Halma

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Annual Report and Accounts 2012

Industrial Safety

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Overview

We make products which protect assets and people in industry.

Performance

KPIs Sector
performance
Group
target
Target
met
Revenue growth1 18.6% >5%
Profit growth1 19.6% >5%
Return on Sales2 23.9% >18%
ROCE3 97.7% >45%
R&D % of Revenue4 3.7% >4% x

Contribution to Group

£m 2012 2011 2010 2009 2008
Revenue 122 103 98 103 91
Profit 29 25 20 22 20
Sub-sector revenue split Growth rate

Safety Interlocks

44%

 

 

24%

Gas Detection

27%

 

 

10%

Bursting Disks

19%

 

 

14%

 

10%

Asset Monitoring

 

 

30%
Sector revenue

£122m

+19%

Sector profit

£29m

+20%

  • 1 Sector revenue and adjusted5 sector profit before finance expense are compared to the equivalent prior year figure.
  • 2 Return on Sales is defined as adjusted5 profit before finance expense and taxation expressed as a percentage of sector revenue.
  • 3 Adjusted5 sector profit before finance expense expressed as a percentage of sector operating net assets.
  • 4 Sector research and development expenditure expressed as a percentage of sector revenue.
  • 5 Adjusted to remove the amortisation of acquired intangible assets, acquisition transaction costs and movement on contingent consideration.

Safety Interlocks

Safety Interlocks

Specialised mechanical, electrical and electromechanical locks which ensure that critical processes operate safely.

Market trends and growth drivers

Legislation-driven improvements in workplace safety standards is a resilient, long-term growth driver in safety interlocks markets. Continuously rising global energy consumption also creates demand.

Worldwide demand for industrial safety products reflects changing social and ethical attitudes towards worker safety and a recognition of the economic and reputation costs of accidents. We are seeing that local workplace safety regulations in most less-developed markets are becoming more widespread and better enforced each year. China’s growing consumption of energy and raw materials is creating strong demand for interlocks from coal and metals producers within the wider Asian region.

Strategy

We will grow revenue by investment in sales and manufacturing resources and in developing new applications, particularly in emerging markets. New products custom- engineered to match the needs of individual markets will be a key focus. We will increase manufacture of safety interlocks in China for rapid delivery to customers in Asia.

Performance

Our Safety Interlocks businesses achieved record profit and revenue. We achieved strong growth in the UK and USA. Growth in China was steady while the government put investment in nuclear power on hold in response to the Fukushima nuclear disaster in Japan.

Outlook

We expect continued growth in most geographic areas. Demand in Europe will be slower, particularly if the sovereign debt crisis intensifies. Oil and Gas project completions are likely to increase substantially as contractor bottlenecks are eased. Nuclear power investment in China, a significant growth market for our safety systems, may resume during 2012/13.

44%

% of sector revenue

Safety interlock

Fortress Interlocks

Gas detection

Gas Detection

Portable instruments and fixed systems which detect flammable and hazardous gases.

Market trends and growth drivers

Our core gas detection markets are the Oil and Gas industry, power generation, the utility industries and chemical processing. Global expansion of these markets will continue to support rising sales of toxic and flammable gas detection equipment. The underlying driver of demand is a growing focus on workplace safety coupled with the need to comply with stringent environmental and safety legislation. The global market is forecast to grow by around 4% p.a. New product introductions enable us to grow at rates in excess of the underlying market growth.

Strategy

Geographic expansion, particularly into the Americas and Asia, supports our goal of growing revenue ahead of underlying market growth. Investment in the upgrading and extension of our product range allows us to continue to gain market share. We will continue to strengthen our senior management in China and our global marketing team.

Performance

Our Gas Detection business again achieved record revenue and profits. This was based on market share gains in all regions except North America, Africa and Near and Middle East. We completed a comprehensive upgrade of our portable detector products in 2011/12. Our active new product development programme has resulted in over 50% of gas detector products sold during 2011/12 having been developed in the previous three years.

Outlook

We anticipate continued growth in Gas Detection revenues underpinned by resilient regulatory drivers in our core industrial safety markets. Further growth opportunities will come from our new product development pipeline and entry into new gas detection applications and markets.

27%

% of sector revenue

Personal gas detector

Crowcon Gas Detection

Bursting disks

Bursting Disks

‘One time use’ pressure relief devices to protect pressurised vessels and pipework in process industries.

Market trends and growth drivers

Increasing global capital investment in both onshore and offshore Oil and Gas fields, combined with rising safety standards, continues to drive demand for our Bursting Disk safety devices. This rising investment trend is expected to be sustained during 2012 by high oil prices, with forecast growth of 13%. Technological advances have unlocked hydrocarbon resources from shale formations and we anticipate strong sales growth from this new gas production niche.

Strategy

Our primary Bursting Disks strategy is to build on growth in our core oil, gas, process and manufacturing industry sectors while diversifying our customer base both geographically and in terms of applications. New offices were recently opened in China, Poland and Brazil. Potential new applications include medical instrumentation, aviation, storage safety and battery protection.

Performance

During 2011/12 our Bursting Disks businesses achieved record revenue and profit with growth in all geographic regions except Far East, Africa and Near and Middle East.

Outlook

Despite healthy market share in our traditional markets, we foresee additional growth potential through continued investment in innovative technology, expansion of global sales channels and diversification into new applications.

19%

% of sector revenue

Bursting disk

Elfab

Asset monitoring

Asset Monitoring

Products for monitoring physical assets under water using sensors and communications technologies.

Market trends and growth drivers

Our sonar products are used primarily on underwater, remotely-operated vehicles to monitor Oil and Gas industry offshore assets. The relatively high prices of oil and gas have prompted increasing investment in offshore production. Brazil, in particular, is experiencing huge capital investment growth as offshore production becomes increasingly viable. Other underwater applications, such as maintenance of harbours, sea-walls and dams, are increasing as post-war infrastructure projects (particularly in the USA) begin to decay. Construction of offshore renewable energy projects, such as wave, tidal and offshore wind power, may produce future growth opportunities.

Strategy

Our strategy has been to grow market share through market-leading technology, investment in sales channels and entry into new niches like offshore renewable energy and subsea mining. During 2011/12 we expanded our presence in the USA and Brazil to get support resources closer to our customers.

Performance

High R&D investment in our Asset Monitoring sonar products continued to drive growth and we achieved significant increases in revenue and profit.

Outlook

We expect continued growth as high oil prices and political uncertainty over oil supply combine to drive investment in existing and new offshore assets. The relentless rise in global energy demand, forecast to rise by 30% between 2010 and 2040, also underpins growth in our subsea monitoring markets.

10%

% of sector revenue

Sonar imaging system

Tritech International

Innovation in action

Innovation in action
“Today’s gas detection market demands personal monitors that are informative and easy to use. Customer research prompted two key technical innovations in our new Gas-Pro confined space entry monitor which give the user increased confidence that their environment is a safe place to work.”

Crowcon Detection Instruments

Innovation in action

The new Gas-Pro personal gas detector is routinely used to check that a confined space is safe to enter and work in. An innovative pre-entry check function guides users through the process and logs data that shows safe pre-entry compliance or unsafe gas levels. Another new feature, a’ traffic light’ status indicator, tells the user at a glance whether their monitor is providing complete protection or needs calibration.

Global operations

Global operations

Sector growth drivers

  • Increasing health and safety regulation
  • Increasing demand for energy and water

Strategic summary

Achievements

  • Record revenue and profit
  • Revenue growth in China and Asia Pacific
  • New offices opened in Brazil, Poland and China
  • Over 20 new products launched
  • Acquisition of Kirk Key

Directions

  • Organic revenue and profit growth
  • Increase rate of new product introductions
  • Bolt-on acquisitions
  • Grow sales outside of European and North American markets; expansion into China, India and South America.