Halma plc Final results 2017/18

Transcription

1 Halma plc Final results 217/18 Summary of analysts presentation by: Andrew Williams, Chief Executive Kevin Thompson, Finance Director 12 June 218

2 Page 2 Summary of analysts presentation 12 June 218 Record revenue, profit and dividend Andrew Williams, Halma s CEO, began by summarising the progress made during the year. Halma has had a busy and successful year and I have been happy with the progress we have made. Milestones 217/18 Ø 15 th consecutive record year Ø 1 Billion+ revenue Ø FTSE 1 promotion Ø Halma s purpose and strategy renewed Ø Group FD succession This is our fifteenth consecutive year of record revenue and profit growth. We achieved strong organic growth, maintained our high returns, completed five acquisitions and have a good pipeline for the year ahead. We exceeded 1 billion of revenue for the first time with widespread growth across all sectors and regions. In December, we were pleased to be promoted to the FTSE 1 for the first time. I am particularly pleased that we have achieved this with sustainable growth momentum and a strong balance sheet, which provides us with a good platform for growth in the future. During the year Halma also renewed its purpose and growth strategy. Our purpose of growing a safer, cleaner, healthier future for everyone every day gives us renewed energy, as embodied in our Halma 4. growth strategy which is aimed at driving our growth through the 4 th Industrial Revolution. Later in this presentation, I will explain how the strategy works and the early progress we have made. Finally, we successfully completed the recruitment of a successor to Kevin Thompson, who has been Halma s Group Finance Director for over 2 years. I thank Kevin for his contribution to Halma s success over this long period and I wish him a happy retirement. I look forward to working with Marc Ronchetti, who will succeed Kevin on 1 July 218, having completed a successful transition and handover over the past year. Kevin Thompson, Finance Director, reviewed the financial performance for the year. For the first time Halma exceeded 1bn of revenue, 2m of Adjusted 1 profit and revenue in exceeded that in the. We achieved widespread growth. Record results 11 m 1 m Revenue Profit* 1,76m m * Profit before amortisation and impairment of acquired intangibles, acquisition items, restructuring costs and profit or loss on disposal of operations This is the fifteenth consecutive year of record revenue and profit 1. Halma has delivered compound revenue growth of 11% over the past 3 years. The chart above shows the strong progress over the past five years. Revenue growth FY 217/18 Ø Organic constant currency growth 1% ØAcquisitions 2% ØCurrency - Ø Headline growth 12%

3 Page 3 Summary of analysts presentation 12 June 218 Revenue increased by 12% to 1,76m (217: 962m). There was strong organic 2 constant currency revenue growth of 1%. The contribution to growth from the acquisition in 216/17 and the five acquisitions in the current year was 2%, in line with expectations. Although there was a lot of currency volatility throughout the year, the currency translation impact was neutral for the year as a whole. We saw 5% currency translation benefit in the first half which reversed in the second half. Revenue growth FY 217/18 m Headline Organic: Constant Currency growth H % 9% H2 57 1% 11% Total 1,76 12% 1% All four sectors delivered revenue growth both headline and when measured at organic constant currency (excluding acquisitions and currency translation impacts). The organic 2 constant currency revenue growth of 9% in the first half increased to 11% growth in the second half, with a strong finish to the year and increased second half revenue growth rates in the Environmental & Analysis and Medical sectors. There was also strong revenue growth in all the regions. Revenue by destination Revenue and revenue growth, 217/18 8% 9% 16% 35% 21% 15% 1,76m 22% Outside US// = 16% growth 27% 11% 28% 16% 17% 15% 12% 13% The remains our largest sales destination, up 8%, at 35% (217: 36%) of total revenue. The was up 12% with growth in all four sectors. There was also growth in all four sectors in Mainland (up 13%) and (up 15%). At 175m of revenue, revenue was higher than the. regions were 17% higher. Revenue outside of US/Mainland / was up 16%. Revenue by destination: organic constant currency Revenue and revenue growth, 217/18 9% 12% 15% 9% 21% 27% 28% 14% There was good growth across all regions measured at organic 2 constant currency. revenue grew by 9% and after 6% growth in the first half growth accelerated to 12% in the second half, with an excellent performance in particular by the Environmental & Analysis sector. The and Mainland grew evenly through the year at 9% and 8% respectively, and while revenue in France was lower, Germany, Holland and Scandinavia grew. performed well in the year and was up 14% in organic constant currency terms. China was up 18% with growth in all sectors. regions were up, with progress in Near and Middle East, good growth in Canada and with mixed performances across South and Central America including good growth in Brazil. Adjusted 1 profit increased by 2m to 214m (217: 194m) up 1%. Organic 2 constant currency growth was 9%, well above our 5% growth KPI. There was profit growth in all four sectors. 9% 8%

4 Page 4 Summary of analysts presentation 12 June 218 Profit* growth FY 217/18 Ø Organic constant currency growth 9% ØAcquisitions 1% ØCurrency - Ø Headline growth 1% Currency Ø Translation impact in 17/18 Ø H1 net benefit: revenue and profit 5% Ø Full year net benefit: neutral Ø At recent Fx rates 18/19 profit impact*:- Ø H1: ~ 2% adverse Ø FY: ~ 1% adverse Ø Impact varying by sector Ø More information in Appendix * Profit before amortisation and impairment of acquired intangibles, acquisition items, restructuring costs and profit or loss on disposal of operations * Based on 17/18 results, assuming /$ 1.35, / 1.13 There was a 1% contribution to adjusted 1 profit from the acquisitions made in 216/17 and in 217/18. This profit growth contribution was lower than the percentage contribution to revenue due to the phasing of contracts in acquired businesses and additional investment under the early stages of Halma ownership. We expect profit growth from these acquisitions in 218/19 and beyond. Central costs increased, as expected, with investments to support our growth strategy, the higher cost of performance based rewards due to the high organic growth rate and the cost of the biennial HITEx event. The most important currency exchange rate movements to Halma are the US$, Euro and to a lesser extent the Swiss Franc and Chinese Renminbi, all relative to Sterling. The full year Income Statement impact of currency translation was neutral. If exchange rates continue around recent levels, and based on the 217/18 mix of revenue and profit, we would expect a 1% adverse impact from currency translation in 218/19 with an estimated 2% adverse impact in the first half of the year reversing somewhat in the second half. Cash flow 217/18 2m Profit* growth (2)m (4)m Working capital Capex > Depn 85% cash conversion (6)m Tax m Headline Organic: Constant Currency growth H % 8% H % 9% (8)m (1)m (12)m (14)m (16)m (18)m (2)m (22)m Debt b/f YE 17 Profit Pensions Working capital: outflow 25m (217: 14m) Capex: 22m (217: 24m) Effective tax rate: 19.7% (217: 21.5%) Pensions: Deficit 54m (217: 75m) Acquisitions: 116m current year Acquisitions + 1m prior year (217: 1m) Dividend: 7% increase Total % 9% (24)m Debt: 22m net debt (217: 196m net debt) Dividend Debt c/f YE 18 incl. FX (net) * Profit before amortisation and impairment of acquired intangibles, acquisition items, restructuring costs and profit or loss on disposal of operations Headline profit was higher in the first half due to the 5% currency translation contribution, with neutral currency impact by the year end. Organic 2 constant currency profit growth increased from 8% in the first half to 9% in the second half, giving 9% for the year. There was good cash conversion in the year at 85%, in line with our KPI metric. Working capital increased, with higher debtors following strong revenue growth in the final quarter. Debtor days remain in line with the prior year. There was also higher inventory supporting new product introductions. Capital expenditure was 22m (217: 24m) with lower expenditure on property this year and, as mentioned at the half year, a couple of larger projects deferred into 218/19. We are expecting a higher level of investment in 218/19, with capex forecast

5 Page 5 Summary of analysts presentation 12 June 218 to be 34m, to support growth in particular in the Infrastructure sector. The effective tax rate on adjusted 1 profit was 19.7% (217: 21.5%) reflecting the mix of profits earned across the various jurisdictions, increased R&D related tax reliefs including Patent Box and the benefit of reduced corporate tax rates following tax reforms in the US. There was a 15m credit due to the revaluation of US deferred tax assets and liabilities which has been treated as an Adjustment (Middle Column item) in the Income Statement. We expect the 218/19 effective tax rate to be around 2%. The pension deficit reduced to 54m (217: 75m) mainly due to company contributions and the revision to mortality assumptions based on latest guidance. The recent triennial pension plan valuations are being finalised and we will review future pension contributions based on the outcome. We spent 116m on the five acquisitions made in the year across three sectors. We paid 53m (217: 5m) in dividends to shareholders in 217/18. A 7% increase in the final dividend per share is proposed, giving a 7% increase for the year. This represents the 39 th consecutive year of dividend increases of 5% or more. The Group s financial position remains strong. Significant financial capacity Ø Revolving Credit Facility Ø 55m extended to November 222 Ø In addition to existing $25m USPP Ø Capacity for medium term growth Ø Year end gearing.87x, comfortable up to 2x we extended the term a further year to 222. This provides variable funding on top of the $25m US Private Placement we put in place in 215/16. Gearing (net debt to adjusted 1 EBITDA) was.87x at the year end (217:.86x). We are comfortable with gearing up to 2x to fund acquisitions and meet our medium term growth objectives. Financial KPI Summary 217/18 Target Achieved Organic revenue growth > 5% 1% Organic profit growth > 5% 9% Revenue growth outside US// > 1% 16% Cash conversion > 85% 85% Acquisition profit growth* > 5% 4% R&D investment (% of revenue) > 4% 5.2% Return on Sales 18% - 22% 19.9% Adjusted Earnings per Share > 1% 13% Return on Total Invested Capital >12% 15.2% * annualised profit of acquisitions made in the year (net of finance cost) as % of prior year adjusted profit The chart above shows our performance against our KPI targets. Organic 2 constant currency revenue and profit growth were 1% and 9% respectively, well above our 5% target. Acquisition profit growth (the annualised profit of acquisitions made in the year net of finance cost, as a % of prior year adjusted profit) at 4% was just below our 5% KPI target. Cash conversion was good enabling further investment including record R&D expenditure for development of new products. Return on Sales 3 continued at a high rate as did ROTIC 4. Overall we achieved a very good performance against our targets. Andrew Williams reviewed the performance of each sector and gave a strategy update All sectors increased revenue and profit. There was record revenue in all sectors and record profit in all but one. We finished the year with net debt of 22m (217: 196m). In November 216 we increased our Revolving Credit Facility to 55m for five years to 221 and this year

6 Page 6 Summary of analysts presentation 12 June 218 Sector performances Infrastructure +11% 33% Process 17% +11% Revenue Medical +9% 26% 1,76m 239m 46% 24% Environmental & Analysis +18% Infrastructure +13% 31% Process 18% +8% Profit* Medical +% 28% 23% Environmental & Analysis +32% Group revenue by end-market Revenue +31% Energy/Res +12% 7% Process Ind 8% +2% 7% Utilities +15% 8% 11% Science/Env +23% 27% +9% Buildings +9% 32% Health/Med Energy/Res +12% Process Ind +2% Utilities +8% Science/Env +23% Organic ccy +28% 46% Buildings +6% Health/Med +7% * Profit before amortisation and impairment of acquired intangible assets, acquisition items, restructuring costs and profit or loss on disposal of operations and excluding finance and central administration costs * Includes a re-classification of 216/17 revenue from Utilities and s Both sectors performed really well, even though Process didn t quite exceed the record profit it achieved in 215. The Medical sector had good revenue growth throughout the year and, as expected, improved its profitability in the second half. The Environmental & Analysis sector delivered an outstanding performance even after excluding the positive impact of the Pixelteq reorganisation in FY17. Sector performances: Organic constant currency growth Infrastructure Infrastructure Medical Medical +8% +7% +1% ()% Process +11% Revenue Environmental & Analysis +15% Process +8% Profit* +1% +9% 46% Environmental & Analysis +28% * Profit before amortisation and impairment of acquired intangible assets, acquisition items, restructuring costs and profit or loss on disposal of operations and excluding finance and central administration costs The group achieved organic revenue growth in all of its major end markets. The highest growth was in the Science/Environmental segment, which is a key market for our Environmental & Analysis sector. Good progress in the Energy end-market supported the Process sector s growth. We continued to see improvement in revenue from both the Buildings and Health/Medical segments, underpinning the good results in the Infrastructure and Medical sectors respectively. This widespread growth demonstrates that the long-term growth drivers of increasing health and safety regulation, increasing demand for healthcare and life critical resources continues to sustain growth across the diverse range of end-markets we choose to operate in. I am pleased with both the diversity and growth opportunities of our markets as I believe they will continue to underpin growth in the future. There was good organic constant currency revenue growth in all sectors with good organic constant currency profit growth in all except the Medical sector. After a tough first half for this sector, where there was a 6% organic decline in profit, as expected, it achieved a 4% organic profit improvement in the second half. Overall, I was very pleased with the organic growth performance during the year, especially with the ongoing increase in investment for the future. For example, we have invested in new digital growth resources and the companies R&D spending was up by 12%. The Process sector performed well and in-line with expectations, maintaining the improved performance which started to emerge in the second half of last year. Process : Trading performance Revenue: +11% m Organic ccy: +11% m m Revenue was up by 11% to 185m, which was all organic. Profit improved by 8% to Profit: +8% Organic ccy: +8% Return on Sales: 23.5% R&D Spend: +6% 43m

7 Page 7 Summary of analysts presentation 12 June m, again this was all organic. Return on Sales of 23.5% was strong, although a little below the 24.1% achieved last year. However, I was happy with the balance between growth and investment, with R&D spend up by 6%. The Pipeline Management, Interlocks and Pressure Management businesses all performed well with more modest rates of growth from Gas Sensors. Process : Revenue by destination % of sector & % growth +12% 28% +2% 16% As reported 22% +9% +14% +2% Organic ccy +7% The Infrastructure sector performed very well and reclaimed its position as the largest profit sector in Halma. Revenue improved by 11% to 349m with 8% organic constant currency growth. Profit increased by 13% to 73m with 1% organic constant currency growth. Both revenue and profit benefited by 2% from acquisitions and by 1% from currency movements. Return on Sales rose from 2.7% to 21%, even though R&D spend continued to rise, this year by 13%. There were strong performances from the Fire and People/Vehicle Movement businesses as well as solid progress by Security and Elevator. +18% 19% 15% +11% +18% +11% Infrastructure : Revenue by destination % of sector & % growth 15% There was revenue growth in all of the major regions. In the, steadily improving demand from onshore energy customers underpinned strong organic constant currency revenue growth. There was also excellent growth from and regions, which includes the Middle East. There was solid growth in Mainland and modest growth in the, which is a key market for our Gas Sensors business. Process will continue to invest in products, markets and its organisation to make it more resilient and able to sustain growth despite volatility in its major endmarket, Oil and Gas. We expect the sector to make progress in the year ahead. Infrastructure : Trading performance Organic ccy: +8% m m m Revenue: +11% Profit: +13% Organic ccy: +1% 73m Return on Sales: 21.% R&D Spend: +13% +18% (4)% 19% 11% 13% +15% As reported 25% +1% 32% +19% +16% (3)% +15% Organic ccy +8% +11% There was growth in all regions except the. Here our Fire businesses saw slightly reduced demand although in the second half performance improved following a 5% organic constant currency decline in the first half. There was double-digit growth in Asia Pacific and regions which again highlights the strengthening of safety regulations for public and commercial infrastructure. There was double-digit growth in Mainland, where the acquisitions of Setco (Elevator ) in Spain and Argus (Fire Systems) in Italy will further strengthen our position. There was good progress in the, which delivered 8% constant currency revenue growth. Given the widespread growth in endmarkets plus recent acquisitions, we expect Infrastructure to continue to make progress in the coming year.

8 Page 8 Summary of analysts presentation 12 June 218 Medical: Trading performance m Organic ccy: +7% m 3 284m Revenue: +9% Profit: +% Organic ccy: ()% Return on Sales: 23.6% R&D Spend: +4% The Medical sector delivered consistently good revenue growth throughout the year and, as expected at the half year results, improved profitability as the year progressed. Revenue increased by 9% to 284m with 7% organic constant currency growth and a 2% contribution from acquisitions. Profit was slightly ahead of the prior year at 67m with a marginal organic constant currency decline and a 1% benefit from acquisitions. There was only a marginal currency impact on both revenue and profit. Return on Sales remained strong but reduced from 25.6% to 23.6%. This reflected both the change in revenue mix between higher and lower Gross Margin businesses as well as increased investment in talent upgrades and R&D where spend was up by 4%. Medical: Revenue by destination % of sector & % growth +8% +3% 5% 18% +6% +9% +4% 67m +5% growth in the, which is the dominant regional market for our Medical products. There was solid progress in the, Mainland and. There was strong growth in regions, which included the contribution from Cardios. This is our first ever acquisition in Brazil and a useful addition to our global blood pressure monitoring businesses. In summary, we expect the Medical sector to sustain revenue growth and to improve profitability in the coming year. It is therefore well positioned to make continued progress in the year ahead. Environmental & Analysis: Trading performance m Organic ccy: +15% m m Revenue: +18% Profit: +32% Organic ccy: +28% Return on Sales: 21.2% R&D Spend: +18% Our Environmental & Analysis sector delivered an outstanding performance. Revenue was up by an impressive 18% to 259m including 15% organic constant currency growth and a 3% acquisition contribution. Profit grew by 32% to 55m including 28% organic constant currency growth and a 6% acquisition contribution. Currency had a marginal impact on revenue and a 2% negative impact on profit. 55m 51% As reported Asia 15% Pacific +4% 11% +33% Organic ccy +14% Asia Pacific +3% Return on Sales improved from 19% to 21.2% even though we continued to increase investment. For example, R&D spend increased by 17% to remain at 6.9% of sector revenue. All business segments, including Patient Assessment, Sensors, Diagnostic and Ophthalmic increased revenue and there was good profit growth in the first two segments and small declines in the second two. The Photonics, Water and Environmental Monitoring business segments all contributed strongly, as did the acquisition of Mini-Cam, the waste water pipeline inspection business, which was acquired at the start of H2. There was growth in all major regions including good organic constant currency

9 Page 9 Summary of analysts presentation 12 June 218 Environmental & Analysis: Revenue by destination % of sector & % growth Halma 4. Strategy: How it works Purpose Growing a safer, cleaner, healthier future for everyone, every day +17% +29% 17% +16% +22% Growth Strategy 43% As reported 12% +12% Organic ccy +5% Growth Enablers Innovation Network Talent & Culture M&A Finance & Risk International Expansion Strategic Comms Digital Growth Engines 6% (1)% 22% +29% (1)% +24% Achievements Financial KPIs Non Financial KPIs Customer Satisfaction Shareholder Value Employee Engagement Purpose Growing a safer, cleaner, healthier future for everyone, every day As at the half year, there was organic growth in all major regions except a decline in regions, which represents only 6% of the sector. There was strong organic constant currency growth in the, with a strong performance from Photonics, and also in the, where Water continued to perform well. There was solid progress in Mainland, although this represented an improved second half performance following organic decline in the first half of the year. continues to thrive, with strong growth. We believe this is sustainable, due to stronger environmental regulatory drivers continuing to emerge in the region. In summary, the Environmental & Analysis sector had an outstanding year with widespread growth, a good-sized acquisition and, although it faces a tougher comparative year, it is well placed to make progress in the coming year. Andrew Williams then gave an update on Halma s strategy. In February, I outlined a renewed purpose for Halma and how we are approaching new growth opportunities brought by the technological changes known as the 4 th Industrial Revolution. During the year we launched the Halma 4. growth strategy and, associated with this, I changed our leadership structure to reduce the number of Sector Chief Executives from four to two and added a Chief Innovation and Digital Officer, Inken Braunschmidt. These changes are working well. The Halma 4. growth strategy starts with our purpose of, Growing a safer, cleaner, healthier future for everyone every day. This acts as our North Star, which directs our growth efforts and also attracts the right partners, customers, talent and investors. We call this a Massive Transformative Purpose (MTP). To our successful Core growth strategy, we have added two new elements to exploit the new opportunities created by technological change. Our Core growth strategy will remain our priority for investment, although it is also becoming more digital in nature. We have added a Convergence growth strategy, which is aimed at combining the assets or capabilities from two or more businesses to create a new value proposition and business model. The business created might operate inside an existing Halma company or as a standalone business. Due to the diversity of our group, we see lots of opportunities for these convergence growth opportunities. The Edge growth strategy is focussed on digital disruption and ensuring that our companies are plugged into the innovation hotspots around the world to accelerate their growth and competitiveness. An example would be by partnering with experts in artificial intelligence or new robotic technologies. We have Growth Enablers which support our companies growth and these continue to evolve through the Halma 4. growth strategy. All of these growth enablers articulate the value that companies get from being part of Halma.

10 Page 1 Summary of analysts presentation Finally, we will measure our achievements more broadly than just the vital financial KPIs. We will develop a range of nonfinancial KPIs to reflect the progress of our digital growth initiatives as well as including more traditional measures of achievement such as customer satisfaction and employee engagement. However, ultimately, our success will be measured by the impact we have as defined by our purpose. Halma 4. Strategy: Our Growth Enablers M&A International Expansion Talent & Culture Finance & Risk Innovation Network Strategic Comms Digital Growth Engines H a lm a F in a l re su lts Ju n e At the fulcrum of the execution of our growth strategy are our Growth Enablers. The M&A growth enabler will now include identifying new partnerships not just acquisitions and will also support improving our market intelligence. In Talent and Culture, we are building new digital expertise and developing the capabilities of existing management to support new approaches such as convergence growth. Our Innovation Network is providing all employees with greater visibility of the capabilities residing in other group companies and encouraging mutual learning. 12 June 218 We can improve communication and we have rebuilt and upskilled our Strategic Communication team during the year. It will work on improving both internal communications (to provide more visibility for problem solving and collaboration) and external communication (to tell our story better to attract new partners, customers, talent and investors). A good example of this in action is the new Halma Hub. It already has almost 2,5 Halma users and is becoming a focal point for collaboration, learning and giving visibility of what is going on across our global business. Halma 4. relies on improving visibility and networking up, down and across our business. A key objective of the Halma 4. growth strategy is to help our companies solve digital technical barriers (to make their products more connected and data driven) and digital business model barriers (to understand the real value proposition to customers, select the right business model and how to scale it). We have built a small central team, under the leadership of our Chief Innovation and Digital Officer, to lead a variety of Digital Growth Engine programmes. Digital Growth Engines: Early progress Digital Growth Sprints Exponential Scaling Convergence Accelerator Digital Edge Hub Innovation hot spot H a lm a F in a l re su lts Ju n e In International Expansion, we are using our hubs to bring local knowledge and market intelligence to our businesses and helping them better understand the viability of new technologies. In Finance and Risk we are developing new cloud-based data analysis capabilities to get more value from the data which all of our companies have, in order to help them make better, faster and more informed decisions. The Digital Growth Sprints help our businesses grow their core business digitally. Businesses have to have an existing digital product or business model idea which is solving a real customer problem, and a cross functional team available for a three-month programme. The benefits of this programme are not just in developing individual ideas but also in building long-term and sustainable capability within our businesses. Through the first programme, SunTech learnt to be

11 Page 11 Summary of analysts presentation 12 June 218 agile with customer validation of their new digital blood pressure monitoring concept. They were also able to gain a greater understanding of the new digital players in their market giving them a vital insight into where to play and how to play. We are helping our more digitally mature companies explore new ways to grow more rapidly and potentially achieve exponential growth. This programme is called Exponential Scaling. We take an existing digital platform built for one niche application and explore if we can apply it to another, possibly unrelated, niche market. CenTrak, one of our Medical sector companies, has just started the first threemonth programme with an external partner and will look at potential new business models within the wider healthcare market. Our Convergence Accelerator is a 4- month long programme. Teams constituted from at least two Halma companies, use capabilities from multiple sources to develop totally new ideas. The first programme was launched in December 217 and attracted twenty-four applications from which six were selected. Six teams pitched their ideas to the Halma Leadership Conference in April, which also helped our Halma leaders to learn how to assess new digital business ideas. One of the successful ideas was EyeRisio, which is a team from our US and an ophthalmic companies combined with an external expert in artificial intelligence. Their idea is to transform the screening of diabetic retinopathy in developing countries, as over 94 million people suffer from it globally. The team received funding to complete further market research in their selected markets. companies to identify new trends, bridge skill gaps, find new talent and build partnerships. It will do this by plugging into the major innovation hubs around the world including Tel Aviv, Singapore and Silicon Valley. Our first partnership is with OurCrowd in Tel Aviv. It is a leading global equity crowd funding platform with over 15 start-ups with a strong alignment with Halma's purpose of making the world a safer, cleaner, healthier place. In summary, there are three clear messages I want to emphasise for the Halma 4. growth strategy. 1. Our new Digital Growth Enablers are complementary to our existing growth enablers rather than replacing them and will contribute to all elements of our growth strategy including Core growth, which remains our primary focus. 2. We are taking a practical approach of building capability across our business for the long-term rather than just short-term financial returns. 3. Over the next year, we will review what is working and not working and develop new KPIs to measure our progress. Summary and Outlook Statement Ø Record results Ø Widespread growth Ø Strong returns and cash generation Ø Increased strategic investment including 5 acquisitions Ø Halma 4. Strategy Ø Core, Convergence and Edge growth models Ø Digital Growth Engines & Strategic Comms growth enablers added Ø Organisation re-aligned Ø Positive start to new financial year Ø Order intake ahead of revenue and last year Ø Solid M&A pipeline Ø Expect to continue to make progress in the coming year The Digital Edge Hub is the newest of our growth engines. It will enable our companies to explore disruptive digital business models within a lean start-up incubator environment. The first programme is due to start in London in July and will run for three months. The Innovation Hot Spots growth engine will contribute to all three elements of our growth strategy. It will help Halma So in summary, Halma has had a successful year and achieved record results with widespread growth in all sectors and regions. We have delivered strong returns and cash generation and increased our dividend for the 39 th consecutive year. We have increased strategic investment, with R&D up 12% and five acquisitions completed.

12 Page 12 Summary of analysts presentation 12 June 218 We have successfully launched the Halma 4. growth strategy, which includes two new elements of growth in addition to our Core growth strategy. We have added two new Growth Enablers, Digital Growth Engines and Strategic Communications, and given examples of them in action. During the year, I have also changed our senior leadership organisation to ensure it is aligned with the Halma 4. growth strategy. Finally, Halma has had a positive start to the new financial year. Order intake is ahead of revenue and ahead of order intake last year. We also have a solid M&A pipeline and this, combined with continued organic growth, means we expect to continue to make progress in the coming year. 1 Adjusted to remove the amortisation and impairment of acquired intangible assets, acquisition items, restructuring costs and profit or loss on disposal of operations, totalling 41.7 m (217: 36.3 m). 2 Organic growth measures the change in the revenue and profit from continuing operations. The effect of acquisitions and disposals during the current or prior financial year has been equalised. Acquisitions are removed to calculate organic results for the first full year of ownership. 3 Return on Sales is defined as adjusted 1 profit before taxation from continuing operations expressed as a percentage of revenue from continuing operations. 4 Return on Total Invested Capital (ROTIC) is defined as the post-tax return from continuing operations before amortisation and impairment of acquired intangible assets; acquisition items; restructuring costs; profit or loss on disposal of operations, the associated taxation thereon and the effect of the US tax reform measures, expressed as a percentage of average shareholders funds, adding back net retirement benefit obligations, cumulative amortisation of acquired intangible assets and historic goodwill. potential synergies; and (iii) the effects of government regulation on business. These forward-looking statements are not guarantees of future performance. They have not been reviewed by the auditors of Halma plc. They involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any results, performance or achievements expressed or implied by such statements. They are based on numerous assumptions regarding present and future business strategies and the future operating environment. All subsequent oral or written forwardlooking statements attributable to Halma plc or any of its shareholders or any persons acting on its behalf are expressly qualified in their entirety by this cautionary statement. All forward-looking statements included in this document speak only as of the date they were made and are based on information then available to Halma plc. Investors should not place undue reliance on such forward-looking statements, and Halma plc does not undertake any obligation to update publicly or revise any forward-looking statements. No representation or warranty, express or implied, is given regarding the accuracy of the information or opinions contained in this document and no liability is accepted by Halma plc or any of its directors, members, officers, employees, agents or advisers for any such information or opinions. This information is being supplied to you for information purposes only and not for any other purpose. This document and the information contained in it does not constitute or form any part of an offer of, or invitation or inducement to apply for, securities. The distribution of this document in jurisdictions other than the United Kingdom may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of laws of any such other jurisdiction. * see the Results published on 12 June 218 for more details. CAUTIONARY NOTE. This document contains statements about Halma plc that are or may be forward-looking statements. Forward-looking statements include statements relating to (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Halma plc s operations and