Half year report for the 26 weeks to 29 September 2007

29 Nov 2007

Fifth successive half year of strong organic growth

Halma, the leading safety, health and sensor technology group, today announces its half year results for the 26 weeks to 29 September 2007.

Highlights include:

• Fifth successive half year of strong organic growth* despite an adverse currency headwind. Growth in all three business sectors and across all major geographic regions.
• Revenue from continuing operations up 12% to £187.9 million (2006/07: £167.5 million), including 8% organic growth*. On a constant currency basis, organic revenue growth was 11%.
• Pre-tax profit from continuing operations** up 10% to £33.6 million (2006/07: £30.6 million), including 5% organic growth*. On a constant currency basis, organic profit growth was 8%.
• Strong margins and returns maintained, with return on sales of 17.9% (2006/07: 18.3%), ROTIC* of 13.9% (2006/07: 13.3%) and ROCE* of 58.5% (2006/07 59.0%).
• 5% increase in interim dividend reflects the Board's confidence in Halma's long-term growth prospects whilst continuing to improve dividend cover.
• Acquisition of Sonar Research & Development further strengthens Halma's market leading position in subsea applications. Substantial resources available for further investment in innovation and growth.
• Encouraging growth in China reflects Halma's strategy of accelerated business development in the region.

* Organic growth rates, return on capital employed (ROCE) and return on total invested capital (ROTIC) are non-GAAP performance measures used by management in measuring the returns achieved from the Group's asset base. See note 7 for details.
** Adjusted to remove the amortisation of acquired intangible assets of £2.0 million (2006/07 £1.5 million).

Commenting on the results, Andrew Williams, Chief Executive of Halma, said:

"We have made good progress during the first half of the year, achieving record revenue and profits. Halma's diverse and carefully selected market mix has enabled the Group to deliver consistently good short-term performances whilst also investing in growth for the future. We remain positive about our prospects for making further progress this year and in the medium term."

Note to editors

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

   • Infrastructure Sensors
     We make products which detect hazards to protect people and property in public and commercial buildings.
   • Health and Analysis
     We make components and products used to improve personal and public health. We also develop technologies and products which are used for analysis in safety, environmental and leisure related markets including Water.
   • Industrial Safety
     We make products which protect property and people at work.
   The key characteristics of Halma's businesses are that they are based on advanced technology and offer strong growth potential. Many Group businesses are a clear market leader in their specialist field and, in a number of cases, are the dominant world supplier.
2. High resolution photos of Halma senior management, including Chief Executive Andrew Williams, and images illustrating Halma business activities can be downloaded from this website. Click on the 'News' link, then 'Image Library'. Photo queries: David Waller +44 (0)20 8205 0038, e-mail: dwaller@halmapr.com
3. You can view or download copies of this announcement and our latest Half year and Annual reports from this website or request free printed copies by contacting halma@halma.com

HALMA p.l.c.

Half year results for the 26 weeks to 29 September 2007

Financial highlights

Change		Unaudited 26 weeks to 29 September 2007	Unaudited 26 weeks to 30 September 2006
Continuing operations
Revenue	+ 12%	£187.9m	£167.5m
Adjusted profit before taxation(1)	+ 10%	£33.6m	£30.6m
Statutory profit before taxation	+ 8%	£31.6m	£29.2m
Adjusted earnings per share(2)	+ 10%	6.31p	5.73p
Statutory earnings per share	+ 9%	5.97p	5.46p
Interim dividend per share	+ 5%	3.00p	2.85p
Return on sales(3)		17.9%	18.3%
Return on total invested capital(4)		13.9%	13.3%
Return on capital employed(4)		58.5%	59.0%

Pro-forma information:

1. Adjusted to remove the amortisation of acquired intangible assets of £1,968,000 (2006/07: £1,452,000).
2. Adjusted to remove the amortisation of acquired intangible assets. See note 4 for details.
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. Organic growth rates, return on capital employed (ROCE) and return on total invested capital (ROTIC) are non-GAAP performance measures used by management in measuring the returns achieved from the Group's asset base. See note 7 for details.

Chairman's statement

Geoff Unwin, Chairman of Halma, said:

The Board continues to remain confident in the prospects for the full year.

Results
For the first half, revenue from continuing operations increased 12% to £187.9 million (2006/07: £167.5 million) and adjusted* profit before tax from continuing operations increased 10% to £33.6 million (2006/07: £30.6 million). Statutory profit before tax increased by 8% to £31.6 million. Organic revenue growth** was 8% and 11% at constant currency. Organic profit growth** was 5%, 8% at constant currency. Return on total invested capital** was 13.9% (2006/07: 13.3%).

We continue to invest strongly in products, people and market development. An example of the latter is a modest acquisition in China to manufacture low cost gas detectors to service the Asia Pacific market and to provide components for elsewhere. On 1 October 2007 we acquired Sonar Research & Development Limited which manufactures solid-state sonars for subsea applications which will complement the product range of Tritech International, our existing subsea asset monitoring company.

Dividends
The Board declares an interim dividend of 3 pence per share, an increase of 5% which will be paid on 6 February 2008 to shareholders on the register at 4 January 2008. This increase reflects the Board's confidence in Halma's long-term growth prospects whilst continuing to improve our dividend cover.

Progress
Across the Group, progress has been solid. We are seeing good management development and it is pleasing to see an increase in the number of internal promotions to subsidiary Boards throughout the Group.

We have a strengthening list of possible acquisition prospects and so far the current liquidity squeeze does not seem to have reduced the potential M&A activity within our chosen markets.

Outlook
The Board continues to remain confident in the prospects for the full year.

* Before amortisation of acquired intangible assets.
** See Financial highlights.

Chief Executive's review

Andrew Williams, Chief Executive of Halma, said:

Consistently good short-term performance whilst investing in growth for the future.

Fifth successive half year of strong organic growth
We have made good progress during the first half of the year, achieving record revenue and profits. Overall revenue growth of 12% and profit* growth of 10% was achieved despite a negative currency impact of 3% (mainly US Dollar). Organic revenue growth** was 8% (11% at constant currency) and organic profit growth** was 5% (8% at constant currency).

Double digit revenue growth was achieved in all major geographic regions with the exception of the US where adverse currency movements reduced growth from 16% at constant currency to 7%. Overall market conditions were steady, as were our product margins. The energy market niche, in particular, continued to offer strong opportunities for growth.

Cash generation in the first half of the year was satisfactory. We ended the period with net debt of £6.4 million.

Encouraging progress in China; further small investments being made
Following the creation of our Halma China hubs last year, we are seeing promising results already with revenue to China up 38% to £4.3 million (2006/07: £3.1 million). To boost our efforts further, small investments to establish new local businesses in Infrastructure Sensors (Fire sub-sector) and Industrial Safety (Gas sub-sector) should start to bear fruit as we move into next year. Actions to establish additional manufacturing facilities in China for certain other Group companies during the second half are proceeding to plan.

Strong growth in Fire drives Infrastructure Sensors forward; major strategic actions in Security
Infrastructure Sensors increased revenue by 8% to £80.4 million and profit by 1% to £13.8 million - all organic growth. Our Fire detection business delivered an exceptional performance, driven by a strategic move towards becoming a total fire solutions business by successfully adding complementary products to our existing line of detectors. The growth of our Fire detection business reduced the cost impact of implementing the planned strategic actions in our Security business designed to position this sector for global expansion. Examples include gaining new national and international product approvals and improving the efficiency of the UK manufacturing base. The benefits of these changes should start to emerge during the second half of the year and should make a tangible positive impact on the sectoral performance in the next financial year.

Health and Analysis makes solid progress; increased investment in selling and R&D
Despite taking the brunt of the US Dollar currency effects, Health and Analysis grew revenue by 12% to £62.7 million and profits by 7% to £12.0 million. Product margins remained steady and investment in sales and R&D resources was increased. Balancing the tension between adding additional resources to secure sustainable growth and delivering consistent profit increases in the short term is a constant management focus in these higher growth markets. In this context, I am pleased with the progress made in the year to date.

Industrial Safety continues to prosper in good market conditions
Industrial Safety delivered another excellent performance in good market conditions - especially for those businesses selling into the oil, gas and petrochemical markets. Revenue grew by 23% to £45.0 million and profit by 27% to £9.0 million. Our Safety interlock sub-sector is performing particularly well having sought, in recent years, to develop new sales, product development and manufacturing strategies. Their continued success over a long period within the Group is pleasing to see.

Investment in innovation and people development increases further
Our commitment to building a culture which encourages innovation and prioritises people development is stronger than ever. R&D expenditure increased by 28% to £9.4 million, from 4.4% to 5.0% of revenue, thereby reducing the Group's overall return on sales margin slightly. However, this investment is necessary to ensure that organic growth is sustained.

The Halma Annual Innovation Award for 2007 was won by a team from Crowcon Detection Instruments who developed a new flue gas analyser, called Sprint V, which is already being used extensively by British Gas. The runners-up were Ocean Optics, who created a new market niche for their products in science education and Klaxon Signals, who developed the new Nexus sounder beacons for industrial and fire alarm applications.

We continue to reap the benefits of increasing our investment in developing talent within the Group. Our ability to identify and target resources to meet the fast-changing needs of our business has improved tremendously. Since the start of the year, two Executive Board positions have been filled through internal promotion. Most recently Allan Stamper, previously a Divisional Managing Director of our Gas detection business, replaced Andy Richardson, who left the Group in early October.

Additional resources allocated to support more acquisitions
In October 2007, we added to our Industrial Safety sector by acquiring Sonar Research & Development Limited (SRD) for £2.6 million. SRD will add new technology to our existing subsea asset monitoring business, Tritech International, and benefit from their stronger market distribution.

At a Group level we have appointed two of our more experienced subsidiary executives to work alongside our Divisional Chief Executives to ensure we can generate greater momentum in our acquisition activities, whilst ensuring our efforts to sustain organic growth are also maintained. We have substantial resources available for further investment in innovation and growth.

Risks and uncertainties
Geographic expansion increases the exposure of the Group to different accounting bases and business cultures. Strong and well trained local managers utilising our common reporting procedures and policies, together with rigorous internal audit processes, help to mitigate this risk.

As experienced acquirers, we recognise that making acquisitions involves risk both at the time of acquisition and during integration thereafter. Increased resources are being directed at both these pre-acquisition and post-acquisition stages to ensure the businesses we acquire meet our demanding financial and growth criteria.

The Group does not use complex derivative financial instruments or undertake speculative treasury transactions but is exposed to foreign currency risk. Payments and receipts are hedged at the time of invoice, significant currency net assets are hedged, future currency profits are not. Our main currency risk is the US Dollar relative to Sterling where a 1% shift impacts revenue by approximately £1 million and profits by approximately £200,000 in a full year.

Summary
Halma's diverse and carefully selected market mix has enabled the Group to deliver consistently good short-term performances whilst also investing in growth for the future. We remain positive about our prospects for making further progress this year and in the medium term.

* Before amortisation of acquired intangible assets.
** See Financial highlights.

Responsibility statement

We confirm that to the best of our knowledge:

1. These Condensed financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting";
2. this Half year report includes a fair review of the information required by Disclosure 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
3. 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

A J Williams, Chief Executive
K J Thompson, Finance Director

29 November 2007

Further financial data (Consolidated Income Statement, Consolidated Balance Sheet, Statement of Recognised Income and Expense, Reconciliation of Movements in Shareholders' Funds, Consolidated Cash Flow Statement and Notes to the Condensed Financial Statements) is available in a pdf file (350KB). To download, right click on the link next to the red pdf symbol below and select 'Save Target As...'.

For further information, please contact:

Halma p.l.c.
Andrew Williams, Chief Executive
Kevin Thompson, Finance Director
Tel: +44 (0)1494 721111

Hogarth Partnership Limited
Rachel Hirst / Andrew Jaques
Tel: +44 (0)20 7357 9477

Cautionary note
The Half year 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 risks 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.

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Half Year Report for the 26 Weeks to 29 September 2007
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