RNS Number : 8162T

Halma PLC

19 November 2019

HALMA plc

HALF YEAR RESULTS 2019/20

Record first half results and continued dividend growth

Halma, the global group of life-saving technology companies focused on growing a safer, cleaner and healthier future, today announces its half year results for the 6 months to 30 September 2019.

Highlights

	Change	2019	2018
Revenue	+12%	£653.7m	£585.5m
Adjusted Profit before Taxation1	+14%	£128.8m	£112.9m
Adjusted Earnings per Share2	+15%	27.20p	23.67p
Statutory Profit before Taxation	+12%	£105.8m	£94.5m
Statutory Earnings per Share	+14%	22.40p	19.67p
Interim Dividend per Share3	+7%	6.54p	6.11p
Return on Sales4		19.7%	19.3%
Return on Total Invested Capital5		14.8%	14.9%
Net Debt6		£310.4m	£194.6m

·      Strong growth with Revenue up 12%, Adjusted¹ Profit before Taxation up 14%, and Statutory Profit before Taxation up 12%, reflecting good organic and acquired growth.

·      Organic constant currency⁷ revenue growth up 5%, and organic constant currency³ Adjusted¹ Profit before Taxation growth of 6%.

·      Organic constant currency⁷ revenue growth in all major regions, with good performances in the USA, UK and Asia Pacific, and solid growth in Mainland Europe.

·      Revenue growth in all four sectors on an organic constant currency basis⁷, with three out of four sectors delivering growth in Adjusted¹ Profit before Taxation on an organic constant currency basis⁷.

·      Strong returns, with Return on Sales⁴ of 19.7% and ROTIC5 of 14.8%, as well as continued investment, with R&D expenditure up 12% and representing 5.3% of revenue.

·      Solid cash generation, with cash conversion of 82%.

·      Healthy acquisition pipeline with three acquisitions completed in the first half and two further acquisitions completed since the period end.

·      Robust balance sheet supporting sustained investment in organic growth and acquisitions, with net debt of £310.4m (including an increase from IFRS 16 of £57.0m) and net debt to EBITDA of 0.98 times.

·      Interim dividend increased 7%.

Andrew Williams, Group Chief Executive of Halma, commented:

"Halma made good progress in the first half, delivering record revenue, profit and dividends, while increasing strategic investment to remain well positioned in global niche markets which have resilient, long-term growth drivers. Our strong purpose and culture, our portfolio and geographic diversity together with our agile business model are enabling us to deliver a good performance in varied market conditions and to sustain growth and returns over the longer term.

Since the period end, order intake has continued to be ahead of revenue and order intake last year. Halma remains on track to make further progress in the second half of the year and deliver another good full year performance."

Notes

1	Adjusted to remove the amortisation of acquired intangible assets, acquisition items, significant restructuring costs and profit or loss on disposal of operations, totalling £23.0m (2018/19: £18.4m). See note 2 to the Condensed Interim Financial Statements for details.
2	Adjusted to remove the amortisation of acquired intangible assets, acquisition items, significant restructuring costs, profit or loss on disposal of operations and the associated taxation thereon. See note 2 to the Condensed Interim Financial Statements for details.
3	Interim dividend paid and declared 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	Return on Total Invested Capital (ROTIC) is defined as post-tax Adjusted1 Profit as a percentage of average Total Invested Capital.
6	Includes an increase in 2019 of £57.0m as a result of the implementation of IFRS 16.
7	Adjusted1 Profit before Taxation, Adjusted2 Earnings per Share, organic growth rates, Return on Sales and ROTIC are alternative performance measures used by management. See notes 2, 6 and 9 to the Condensed Interim Financial Statements for details.

For further information, please contact:

Halma plc Andrew Williams, Group Chief Executive Marc Ronchetti, Chief Financial Officer Charles King, Head of Investor Relations	+44 (0)1494 721 111 +44 (0)7776 685948
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.  The webcast of the results presentation will be available on the Halma website later today: www.halma.com

NOTE TO EDITORS

1.	Halma is a global group of life-saving technology companies, focused on growing a safer, cleaner and healthier future for everyone, every day. Our innovative products and solutions address many of the key issues facing the world today. The Group comprises four business sectors:
	·    Process Safety	Technologies that protect people and assets at work.
	·    Infrastructure Safety	Technologies that save lives, protect infrastructure and enable safe movement in public spaces.
	·    Environmental & Analysis	Technologies to improve environmental protection and the security of life-critical resources.
	·    Medical	Technologies which enhance the quality of life for patients and improve the quality of care delivered by healthcare providers.

	The key characteristics of Halma's businesses are specialist technology and application knowledge for niches within markets offering strong long-term growth potential. Many Group businesses are market leaders in their specialist fields.
2.	You can view or download copies of this announcement and the latest Half Year and Annual Reports from the website at www.halma.com or request free printed copies by contacting halma@halma.com.
3.	This announcement contains certain forward-looking statements which have been made by the Directors in good faith using information available up until the date they approved the announcement. Forward-looking statements should be regarded with caution as by their nature such statements involve risk and uncertainties relating to events and circumstances that may occur in the future. Actual results may differ from those expressed in such statements, depending on the outcome of these uncertain future events.

Review of Operations

Record half year results

Halma made good progress in the first half of the year. Revenue increased by 12% to £653.7m (2018/19: £585.5m), Adjusted¹ Profit before Taxation increased by 14% to £128.8m (2018/19: £112.9m), and Statutory Profit before Taxation increased by 12% to £105.8m (2018/19: £94.5m).

Revenue growth included good organic constant currency revenue growth of 5%, against a strong comparative of 14% growth in the first half of the last financial year, a 4% contribution from acquisitions completed in this and the previous half year, and a positive currency translation effect of 3%.

The 14% increase in Adjusted¹ Profit before Taxation included organic constant currency growth of 6% against a comparative of 16% growth in the first half of last year, a 4% contribution from acquisitions completed in this half year and the second half of last year and a positive currency translation effect of 4%.

Return on Sales¹ improved to 19.7% (2018/19: 19.3%), including a further increase in strategic investment for future growth. Our companies increased R&D expenditure by 12% to £34.9m, representing 5.3% of Group revenue (2018/19: 5.3%).

The Board has declared an increase of 7% in the interim dividend to 6.54p per share (2018/19: 6.11p per share). The interim dividend will be paid on 5 February 2020 to shareholders on the register on 24 December 2019.

Revenue growth in all four major regions

We grew revenue in all four major regions, with organic constant currency revenue growth in our four major regions and in all of our business sectors. This was further supported by a positive contribution from acquisitions and by favourable currency translation.

The USA remains our largest sales destination and contributed 38% of total revenue. Revenue increased 15%, or 7% on an organic constant currency basis, driven by strong performances in the Environmental & Analysis and Infrastructure Safety sectors. Reported revenue growth in Infrastructure Safety included a contribution, in line with our expectations, from Rath Communications, which was acquired in January 2019. Process Safety delivered a good performance, despite challenges in some areas including certain oil and gas-related markets, as it continued to benefit from a large logistics contract. The Medical sector grew at a slower rate, partly as a result of the disposal of Accudynamics in the last financial year.

Revenue in the UK grew 9%, or 8% on an organic constant currency basis, with strong contributions from the two largest sectors in the region, Environmental & Analysis and Infrastructure Safety, and good progress in the smaller Medical sector. This was partly offset by a slowdown in the Process Safety sector.

Mainland Europe revenue increased by 9%, or 4% on an organic constant currency basis. Infrastructure Safety and Environmental & Analysis performed well, while there were small declines in the other two sectors.

Asia Pacific's revenue grew 21%, or 9% on an organic constant currency basis. Organic growth reflected strong performances in the Process Safety and Medical sectors and modest growth in the Environmental & Analysis and Infrastructure Safety sectors. Total revenue growth in this region included a contribution of 9% from acquisitions, primarily the Ampac Group acquisition which was completed in July 2019, details of which are given below.

In the rest of the world, which represents just 9% of the Group, revenue fell 6%, or 9% on an organic constant currency basis. Revenue declined in the Africa, Near and Middle East territories, partially reflecting the timing of project-based business. Other countries performed well overall.

The tables below summarise revenue growth by destination and by sector, including the rates of organic growth at constant currency. Organic constant currency measures exclude the effect of movements in foreign exchange rates on the translation of revenue and profit into Sterling, as well as acquisitions and disposals for the year following completion.

External revenue by destination
	Half year 2019		Half year 2018
	£m	% of total	£m	% of total	Change  £m	% growth	% organic growth at constant currency
United States of America	248.8	38%	216.0	37%	32.8	15%	7%
Mainland Europe	135.5	21%	124.3	21%	11.2	9%	4%
United Kingdom	105.2	16%	96.2	16%	9.0	9%	8%
Asia Pacific	106.8	16%	88.1	15%	18.7	21%	9%
Other regions	57.4	9%	60.9	11%	(3.5)	(6)%	(9)%
	653.7	100%	585.5	100%	68.2	12%	5%

External revenue by sector
	Half year 2019	Half year 2018
	£m	£m	Change   £m	% growth	% organic growth at constant currency
Process Safety	101.3	97.9	3.4	3%	1%
Infrastructure Safety	232.9	197.6	35.3	18%	4%
Environmental & Analysis	163.7	143.0	20.7	14%	10%
Medical	155.9	147.2	8.7	6%	4%
Inter-segmental revenue	(0.1)	(0.2)	0.1	-	-
	653.7	585.5	68.2	12%	5%

Revenue growth in all sectors

Infrastructure Safety revenue increased by 18% to £232.9m (2018/19: £197.6m), with 4% organic constant currency growth and a 2% positive effect from currency translation. It also included 12% growth from last financial year's acquisitions (Limotec, Navtech Radar and Rath Communications), as well as from the Ampac Group which was acquired in the first half of this financial year.

There was strong growth in Fire Detection, People and Vehicle Flow and Elevator Safety and growth across our four major regions. The USA performed strongly on an organic constant currency basis, with revenue increasing 13% against 24% organic constant currency growth in the first half of last year, driven by strong growth in the Elevator Safety, Fire Detection and the People and Vehicle Flow segments with the latter benefiting from new product innovation. Europe and the UK performed well with broadly spread growth across the business segments, while revenue declined in the Other regions due to less project-based business in the Middle East. Acquisitions made an excellent contribution to growth, particularly in Asia Pacific, the USA and Mainland Europe.

Profit² grew by 25% to £52.3m (2018/19: £41.7m) including 9% organic constant currency growth, a 2% positive effect from currency translation and 14% growth from acquisitions. Return on Sales increased to 22.5% (2018/19: 21.1%), helped by recent investments in manufacturing process automation. Strategic investment in innovation increased, with R&D expenditure up 15% to £14.2m (2018/19: £12.4m).

The sector is expected to make further progress in the second half, with continued organic revenue growth and benefits from recent acquisitions. Return on Sales in the second half is expected to be similar to the second half of last year, resulting in the sector delivering a good full year performance.

Process Safety revenue increased by 3% to £101.3m (2018/19: £97.9m). There was organic constant currency growth of 1%, which compared to last year's very strong performance of 12% organic constant currency growth, and a 2% positive effect from currency translation. The Industrial Access Control segment grew strongly and continued to benefit from a large logistics safety contract in the USA. Pressure Management and Safe Storage & Transfer revenue declined, principally due to a challenging market in the USA for Pressure Management, although there was stronger growth in Asia Pacific. Gas Detection saw modest growth, with a weaker performance in developed markets, more than offset by good increases in Asia Pacific and the Middle East, driven by the benefits of recent investment in sales, marketing and new product development.

Overall, the sector saw strong growth in Asia Pacific and the USA, despite variable market conditions, the latter against a very strong comparative. Revenue in Other regions declined.

Profit² increased by 12% to £24.9m (2018/19: £22.2m) including 9% organic constant currency growth and a 3% positive effect from currency translation. Return on Sales increased to 24.5%, from 22.6% in the first half of last year which included some one-off reorganisation costs. R&D investment rose 4% to £3.5m (2018/19: £3.4m).

The sector is expected to make progress in the second half, and to deliver a solid full year result, with revenue momentum steadily improving as the benefits from the actions taken over the past year to improve performance start to come through.

Environmental & Analysis revenue rose by 14% to £163.7m (2018/19: £143.0m), comprising 10% organic constant currency growth and a 4% positive effect from currency translation. There was growth in all business segments with particularly good performances in Spectroscopy & Photonics and in Environmental Monitoring. The USA and the UK delivered strong organic constant currency revenue growth: the USA driven by the Photonics businesses and the UK from an excellent performance in Environmental Monitoring, supported by new product development and by regulatory requirements in the UK water market. Mainland Europe grew well, also due to good contributions from the Spectroscopy & Photonics and Environmental Monitoring segments. Revenue in Asia Pacific grew modestly, while Other regions, which represent only 3% of sector revenue, declined.

Profit² increased by 21% to £35.1m (2018/19: £29.0m). Organic constant currency profit growth was 16% and there was a 5% positive effect from currency translation. Return on Sales saw a further improvement from 20.3% to 21.5%. We expect Return on Sales for the Full Year to be broadly stable year on year due to the revenue mix expected in the second half. R&D investment rose by 2% to £9.8m (2018/19: £9.6m), representing 6.0% of revenue.

The sector is expected to continue to perform well in the second half of the year and achieve a strong full year performance.

Medical revenue was up by 6% to £155.9m (2018/19: £147.2m). There was 4% organic constant currency growth against a strong prior year comparator of 14%, a (3)% negative effect from last year's Accudynamics disposal and a positive effect of 5% from currency translation. The Diagnostics and Sensor Technology segments made good progress while there were weaker performances in Ophthalmology and Patient Assessment.

Medical's largest region, the USA, represented over 50% of the sector's revenue and delivered modest organic growth, influenced by the timing of orders and product launches as well as the strong prior year performance. Certain customers also moved their operations from the USA to Asia Pacific, with that region's revenue growing 22% (or 19% on an organic constant currency basis) as a result. Europe and UK revenue was stable in aggregate, with good progress in Diagnostics and Sensor Technology offset by lower revenue in Ophthalmology. Other regions grew strongly, led by the Sensor Technology segment.

Profit² was £35.6m (2018/19: £35.0m), a 2% increase over the strong performance in the first half of last year which included a 22% organic constant currency increase. There was a £1.7m increase in R&D investment in this half year, notably in our Sensor Technology and Ophthalmology segments. Profit also included a net charge of £2.5m, principally related to the rationalisation of product development strategies, following the reorganisation and merger of two ophthalmic companies. This portfolio change is expected to improve their combined growth and profitability over the medium term. There was a (2)% negative effect following last year's Accudynamics disposal, and a 5% positive impact from currency translation. Return on Sales decreased to 22.9% from 23.8% in 2018/19 with R&D investment (excluding the effect of the Accudynamics disposal) up 30% to £7.2m (2018/19: £5.5m) and now 4.6% of revenue.

We expect a stronger sector performance in the second half in order to deliver a solid full year performance.

Five acquisitions completed this financial year

We made three acquisitions in the period, and a further two early in the second half of the year. These involved three sectors and four geographies, continuing our strategy of making value-enhancing acquisitions in core and adjacent markets to expand our future growth opportunities and geographical reach.

In July 2019, we completed the acquisition of the Ampac Group for a cash consideration of A$135.0m (£75.2m), on a cash- and debt-free basis, as part of our strategy to acquire regional partners to accelerate growth in our core Fire Detection markets within our Infrastructure Safety sector. The Ampac Group, as a leading fire and evacuation systems supplier in the Australian and New Zealand markets, extended our geographical reach and has brought highly complementary technologies to our existing Fire businesses.

In the first half we also completed two smaller bolt-on acquisitions to expand our technology capabilities in the Environmental & Analysis sector, for a maximum total consideration of £7m. These were: Invenio, a UK market leader in customer-side water leak detection, which is now part of our HWM Water business based in Cwmbran, Wales; and Enoveo, a French company with expertise in environmental microbiology, chemistry and biotechnologies and real-time pollution monitoring, which has been incorporated into our Hydreka business based in Lyon, France.

In October 2019, we further expanded our surgical product offering in Ophthalmology with the acquisition of the Trabectome and Goniotome product platforms from NeoMedix Inc., a USA-based company which designs, manufactures and markets surgical devices for the fast-growing minimally-invasive glaucoma surgery market. The initial cash consideration was US$8.1m (£6.6 m) on a cash- and debt-free basis. Further earn-out considerations, capped at a total of US$17m (£14.0m) are payable in cash, dependent on performance in the three years to October 2022. This acquisition is being integrated into Medical's MicroSurgical Technology (MST) business based near Seattle, USA.

In October 2019, we acquired Infowave Solutions Inc., a location sensing and software solutions provider, for CenTrak, one of our Medical sector companies, to further expand its addressable market and enhance its technological and data capabilities. The initial consideration for Infowave was US$8.3m (£6.8m) with further earn-out considerations, payable in cash, of up to US$4m (£3.3m) in total, payable dependent on performance in each of the financial years ended March 2021 and March 2022.

We continue to add to our pipeline of potential acquisitions both in, and adjacent to, our existing markets, with all aligned to our purpose of growing a safer, cleaner, healthier future. We have further strengthened our sector M&A teams globally to support the acquisition of both stand-alone businesses and bolt-ons to existing Halma companies.

New capabilities added to the Executive Board

We announced three changes to Halma's Executive Board in the first half, as part of planned succession processes, which have added important new capabilities and increased diversity, aligned with the needs of our growth strategy.

Laura Stoltenberg succeeded Adam Meyers as Sector Chief Executive, Medical & Environmental from 1 October 2019, becoming a member of the Halma Executive Board. This followed the announcement in July 2019 of Adam's intention to retire from Halma. Adam is supporting Laura in her transition to ensure an orderly handover occurs and he will remain on the Executive Board and the plc Board until July 2020. He has also agreed to support Halma beyond this date until mid-2021 should we need it.

In August 2019, Ruwan De Soyza joined Halma as our General Counsel and Company Secretary following the retirement of Carol Chesney as Company Secretary in late 2018. This is a newly created role on Halma's Executive Board, with global responsibility for the Group's legal, compliance, governance and company secretarial affairs.

In September 2019, Catherine Michel joined Halma as our first Chief Technology Officer, with global responsibility for IT and digital architecture. Catherine's remit covers both internal and externally facing IT systems and she will work closely with Inken Braunschmidt in her role of driving the execution of Halma's Digital and Innovation growth strategy

Evolution of the Halma 4.0 growth strategy

We made further good progress on our Halma 4.0 strategy, through which our companies are addressing the diverse challenges and opportunities presented by the digital age. We have continued to increase investment to support our companies to improve the speed and cost of innovation.

Our innovation and digital accelerator programmes are increasingly focusing on the commercialisation of projects. We are piloting a new Execution Accelerator programme that delivers targeted support to shorten the time from investment to revenue by addressing specific areas of challenge, such as the development of new routes to market and new technology. Increasingly we are also leveraging our existing digital project development experience and will be creating improved IT and digital architecture.

Sustainability and living our purpose

Halma's approach to sustainability is defined by our purpose of growing a safer, cleaner, healthier future for everyone, every day. We aim to play a positive role in society over the long term, both through the beneficial effects of our products and services, and by behaving responsibly. We have carefully selected four UN Sustainable Development Goals to provide a framework for our initiatives, and began in the first half to develop measures to track our impacts in relation to these goals.

In terms of the environment and specifically addressing the challenge of climate change, we are developing new long-term carbon emission targets. We expect them to be aligned with climate science and initially to cover our Scope 1 and 2 emissions. We are also beginning the evaluation of the steps we would need to take to report on our climate change strategy, risks and governance in line with the TCFD (Task Force on Climate-Related Financial Disclosures) framework. We expect to update on this in our Full Year results announcement.

We are committed to ensuring that Halma is an inclusive organisation, thereby maximising the pool of talent available to us and ensuring we recruit the best people for each role. One measure of our inclusivity is gender diversity, and the changes to our Executive Board outlined above will ultimately result in gender balance, setting a strong example to the rest of the Group. We were also pleased that our progress was recognised by three of our senior leaders being included in the Financial Times' ranking of the 100 Most Influential Women in Engineering in the UK.

We were immensely pleased and energised with the result of our first ever group-wide charitable campaign, Gift of Sight. As part of the campaign, we screened the eyesight of 2,525 employees, approximately one-third of our global employee population, with the involvement of 33 Halma companies in the USA, the UK, India, Brazil and China. We raised over US$200,000 for our campaign partner, the Himalayan Cataract Project, which will help transform more than 8,000 people's lives by giving them sight. We have now formed a team to identify and lead our next campaign in 2020, which will also be aligned with one of our chosen UN Sustainable Development Goals.

Currency effects

We report our results in Sterling with 48% of Group revenue denominated in US Dollars and 12% in Euros during the period. Average exchange rates are used to translate results in the Income Statement. Sterling weakened against the US Dollar and the Euro during the first half of 2019/20. This resulted in a 3% positive currency translation effect on Group revenue and 4% on profit in the first half of 2019/20 relative to 2018/19. If exchange rates remain at current levels, we expect a broadly neutral currency translation effect in the second half of 2019/20.

Pension deficit reduced

On an IAS 19 basis the deficit on the Group's defined benefit plans at the half year end reduced to £27.6m
(31 March 2019: £39.2m) before the related deferred tax asset. The plans' liabilities increased due to a decrease in the discount rate used to value those liabilities, but this was more than offset by further employer contributions together with the return from the plans' assets which resulted in the overall reduction in the plans' deficit. The plans' actuarial valuation reviews, rather than the accounting basis, determine any cash payments by the Group to eliminate the deficit. We expect the aggregate cash contributions in this regard for the two UK defined benefit plans in the 2019/20 financial year to be consistent with our previous guidance of £12.7m.

Group tax rate as expected

The Group's effective tax rate on adjusted profit was 19.9%. This is based on the forecast effective tax rate for the year as a whole, and is higher than in the Full Year 2018/19 (18.6%) mainly due to a change in expected mix of profits arising from increased profits in higher tax jurisdictions.

On 2 April 2019, the European Commission published its final decision that the UK controlled Finance Company Partial Exemption (FCPE) partially constituted State Aid. In common with other UK companies, Halma has benefited from the FCPE, which was a plan approved by the UK Government, and the total benefit to date is approximately £15.4m (in respect of tax) and approximately £0.9m (in respect of interest). Halma has appealed against the European Commission's decision, as has the UK Government and a number of other UK companies. In the meantime, the UK Government is required to commence collection proceedings and therefore it is expected that the Group will have to make a payment in the second half of the year ending 31 March 2020 of up to £16.3m. Based on its current assessment, the Group believes that no provision is required in respect of this issue.

New accounting standard IFRS 16 adopted

The Group adopted new accounting standards and interpretations with effect from 1 April 2019. There has been no material impact on the Group's financial statements, with the exception of IFRS 16 'Leases', which brings leases, principally for land and buildings, on to the balance sheet. IFRS 16 has resulted in a small reduction in net assets of £3.3m, comprising an increase in assets of £45.4m recognising a right-of-use asset, and an increase in liabilities (principally from the lease liability) of £48.7m. The net effect on the Group's profit and loss account has been immaterial, with operating lease costs of approximately £7.7m being replaced by a depreciation charge of £6.3m and a financing expense of £1.0m, resulting in a benefit to Operating Profit of £1.4m and to Profit before Tax of £0.4m. There has been no impact on the Group's cash flow. Further details of all new accounting standards adopted, and their application to the Group's accounts, can be found in the notes to the Condensed Interim Financial Statements.

Cash flow and funding

Cash conversion (adjusted operating cash flow as a percentage of adjusted operating profit - see note 9) was 82% (2018/19: 86%), just below our cash conversion target of 85%. This included an increase in working capital of £25.2m (2018/19: £10.6m), principally reflecting the timing and relative quantum of payments and the Group's continued strong growth.

Dividend and tax payments also increased this half year, with tax payments of £27.3m (2018/19: £19.0m). This included a one-off increase in cash taxation payable of £5.4m as a result of the acceleration of the payment timetable for UK Corporation Tax payments for larger companies, which will not be repeated in the second half. Acquisition expenditure (including acquisition costs and contingent consideration for acquisitions made in prior years) was £88.3m (2018/19: £4.7m). Capital expenditure reduced to £13.7m (2018/19: £14.9m) reflecting the timing of company projects rather than a specific action to limit investment. We continue to expect capital expenditure for the full year to be around £35m.

Net debt at the end of the period was £310.4m, which includes an increase of £57.0m for lease liabilities now included as a result of the adoption of IFRS 16 (31 March 2019 net debt: £181.7m, £232.0m restated for the effect of IFRS 16). Gearing (the ratio of net debt to EBITDA) at half year end was 0.98 times, which is within our typical operating range of up to 2 times gearing and included the effect of IFRS 16 on net debt and EBITDA.

Continued cash generation, a healthy balance sheet and committed external financial resources will allow us to continue to invest in organic growth and acquisitions to meet our growth objectives as well as to sustain our progressive dividend policy.

Principal risks and uncertainties

A number of potential risks and uncertainties exist, which could have a material impact on the Group's performance over the second half of the financial year and thereby cause actual results to differ materially from expected and historical results. The Group has processes in place for identifying, evaluating and managing risk. Our principal risks, together with a description of our approach to mitigating them, are set out on pages 54 to 59 of the Annual Report and Accounts 2019, which is available on the Group's website at www.halma.com. See note 15 to the Condensed Interim Financial Statements for further details.

We continue to closely monitor and assess any potential effects from the UK's exit from the European Union, and to monitor and respond to changes in tariffs on certain goods by the USA and China. In the first half of this financial year, approximately 9% of Group revenue came from direct sales between the UK and Mainland Europe, and approximately 3% between the USA and China. We have not seen any material effects to date and consider that our decentralised model, with businesses in diverse markets and locations, enables our companies to adapt quickly to changing trading conditions. We expect that our companies' agility, and the support we are providing from across the Group to share best practice will help us to prepare for these changes, to mitigate any potential effects, as well as enabling us to take advantage of any new opportunities that arise.

Going concern

After conducting a review of the Group's financial resources, the Directors have a reasonable expectation that the Group has 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 Condensed Interim Financial Statements.

Outlook

Halma made good progress in the first half, delivering record revenue, profit and dividends, while increasing strategic investment to remain well positioned in global niche markets which have resilient, long-term growth drivers. Our strong purpose and culture, our portfolio and geographic diversity together with our agile business model are enabling us to deliver a good performance in varied market conditions and to sustain growth and returns over the longer term.

Since the period end, order intake has continued to be ahead of revenue and order intake last year. Halma remains on track to make further progress in the second half of the year and deliver another good full year performance.

  Andrew Williams                 Marc Ronchetti

Group Chief Executive           Chief Financial Officer

     ¹ See Highlights, page 1.

  ² See note 2 to the Condensed Interim Financial Statements. Profit is Adjusted¹ operating profit before central administration costs after    share of associate. Profit includes the effect of the adoption of IFRS 16 from 1 April 2019, which benefited Adjusted¹ Operating Profit by £1.4m. The effect on each individual sector was immaterial.

Independent review report to Halma plc

Report on the Condensed Interim Financial Statements

Our conclusion

We have reviewed Halma plc's half year financial information (the "interim financial statements") in the Half Year Report of Halma plc for the six-month period ended 30 September 2019. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

-       the Consolidated Balance Sheet as at 30 September 2019;

-       the Consolidated Income Statement and Consolidated Statement of Comprehensive Income and Expenditure for the period then ended;

-       the Consolidated Cash Flow Statement for the period then ended;

-       the Consolidated Statement of Changes in Equity for the period then ended; and

-       the explanatory notes to the interim financial statements.

The interim financial statements included in the Half Year Report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 in the notes to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The Half Year Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half Year Report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Half Year Report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Half Year Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Watford

19 November 2019

Half year results 2019/20

Condensed INTERIM Financial Statements

Consolidated Income Statement

		Unaudited Six months to 30 September 2019			Unaudited  Six months to 30 September 2018			Audited Year to 31 March 2019
	Notes	Before adjustments* £m	Adjustments* (note 2) £m	Total £m	Before adjustments* £m	Adjustments* (note 2) £m	Total £m	Total £m
Continuing operations
Revenue	2	653.7	-	653.7	585.5	-	585.5	1,210.9
Operating profit		134.6	(23.0)	111.6	117.9	(17.5)	100.4	217.8
Share of results of associates		(0.1)	-	(0.1)	(0.1)	-	(0.1)	(0.1)
Loss on disposal of operations	2	-	-	-	-	(0.9)	(0.9)	(1.0)
Finance income	3	0.4	-	0.4	0.1	-	0.1	0.5
Finance expense	4	(6.1)	-	(6.1)	(5.0)	-	(5.0)	(10.5)
Profit before taxation		128.8	(23.0)	105.8	112.9	(18.4)	94.5	206.7
Taxation	5	(25.6)	4.8	(20.8)	(23.1)	3.2	(19.9)	(36.9)
Profit for the period attributable to equity shareholders		103.2	(18.2)	85.0	89.8	(15.2)	74.6	169.8
Earnings per share from continuing operations	6
Basic and diluted		27.20p		22.40p	23.67p		19.67p	44.78p
Dividends in respect of the period	7
Dividends paid and proposed (£m)				24.8			23.2	59.6
Per share				6.54p			6.11p	15.71p

*    Adjustments include the amortisation and impairment of acquired intangible assets; acquisition items; significant restructuring costs; profit or loss on disposal of operations; and the associated taxation thereon. Note 9 provides more information on alternative performance measures.

Consolidated Statement of Comprehensive Income and Expenditure

	Unaudited Six months to 30 September 2019 £m	Unaudited Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Profit for the period	85.0	74.6	169.8
Items that will not be reclassified subsequently to the Income Statement:
Actuarial gains on defined benefit pension plans	6.0	28.2	6.5
Tax relating to components of other comprehensive income that will not be reclassified	(1.1)	(5.2)	(1.6)
Items that may be reclassified subsequently to the Income Statement:
Effective portion of changes in fair value of cash flow hedges	(0.4)	(0.6)	-
Exchange gains on translation of foreign operations and net investment hedge	43.2	37.3	32.5
Exchange gain on translation of foreign operations recycled on disposal	-	(0.4)	(0.3)
Tax relating to components of other comprehensive income that may be reclassified	(0.1)	-	-
Other comprehensive income for the period	47.6	59.3	37.1
Total comprehensive income for the period attributable to equity shareholders	132.6	133.9	206.9

The exchange gains of £43.2m (six months to 30 September 2018: £36.9m gain; year to 31 March 2019: £32.5m gain) include losses of £8.0m (six months to 30 September 2018: £10.7m losses; year to 31 March 2019: £7.9m losses), which relate to net investment hedges.

Consolidated Balance Sheet

	Notes	Unaudited 30 September 2019 £m	Unaudited 30 September 2018 Restated £m	Audited 31 March 2019 Restated £m
Non-current assets
Goodwill	10	765.5	655.6	694.0
Other intangible assets		272.4	229.9	245.2
Property, plant and equipment		171.7	109.6	112.4
Interests in associates and other investments		5.5	3.9	3.9
Deferred tax asset		1.4	1.7	1.4
		1,216.5	1,000.7	1,056.9
Current assets
Inventories		162.9	141.2	144.3
Trade and other receivables		275.2	241.8	259.6
Tax receivable		4.8	0.7	0.2
Cash and bank balances		83.2	66.4	81.2
Derivative financial instruments	11	0.9	0.3	0.9
		527.0	450.4	486.2
Total assets		1,743.5	1,451.1	1,543.1
Current liabilities
Trade and other payables		157.9	154.5	164.8
Borrowings		1.7	3.0	9.2
Lease liabilities		12.3	-	-
Provisions		20.5	18.2	25.4
Tax liabilities		13.4	13.3	13.4
Derivative financial instruments	11	0.7	0.5	0.3
		206.5	189.5	213.1
Net current assets		320.5	260.9	273.1
Non-current liabilities
Borrowings		334.9	258.0	253.7
Lease liabilities		44.7	-	-
Retirement benefit obligations		27.6	20.7	39.2
Trade and other payables		13.3	9.7	11.6
Provisions		7.9	4.7	10.9
Deferred tax liabilities		41.1	41.2	33.2
		469.5	334.3	348.6
Total liabilities		676.0	523.8	561.7
Net assets		1,067.5	927.3	981.4
Equity
Share capital		38.0	38.0	38.0
Share premium account		23.6	23.6	23.6
Own shares		(6.6)	(3.5)	(4.7)
Capital redemption reserve		0.2	0.2	0.2
Hedging reserve		(0.2)	(0.3)	0.3
Translation reserve		162.7	124.2	119.5
Other reserves		(11.8)	(10.9)	(5.6)
Retained earnings		861.6	756.0	810.1
Total equity		1,067.5	927.3	981.4

Consolidated Statement of Changes in Equity

	For the six months to 30 September 2019
	Share capital £m	Share premium account £m	Own shares £m	Capital redemption reserve £m	Hedging reserve £m	Translation reserve £m	Other reserves £m	Retained earnings £m	Total £m
At 1 April 2019 (audited)	38.0	23.6	(4.7)	0.2	0.3	119.5	(5.6)	810.1	981.4
Impact of changes in accounting policies:
IFRS 16	-	-	-	-	-	-	-	(3.3)	(3.3)
Restated balance at 1 April 2019	38.0	23.6	(4.7)	0.2	0.3	119.5	(5.6)	806.8	978.1
Profit for the period	-	-	-	-	-	-	-	85.0	85.0
Other comprehensive income and expense:
Exchange differences on translation of foreign operations	-	-	-	-	-	43.2	-	-	43.2
Actuarial gains on defined benefit pension plans	-	-	-	-	-	-	-	6.0	6.0
Effective portion of changes in fair value of cash flow hedges	-	-	-	-	(0.4)	-	-	-	(0.4)
Tax relating to components of other comprehensive income and expense	-	-	-	-	(0.1)	-	-	(1.1)	(1.2)
Total other comprehensive income and expense	-	-	-	-	(0.5)	43.2	-	4.9	47.6
Dividends paid	-	-	-	-	-	-		(36.4)	(36.4)
Share-based payments charge	-	-	-	-	-	-	5.2	-	5.2
Deferred tax on share-based payment transactions	-	-	-	-	-	-	0.8	-	0.8
Excess tax deductions related to share-based payments on exercised awards	-	-	-	-	-	-	-	1.3	1.3
Purchase of own shares	-	-	(8.5)	-	-	-	-	-	(8.5)
Performance share plan awards vested	-	-	6.6	-	-	-	(12.2)	-	(5.6)
At 30 September 2019 (unaudited)	38.0	23.6	(6.6)	0.2	(0.2)	162.7	(11.8)	861.6	1,067.5

Own shares are ordinary shares in Halma plc purchased by the Company and held to fulfil the Company's obligations under the Company's share plans. As at 30 September 2019 the number of shares held by the Employee Benefit Trust was 393,672
(30 September 2018: 289,966 and 31 March 2019: 370,354).

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

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

	For the six months to 30 September 2018
	Share capital £m	Share premium account £m	Own shares £m	Capital redemption reserve £m	Hedging reserve £m	Translation reserve £m	Other reserves £m	Retained earnings £m	Total £m
At 1 April 2018 (audited)	38.0	23.6	(6.3)	0.2	0.3	87.3	(5.9)	691.2	828.4
Impact of changes in accounting policies:
IFRS 9	-	-	-	-	-	-	-	0.1	0.1
IFRS 15	-	-	-	-	-	-	-	(0.2)	(0.2)
Restated balance at 1 April 2018	38.0	23.6	(6.3)	0.2	0.3	87.3	(5.9)	691.1	828.3
Profit for the period	-	-	-	-	-	-	-	74.6	74.6
Other comprehensive income and expense:
Exchange differences on translation of foreign operations	-	-	-	-	-	37.3	-	-	37.3
Exchange gains on translation of foreign operations recycled on disposal	-	-	-	-	-	(0.4)	-	-	(0.4)
Actuarial gains on defined benefit pension plans	-	-	-	-	-	-	-	28.2	28.2
Effective portion of changes in fair value of cash flow hedges	-	-	-	-	(0.6)	-	-	-	(0.6)
Tax relating to components of other comprehensive income and expense	-	-	-	-	-	-	-	(5.2)	(5.2)
Total other comprehensive income and expense	-	-	-	-	(0.6)	36.9	-	23.0	59.3
Dividends paid	-	-	-	-	-	-	-	(34.0)	(34.0)
Share-based payments charge	-	-	-	-	-	-	4.9	-	4.9
Deferred tax on share-based payment transactions	-	-	-	-	-	-	0.5	-	0.5
Excess tax deductions related to share-based payments on exercised awards	-	-	-	-	-	-	-	1.3	1.3
Purchase of own shares	-	-	(2.7)	-	-	-	-	-	(2.7)
Performance share plan awards vested		-	5.5	-	-	-	(10.4)	-	(4.9)
At 30 September 2018 (unaudited)	38.0	23.6	(3.5)	0.2	(0.3)	124.2	(10.9)	756.0	927.3

	For the year to 31 March 2019
	Share capital £m	Share premium account £m	Own shares £m	Capital redemption reserve £m	Hedging reserve £m	Translation reserve £m	Other reserves £m	Retained earnings £m	Total £m
At 1 April 2018 (audited)	38.0	23.6	(6.3)	0.2	0.3	87.3	(5.9)	691.2	828.4
Impact of changes in accounting policies:
IFRS 9	-	-	-	-	-	-	-	0.1	0.1
IFRS 15	-	-	-	-	-	-	-	(0.2)	(0.2)
Restated balance at 1 April 2018	38.0	23.6	(6.3)	0.2	0.3	87.3	(5.9)	691.1	828.3
Profit for the period	-	-	-	-	-	-	-	169.8	169.8
Other comprehensive income and expense:
Exchange differences on translation of foreign operations	-	-	-	-	-	32.5	-	-	32.5
Exchange gains on translation of foreign operations recycled on disposal	-	-	-	-	-	(0.3)	-	-	(0.3)
Actuarial gains on defined benefit pension plans	-	-	-	-	-	-	-	6.5	6.5
Effective portion of changes in fair value of cash flow hedges	-	-	-	-	-	-	-	-	-
Tax relating to components of other comprehensive income	-	-	-	-	-	-	-	(1.6)	(1.6)
Total other comprehensive income and expense	-	-	-	-	-	32.2	-	4.9	37.1
Dividends paid	-	-	-	-	-	-	-	(57.2)	(57.2)
Share-based payments charge	-	-	-	-	-	-	9.7	-	9.7
Deferred tax on share-based payment transactions	-	-	-	-	-	-	0.9	-	0.9
Excess tax deductions related to share-based payments on exercised awards	-	-	-	-	-	-	-	1.5	1.5
Purchase of own shares	-	-	(3.8)	-	-	-	-	-	(3.8)
Performance share plan awards vested		-	5.4	-	-	-	(10.3)	-	(4.9)
At 31 March 2019 (audited)	38.0	23.6	(4.7)	0.2	0.3	119.5	(5.6)	810.1	981.4

Consolidated Cash Flow Statement

	Notes	Unaudited Six months to 30 September 2019 £m	Unaudited Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Net cash inflow from operating activities	8	95.6	96.8	219.0
Cash flows from investing activities
Purchase of property, plant and equipment		(12.0)	(13.7)	(26.4)
Purchase of computer software		(1.5)	(1.2)	(2.4)
Purchase of other intangibles		(0.2)	(0.8)	(2.5)
Proceeds from sale of property, plant and equipment and capitalised development costs		0.3	0.4	1.6
Development costs capitalised		(6.3)	(4.3)	(10.8)
Interest received		0.3	0.1	0.4
Acquisition of businesses, net of cash acquired		(84.5)	(4.7)	(67.0)
Disposal of business		0.8	3.0	3.1
Payments for financial assets at fair value through other comprehensive income		(1.8)	-	-
Net cash used in investing activities		(104.9)	(21.2)	(104.0)
Cash flows from financing activities
Dividends paid	7	(36.4)	(34.0)	(57.2)
Purchase of own shares		(8.5)	(2.6)	(3.8)
Interest paid		(5.2)	(4.0)	(8.2)
Loan arrangement fee paid		-	-	(0.5)
Proceeds from bank borrowings		91.9	28.0	66.4
Repayment of bank borrowings		(18.4)	(70.4)	(110.3)
Repayment of lease liabilities		(6.7)	-	-
Net cash from/(used in) financing activities		16.7	(83.0)	(113.6)
Increase/(decrease) in cash and cash equivalents		7.4	(7.4)	1.4
Cash and cash equivalents brought forward		72.1	69.7	69.7
Exchange adjustments		2.0	1.2	1.0
Cash and cash equivalents carried forward		81.5	63.5	72.1

	Unaudited Six months to 30 September 2019 £m	Unaudited Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash and cash equivalents	7.4	(7.4)	1.4
Net cash (inflow)/outflow from (drawdown)/repayment of bank borrowings	(73.5)	42.4	43.9
Loan notes repaid in respect of acquisitions	0.1	0.1	0.1
Lease liabilities additions	(9.0)	-	-
Lease liabilities acquired	(3.6)	-	-
Lease liabilities and interest repaid	7.7	-	-
Exchange adjustments	(7.5)	(9.4)	(6.8)
	(78.4)	25.7	38.6
Net debt brought forward	(181.7)	(220.3)	(220.3)
Impact of changes in accounting policies - IFRS 16	(50.3)	-	-
Restated net debt brought forward	(232.0)	(220.3)	(220.3)
Net debt carried forward	(310.4)	(194.6)	(181.7)

Notes to the Condensed Interim Financial Statements

1   Basis of preparation

General information

The Half Year Report, which includes the Interim Management Report and Condensed Interim Financial Statements for the six months to 30 September 2019, was approved by the Directors on 19 November 2019.

Basis of preparation

The Report has been prepared solely to provide additional information to shareholders as a body to assess the Board's strategies and the potential for those strategies to succeed. It should not be relied on by any other party or for any other purpose.

The Report 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 Report. 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.

The Report has been prepared in accordance with International Accounting Standard 34, applying the accounting policies and presentation that were applied in the preparation of the Group's statutory accounts for the year to
31 March 2019, with the exception of the policy for taxes on income, which in the interim period is accrued using the effective tax rate that would be applicable to expected total income for the financial year, and except for the adoption of new accounting standards described below.

The figures shown for the year to 31 March 2019 are based on the Group's statutory accounts for that period and do not constitute the Group's statutory accounts for that period as defined in Section 434 of the Companies Act 2006. These statutory accounts, which were prepared under International Financial Reporting Standards, have been filed with the Registrar of Companies. The audit report on those accounts was not qualified, did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying the report, and did not contain statements under Sections 498 (2) or (3) of the Companies Act 2006.

As part of a review of deferred tax balances as at 30 September 2019, some balances were identified (mainly relating to intangible assets on US acquisitions) that were previously presented gross but should have been netted off as they are in the same jurisdiction and there is a legally enforceable right to set off current tax assets against current tax liabilities. These balances have now been netted off. Restatements have been made to the prior periods as at 30 September 2018 and 31 March 2019, resulting in a netting down of assets and liabilities of £29.2m and £40.7m respectively. There is no impact on net assets, cash or other KPIs. There was no impact on opening net assets as at 1 April 2018.

Going concern

The Directors believe the Group is well placed to manage its business risks successfully. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current committed facilities, which includes a £550m five-year Revolving Credit Facility (RCF) running until November 2023 of which £398.8m remains undrawn at the date of this report. With this in mind, the Directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the half year Condensed Financial Statements.

New accounting standards and policies

With effect from 1 April 2019 the Group has adopted the following new accounting standard:

IFRS 16 'Leases'

The Group has adopted IFRS 16 from 1 April 2019 and applied the modified retrospective approach. IFRS 16 provides a single on-balance sheet accounting model for lessees which recognises a right-of-use asset, representing its right to use the underlying asset, and lease liability, representing its obligations to make payment in respect of the use of the underlying asset. The distinction between finance and operating leases for lessees is removed. Comparatives for the prior period have not been restated and the adjustments arising from the new leasing standard are therefore recognised in the opening balance sheet on 1 April 2019 as follows:

	1 April 2019 £m
Non-current assets
Property, plant and equipment (right of use assets)	45.4
Total assets	45.4
Current liabilities
Trade and other payables	0.4
Lease liabilities	(10.7)
Non-current liabilities
Lease liabilities	(39.6)
Deferred tax liability	1.2
Total liabilities	(48.7)
Total movement in retained earnings as at 1 April 2019	(3.3)

On adoption of IFRS 16, the Group recognised liabilities for leases which had been classified as operating leases under previous accounting standards. The lease liability has been measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate as at 1 April 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 April 2019 was 3.7%.

	1 April 2019 £m
Operating lease commitments as disclosed at 31 March 2019	52.5
Reconciling items
-  Effect of discounting (at incremental borrowing rate as a 1 April 2019)	(4.8)
-  Short-term leases recognised on a straight-line basis as expense	(0.4)
-  Low-value leases recognised on a straight-line basis as expense	(0.3)
-  Recognition differences on new leases and extension assumptions	3.3
Lease liability recognised as at 1 April 2019	50.3

Practical expedients applied

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

-  Relied on previous assessments of whether leases are onerous

-  Excluded initial direct costs for the measurement of right-of-use assets at the date of the initial application

-  Used hindsight in determining the lease term where the contract contains options to extend or terminate the

lease

Additionally, on transition the Group elected not to reassess whether a contract is, or contains, a lease, instead relying on the assessment already made applying IAS 17 'Leases' and IFRIC 4 'Determining whether an Arrangement contains a Lease'.

Impact on the income statement

The impact on the income statement for the six months ended 30 September 2019 is to increase operating profit by approximately £1.4m and increase finance costs by £1.0m resulting in an increase in profit before tax of £0.4m. The impact on the income statement for the year ended 31 March 2020 is expected to increase operating profit by approximately £2.8m and increase finance costs by £2.0m resulting in an increase in profit before tax of £0.8m.

Impact on the cash flow statement

There has been a change to the classification of cash flows in the cash flow statement with operating lease payments previously categorised as net cash used in operations now being split between the principal element, included as repayment of lease liabilities within financing activities and the interest element, included as interest paid within financing activities. In the six months to 30 September 2019 there are £7.7m of lease payments within financing activities comprising £6.7m of repayment of lease liabilities and £1.0m of interest paid.

Accounting policy

The Group recognises a right-of-use asset and a lease liability at the lease commencement date.

The right-of-use asset is initially measured at cost, comprising the initial amount of the lease liability plus any initial direct costs incurred and an estimate of costs to restore the underlying asset, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the incremental borrowing rate. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or a rate or a change in the Group's assessment of whether it will exercise an extension or termination option. When the lease liability is remeasured, a corresponding adjustment is made to the right-of-use asset.

Payments associated with short-term leases or low-value assets are recognised on a straight-line basis as an expense in the income statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets mostly comprise of IT equipment and small items of office furniture.

Other new accounting standards and interpretations applied for the first time

The following Standards with an effective date of 1 January 2019 have been adopted without any significant impact on the amounts reported in these financial statements:

-  Amendments to IAS 19: Plan amendment, Curtailment of Settlement

-  Annual improvements 2015-2017 cycle

-  IFRIC Interpretation 23: Uncertainty over Income Tax Treatments

-  Amendments to IAS 28: Long-term Interests in Associates and Joint Ventures

2 Segmental analysis and revenue from contracts with customers

Sector analysis

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

Segment revenue disaggregation (by location of external customer)

	Unaudited Six months to 30 September 2019
	Revenue by sector and destination (all continuing operations)
	United States of America £m	Mainland Europe £m	United Kingdom £m	Asia Pacific £m	Africa, Near and Middle East £m	Other countries £m	Total £m
Process Safety	35.4	19.2	13.4	17.3	10.7	5.3	101.3
Infrastructure Safety	55.5	71.8	53.9	33.3	11.8	6.6	232.9
Environmental & Analysis	78.1	19.5	31.3	29.6	2.5	2.7	163.7
Medical	79.9	25.0	6.6	26.6	5.7	12.1	155.9
Inter-segmental sales	(0.1)	-	-	-	-	-	(0.1)
Revenue for the period	248.8	135.5	105.2	106.8	30.7	26.7	653.7

	Unaudited Six months to 30 September 2018
	Revenue by sector and destination (all continuing operations)
	United States of America £m	Mainland Europe £m		United  Kingdom £m	Asia Pacific £m	Africa,  Near and Middle East £m	Other countries £m	Total £m
Process Safety	32.5	19.8		15.4	13.9	12.0	4.3	97.9
Infrastructure Safety	39.8	61.2		50.2	24.4	16.2	5.8	197.6
Environmental & Analysis	65.6	17.7		24.7	28.1	3.7	3.2	143.0
Medical	78.2	25.6		6.0	21.7	6.6	9.1	147.2
Inter-segmental sales	(0.1)	-		(0.1)	-	-	-	(0.2)
Revenue for the period	216.0	124.3		96.2	88.1	38.5	22.4	585.5
	Audited year end 31 March 2019
	Revenue by sector and destination (all continuing operations)
	United States of America £m		Mainland Europe £m	United  Kingdom £m	Asia Pacific £m	Africa,  Near and Middle East £m	Other countries £m	Total £m
Process Safety	61.3		42.1	32.6	29.6	23.2	8.7	197.5
Infrastructure Safety	87.8		131.2	101.4	48.6	28.4	11.2	408.6
Environmental & Analysis	135.2		38.0	53.6	59.7	6.0	6.6	299.1
Medical	159.2		55.0	13.4	46.1	13.2	19.2	306.1
Inter-segmental sales	(0.3)		-	(0.1)	-	-	-	(0.4)
Revenue for the period	443.2		266.3	200.9	184.0	70.8	45.7	1,210.9

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. Revenue derived from the rendering of services was £26.6m (six months to 30 September 2018: £18.0m; year to 31 March 2019: £39.2m). All revenue was otherwise derived from the sale of products.

The majority of the Group's revenue is recognised when control passes at a point in time.

Segment results

	Profit (all continuing operations)
	Unaudited Six months to  30 September 2019 £m	Unaudited Six months to  30 September 2018 £m	Audited Year to 31 March 2019 £m
Segment profit before allocation of adjustments*
Process Safety	24.9	22.2	45.5
Infrastructure Safety	52.3	41.7	88.9
Environmental & Analysis	35.1	29.0	66.4
Medical	35.6	35.0	76.9
	147.9	127.9	277.7
Segment profit after allocation of adjustments*
Process Safety	22.9	20.2	41.5
Infrastructure Safety	43.0	37.3	79.1
Environmental & Analysis	30.3	25.5	60.1
Medical	28.7	26.5	60.1
Segment profit	124.9	109.5	240.8
Central administration costs	(13.4)	(10.1)	(24.1)
Net finance expense	(5.7)	(4.9)	(10.0)
Group profit before taxation	105.8	94.5	206.7
Taxation	(20.8)	(19.9)	(36.9)
Profit for the period	85.0	74.6	169.8

*    Adjustments include the amortisation and impairment of acquired intangible assets; acquisition items; significant restructuring costs; and profit or loss on disposal of operations. Note 9 provides more information on alternative performance measures.

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

These adjustments are analysed as follows:

	Unaudited for the Six months to 30 September 2019
	Amortisation of acquired intangibles £m	Acquisition items			Total amortisation charge and acquisition items £m	Disposal of operations and significant restructuring £m	Total £m
		Transaction costs £m	Adjustments to contingent consideration £m	Release of  fair value adjustments to inventory £m
Process Safety	(2.0)	-	-	-	(2.0)	-	(2.0)
Infrastructure Safety	(5.2)	(2.2)	-	(1.9)	(9.3)	-	(9.3)
Environmental & Analysis	(4.6)	(0.2)	-	-	(4.8)	-	(4.8)
Medical	(6.5)	(0.5)	0.1	-	(6.9)	-	(6.9)
Total Segment & Group	(18.3)	(2.9)	0.1	(1.9)	(23.0)	-	(23.0)

The transaction costs arose mainly on the acquisitions during the year. In Infrastructure Safety, they related to Ampac £2.2m. In Environmental and Analysis, they related to the acquisitions of Invenio (£0.1m) and Enoveo (£0.1m). In Medical, they mainly related to the acquisition of Visiometrics in a previous year (£0.3m).

The £1.9m release of fair value adjustments to inventory relates to Navtech Radar (£0.4m) and Ampac (£1.5m). All amounts have now been released in relation to Navtech Radar.

	Unaudited for the Six months to 30 September 2018
	Amortisation of acquired intangibles £m	Acquisition items			Total amortisation charge and acquisition items £m	Disposal of operations and significant restructuring £m	Total £m
		Transaction costs £m	Adjustments to contingent consideration £m	Release of  fair value adjustments to inventory £m
Process Safety	(2.0)	-	-	-	(2.0)	-	(2.0)
Infrastructure Safety	(3.0)	-	-	(1.4)	(4.4)	-	(4.4)
Environmental & Analysis	(4.5)	-	1.1	(0.1)	(3.5)	-	(3.5)
Medical	(8.0)	-	0.4	-	(7.6)	(0.9)	(8.5)
Total Segment & Group	(17.5)	-	1.5	(1.5)	(17.5)	(0.9)	(18.4)

The £1.5m adjustment to contingent consideration comprised a credit of £1.1m in Environmental & Analysis arising from a change in estimate of the payable for FluxData, Inc. and a credit of £0.4m in Medical arising from exchange differences on the payables for Visiometrics S.L. ("Visiometrics") which is denominated in Euros.

The £1.5m charge related to the release of the remaining fair value adjustment on revaluing the inventory of Firetrace (£1.4m) and Mini-Cam Enterprises Limited and subsidiaries (£0.1m).

The loss on disposal of operations of £0.9m arose on the sale of the trade and assets of Accudynamics Inc, for sale proceeds of £4.1m. The net assets on disposal were £4.3m, which together with the disposal of related goodwill of £0.8m and disposal costs of £0.3m, offset by the recycling of foreign exchange gains of £0.4m, resulted in a net loss on disposal (before taxation) of £0.9m.

		Audited for the year to 31 March 2019
	Amortisation of acquired intangibles £m	Acquisition items			Total amortisation charge and acquisition items £m		Disposal of operations and significant restructuring £m	Total £m
		Transaction costs £m	Adjustments to contingent consideration £m	Release of  fair value adjustments to inventory £m		Defined benefit pension charge £m
Process Safety	(4.0)	-	-	-	(4.0)	-	-	(4.0)
Infrastructure Safety	(6.8)	(0.4)	-	(2.6)	(9.8)	-	-	(9.8)
Environmental & Analysis	(9.1)	(0.1)	3.0	(0.1)	(6.3)	-	-	(6.3)
Medical	(15.7)	(0.6)	0.5	-	(15.8)	-	(1.0)	(16.8)
Total Segment	(35.6)	(1.1)	3.5	(2.7)	(35.9)	-	(1.0)	(36.9)
Unallocated	-	-	-	-	-	(2.1)	-	(2.1)
	(35.6)	(1.1)	3.5	(2.7)	(35.9)	(2.1)	(1.0)	(39.0)

The transaction costs arose mainly on the acquisitions during the year. In Infrastructure Safety, they mainly related to LAN Controls Limited (£0.1m), Limotec (£0.1m), Navtech Radar (£0.4m) and Business Marketers Group (trading as Rath Communications) (£0.1m) and a credit from a previous acquisition. In Environmental & Analysis, they related to the acquisition of FluxData in a previous year (£0.1m). In Medical, they mainly related to the acquisition of Visiometrics in a previous year (£0.5m).

The £3.5m adjustment to contingent consideration comprised: a credit of £3.0m in Environmental & Analysis arising from decreases in estimates of the payable for FluxData (£2.7m) and Mini-Cam (£0.3m); and a credit of £0.5m in Medical arising from an increase in estimate of the payable for CasMed NIBP (£0.1m) offset by a credit of £0.6m arising from exchange differences on the payable for Visiometrics which is denominated in Euros.

The £2.7m release of fair value adjustments to inventory related to Firetrace (£1.4m), Limotec (£0.3m), Navtech Radar (£0.6m) and Rath (£0.3m) in Infrastructure and Safety; and Mini-Cam (£0.1m) within Environmental & Analysis. All amounts have now been released in relation to Firetrace, Limotec, Rath and Mini-Cam.

The £2.1m defined benefit pension charge related to the estimate of Guaranteed Minimum Pension equalisation for men and women.

3 Finance income

	Unaudited  Six months to 30 September 2019 £m	Unaudited  Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Interest receivable	0.3	0.1	0.4
Fair value movement on derivative financial instruments	0.1	-	0.1
	0.4	0.1	0.5

4 Finance expense

	Unaudited  Six months to 30 September 2019 £m	Unaudited  Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Interest payable on loans and overdrafts	3.7	3.9	7.6
Interest payable on lease obligations	1.0	-	-
Amortisation of finance costs	0.4	0.4	0.9
Net interest charge on pension plan liabilities	0.4	0.6	1.2
Other interest payable	0.1	0.1	0.5
	5.6	5.0	10.2
Fair value movement on derivative financial instruments	0.2	-	0.2
Unwinding of discount on provisions	0.3	-	0.1
	6.1	5.0	10.5

5 Taxation

The total Group tax charge for the six months to 30 September 2019 of £20.8m (six months to 30 September 2018: £19.9m; year to 31 March 2019: £36.9m) comprises a current tax charge of £23.3m (six months to 30 September 2018: £21.2m; year to 31 March 2019: £44.7m) and a deferred tax credit of £2.5m (six months to 30 September 2018: £1.3m; year to 31 March 2019: £7.8m). The tax charge is based on the estimated effective tax rate for the year, for profit before tax before adjustments. The tax rates applied to the adjustments are established on an individual basis for each adjustment.

The tax charge includes £19.6m (six months to 30 September 2018: £17.3m; year to 31 March 2019: £33.6m) in respect of overseas tax.

6 Earnings per ordinary share

Basic and diluted earnings per ordinary share are calculated using the weighted average of 379,134,587
(30 September 2018: 379,043,693; 31 March 2019: 379,159,755) shares in issue during the period (net of shares purchased by the Company and held as Employee Benefit Trust shares). There are no dilutive or potentially dilutive ordinary shares.

Adjusted earnings are calculated as earnings from continuing operations excluding the amortisation of acquired intangible assets; acquisition items; significant restructuring costs; profit or loss on disposal of operations; and the associated taxation 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:

	Unaudited  Six months to 30 September 2019 £m	Unaudited  Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Earnings from continuing operations	85.0	74.6	169.8
Amortisation of acquired intangible assets (after tax)	14.1	14.9	27.5
Acquisition transaction costs (after tax)	2.8	-	1.0
Adjustments to contingent consideration (after tax)	(0.1)	(1.5)	(2.9)
Release of fair value adjustments to inventory (after tax)	1.4	1.1	2.1
Defined benefit pension charge (after tax)	-	-	1.7
Disposal of operations and restructuring (after tax)	-	0.7	0.8
Adjusted earnings	103.2	89.8	200.0

	Per ordinary share
	Unaudited  Six months to 30 September 2019 pence	Unaudited  Six months to 30 September 2018 pence	Audited Year to 31 March 2019 pence
Earnings from continuing operations	22.40	19.67	44.78
Amortisation of acquired intangible assets (after tax)	3.72	3.93	7.25
Acquisition transaction costs (after tax)	0.75	-	0.27
Adjustments to contingent consideration (after tax)	(0.04)	(0.40)	(0.75)
Release of fair value adjustments to inventory (after tax)	0.37	0.29	0.55
Defined benefit pension charge (after tax)	-	-	0.44
Disposal of operations and restructuring (after tax)	-	0.18	0.20
Adjusted earnings	27.20	23.67	52.74

7 Dividends

	Per ordinary share
	Unaudited  Six months to 30 September 2019 pence	Unaudited  Six months to 30 September 2018 pence	Audited Year to 31 March 2019 pence
Amounts recognised as distributions to shareholders in the period
Final dividend for the year to 31 March 2019 (31 March 2018)	9.60	8.97	8.97
Interim dividend for the year to 31 March 2019	-	-	6.11
	9.60	8.97	15.08
Dividends in respect of the period
Proposed interim dividend for the year to 31 March 2020 (31 March 2019)	6.54	6.11	6.11
Final dividend for the year to 31 March 2019	-	-	9.60
	6.54	6.11	15.71

	Unaudited  Six months to 30 September 2019 £m	Unaudited  Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Amounts recognised as distributions to shareholders in the period
Final dividend for the year to 31 March 2019 (31 March 2018)	36.4	34.0	34.0
Interim dividend for the year to 31 March 2019	-	-	23.2
	36.4	34.0	57.2
Dividends in respect of the period
Proposed interim dividend for the year to 31 March 2020 (31 March 2019)	24.8	23.2	23.2
Final dividend for the year to 31 March 2019	-	-	36.4
	24.8	23.2	59.6

8 Notes to the Consolidated Cash Flow Statement

	Unaudited Six months to 30 September 2019 £m	Unaudited Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
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 profit or loss on disposal of operations	111.6	100.4	217.8
Financial instruments at fair value through profit or loss	-	(0.1)	(0.1)
Depreciation of property, plant and equipment	17.0	9.8	20.0
Loss on disposal of capitalised development costs	-	0.7	-
Amortisation of computer software	1.1	0.8	1.8
Amortisation of capitalised development costs and other intangibles	4.1	4.3	8.8
Impairment of capitalised development costs	2.0	-	0.7
Amortisation of acquired intangible assets	18.3	17.5	35.6
Share-based payment expense in excess of amounts paid	0.2	-	4.7
Additional payments to pension plans	(6.2)	(5.5)	(11.4)
Defined benefit pension charge	-	-	2.1
Loss/(profit) on sale of property, plant and equipment and computer software	0.1	-	(0.6)
Operating cash flows before movement in working capital	148.2	127.9	279.4
Increase in inventories	(6.5)	(9.9)	(9.2)
Increase in receivables	(2.3)	(1.2)	(15.3)
(Decrease)/increase in payables and provisions	(16.4)	0.5	8.2
Revision to estimate of contingent consideration payable	(0.1)	(1.5)	(3.5)
Cash generated from operations	122.9	115.8	259.6
Taxation paid	(27.3)	(19.0)	(40.6)
Net cash inflow from operating activities	95.6	96.8	219.0

	Unaudited 30 September 2019 £m	Unaudited 30 September 2018 £m	Audited 31 March 2019 £m
Analysis of cash and cash equivalents
Cash and bank balances	83.2	66.4	81.2
Overdrafts (included in current Borrowings)	(1.7)	(2.9)	(9.1)
Cash and cash equivalents	81.5	63.5	72.1

	At 31 March 2019 £m	Restatement for changes in accounting standards IFRS 16 £m	Restated as at 1 April 2019 £m	Cash flow £m	Net cash/(debt) acquired £m	Loan notes repaid £m	Lease liabilities additions £m	Exchange adjustments £m	At 30 September  2019 £m
Analysis of net debt
Cash and bank balances	81.2	-	81.2	(6.8)	6.8	-	-	2.0	83.2
Overdrafts	(9.1)	-	(9.1)	7.4	-	-	-	-	(1.7)
Cash and cash equivalents	72.1	-	72.1	0.6	6.8	-	-	2.0	81.5
Loan notes falling due within one year	(0.1)	-	(0.1)	-	-	0.1	-	-	-
Loan notes falling due after more than one year	(179.3)	-	(179.3)	-	-	-	-	(4.4)	(183.7)
Bank loans falling due after more than one year	(74.4)	-	(74.4)	(73.5)	-	-	-	(3.3)	(151.2)
Lease liabilities	-	(50.3)	(50.3)	7.7	(3.6)	-	(9.0)	(1.8)	(57.0)
Total net debt	(181.7)	(50.3)	(232.0)	(65.2)	3.2	0.1	(9.0)	(7.5)	(310.4)

Overdrafts and Loan notes falling due within one year are included as current borrowings in the Consolidated Balance Sheet. Loan notes and Bank loans falling due after more than one year are included as non-current borrowings.

9 Alternative performance measures

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

Note 2 provides further analysis of the adjusting items in reaching adjusted profit measures.

Return on Total Invested Capital (ROTIC)

	Unaudited Six months to  30 September 2019 £m	Unaudited Six months to  30 September 2018 £m	Audited Year to 31 March 2019 £m
Profit after tax	85.0	74.6	169.8
Adjustments1	18.2	15.2	30.2
Adjusted profit after tax1	103.2	89.8	200.0
Total equity	1,067.5	927.3	981.4
Add back retirement benefit obligations	27.6	20.7	39.2
Less associated deferred tax assets	(4.7)	(3.6)	(7.0)
Cumulative amortisation of acquired intangible assets	264.8	219.0	235.2
Historical adjustments to goodwill2	89.5	89.5	89.5
Total Invested Capital	1,444.7	1,252.9	1,338.3
Average Total Invested Capital3	1,391.5	1,203.0	1,245.7
Return on Total Invested Capital (annualised)4	14.8%	14.9%	16.1%

Return on Capital Employed (ROCE)

	Unaudited Six months to  30 September 2019 £m	Unaudited Six months to  30 September 2018 £m	Audited Year to 31 March 2019 £m
Profit before tax	105.8	94.5	206.7
Adjustments1	23.0	18.4	39.0
Net finance costs	5.7	4.9	10.0
Lease interest	(1.0)	-	-
Adjusted operating profit1 after share of results of associates	133.5	117.8	255.7
Computer software costs within intangible assets	6.0	5.1	5.5
Capitalised development costs within intangible assets	34.7	30.2	33.1
Other intangibles within intangible assets	3.3	3.0	3.1
Property, plant and equipment	171.7	109.6	112.4
Inventories	162.9	141.2	144.3
Trade and other receivables	275.2	241.8	259.6
Trade and other payables	(157.9)	(154.5)	(164.8)
Provisions	(20.5)	(18.2)	(25.4)
Net current tax liabilities	(8.6)	(12.6)	(13.2)
Non-current trade and other payables	(13.3)	(9.7)	(11.6)
Non-current provisions	(7.9)	(4.7)	(10.9)
Lease liabilities	(57.0)	-	-
Add back contingent purchase consideration	19.4	14.8	26.8
Capital Employed	408.0	346.0	358.9
Average Capital Employed3	383.5	334.0	340.4
Return on Capital Employed (annualised)4	69.6%	70.5%	75.1%

1    Adjustments include the amortisation of acquired intangible assets; acquisition items; significant restructuring costs and profit or loss on disposal of operations. These also include the associated taxation on adjusting items where after-tax measures.

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

3    The ROTIC and ROCE measures are expressed as a percentage of the average of the current period's and prior year's Total Invested Capital and Capital Employed respectively. Using an average as the denominator is considered to be more representative. The March 2018 Total Invested Capital and Capital Employed balances were £1,125.1m and £312.1m respectively.

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

Organic growth and constant currency

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

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

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

    acquisition period in the prior year.

The resultant effect is that the acquisitions are removed from organic results for one full year of ownership.

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

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

Organic growth at constant currency has been calculated as follows:

Organic growth at constant currency

	Revenue			Adjusted profit* before taxation
	Unaudited Six months to 30 September 2019  £m	Unaudited Six months to 30 September 2018  £m	% growth	Unaudited Six months to  30 September 2019 £m	Unaudited Six months to  30 September 2018 £m	% growth
Continuing operations	653.7	585.5	11.7%	128.8	112.9	14.1%
Acquired and disposed revenue/profit	(23.4)	(3.6)		(5.1)	(0.6)
Organic growth	630.3	581.9	8.3%	123.7	112.3	10.2%
Constant currency adjustment	(18.7)	-		(4.1)	-
Organic growth at constant currency	611.6	581.9	5.1%	119.6	112.3	6.5%

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

Sector organic growth at constant currency

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

Process Safety   

	Revenue			Adjusted* segment profit
	Unaudited Six months to 30 September 2019  £m	Unaudited Six months to 30 September 2018  £m	% growth	Unaudited Six months to  30 September 2019 £m	Unaudited Six months to  30 September 2018 £m	% growth
Continuing operations	101.3	97.9	3.5%	24.9	22.2	12.2%
Acquisition and currency adjustments	(2.4)	-		(0.7)	-
Organic growth at constant currency	98.9	97.9	1.0%	24.2	22.2	9.3%

Infrastructure Safety

	Revenue			Adjusted* segment profit
	Unaudited Six months to 30 September 2019  £m	Unaudited Six months to 30 September 2018  £m	% growth	Unaudited Six months to  30 September 2019 £m	Unaudited Six months to  30 September 2018 £m	% growth
Continuing operations	232.9	197.6	17.9%	52.3	41.7	25.3%
Acquisition and currency adjustments	(26.9)	-		(6.7)	-
Organic growth at constant currency	206.0	197.6	4.3%	45.6	41.7	9.3%

Environmental & Analysis

	Revenue			Adjusted* segment profit
	Unaudited Six months to 30 September 2019  £m	Unaudited Six months to 30 September 2018  £m	% growth	Unaudited Six months to  30 September 2019 £m	Unaudited Six months to  30 September 2018 £m	% growth
Continuing operations	163.7	143.0	14.5%	35.1	29.0	21.3%
Acquisition and currency adjustments	(6.1)	-		(1.3)	-
Organic growth at constant currency	157.6	143.0	10.2%	33.8	29.0	16.5%

Medical 

	Revenue			Adjusted* segment profit
	Unaudited Six months to 30 September 2019  £m	Unaudited Six months to 30 September 2018  £m	% growth	Unaudited Six months to  30 September 2019 £m	Unaudited Six months to  30 September 2018 £m	% growth
Continuing operations	155.9	147.2	6.0%	35.6	35.0	1.8%
Acquisition and currency adjustments	(6.7)	(3.6)		(1.6)	(0.6)
Organic growth at constant currency	149.2	143.6	3.9%	34.0	34.4	(1.1%)

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

Adjusted operating profit

	Unaudited Six months to 30 September 2019 £m	Unaudited Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Operating profit	111.6	100.4	217.8
Add back:
Acquisition items	4.7	-	0.3
Defined benefit pension charge	-	-	2.1
Amortisation of acquired intangible assets	18.3	17.5	35.6
Adjusted operating profit	134.6	117.9	255.8

Adjusted operating cash flow

	Unaudited Six months to 30 September 2019 £m	Unaudited Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Net cash from operating activities (note 8)	95.6	96.8	219.0
Add back:
Net acquisition costs	2.0	-	1.2
Taxes paid	27.3	19.0	40.6
Proceeds from sale of property, plant and equipment	0.3	0.4	1.6
Share awards vested not settled by own shares*	5.6	4.9	4.9
Less:
Purchase of property, plant and equipment	(12.0)	(13.7)	(26.4)
Purchase of computer software and other intangibles	(1.7)	(2.0)	(4.9)
Development costs capitalised	(6.3)	(4.3)	(10.8)
Adjusted operating cash flow	110.8	101.1	255.2
Cash conversion % (adjusted operating cash flow/adjusted operating profit)	82%	86%	88%

*    See Consolidated Statement of Changes in Equity.

Return on Sales

Group Return on Sales is defined as Adjusted Profit before Taxation as a percentage of revenue. For the sectors, Return on Sales is defined as Adjusted segment profit as a percentage of segment revenue. Adjusted Profit before Taxation and Adjusted segment profit is as defined in note 2.

10 Acquisitions

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

During the period ended 30 September 2019, the Group made three acquisitions namely:  

-  Invenio Systems Limited;

-  Enoveo SARL; and

-  Ampac Group.

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

a) the total of acquisitions;

b) Invenio Systems Limited and Enoveo SARL; and

c) Ampac Group, on a stand-alone basis.

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

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

The combined fair value adjustments made for the acquisitions above under IFRS 3, excluding acquired intangible assets recognised and deferred taxation thereon, increased the goodwill recognised by £1.7m (30 September 2018: £Nil).

The accounting for all current year and prior year acquisitions with the exception of LAN Control Systems is provisional; relating to finalisation of the valuation of acquired intangible assets, the initial consideration, which is subject to agreement of certain contractual adjustments, and certain other provisional balances.

During the period ended 30 September 2019 goodwill increased by £43.1m as a result of acquisitions and £28.4m from movements in foreign exchange.

a) Total of acquisitions

	Total £m
Non-current assets
Intangible assets	35.7
Property, plant and equipment	6.3
Current assets
Inventories	7.4
Trade and other receivables	6.6
Cash and cash equivalents	6.8
Total assets	62.8
Current liabilities
Trade and other payables	(10.0)
Provisions	(2.0)
Corporation tax	(0.1)
Non-current liabilities
Deferred tax	(10.4)
Total liabilities	(22.5)
Net assets of businesses acquired	40.3
Initial cash consideration paid	78.2
Additional amounts paid in respect of cash acquired	3.1
Contingent purchase consideration estimated to be paid in respect of current year acquisitions	2.1
Total consideration	83.4
Goodwill arising on acquisitions (current year)	43.1
Total goodwill	43.1

Analysis of cash outflow in the Consolidated Cash Flow Statement

	Unaudited Six months to 30 September 2019 £m	Unaudited Six months to 30 September 2018 £m	Audited Year to 31 March 2019 £m
Initial cash consideration paid	78.2	1.2	63.0
Cash acquired on acquisitions	(6.8)	-	(5.3)
Initial cash consideration adjustment on current year acquisitions	3.1	-	5.7
Initial cash consideration adjustment on prior year acquisitions	-	-	(0.1)
Contingent consideration paid and loan notes repaid in cash in relation to prior year acquisitions	10.0	3.5	3.7
Net cash outflow relating to acquisitions (per Consolidated Cash Flow Statement)	84.5	4.7	67.0

b) Invenio Systems Limited ('Invenio') and Enoveo SARL ('Enoveo')

	Total £m
Non-current assets
Intangible assets	2.1
Property, plant and equipment	0.2
Current assets
Trade and other receivables	0.8
Cash and cash equivalents	0.2
Total assets	3.3
Current liabilities
Trade and other payables	(0.6)
Non-current liabilities
Deferred tax	(0.4)
Total liabilities	(1.0)
Net assets of business acquired	2.3
Initial cash consideration paid	3.0
Additional amounts paid in respect of cash acquired	0.1
Contingent purchase consideration estimated to be paid	2.1
Total consideration	5.2
Goodwill arising on acquisition	2.9

Invenio

The Group acquired the entire share capital of Invenio Systems Limited ('Invenio') on 2 July 2019 for an initial cash consideration of £2.8m adjustable for cash acquired. The adjustment was determined to be £0.2m. The maximum contingent consideration payable is £3.0m.

The contingent purchase consideration recognised represents the estimated amount payable, based on profit-based targets, for each of the three annual earnout periods, commencing 1 April 2019.

Invenio, located in Durham, UK, is a market leader in customer-side leak detection, offering innovative, non-intrusive detection solutions for household leaks. Invenio will join the Group as part of HWM, creating a global leader in leakage reduction within the Group's Environmental & Analysis sector.

The excess of the fair value of the consideration paid over the fair value of the assets acquired is represented by technology related intangibles of £1.3m and customer relationship intangibles of £0.4m; with residual goodwill arising of £2.5m. The goodwill represents:

a) the technical expertise of the acquired workforce;

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

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

There is no material impact on the Group's income statement for the six months ended 30 September 2019 arising from the acquisition.

Acquisition costs totalling £0.1m were recorded in the Consolidated Income Statement.

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

Enoveo

The Group also acquired the entire share capital of Enoveo on 1 July 2019 for an initial cash consideration of €0.2m (£0.2m). The maximum contingent consideration payable is €1.0m (£0.9m).

Enoveo, based in Lyon, France, provides services and monitoring tools for natural, urban or industrial aquatic environments. Enoveo will be a bolt-on to Hydreka within the Environmental & Analysis sector.

The excess of the fair value of the consideration paid over the fair value of the assets acquired of £0.4m has provisionally been allocated to goodwill.

There is no material impact on the Group's income statement for the six months ended 30 September 2019 arising from the acquisition.

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

c) Ampac Group, on a stand-alone basis

	Total £m
Non-current assets
Intangible assets	33.6
Property, plant and equipment	6.1
Current assets
Inventories	7.4
Trade and other receivables	5.8
Cash and cash equivalents	6.6
Total assets	59.5
Current liabilities
Trade and other payables	(9.4)
Provisions	(2.0)
Corporation tax payable	(0.1)
Non-current liabilities
Deferred tax	(10.0)
Total liabilities	(21.5)
Net assets of business acquired	38.0
Initial cash consideration paid	75.2
Additional amounts paid in respect of cash acquired	3.0
Total consideration	78.2
Goodwill arising on acquisition	40.2

On 15 July 2019, the Group acquired the Ampac group ('Ampac') for an initial cash consideration of A$135.0m (£75.2m), adjustable for cash acquired. The adjustment was determined to be A$5.4m (£3.0m). The acquisition comprised of the trade and assets of Ampac Technologies Pty Ltd, Ampac Distributors Pty Ltd and Ampac Pacific Ltd and the entire share capital of Ampac Europe Ltd and Cranford Controls Ltd.

Ampac, headquartered in Perth, Australia with offices in Australia, New Zealand and the UK is a leading fire and evacuation systems supplier in the Australian and New Zealand markets. The company will continue to run under its own management team and will become part of the Group's Infrastructure Safety sector.

The excess of the fair value of the consideration paid over the fair value of the assets acquired is represented by customer related intangibles of £19.0m; trade name of £6.9m and technology related intangibles of £7.3m; with residual goodwill arising of £40.2m. The goodwill represents:

a) the technical expertise of the acquired workforce;

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

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

Ampac contributed £8.3m of revenue and £2.1m of profit after tax for the six months ended 30 September 2019.

Acquisition costs totalling £2.2m were recorded in the Consolidated Income Statement.

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

11 Fair values of financial assets and liabilities

As at 30 September 2019, with the exception of the Group's fixed rate loan notes, there were no significant differences between the book value and fair value (as determined by market value) of the Group's financial assets and liabilities.

The fair value of floating rate borrowings approximates to the carrying value because interest rates are reset to market rates at intervals of less than one year.

The fair value of the Group's fixed rate loan notes arising from the United States Private Placement completed in January 2016 is estimated to be £189.9m, against a carrying value of £183.7m.

The fair value of financial instruments is estimated by discounting the future contracted cash flow using readily available market data and represents a level 2 measurement in the fair value hierarchy under IFRS 7.

As at 30 September 2019, the total forward foreign currency contracts outstanding were £49m. The contracts mostly mature within one year and therefore the cash flows and resulting effect on profit and loss are expected to occur within the next 12 months.

The fair values of the forward contracts are disclosed as a £0.9m (30 September 2018: £0.3m; 31 March 2019: £0.9m) asset and £0.7m (30 September 2018: £0.5m; 31 March 2019: £0.3m) liability in the Consolidated Balance Sheet.

Any movements in the fair values of the forward contracts are recognised in equity until the hedge transaction occurs, when gains/losses are recycled to finance income or finance expense.

12 Subsequent events

On 2 October 2019, the Group acquired the entire share capital of Infowave Solutions Inc., located in the USA, for an initial cash consideration of US$8.3m (£6.8m). Infowave will join the Group as part of CenTrak, complementing CenTrak's hardware capabilities with software and data capabilities, within the Medical sector. The maximum contingent consideration payable is US$4.0m (£3.3m) based on profit-based targets for the years ended March 2021 and March 2022.

On 4 October 2019, the Group acquired certain trade and assets of NeoMedix, located in the USA, for an initial cash consideration of US$8.1m (£6.6m). The glaucoma-related assets of NeoMedix was acquired by MicroSurgical Technology within the Group's Medical sector. The maximum contingent consideration payable is US$17.0m (£14.0m) based on revenue-based targets for three years from the completion of the acquisition.

13 Contingent liability

Group financing exemptions applicable to UK controlled foreign companies

As previously reported, on 2 April 2019 the European Commission issued its final decision in a State Aid investigation into the Group Financing Exemption in the UK controlled foreign company rules. The European Commission found that part of the Group Financing Exemption constitutes State Aid. The Group Financing Exemption was introduced in legislation by the UK government in 2013. In common with other UK -based international companies whose arrangements are in line with current UK CFC legislation the Group may be affected by the ultimate outcome of this investigation. In June and July 2019, the UK government and other UK -based international companies, including the Group, appealed to the General Court of the European Union against the decision. In the meantime, the UK Government is required to commence collection proceedings and therefore it is expected that the Group will have to make a payment in the second half of the year ending 31 March 2020 in respect of this case. At present it is not possible to determine the amount that the UK government will seek to collect.

If the decision of the European Commission is upheld, the Group calculates its maximum potential liability at 30 September 2019 to be approximately £15.4m (31 March 2019: £15.4m) in respect of tax and approximately £0.9m in respect of interest (31 March 2019: £0.6m). Based on its current assessment, the Group believes that no provision is required in respect of this issue.

Other contingent liabilities

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

14 Other matters

Seasonality

The Group's financial results have not historically been subject to significant seasonal trends.

Equity and borrowings

Issues and repurchases of Halma plc's ordinary shares and drawdowns and repayments of borrowings are shown in the Consolidated Cash Flow Statement.

Related party transactions

There were no significant changes in the nature and size of related party transactions for the period to those reported in the Annual Report and Accounts 2019.

15 Principal risks and uncertainties

A number of potential risks and uncertainties exist that could have a material impact on the Group's performance over the second half of the financial year and could cause actual results to differ materially from expected and historical results.

The Group has in place processes for identifying, evaluating and managing key risks. These risks, together with a description of the approach to mitigating them, are set out on pages 54 to 59 in the Annual Report and Accounts 2019, which is available on the Group's website at www.halma.com. The Directors do not consider that the principal risks and uncertainties have changed since the publication of the Annual Report and Accounts.

The principal risks and uncertainties relate to:

-  Cyber

-  Organic growth

-  Making and integrating acquisitions

-  Talent and diversity

-  Innovation

-  Competition

-  Economic and geopolitical uncertainty

-  Natural disasters

-  Communications

-  Non-compliance with laws and regulations

-  Financial controls

-  Treasury management

-  Product failure

16 Responsibility statement

We confirm that to the best of our knowledge:

a)   these Condensed Financial Statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' as adopted by the European Union and the ASB's 2007 statement on half-yearly reports;

b)   this Half Year Report includes a fair review of the information required by Disclosure Guidance and Transparency Rule (DTR) 4.2.7R (indication of important events during the period and description of principal risks and uncertainties for the remainder of the financial year); and

c)   this Half Year Report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

Andrew Williams                Marc Ronchetti

Group Chief Executive        Chief Financial Officer

19 November 2019

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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