a proportion of the sector.

Market trends

The Medical sector growth driver of increasing demand for healthcare is underpinned by:

- worldwide population ageing and increasing life expectancy

- increasing prevalence of obesity and hypertension

- increasing healthcare access in developing economies

- new medical diagnostic technologies

- new or improved surgical and pharmaceutical therapies

The proportion of people aged over 60 continues to rise and drives demand for healthcare both in developed and developing geographies. Population ageing is a key driver for our ophthalmology and hypertension management businesses because eyesight problems and rising blood pressure are both age-related.

The global market for ophthalmic diagnostic and eye surgery products is forecast to grow at 4% per year through 2017 as new technologies, population ageing and rising healthcare expectations and affordability in developing economies continue to drive demand.

Eye surgeons are increasingly switching to the type of single-use surgical instruments that we make. Cataract surgery is a key market niche and demand for cataract instruments is forecast to grow annually by over 5% through 2019.

We expect continued growth in spending on hypertension management tools throughout the developed world. In the USA for example, one in three adults has high blood pressure, but over 50% do not realise they have this condition which causes, or leads to, over 2.4 million American deaths annually. In addition, rising obesity can lead to both an increase in hypertension-related conditions and an increase in diabetic-related eye disorders.

In South East Asia medical product demand should remain strong as governments continue to improve healthcare provision and extend it to rural areas. Last year China announced a three-year, £75 billion healthcare investment project to build 2,000 new regional hospitals and 29,000 township hospitals.

Molecular diagnostics (tests on patients' genetic codes), is expected to be our fastest growing market for fluidic components with forecast global growth of 11% annually through 2019. North America and Europe comprise the largest global markets, while growth in Asia is expected to outpace all other geographies, with an expected annual growth rate of over 14%.

We continue to invest in resources to increase sales in the fast-growing Asian and South American healthcare markets. In the past year we increased staff in China, India, Brazil and the Middle East. Additional medical device R&D engineers recruited in China should deliver new products with specifications to meet the needs of Asian customers during 2014/15.

Geographic trends

Apart from Japan, our sales in Asia continue to grow strongly as governments invest in health and medical infrastructure and extend healthcare to a wider section of their populations. China now has more than 330 million people with high blood pressure (one out of every three adults) with prevalence increasing particularly among the young and rural populations. Increased awareness and programmes to combat hypertension will increase demand for our diagnostic devices.

In China, most of our medical products have now completed lengthy and costly official testing and registration. This should ensure that China continues to offer substantial growth opportunities. However, Chinese growth may be affected by government control of the medical device market, including the possibility of price controls.

US healthcare spending is forecast to continue to rise rapidly at almost 6% annually through 2022. However, short-term medical market growth in the USA is less certain as the impact of the recently enacted Patient Protection and Affordable Care Act (PPACA) is being digested. The US market for single-use surgical devices and consumables should continue to grow with medical procedure growth, but capital equipment sales could be slower until the increased patient flow from the PPACA is realised.

Growth in the US medical diagnostic market, our largest fluidics niche, was also affected by uncertainty in the new US healthcare model. Its new 2.3% tax on medical devices in the USA increased sales costs by over £0.6m in 2014 and was reported by some of our customers to cause reductions in their spending. We expect flat short-term sales in Europe as economic conditions slowly improve.

With the acquisition of a Chinese peristaltic pump maker in 2013, we began selling their products through our US distribution channels and our US-made products through the acquired business' Chinese channels.

Strategy

Following strong growth in 2012/13 Medical sector strategy is to increase organic growth through:

- broadening our product lines and commercialising innovative new products

- further penetration of geographical markets

- increasing our customer diversity

- expansion into adjacent market niches

We aim to increase R&D investment in ophthalmology and hypertension management products where we have a competitive advantage due to our strong sales channels in these niche markets. Product line growth will come from both internally and externally developed products. Medical sector R&D focus is on high quality components and instrumentation that will be readily accepted by our existing conservative customer base. However, local development and manufacture in emerging markets, to better satisfy local customer needs, is a key Medical sector strategic priority.

Focusing on Asia, South America, USA and Russia extended market penetration will be achieved through additional sales resources, market intelligence sharing, cooperative marketing between sector companies and new sales channel partnerships.

Compliance with national product regulation continues to get more complex and costly, in both developing and developed markets. Product registration and renewal overheads continue to rise but provide market access and bar entry by weaker competitors.

Further acquisitions of value-enhancing healthcare businesses should also add significant growth.

Performance

Following strong growth in 2012/13 our Medical sector grew revenue by 20% to £163.2m (2013: £136.1m) and profit¹ by 16% to £41.8m (2013: £35.9m), including a sizeable contribution from acquisitions completed in the prior financial year. Organic revenue growth at constant currency was 7% and organic profit growth was 1%. Return on Sales remained strong at 25.6%, albeit slightly below last year's record 26.4% due to a combination of minor factors, including the full-year effect of the new medical device tax in the USA. Increased investment internationally to support good rates of underlying revenue growth also impacted profitability this year.

While currency translation impact was minimal in the year, if exchange rates remain at current levels we expect an adverse impact on results in 2014/15 due to the relative strength of Sterling versus the US dollar and Euro.

Elsewhere, organic revenue growth (constant currency) from the UK was up 8%, Mainland Europe grew by 6% and the USA increased 3%.

Outlook

Ageing populations in developed economies and rising populations with increasing access to affordable healthcare in the developing world should, subject to budgetary constraints, continue to create a favourable environment for growth.

We expect our Medical businesses to outperform the market in the medium term with sales into the healthcare and medical diagnostics markets rising consistently, driven by enhanced distribution in export markets, new products and acquisitions. We expect the strongest growth in the short term in developing markets, especially Asia and the Middle East. Growth in South East Asia, particularly China, should remain strong as government healthcare spending continues to rise.

While our fluidics businesses will remain US-centric, we expect to reduce reliance on large customers by diversifying our customer base in emerging markets and Europe.

¹See Note 2 to the Preliminary Statement.

Environmental & Analysis Sector Review

Products and technologies for analysis in safety, life sciences and environmental markets. Market-leading opto-electronic technology and gas conditioning products. Products to monitor water networks, UV technology for disinfecting water, and water quality testing products.

Chuck Dubois, Sector Chief Executive, Environmental & Analysis

The sector has delivered increasing revenue and profit growth as the year progressed and made good progress on its reorganisation. Action within the businesses to improve performance will continue and we expect to see the benefits of this in the coming year, including more collaborative inter-company projects.

Market trends

Our Environmental & Analysis sector businesses operate in diverse markets where sustained growth is delivered by three key drivers:

- rising demand for basic resources such as energy and water

- increasing environmental monitoring and regulation

- growing demand for healthcare

In many countries water demand outstrips supply and water quality often fails to meet minimum standards. The quality and scarcity of water, and the need to reduce water treatment energy costs, are the key factors behind increasingly strict regulation and enforcement which drives demand for our water analysis and water and wastewater treatment systems.

Increasing water scarcity is due to finite resources, population growth, increasing urbanisation in developing economies and climate change impact. In about 15 years' time almost half of the world's population is forecast to live in regions of high water stress or water scarcity. Within the next 20 years water demand will exceed supply by 40%.

New carbon reduction regulations, such as the CRC Energy Efficiency Scheme in the UK, is increasing demand for cost effective monitoring and remote transmission of data related to water usage and energy consumption.

Sales to the scientific analysis market grew faster in 2013/14 than in previous years. The global market for laboratory analytical instruments and environmental sensors and monitoring is forecast to grow at about 6% per year until 2016. Photonics technology is no longer just a science and research tool, but is increasingly used in manufacturing processes; industrial photonics is the fastest growing photonics sector worldwide.

Environmental regulations in China are being strengthened and the government has made a series of multi-billion dollar funding commitments to increase controls on air and water pollution, and decrease greenhouse gas emissions.

China's most heavily-polluting industries, including thermal power, iron and steel, and petrochemicals will, in the future, have to comply with international pollution standards. New environmental regulations and stronger enforcement in China will create increased opportunities for our businesses which make analytical and monitoring equipment for controlling environmental pollution.

US environmental protection regulations are also undergoing significant change, with many more stringent requirements being issued by the EPA. US government spending on environmental monitoring is increasing. As a result, we expect rising demand in America for our analytical technologies that monitor pollutants in trace amounts.

Geographic trends

In April 2014 we created a new subsidiary in China by transforming the Shanghai R&D, sales and manufacturing operations of our US-based Ocean Optics business into a stand-alone company to deliver an optimal service to Asian customers. This company not only distributes spectroscopy products made by Ocean Optics in the USA, but is designing and developing products fit for purpose in China and Southeast Asia.

In the USA, we reorganised our multispectral sensing and imaging business by investing in a consolidated manufacturing centre.

Plans for deregulation of the UK commercial water market from 2017 are prompting UK water companies to increase investment in treatment and distribution to retain existing customers. Continued economic difficulties in Europe significantly reduced spending by some of our key OEM customers in the water market.

China is now the world's fastest growing water and wastewater treatment market. It recently announced plans to invest almost £200 billion in water treatment technology to control water resources pollution.

Strategy

Our organic profit growth strategy for the Environmental & Analysis sector centres on geographic expansion, with a strong focus on emerging markets, increased R&D investment in new product development and continued diversification of the customer base.

R&D will focus on products to meet emerging market customer needs. Investments to develop emerging markets include a new business unit in India and local manufacture in China.

Sales development in the US alternative energy market was cut back because progress on alternative energy projects depends on government funding, which has proven to be very variable.

While we will aim to maintain world leadership in products to reduce treated water loss in distribution networks, we succeeded in reducing dependence on water conservation technology sales to UK water companies within their 5-year cyclical investment programmes. We diversified our customer base and achieved strong sales growth in non-water markets such as energy monitoring, building management systems and commercial remote data logging.

Our strategy for opto-electronic analytical products is to grow organic profit by extending our offering in the life sciences and environmental monitoring sectors.

Performance

Environmental & Analysis achieved a pleasing full-year performance after a disappointing prior year and some reorganisation in the first half. Revenue increased by 9% to £166.5m (2013: £152.4m) and profit¹ grew by 4% to £31.7m (2013: £30.4m). At constant currency, organic revenue growth was 5% and profit was up 2%.

In addition to the reorganisation costs noted above the sector incurred the cost of fully addressing a supplier component quality issue within the water monitoring business.

As noted with the Medical sector, if exchange rates remain at current levels we expect an adverse impact on results in 2014/15 due to the relative strength of Sterling in particular in relation to the US Dollar.

Revenue grew by 53% in the UK, dominated by large sales of flow/pressure data loggers to UK water utilities as part of their preparation for the deregulation of the UK commercial water market in 2017. There was mid-single digit growth in Mainland Europe and the USA whilst revenue from Asia Pacific declined by 5% as major contracts for certain water and photonics businesses last year were not repeated. Restructuring completed during the year and additional senior management changes made shortly after year-end should improve the consistency of this sector's performance in the medium term.

Outlook

Market growth prospects and key drivers for our environmental and analysis product niches remain strong. We anticipate rising global demand in the Environmental & Analysis sector through increased regulation for water supply security and drinking water quality, plus environmental pressures on wastewater discharge.

We are uniquely placed to develop systems for remote collection and management of environmental data through our technology portfolio enhanced by the acquisition of ASL Holdings in 2013.

New environmental regulations and stricter enforcement in China should significantly increase demand for our technology in coming years. Growth in India remains more elusive, but we expect to increase market share with new localised products.

We have a strong pipeline of Environmental & Analysis acquisition prospects in both developed and emerging markets.

¹See Note 2 to the Preliminary Statement.

Principal Risks and Uncertainties

Halma's principal risks and uncertainties are detailed below and are supported by the robust risk management and internal control systems and procedures noted in the Annual Report and Accounts 2014.

Risk description

Potential impact

Mitigation

Remoteness of operations and globalisation

A key operational risk emanates from remoteness of operations from Head Office and the increasing global spread of our businesses.

- Weakening of financial, tax, audit and legal control and divergence from overall Group strategy in remote operations, leading to businesses taking on more risks than intended or unexpected financial outcomes

- Failure to comply with local laws and regulations in unfamiliar territories, leading to legal or regulatory disputes

- Continued international growth increases risk

- Control is exercised locally in accordance with the Group's policy of autonomous management. We seek to employ local high-quality experts.

- The Group's acquisition model ensures retention of management and staff in acquired businesses, meaning that local expertise is maintained.

- Sector Chief Executives ensure that overall Group strategy is fulfilled through ongoing review of the businesses. The right balance between autonomy and adherence to the overall objectives of the Group is a key function of the Sector Chief Executives and Senior Finance Executives.

- Regular visits and maintenance of key adviser relationships by senior management, finance staff and Internal Audit support local control.

Competition

The Group faces competition in the form of pricing, service, reliability and substitution.

- Loss of market share due to price pressure and changing markets

- Reduced financial performance arising from competitive threats

- By empowering and resourcing innovation in local operations to respond to changing market needs, the potential adverse impact of downward price pressure and competition can be mitigated and growth maintained.

- We recognise the competitive threat coming from emerging economies and by operating within these economies, typically using local staff, we are better placed to make fast progress ourselves.

- The Group operates in specialised global niche markets offering high barriers-to-entry.

Economic conditions

In times of uncertain economic conditions, businesses face additional or elevated levels of risk. These include market and customer risk, customer default, fraud, supply chain risk and liquidity risk.

- Reduced financial performance

- Loss of market share

- Unforeseen liabilities

- Disruption of service to customers

- Risks are primarily managed at the operating company level where local knowledge is situated. The financial strength and availability of pooled finances within the Group mitigates local risks faced by operating companies as does the robust credit management processes in place across the Group.

- The Halma Executive Board identifies any wider trends which require action.

- The Group's geographic diversity limits its exposure to economic risk arising in any one territory. The Group does not have significant operations, cash deposits or sources of funding in economically uncertain regions.

Financial

Funding

A key risk is that the Group may run out of cash or not have access to adequate funding. In addition, cash deposits need to be held in a secure form and location.

- Constraints on, or inability to, trade and buy new companies

- Inability to deliver on growth strategies

- Permanent loss of shareholders' funds

- Financial capacity increased during the year

- The strong cash flow generated by the Group provides financial flexibility.

- Cash needs are monitored regularly. In addition to short-term overdraft facilities, the Group renewed and increased to £360m its five-year revolving credit facility during the year providing security of funding and sufficient headroom for its needs. Debt levels decreased this year, further increasing the funding available to the Group.

- Cash deposits are monitored centrally and spread amongst a number of high credit-rated banks. Subsidiaries report their cash/indebtedness status to Head Office every week.

Treasury

Foreign currency risk is the most significant treasury-related risk for the Group. In times of increased volatility this can have a significant impact on performance. The Group is exposed to a lesser extent to other treasury risks such as interest rate risk and liquidity risk.

- Volatile financial performance arising from translation of profit from overseas operations or poorly-managed foreign exchange exposures

- Deviation from core strategy through the use of speculative or overly complex financial instruments

- Financial penalties and reputational damage arising from breach of banking covenants

- More of Group profit now earned in non-Sterling currencies. Increased interest rate risk on higher forecast borrowings

- The risk has increased because more of the Group's profits are derived from non-Sterling currencies. Currency profits are not hedged. Currency hedging must fit with the commercial needs of the business and we have in place a hedging strategy to manage Group exposures. This requires the hedging of a substantial proportion of expected future transactions up to 12 months (and in exceptional cases 24 months) ahead. Longer-term currency trends can only be covered through a wide geographic spread of operations.

- The Group does not use overly complex derivative financial instruments and no speculative treasury transactions are undertaken.

- We closely monitor performance against the financial covenants on our revolving credit facility and operate well within these covenants.

Pension deficit

To meet our pension obligations, we must adequately fund our pension plans. Our UK Defined Benefit pension plans are closed to new members and future benefit accrual for existing members will cease in the coming year.

- Excessive consumption of cash, limiting investment in operations

- Unexpected variability in the Company's financial results

- There is regular dialogue with pension fund trustees and pension strategy is a regular Halma Board agenda item. The Group's strong cash flows and access to adequate borrowing facilities mean that the pensions risk can be adequately managed.

- The Group has maintained additional pension contributions with the overall objective of paying off the deficit in line with the Actuary's recommendations. We monitor and consider alternative means of reducing our pension risk in light of the best long-term interest of shareholders.

- The UK Defined Benefit plans close to future accrual on 1 December 2014 reducing future risk.

Cyber security/ Information Technology/ Business interruption

Group and operational management depend on timely and reliable information from our software systems. We seek to ensure continuous availability, security and operation of those information systems.

- Delay or impact on decision making through lack of availability of sound data

- Reduced service to customers due to poor information handling or interruption of business

- Global threats to systems and critical information increase each year

- There is substantial redundancy and back-up built into group-wide systems and the spread of business offers good protection from individual events.

- We have a small central resource, Halma IT Services, to assist Group companies with strategic IT needs and to ensure adequate IT security policies are used across the Group.

- An IT security committee was set up in December 2012 comprising Halma plc IT members and selected subsidiary IT managers.

- Halma IT has been ISO 27001: 2013 certified for its information security management systems.

- We carry out regular IT audits. Comprehensive IT systems monitoring was introduced in 2013/14.

- We carry out cyber risk briefings and security awareness training for employees. Cyber security is a regular Board agenda item.

- We utilise external penetration testing and have completed the rollout of a centralised IT disaster recovery solution to supplement local processes.

- Business continuity plans are well advanced in each business unit.

Acquisitions

The identification and purchase of businesses which meet our demanding financial and growth criteria are an important part of our strategy for developing the Group, as is ensuring the new businesses are rapidly integrated into the Group.

- Failure to deliver expected results resulting from poor acquisition selection

- Reduced financial performance arising from failure to integrate acquisitions into the Group

- Unforeseen liabilities arising from a failure to understand acquisition targets fully

- We acquire businesses whose technology and markets we know well. Sector Chief Executives are responsible for finding and completing acquisitions in their business sectors, subject to Board approval, supported by central resources to search for opportunities. We employ detailed post-acquisition integration plans.

- Thorough due diligence is performed by a combination of in-house and external experts to ensure that a comprehensive appraisal of the commercial, legal and financial position of every target is obtained.

- Incentives are aligned to encourage acquisitions which are value-enhancing from day one.

Laws and regulations

Group operations are subject to wide-ranging laws and regulations including business conduct, employment, environmental and health and safety legislation. There is also exposure to product litigation and contractual risk. The laws and regulations we are exposed to as our businesses expand around the world increase each year.

- Diversion of management resources creating opportunity costs

- Penalties arising from breach of laws and regulations

- Loss of revenue and profit associated with contractual disputes

- The Group's emphasis on excellent internal controls, high ethical standards, the deployment of high-quality management resources and the strong focus on quality control over products and processes in each operating business help to protect us from product failure, litigation and contractual issues.

- Each operating company has a health and safety manager responsible for compliance and our performance in this area is good. Health and Safety policies, guidance and monthly reporting requirements are updated to reflect changing reporting and governance requirements and to enhance compliance. Our well-established policies on bribery and corruption have been maintained during the year to ensure continued compliance with best practice internally, via the Group Code of Conduct and externally, via appropriate clauses included in third-party agreements.

- We carry comprehensive insurance against all standard categories of insurable risk. Contract review and approval processes mitigate exposure to contractual liability.

Succession planning and staff quality

Group performance is dependent on having high-quality leaders at all levels and an organisation allowing us to continue to grow through acquisition as well as driving organic growth.

- Failure to recruit and to retain key staff could lead to reduced innovation and progress in the business

- Unethical actions of staff could cause reputational damage to the Group

- Acquisition growth can be limited by our organisation's and our leaders' ability to absorb acquisitions effectively

- International growth increases risk and need for high-quality local talent

- Group development programmes enhance the skills of executives and middle managers needed in their current and future roles.

- Comprehensive recruitment and ongoing evaluation processes assist high-quality hiring and development.

- The Group regularly surveys staff to assess the alignment of individuals with Group values.

- The appointment of a Group Talent Director underpins our identification and development of Group executives.

Research & Development and Intellectual Property strategy

New products are critical to our organic growth and underpin our ability to earn high margins and high returns over the long term.

Protection of our intellectual property builds competitive advantage by strengthening barriers-to-entry. Our intangible resources include patents, product approvals, technological know-how, branding and our workforce.

- Loss of market share resulting from product obsolescence and failure to innovate to meet customer needs

- Loss of market share resulting from a failure to protect key intellectual property

- By devolving control of product development to the autonomous operating businesses, we both spread risk and ensure that the people best placed to service the customers' needs are driving innovation.

- New product development best practice is shared between Group companies and return on investment of past and future innovation projects is tracked monthly. This ensures that the collective experience and expertise of the Group can be utilised to maximum effect.

- Large R&D projects, especially those which are capitalised, require Head Office approval, ensuring that the Group's significant projects are aligned to overall strategy.

- Workforce quality and retention is a central objective. This focus ensures that intangible resources stay and grow within the business.

- Operating businesses are actively encouraged to develop and protect know-how in local jurisdictions.

- Innovation is encouraged and fostered throughout the Group, inter alia, via the Halma Innovation Awards.

Going Concern Statement

The Group's business activities, together with the main trends and factors likely to affect its future development, performance and position, and the financial position of the Group, its cash flows, liquidity position and borrowing facilities, are set out herein.

The Group has considerable financial resources (including a £360m five-year revolving credit facility, of which £255m was undrawn at 29 March 2014) together with contracts with a diverse range of customers and suppliers across different geographic areas and industries. No one customer accounts for more than 2% of Group turnover. The Directors have considered the Group's potential exposure to the Eurozone crisis and have concluded that this is minimal due to the fact that less than 5% of sales arise in areas experiencing macro-economic uncertainty and the Group does not maintain significant banking or other business relationships in these areas. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully.

After conducting a formal review of the Group's financial resources, 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 Annual Report and Accounts.

Responsibility Statement of the Directors on the Annual Report and Accounts The responsibility statement below has been prepared in connection with the Company's full Annual Report and Accounts for the 52 weeks to 29 March 2014. Certain parts thereof are not included within this Preliminary Statement. We confirm that to the best of our knowledge:
1.	the financial statements (on which the Preliminary Statement is based), prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
2.	the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
3.	the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

This responsibility statement was approved by the Board of Directors on 12 June 2014 and is signed on its behalf by:

A J Williams

Chief Executive

K J Thompson

Finance Director

Preliminary Statement for the 52 weeks to 29 March 2014

Consolidated Income Statement

					(Restated)*
		52 weeks to 29 March 2014			52 weeks to 30 March 2013
	Notes	Before Adjustments** £000	Adjustments** (note 2) £000	Total £000	Before Adjustments** £000	Adjustments** (note 2) £000	Total £000
Continuing operations
Revenue	2	676,506	-	676,506	619,210	-	619,210
Operating profit		144,660	(1,089)	143,571	133,774	(16,477)	117,297
Share of results of associates		307	-	307	(352)	-	(352)
(Loss)/ profit on disposal of operations		-	(483)	(483)	-	8,070	8,070
Finance income	3	622	-	622	195	-	195
Finance expense	4	(5,340)	-	(5,340)	(5,074)	-	(5,074)
Profit before taxation		140,249	(1,572)	138,677	128,543	(8,407)	120,136
Taxation	5	(32,685)	335	(32,350)	(31,162)	4,632	(26,530)
Profit for the year attributable to equity shareholders	2	107,564	(1,237)	106,327	97,381	(3,775)	93,606
Earnings per share	6
From continuing operations
Basic		28.47p		28.14p	25.79p		24.79p
Diluted				28.13p			24.76p
Dividends in respect of the year	7
Paid and proposed (£000)				42,198			39,389
Paid and proposed per share				11.17p			10.43p

* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

** Adjustments include the amortisation of acquired intangible assets; acquisition items; the effects of closure to future benefit accrual of the defined benefit pension schemes net of associated costs; profit or loss on disposal of operations; and the associated taxation thereon.

Consolidated Statement of Comprehensive Income and Expenditure

	52 weeks to 29 March 2014 £000	(Restated)* 52 weeks to 30 March 2013 £000
Profit for the year	106,327	93,606
Items that will not be reclassified subsequently to the Income Statement:
Actuarial gains/ (losses) on defined benefit pension schemes	2,060	(19,852)
Tax relating to components of Other Comprehensive Income that will not be reclassified	(1,570)	4,292
Items that may be reclassified subsequently to the Income Statement:
Effective portion of changes in fair value of cash flow hedges	499	(504)
Exchange (losses)/ gains on translation of foreign operations and net investment hedge	(31,379)	16,534
Tax relating to components of Other Comprehensive Income that may be reclassified	(129)	130
Other comprehensive (expense)/ income for the year	(30,519)	600

Total comprehensive income for the year attributable to equity shareholders	75,808	94,206
*Details of the restatement are disclosed in note 1 to the Preliminary Statement. The exchange loss of £31,379,000 (2013: gain of £16,534,000) comprises losses of £2,200,000 (2013: gains of £113,000) which relate to net investment hedges as set out in the Annual Report and Accounts 2014.

Consolidated Balance Sheet

	29 March 2014 £000	(Restated)* 30 March 2013 £000
Non-current assets
Goodwill	335,278	351,785
Other intangible assets	112,754	134,457
Property, plant and equipment	74,417	76,725
Interests in associates	5,088	4,792
Deferred tax asset	20,677	28,749
	548,214	596,508
Current assets
Inventories	71,034	69,713
Trade and other receivables	135,177	133,605
Tax receivable	172	69
Cash and bank balances	34,531	49,723
Derivative financial instruments	496	256
	241,410	253,366
Total assets	789,624	849,874
Current liabilities
Trade and other payables	88,291	87,073
Borrowings	4,136	5,147
Provisions	4,482	16,276
Tax liabilities	11,340	11,331
Derivative financial instruments	167	796
	108,416	120,623
Net current assets	132,994	132,743
Non-current liabilities
Borrowings	104,891	154,866
Retirement benefit obligations	36,849	47,172
Trade and other payables	3,564	2,993
Provisions	6,777	21,756
Deferred tax liabilities	43,127	49,197
	195,208	275,984
Total liabilities	303,624	396,607
Net assets	486,000	453,267
Equity
Share capital	37,902	37,888
Share premium account	22,778	22,598
Treasury shares	(7,054)	(4,534)
Capital redemption reserve	185	185
Hedging and translation reserve	14,363	45,372
Other reserves	(2,745)	(1,484)
Retained earnings	420,571	353,242
Shareholders' funds	486,000	453,267

* The restatement incudes contingent purchase consideration being reclassified from Trade and other payables to Provisions and the application of IAS 19 (revised) as disclosed in note 1 to the Preliminary Statement.

Consolidated Statement of Changes in Equity

	Share capital £000	Share premium account £000	Treasury shares £000	Capital redemption reserve £000	Hedging and translation reserve £000	Other reserves £000	Retained earnings £000	Total £000
At 30 March 2013	37,888	22,598	(4,534)	185	45,372	(1,484)	353,242	453,267
Profit for the year	-	-	-	-	-	-	106,327	106,327
Other comprehensive income and expense:
Exchange differences on translation of foreign operations	-	-	-	-	(31,379)	-	-	(31,379)
Actuarial gains on defined benefit pension schemes	-	-	-	-	-	-	2,060	2,060
Effective portion of changes in fair value of cash flow hedges	-	-	-	-	499	-	-	499
Tax relating to components of other comprehensive income	-	-	-	-	(129)	-	(1,570)	(1,699)
Total other comprehensive income and expense	-	-	-	-	(31,009)	-	490	(30,519)
Share options exercised	14	180	-	-	-	-	-	194
Dividends paid	-	-	-	-	-	-	(40,485)	(40,485)
Share-based payments	-	-	-	-	-	(1,556)	-	(1,556)
Deferred tax on share-based payment transactions	-	-	-	-	-	295	-	295
Excess tax deductions related to share-based payments on exercised options	-	-	-	-	-	-	997	997
Net movement in treasury shares	-	-	(2,520)	-	-	-	-	(2,520)
At 29 March 2014	37,902	22,778	(7,054)	185	14,363	(2,745)	420,571	486,000
At 31 March 2012	37,856	22,177	(4,569)	185	29,212	1,346	311,905	398,112
Profit for the year (restated)*	-	-	-	-	-	-	93,606	93,606
Other comprehensive income and expense:
Exchange differences on translation of foreign operations	-	-	-	-	16,534	-	-	16,534
Actuarial losses on defined benefit pension schemes (restated)*	-	-	-	-	-	-	(19,852)	(19,852)
Effective portion of changes in fair value of cash flow hedges	-	-	-	-	(504)	-	-	(504)
Tax relating to components of other comprehensive income (restated)*	-	-	-	-	130	-	4,292	4,422
Total other comprehensive income and expense (restated)*	-	-	-	-	16,160	-	(15,560)	600
Share options exercised	32	421	-	-	-	-	-	453
Dividends paid	-	-	-	-	-	-	(37,765)	(37,765)
Share-based payments	-	-	-	-	-	(2,835)	-	(2,835)
Deferred tax on share-based payment transactions	-	-	-	-	-	5	-	5
Excess tax deductions related to share-based payments on exercised options	-	-	-	-	-	-	1,056	1,056
Net movement in treasury shares	-	-	35	-	-	-	-	35
At 30 March 2013	37,888	22,598	(4,534)	185	45,372	(1,484)	353,242	453,267

* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

Treasury shares are ordinary shares in Halma plc purchased by the Company and held to fulfil the Company's obligations under the performance share plan. At 29 March 2014 the number of treasury shares held was 1,278,148 (2013: 1,143,209) and their market value was £7,394,086 (2013: £5,921,823). The net increase in treasury shares of £2,520,000 (2013: reduction of £35,000) comprises the purchase of treasury shares of £7,515,000 (2013: £5,525,000) offset by the transfer to Other reserves of £4,995,000 (2013: £5,560,000).

The Hedging and translation reserve is used to record differences arising from the retranslation of the financial statements of foreign operations and the portion of the cumulative net change in the fair value of cash flow hedging instruments that are deemed to be an effective hedge. Other than a credit of £123,000 (2013: charge of £247,000), all amounts at year end relate to translation movements.

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

Consolidated Cash Flow Statement

	Notes	52 weeks to 29 March 2014 £000	(Restated)* 52 weeks to 30 March 2013 £000
Net cash inflow from operating activities	10	121,538	108,244

Cash flows from investing activities
Purchase of property, plant and equipment		(15,838)	(14,472)
Purchase of computer software		(1,529)	(1,044)
Purchase of other intangibles		-	(9)
Proceeds from sale of property, plant and equipment		1,708	917
Development costs capitalised		(5,196)	(5,443)
Interest received		252	195
Acquisition of businesses, net of cash acquired	8	(16,685)	(145,641)
Acquisition of investments in associates		-	(3,187)
Disposal of business, net of cash disposed	9	1,917	19,608
Net cash used in investing activities		(35,371)	(149,076)

Financing activities
Dividends paid		(40,485)	(37,765)
Proceeds from issue of share capital		194	453
Purchase of treasury shares		(7,515)	(5,525)
Interest paid		(2,716)	(2,502)
Proceeds from borrowings	10	7,498	92,298
Repayment of borrowings	10	(57,791)	(2,942)
Net cash (used in)/ from financing activities		(100,815)	44,017

(Decrease)/ increase in cash and cash equivalents	10	(14,648)	3,185
Cash and cash equivalents brought forward		49,723	45,305
Exchange adjustments		(1,949)	1,233
Cash and cash equivalents carried forward		33,126	49,723

	2014 £000	(Restated)* 2013 £000
Reconciliation of net cash flow to movement in net debt
(Decrease)/ increase in cash and cash equivalents	(14,648)	3,185
Cash outflow/ (inflow) from repayment/ (drawdowns) of borrowings	50,293	(89,356)
Net debt acquired	-	(2,406)
Loan notes issued**	(2,731)	(2,515)
Loan notes repaid**	2,515	-
Exchange adjustments	365	(489)
	35,794	(91,581)
Net debt brought forward	(110,290)	(18,709)
Net debt carried forward	(74,496)	(110,290)

* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

** The £2,515,000 loan note issued in the prior period was converted at par into cash on 31 May 2013. A new loan note was issued for £2,731,000 on 3 June 2013. This is convertible to cash at par at any time between six and twelve months from date of issue.

Notes to the Preliminary Statement

1 Basis of preparation

General Information

The Preliminary Statement is based on the Company's financial statements which are prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union (EU) and therefore comply with Article 4 of the EU IAS legislation and with those parts of the Companies Act 2006 that are applicable to companies reporting under IFRS.

With the exception of the new standards adopted in the year, as discussed below, there have been no significant changes in accounting policies from those set out in Halma plc's Annual Report and Accounts 2013. The accounting policies have been applied consistently throughout the years ended 30 March 2013 and 29 March 2014.

IAS 19 (as revised in June 2011) 'Employee Benefits' has been adopted by the Group in the current financial year. The interest cost and expected return on defined-benefit pension scheme assets used in the previous version of IAS 19 are replaced with a 'net interest' amount, which is calculated by applying a discount rate to the net defined benefit liability or asset. Furthermore, IAS 19 (revised) also introduces more extensive disclosures in the presentation of the defined benefit cost, including the separate disclosure of the schemes' administrative expenses. To aid comparison, the 52 weeks to 30 March 2013 have been restated as if IAS 19 (revised) had always applied during that year.

The effect of adopting IAS 19 (revised) was a net reduction to profit after tax of £1,610,000 for the 52 weeks ended 30 March 2013 comprising:

a) an increase in administrative expenses of £1,070,000;

b) a decrease in the expected return on pension scheme assets of £1,048,000; and

c) a reduction in the tax charge of £508,000.

The corresponding entries to a) and b) were to actuarial gains and to c) were to deferred tax taken to equity. The effect on basic, adjusted basic and diluted earnings per share of the above changes was a reduction to all of 0.43p. The effect on non-GAAP measures is detailed in Note 11 to the Preliminary Statement. There was no net effect on net cash flow from operations as a result of the change in accounting policy.

The financial information set out in this Preliminary Statement does not constitute the Group's statutory accounts for the years ended 29 March 2014 and 30 March 2013 but is derived from those accounts. Statutory accounts for 2013 have been delivered to the Registrar of Companies and those for 2014 will be delivered following the Company's Annual General Meeting. The auditor's reports on the 2013 and the 2014 accounts were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

IAS 1 (revised) requires that items of Other Comprehensive Income that may in future be recycled to the Income Statement are presented separately from those which will not. This presentational change has been made to the Consolidated Statement of Comprehensive Income in the current year.

The following Standards with an effective date of 1 January 2013 have been adopted without any significant impact on the amounts reported in these financial statements:

- IFRS 1 (amended) 'Government Loans'

- IFRS 7 (amended) 'Disclosures - Offsetting Financial Assets and Financial Liabilities'

- IFRS 13 'Fair Value Measurement'

- IAS 12 (amended) 'Deferred Tax Recovery of Underlying Assets'

The following standard with an effective date of 1 January 2014 has been adopted early without any significant impact on the amounts reported in these financial statements:

- IAS 36 (amended) 'Recoverable Amount Disclosures for Non-financial Assets'

This Preliminary Statement was approved by the Board of Directors on 12 June 2014.

2 Segmental analysis

Sector analysis

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

Segment revenue and results	Revenue (all continuing operations)
	52 weeks to 29 March 2014 £000	52 weeks to 30 March 2013 £000
Process Safety	126,704	125,656
Infrastructure Safety	220,254	205,315
Medical	163,181	136,054
Environmental & Analysis	166,547	152,448
Inter-segmental sales	(180)	(263)
Revenue for the year	676,506	619,210

Inter-segmental sales are charged at prevailing market prices and have not been disclosed separately by segment as they are not considered material. The Group does not analyse revenue by product group and has no material revenue derived from the rendering of services.

	Profit (all continuing operations)
	52 weeks to 29 March 2014 £000	(Restated)* 52 weeks to 30 March 2013 £000
Segment profit before allocation of adjustments**
Process Safety	34,878	32,310
Infrastructure Safety	44,445	41,523
Medical	41,826	35,934
Environmental & Analysis	31,740	30,385
	152,889	140,152
Segment profit after allocation of adjustments**
Process Safety	34,125	39,848
Infrastructure Safety	45,010	41,469
Medical	41,554	24,146
Environmental & Analysis	27,574	26,282
Segment profit	148,263	131,745
Central administration costs excluding the effects of closure to future benefit accrual of the defined benefit pension scheme net of associated costs***	(7,922)	(6,730)
Effects of closure to future benefit accrual of the defined benefit pension scheme net of associated costs***	3,054	-
Net finance expense	(4,718)	(4,879)
Group profit before taxation	138,677	120,136
Taxation	(32,350)	(26,530)
Profit for the year	106,327	93,606

* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

*** The defined benefit scheme referred to here is the Halma Group Pension Plan only, which is not practical to allocate by Segment (see adjustments table below).

The accounting policies of the reportable segments are the same as the Group's accounting policies. For acquisitions after 3 April 2010, acquisition transaction costs and movement on contingent consideration (collectively "acquisition items"), are recognised in the Consolidated Income Statement. Segment profit, before these acquisition items and the other adjustments, is disclosed separately above as this is the measure reported to the Chief Executive Officer for the purpose of allocation of resources and assessment of segment performance.

These adjustments are analysed as follows:

							2014
		Acquisition items
	Amortisation of acquired intangibles £000	Transaction costs £000	Adjustments to contingent consideration £000	Total amortization charge and acquisition items £000	Disposal of operations (note 9) £000	Effects of closure to future benefit accrual of defined benefit pension schemes* £000	Total £000
Process Safety	(598)	-	(17)	(615)	(138)	-	(753)
Infrastructure Safety	(144)	(140)	-	(284)	(45)	894	565
Medical	(12,530)	102	12,456	28	(300)	-	(272)
Environmental & Analysis	(4,243)	(53)	130	(4,166)	-	-	(4,166)
Total Segment	(17,515)	(91)	12,569	(5,037)	(483)	894	(4,626)
Central administration costs	-	-	-	-	-	3,054	3,054
Total Group	(17,515)	(91)	12,569	(5,037)	(483)	3,948	(1,572)

* The effects of closure to future benefit accrual of defined benefit pension schemes, which were gains of £894,000 and £3,054,000, arose on the closure of the Apollo Pension and Life Assurance Plan and Halma Group Pension Plan respectively. It is not practical to apportion the latter gain by Segment.

The transaction costs arose mainly on the acquisition (see note 8) of ASL Holdings Limited and Talentum Developments Limited, which were acquired on 14 March 2013 and 11 April 2013 respectively. The credit in the Medical Segment related mainly to the release of accrued fees arising on the MicroSurgical Technology, Inc. ("MST") acquisition in the prior year. The £12,456,000 credit to contingent consideration related mainly to a revision in the estimate of the MST payment from US $25,0000,000 to US $6,504,000.

						2013
		Acquisition items
	Amortisation of acquired in tangibles £000	Transaction costs £000	Adjustments to contingent consideration £000	Total amortization charge and acquisition items £000	Disposal of continuing operations £000	Effects of closure to future benefit accrual of defined benefit pension schemes £000	Total £000
Process Safety	(602)	-	(16)	(618)	8,156	-	7,538
Infrastructure Safety	-	(54)	-	(54)	-	-	(54)
Medical	(9,947)	(2,272)	517	(11,702)	(86)	-	(11,788)
Environmental & Analysis	(3,686)	(417)	-	(4,103)	-	-	(4,103)
Total Segment	(14,235)	(2,743)	501	(16,477)	8,070	-	(8,407)
Central administration costs	-	-	-	-	-	-	-
Total Group	(14,235)	(2,743)	501	(16,477)	8,070	-	(8,407)

Geographical information

The Group's revenue from external customers (by location of customer) is detailed below:

	Revenue by destination
	2014 £000	2013 £000
United States of America	214,493	194,990
Mainland Europe	163,707	151,631
United Kingdom	127,877	115,575
Asia Pacific	111,572	100,532
Africa, Near and Middle East	33,037	31,380
Other countries	25,820	25,102
	676,506	619,210

3 Finance income
	2014 £000	(Restated)* 2013 £000
Interest receivable	252	195
Fair value movement on derivative financial instruments	370	-
	622	195
* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

4 Finance expense
	2014 £000	(Restated)* 2013 £000
Interest payable on bank loans and overdrafts	2,691	2,366
Amortisation of finance costs	599	634
Net interest charge on pension scheme liabilities	1,875	1,518
Other interest payable	25	90
	5,190	4,608
Fair value movement on derivative financial instruments	-	384
Unwinding of discount on provisions	150	82
	5,340	5,074
* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

5 Taxation As stated in note 1 to the Preliminary Statement, the prior year's results have been restated following the adoption of IAS19 (revised) from 31 March 2013. Consequently, the deferred tax charge in the Consolidated Income Statement and the tax credit recognised directly in the Consolidated Statement of Comprehensive Income have both been reduced by £508,000.
	2014 £000	(Restated)* 2013 £000
Current tax
UK corporation tax at 23% (2013: 24%)	9,465	8,081
Overseas taxation	20,872	19,046
Adjustments in respect of prior years	(492)	(178)
Total current tax charge	29,845	26,949
Deferred tax
Origination and reversal of timing differences	2,626	(548)
Adjustments in respect of prior years	(121)	129
Total deferred tax charge/ (credit)	2,505	(419)
Total tax charge recognised in the Consolidated Income Statement	32,350	26,530
Reconciliation of the effective tax rate:
Profit before tax	138,677	120,136

Tax at the UK corporation tax rate of 23% (2013: 24%)	31,896	28,833
Overseas tax rate differences	5,665	5,413
Permanent differences	(4,598)	(7,667)
Adjustments in respect of prior years	(613)	(49)
	32,350	26,530
Effective tax rate after adjustments**	23.3%	22.1%

	2014 £000	2013 £000
Profit before tax and adjustments**	140,249	128,543
Total tax charge on profit before adjustments**	32,685	31,162
Effective tax rate	23.3%	24.2%

* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

6 Earnings per ordinary share

Basic earnings per ordinary share are calculated using the weighted average of 377,805,248 shares in issue during the year (net of shares purchased by the Company and held as treasury shares) (2013: 377,597,126). Diluted earnings per ordinary share are calculated using the weighted average of 378,035,662 shares (2013: 378,009,506), which includes dilutive potential ordinary shares of 230,414 (2013: 412,380). 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.

Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation of acquired intangible assets; acquisition items; the effects of closure to future benefit accrual of the defined benefit pension schemes net of associated costs; profit or loss on disposal of operations; and associated tax thereon. The Directors consider that adjusted earnings represent a more consistent measure of underlying performance. A reconciliation of earnings and the effect on basic earnings per share figures is as follows:

			Per ordinary share
	2014 £000	(Restated)* 2013 £000		2014 pence	(Restated)* 2013 £000
Earnings from continuing operations	106,327	93,606	28.14		24.79
Cessation of DB pension accrual (after tax)	(3,040)	-	(0.80)		-
Amortisation of acquired intangible assets (after tax)	11,820	9,978	3.14		2.64
Acquisition transaction costs (after tax)	91	2,252	0.02		0.60
Adjustments to contingent consideration (after tax)	(8,104)	(385)	(2.15)		(0.10)
Loss/ (profit) on disposal of operations (after tax)	470	(8,070)	0.12		(2.14)
Adjusted earnings	107,564	97,381	28.47		25.79

* The effect on the prior year of the adoption of IAS 19 (revised) on earnings and adjusted earnings per ordinary share was a reduction to both of 0.43p. See note 1 to the Preliminary Statement.

7 Dividends
	Per ordinary share
	2014 pence	2013 pence	2014 £000	2013 £000
Amounts recognised as distributions to shareholders in the year
Final dividend for the year to 30 March 2013 (31 March 2012)	6.37	5.95	24,049	22,425
Interim dividend for the year to 29 March 2014 (30 March 2013)	4.35	4.06	16,436	15,340
	10.72	10.01	40,485	37,765
Dividends declared in respect of the year
Interim dividend for the year to 29 March 2014 (30 March 2013)	4.35	4.06	16,436	15,340
Proposed final dividend for the year to 29 March 2014 (30 March 2013)	6.82	6.37	25,762	24,049
	11.17	10.43	42,198	39,389

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 24 July 2014 and has not been included as a liability in these financial statements. If approved, the final dividend for 2013/14 will be paid on 20 August 2014 to shareholders on the register at the close of business on 18 July 2014.

The Company offers a Dividend Reinvestment Plan ('DRIP') to enable shareholders to elect to have their cash dividends reinvested in Halma shares. Shareholders who wish to elect for the DRIP for the forthcoming final dividend, but have not already done so, should return a DRIP mandate form to the Company's Registrars no later than 30 July 2014.

8 Acquisitions

The Group made one acquisition during the year, Talentum Developments Limited (Talentum). Below are summaries of the assets and liabilities acquired and the purchase consideration of:

a) The total of Talentum and adjustments to prior year acquisitions; and

b) Talentum, on a stand-alone basis.

(A) Total of Talentum and adjustments to prior year acquisitions
	Book value £000	Fair value adjustments £000	Total £000
Non-current assets
Intangible assets	-	1,444	1,444
Property, plant and equipment	196	-	196
Current assets
Inventories	308	(432)	(124)
Trade and other receivables	649	(25)	624
Cash and cash equivalents	754	-	754
Deferred tax	-	291	291
Total assets	1,907	1,278	3,185
Current liabilities
Trade and other payables	(180)	(125)	(305)
Provisions	-	(734)	(734)
Corporation tax	(143)	(69)	(212)
Non-current liabilities
Deferred tax	(16)	(339)	(355)
Total liabilities	(339)	(1,267)	(1,606)
Net assets of businesses acquired	1,568	11	1,579

Initial cash consideration paid (Talentum)			3,315
Initial cash consideration adjustment (prior year acquisition)			(337)
Deferred purchase consideration to be paid (Talentum)			250
Total consideration			3,228

Goodwill arising on current year acquisitions			1,032
Goodwill arising on prior year acquisitions			617
			1,649

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

During the financial year ended 29 March 2014 adjustments were made to the fair values of acquired assets and liabilities included in the provisional accounting for the following prior year acquisitions:

a) MicroSurgical Technology, Inc.;

b) Thinketron Precision Equipment Company Limited (and its main trading subsidiary, Baoding Longer Precision Pump Co., Ltd); and

c) ASL Holdings Limited.

The provisional accounting was updated for non-material changes to certain provisions, inventory valuations and deferred tax balances. The combined adjustments made for each acquisition resulted in a net adjustment to goodwill of £617,000. All adjustments to the provisional accounting were made within the goodwill measurement period, relevant to each acquisition, as defined by IFRS 3 (revised) 'Business Combinations'.

As at the date of approval of these financial statements, the accounting for all current and prior year acquisitions is completed.

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

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

None of the goodwill arising on acquisitions in the year is expected to be deductible for tax purposes.

Talentum, the one acquisition in the year, contributed £2,132,000 of revenue and £576,000 of profit after tax for the period ended 29 March 2014. If this acquisition had been held since the start of the financial year, it is estimated the Group's reported revenue and profit after tax would have been £52,000 and £13,000 higher respectively.

Analysis of cash outflow in the Consolidated Cash Flow Statement

	2014 £000	2013 £000
Initial cash consideration paid	3,315	133,060
Initial cash consideration adjustment (prior year acquisition)	(337)	-
Cash acquired on acquisitions	(754)	(7,869)
Overdrafts acquired on acquisitions	-	869
Contingent consideration paid in relation to current year acquisitions	-	3,810
Contingent consideration paid in relation to prior year acquisitions*	14,461	15,771
Net cash outflow relating to acquisitions (per Consolidated cash flow statement)	16,685	145,641
Bank loans acquired	-	2,406
Net movement in cash and debt, including bank loans acquired	16,685	148,047

* Of the £14,461,000 (2013: £15,771,000) contingent purchase consideration payment £14,461,000 (2013: £15,771,000) had been provided in the prior year's financial statements.

(B) Talentum Developments Limited

	Book value £000	Fair value adjustments £000	Total £000
Non-current assets
Intangible assets	-	1,444	1,444
Property, plant and equipment	196	-	196
Current assets
Inventories	308	(101)	207
Trade and other receivables	649	-	649
Cash and cash equivalents	754	-	754
Total assets	1,907	1,343	3,250
Current liabilities
Trade and other payables	(180)	-	(180)
Provisions	-	(60)	(60)
Corporation tax	(143)	-	(143)
Non-current liabilities
Deferred tax	(16)	(318)	(334)
Total liabilities	(339)	(378)	(717)
Net assets of businesses acquired	1,568	965	2,533

Cash consideration			3,315
Contingent purchase consideration			250
Total consideration			3,565

Goodwill arising on acquisition			1,032

The Group made one acquisition during the year. The entire share capital of Talentum Developments Limited (Talentum) was acquired on 11 April 2013 for an initial cash consideration of £2,590,000. This was subsequently adjusted by an additional £725,000 which was paid in June 2013 based on the final level of agreed working capital at the acquisition date. Deferred consideration of £250,000 was paid in April 2014 after the seller provided certain pre-agreed technical information and know-how to the Group.

Talentum forms part of the Infrastructure Safety sector and specialises in the design and manufacture of flame detector products for a range of industries, which protect property from the risk of fire. The excess of the fair value of the consideration paid over the fair value of the assets acquired is represented by customer related intangibles of £806,000; marketing and technology related intangibles of £638,000; with residual goodwill arising of £1,032,000. The goodwill represents:

a) the technical expertise of the acquired workforce;

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

c) the ability to exploit the Group's existing customer base.

9 Disposal of business

On 22 August 2012, the Group disposed of its Asset Monitoring businesses, comprising Tritech Holdings Limited and its subsidiary Tritech International Limited (together known as Tritech). Tritech was sold for an initial cash consideration of £18,900,000. A further £839,000 was received in October 2012 in respect of cash and working capital held in the business at the time of sale. In addition £2,100,000 was retained in escrow and was released to Halma in August 2013. Net assets disposed of as part of the transaction included goodwill of £8,009,000.

The £1,917,000 cash inflow from disposal of businesses shown in the Consolidated Cash Flow Statement represents the £2,100,000 released from escrow less disposal transaction costs of £183,000. The loss on disposal of £483,000 comprises £183,000 costs and a £300,000 loss on the 2012 disposal of Volumatic Limited, following a revision to the remaining contingent consideration receivable from £300,000 to £nil. No further consideration is due to the Group in relation to either the Tritech or Volumatic Limited disposals.

The profit on disposal of £8,070,000, and cash inflow of £19,608,000, for the 52 weeks to 30 March 2013 related almost entirely to the disposal of Tritech.

10 Notes to the Consolidated Cash Flow Statement
	2014 £000	(Restated)* 2013 £000
Reconciliation of profit from operations to net cash inflow from operating activities:
Profit on continuing operations before finance income and expense, share of results of associates and loss/ (profit) on disposal of operations	143,571	117,297
Depreciation of property, plant and equipment	13,625	12,684
Amortisation of computer software	1,168	1,402
Amortisation of capitalised development costs and other intangibles	4,002	3,578
Disposals/retirements of capitalised development costs	-	264
Amortisation of acquired intangible assets	17,515	14,235
Share-based payment expense in excess of amounts paid	3,470	2,482
Additional payments to pension schemes	(5,892)	(7,195)
Profit on sale of property, plant and equipment and computer software	(26)	(163)
Effects of closure to future benefit accruals on defined benefit pension schemes	(4,246)	-
Operating cash flows before movement in working capital	173,187	144,584
Increase in inventories	(5,127)	(2,693)
Increase in receivables	(9,111)	(9,210)
Increase in payables and provisions	3,334	1,015
Revision to estimate of contingent consideration payable	(12,394)	-
Cash generated from operations	149,889	133,696
Taxation paid	(28,351)	(25,452)
Net cash inflow from operating activities	121,538	108,244

	2014 £000	2013 £000
Analysis of cash and cash equivalents
Cash and bank balances	34,531	49,723
Overdrafts (included in current borrowings)	(1,405)	-
Cash and cash equivalents	33,126	49,723

	At 30 March 2013 £000	Cash flow £000	Net cash acquired £000	Loan notes issued £000	Loan notes repaid £000	Exchange adjustments £000	At 29 March 2014 £000
Analysis of net debt
Cash and bank balances	49,723	(13,997)	754	-	-	(1,949)	34,531
Overdrafts	-	(1,405)	-	-	-	-	(1,405)
Cash and cash equivalents	49,723	(15,402)	754	-	-	(1,949)	33,126
Loan notes falling due within one year	(2,515)	-	-	(2,731)	2,515	-	(2,731)
Bank loans falling due within one year	(2,632)	2,516	-	-	-	116	-
Bank loans falling due after more than one year	(154,866)	47,777	-	-	-	2,198	(104,891)
Total net debt	(110,290)	34,891	754	(2,731)	2,515	365	(74,496)

* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

The net cash outflow from bank loans in 2014 comprised repayments of £57,791,000 offset by drawdowns of £7,498,000 (2013: net cash inflow comprising drawdowns of £92,298,000 offset by repayments of £2,942,000). The £754,000 cash and cash equivalents acquired comprised cash only.

The net of the above £15,402,000 cash outflow and of £754,000 net cash acquired is equal to the decrease in cash and cash equivalents (£14,648,000) in the Consolidated Cash Flow Statement.

11 Non-GAAP measures

The Board uses certain non-GAAP measures to help it effectively monitor the performance of the Group. These measures include Return on Capital Employed, Return on Total Invested Capital, Organic growth, Adjusted operating profit and Adjusted operating cash flow.

Return on Capital Employed
	2014 £000	(Restated)* 2013 £000
Operating profit before adjustments**, but after share of results of associates	144,967	133,422
Computer software costs within intangible assets	2,810	2,383
Capitalised development costs within intangible assets	12,981	11,977
Other intangibles within intangible assets	8	146
Property, plant and equipment	74,417	76,725
Inventories	71,034	69,713
Trade and other receivables	135,177	133,605
Trade and other payables	(88,291)	(87,073)
Current provisions	(4,482)	(16,276)
Net tax liabilities	(11,168)	(11,262)
Non-current trade and other payables	(3,564)	(2,993)
Non-current provisions	(6,777)	(21,756)
Add back contingent purchase consideration	7,562	33,512
Capital employed	189,707	188,701
Return on Capital Employed (ROCE)	76.4%	70.7%

* The effect on the prior year of the adoption of IAS 19 (revised) on the Return on Capital Employed (ROCE) measure was a reduction in ROCE of 0.6%. This change arose due to the reduction in operating profit. See note 1 to the Preliminary Statement for further details.

Return on Total Invested Capital
	2014 £000	(Restated)* 2013 £000
Post-tax profit before adjustments**	107,564	97,381
Total shareholders' funds	486,000	453,267
Add back retirement benefit obligations	36,849	47,172
Less associated deferred tax assets	(7,372)	(10,851)
Cumulative amortisation of acquired intangibles	61,324	46,150
Historical adjustments to goodwill***	89,549	89,549
Total invested capital	666,350	625,287
Return on Total Invested Capital (ROTIC)	16.1%	15.6%

* The effect on the prior year of the adoption of IAS 19 (revised) on the Return on Total Invested Capital (ROTIC) measure was a reduction in ROTIC of 0.2% due to a reduction in post-tax profit. See note 1 to the Preliminary Statement for further details.

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

Organic growth Organic growth measures the change in revenue and profit from continuing Group operations. The effect of acquisitions and disposals made during the prior financial year, and acquisitions made in the current financial year has been equalised by adjusting the current year results for pro-rated contributions based on their revenues and profits before taxation at the dates of acquisition and disposal. The results of disposals made in the prior financial year have been removed from the prior year reported revenue and profit before taxation. Organic growth has been calculated as follows:
	Revenue			Profit** before taxation
	2014 £000	2013 £000	% growth	2014 £000	(Restated)* 2013 £000	% growth
Continuing operations	676,506	619,210		140,249	128,543
Acquired and disposed revenue/profit	(26,413)	(5,088)		(5,379)	(915)
	650,093	614,122	5.9%	134,870	127,628	5.7%

* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

** Profit before adjustments, which include the amortisation of acquired intangible assets; acquisition items; the effects of the closure to future benefit accrual of the defined benefit pension schemes net of associated costs; and profit or loss on disposal of operations.

Adjusted operating profit
	2014 £000	(Restated)* 2013 £000
Operating profit	143,571	117,297
Add back:
Acquisition items	(12,478)	2,242
Effects of closure to future benefit accrual of defined benefit pension schemes	(3,948)	-
Amortisation of acquired intangible assets	17,515	14,235
Adjusted operating profit	144,660	133,774

Adjusted operating cash flow
	2014 £000	(Restated)* 2013 £000
Net cash from operating activities (note 10)	121,538	108,244
Add back:
Taxes paid	28,351	25,452
Proceeds from sale of property, plant and equipment	1,708	917
Less:
Purchase of property, plant and equipment	(15,838)	(14,472)
Purchase of computer software and other intangibles	(1,529)	(1,053)
Development costs capitalised	(5,196)	(5,443)
Adjusted operating cash flow	129,034	113,645
Cash conversion % (adjusted operating cash flow/adjusted operating profit)	89%	85%

* Details of the restatement are disclosed in note 1 to the Preliminary Statement.

The effect on the prior year of the adoption of IAS 19 (revised) was an increase of 1% in the cash conversion %.

12 Events after the balance sheet date

On 2 May 2014 the Group acquired Plasticspritzerei AG (Plasticspritzerei), located in Wolfhalden, Switzerland at the same facility as another Group company, Medicel AG (Medicel). An initial cash consideration of CHF 8,000,000 was paid to acquire the trade and assets of the business. The Group then immediately sold the industrial segment of the business to a third party, resulting in a net cash cost to the Group of CHF 4,800,000 (£3,200,000). These transactions have resulted in the Group owning only those assets which support Medicel's business. Plasticspritzerei will be operated by Medicel's management within Halma's Medical sector, further expanding the Group's manufacturing excellence in ophthalmic diagnostic and surgical instrumentation. Due to the proximity of the acquisition date to the date of approval of the Annual Report, it is impracticable to provide further information.

As part of the transaction in which the Group acquired Plasticspritzerei AG, the Group disposed of its 50% ownership interest in its associate, PSRM Immobilien AG (PSRM), for cash consideration of CHF 500,000. Due to the proximity of the transaction date to the date of approval of the Annual Report, it is impracticable to provide further information.

On 14 May 2014 the Group acquired the entire share capital of Advanced Electronics Limited (Advanced) for an initial cash consideration of £14,100,000. A further £1,369,000 was paid to acquire the net cash in the business at the completion date. The initial cash consideration is adjustable based on the final level of agreed working capital and cash at closing. Contingent consideration of up to £10,100,000 is payable in two tranches on or around July 2014 and July 2015 respectively, subject to the company achieving certain profit targets.

Advanced will operate as a stand-alone business within Halma's Infrastructure Safety sector and specialises in the manufacture of networked fire detection and control systems. Advanced's controllers can be integrated into system solutions using field devices and products from a broad spectrum of suppliers, meeting the increasing diversity of regulatory requirements across the world. Its main manufacturing facility is located near Newcastle in the UK with a dedicated electronics and software development facility in Barnsley. It has additional commercial offices in the UK, USA and Dubai. Advanced will add complementary products that will help capture the international growth opportunity in the increasingly regulated Fire market. Due to the proximity of the acquisition date to the date of approval of the Annual Report, it is impracticable to provide further information.

On 30 May 2014 the Group acquired Rohrback Cosasco Systems Inc. (RCS) and associated companies, headquartered in California, USA. RCS also operates in Canada, UK, UAE, Singapore, China, Australia and Texas, USA. An initial cash consideration of $108,000,000 (£64,700,000) was paid for the entire share capital of RCS and its associate companies. A further $8,000,000 (£4,800,000) was paid to acquire the net cash in the business at the completion date. The initial cash consideration is adjustable based on the final level of agreed working capital and cash at closing. RCS is a world leader in the design, manufacture and sale of pipeline corrosion monitoring products and systems into diverse industries including oil, gas, petrochemical, pharmaceutical and utilities. The acquisition of RCS expands Halma's portfolio of critical safety products which are sold into the Energy and Utility markets to protect life and operational assets. The existing RCS management team will remain in place and will continue to operate the business which already operates in the same industries with similar long-term market growth drivers, including increasing safety requirements. Due to the proximity of the acquisition date to the date of the approval of the Annual Report it is impracticable to provide further information.

On 30 May 2014, the Group disposed of Monitor Elevator Products Inc. (Monitor) from its Infrastructure Safety sector. The total consideration was $6,000,000 (£3,600,000), of which $5,100,000 was received in cash at completion and $900,000 was retained in escrow to be released to Halma on the second anniversary of the transaction subject to any valid warranty/indemnity claims being made by the purchaser. Consideration is adjustable by the amount that closing net assets are calculated to be more or less than $2,500,000 at the time of completion. An additional $400,000 was received in cash at closing representing the initial estimate of the excess closing net asset value. The Directors estimate that the entire $900,000 held in escrow will be received.

The profit on disposal is estimated to be approximately £1m being the total equivalent Sterling consideration stated above less £2.5m of net assets disposed and transaction costs. No goodwill was disposed of or impaired as a result of this transaction. Monitor has not been separately disclosed as a discontinued operation as defined by IFRS 5 due to its nature and size.

13 Related party transactions

Trading transactions

	2014 £000	2013 £000
Associated companies
Purchases from associated companies	524	519
Amounts due to associated companies	56	3
Amounts due from associated companies	128	200

Other related parties
Rent charged by other related parties	115	360
Amounts due to other related parties	-	-

Other related parties comprise two companies with Halma employees on the Boards and from which two Halma subsidiaries rent property. All the transactions above are on an arm's length basis and on standard business terms.

Remuneration of key management personnel

The remuneration of the Directors and Executive Board members, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual Directors is provided in the audited part of the Directors' Remuneration Report in the Annual Report and Accounts 2014.

	2014 £000	2013 £000
Wages and salaries	4,353	4,185
Pension costs	130	165
Share-based payment charge	1,908	1,643
	6,391	5,993

Cautionary note

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

This information is provided by RNS

The company news service from the London Stock Exchange

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