Halma plc

Good morning and welcome to our full year 26 results presentation. I'm delighted to be here to present a very strong set of results for the year. Results which once again demonstrate the quality of our businesses and the strength of our sustainable growth model. A model built on decades of disciplined choices around the markets we operate in, the companies we acquire and the leaders we trust to run them. And I'd like to start today by thanking everyone at Halma for their individual contributions to our record performance, a performance we should all be incredibly proud of. Together, we continue to make a meaningful difference by pursuing our purpose of growing a safer, cleaner, healthier future for everyone, every day. Carol will provide more insight into our financial performance shortly, But first, let me start with the highlights. It's fantastic to report our 23rd consecutive year of profit growth. And I'm really pleased to see these results underpinned by strong, broad-based organic growth delivered across all three sectors. Our results include a premium growth contribution from the continued scaling of our photonics business. More here from Carol shortly. We've delivered strong margins, high returns and good cash conversion. And this performance enabled us to reinvest at a record level well over £600 million in the significant opportunities we see for future growth, including a record year for both R&D spend and M&A. These results reflect the cumulative benefit of decades of disciplined choices, and a model that enables a virtuous cycle of growth where strong performance funds further investment in innovation, talent and acquisitions. You'll recognise the core elements of our sustainable growth model on this slide. In our half year results in November, I shared how our model underpins my confidence in the long term prospects for Halma. The strength of our model lies in the way its elements are interlinked and work together, allowing our businesses to respond with agility to new opportunities while remaining aligned to our group strategy of delivering sustainable compounding growth and returns. Critical to this is the exceptional talent across Halma, which acts as a key enabler and a multiplier of performance. ensuring that as we invest, adapt and grow, we continue to compound value over the long term. In the second part of my presentation, I'll share the core elements of our continued investment. But first, let me hand over to Carol for more details on our financial performance in the year.

Thank you, Mark. Good morning, everyone. A very warm welcome and thank you for joining us this morning. I'll be taking you through the detail behind this excellent set of results. First, let's take a look at our performance against our financial targets. It's been another year of strong financial performance, driven by broad-based growth, strong returns and healthy levels of cash generation. Throughout the presentation, I'll focus on the numbers, excluding the small one-off from the Nuvonik transaction that we completed in the first half of the year. First, we have delivered very strong revenue and profit growth well ahead of our targets. Organic revenue up 16%, well above our 5% target, even excluding the premium photonics growth. With EBIT growing an impressive 19%, resulting in an exceptionally strong EBIT margin of 22.7%, up 110 basis points towards the upper end of our target range. This means we've delivered EPS growth of 21%, far exceeding our KPI target of 10%. Our strong growth and returns enabled us to continue to invest for the long term, with our companies investing 123 million in R&D, representing 4.7% of group revenue. Fantastic to see our M&A momentum driving acquisition profit growth of 8.3%, above our KPI target of five. We also achieved 93% cash conversion ahead of our KPI target of 90%. This reflects good cash management and working capital control across the group. And finally, given the strength of profit growth, ROTIC was 16.2% up 120 basis points. Now let's look at our revenue growth in more detail. This slide bridges the year on year reported revenue growth of 14.4%. Organic revenue growth was very strong at 16.2%. This was broadly spread across all three sectors, with most of the growth volume driven with price increases a typical one to 2%. Additionally, organic revenue benefited from the premium from our photonics business, which accounted for around half of this growth. Acquisitions including Lamedy Nori, Brownline, E2S and Safetec contributed 2.5% to growth. There was a currency headwind of 2.8%, primarily due to the depreciation of the US dollar against sterling. Let's now move to the profit and margin growth. Adjusted EBIT grew by 20.3% and a particularly strong 19% on an organic basis. This was ahead of revenue growth, reflecting the strength of the top line, focused operational delivery, targeted product and portfolio management, and good overhead control, all combined with continued investment across our companies. Acquisitions contributed 3.9% of profit, again ahead of revenue contribution, reflecting the quality of businesses we have acquired. Disposals were also modestly accretive to margins. The currency headwind was similar to that of revenue at 2.8%. Moving on to the sector commentary. Starting with the safety sector, where it's great to see further positive momentum following two years of double digit profit growth. This broad base performance was underpinned by growth in each of safety's four sub-sectors. Revenue grew by 6.5% on an organic constant currency basis. Healthy levels of customer demand underpinned strong momentum in public safety and good levels of growth in fire and worker safety. Growth was further supported by the continued rollout of new products across the sector. Adjusted profit grew 16%, 13% on an organic basis, making it our third year running of double digit organic profit growth. Profit margin increased by 260 basis points to 26.8%. This is a historic high for the sector, driven by the sector's continued strong revenue growth, companies optimising their product and portfolio mix, good cost control and the benefits of active portfolio management. It's great to see our safety companies continuing to make substantial investments, investing ahead of revenue growth. R&D spend increased by 12% to 56 million, which equates to 6% of sector revenue, reflecting the significant opportunities they've identified to deliver future growth. Safety has also had an active year for M&A, acquiring two great companies in the year. These were E2S, our largest acquisition to date for £226 million and Safetec for £64 million. Together, they broaden our fire safety portfolio and strengthen our position in industrial markets. Now turning into environmental and analysis. On this slide, we have shown E&A's performance excluding the Nuvonic one-off. There's a slide in the appendix that shows the numbers, including this benefit. The E&A sector delivered very strong organic revenue growth of 34.4%. It's good to see double digit growth across all three subsectors, with photonics within optical solutions being particularly strong, which I'll return to shortly. In environmental monitoring and measurement, growth was driven by demand in the US and Asia for gas detection and management solutions. In water analysis and treatment, growth benefited from strong demand for water infrastructure products and solutions in the US and UK. Profit grew by 30% to 241 million and by a similar amount on an organic basis. This reflected a profit margin, which was 40 basis points lower at 23.5%, which was mixed driven. Like the safety sector, it's great to see the substantial growth opportunities ahead reflected in a healthy increase in R&D investment, which grew by 23% to 35 million. As I noted at the half year, this is a lower spend as a percentage of sector revenue compared to the other sectors at 3.4%. reflecting the premium growth in Photonics, where R&D is part of the revenue we earn. It's also pleasing to see a strong 4.3% profit contribution from acquisitions, including Brownline and Minicam's bolt-on, Haythorn. I'd now like to spend a moment on the Photonics premium growth, providing some additional colour on what we do for this customer. As a reminder, we acquired Avvo Photonics in 2011, a business that displays many characteristics that are typical of a high quality Halma company. The company's exceptional ability to identify and capture growth opportunities has developed into a relationship of more than a decade with a large hyperscaler technology customer. While the relationship remains commercially confidential, we can share a little more about the nature. It's characterised by a close technical collaboration, applying our customer's IP alongside our own expertise in the co-design and manufacture of optical switches. And we've been working with the customer on multiple generations of the technology for over a decade. In FY26, the premium growth accounted for approximately eight percentage points of the group's organic revenue growth, resulting in a photonics growth rate of 52%. This means the customer now accounts for 20% of group revenue. This is an incredible success story and a testament to the strengths of the local management team in delivering at scale enabled by the support of the Halma model. Looking ahead, trends in this market are clearly dynamic and there will always be technology choices in fast growing markets and the pace of development and rates of growth shaped by various supply side constraints across the data centre market. With a combination of strong customer demand and our continued scaling, we currently expect premium growth of approximately five percentage points of group in FY27, implying a growth rate of a further 30%. This builds on the exceptional growth already achieved with revenue having more than doubled over the past two years as the local management team have successfully and rapidly scaled the business. Now let's move on to our final sector, healthcare. Pleasing to see the continued recovery in healthcare with revenue up 6.3% on an organic basis and profit up 10%, with good levels of growth across all three sub-sectors. This reflected good execution against a background of broad-based recovery in healthcare end markets. supported by improving customer confidence and demand for products and solutions to help facilitate patient diagnosis and treatment and greater efficiency for healthcare providers. You will notice that in this set of results, our healthcare sector companies have been recategorised into three new sub-sectors, better reflecting the patient's journey. Discovery, prevention and diagnostics perform strongly. driven by good demand in vital signs monitoring and eye health diagnostics. There was broad-based organic revenue growth in therapeutic solutions with strong demand for our respiratory device and surgical instrument products. Performance in healthcare enablement was driven by demand for solutions which improve healthcare delivery efficiency. Sector profit was 10% higher, delivering a margin which was 100 basis points higher at 23.9% as a result of stronger revenue growth, continued discipline on pricing and product mix and good control of overheads. As with the other two sectors, our healthcare companies are well invested with R&D at 5.2% of revenue, reflecting their confidence in the growth opportunities in their end markets. There was also good profit contribution from acquisitions of 2.3%, reflecting the quality of businesses we have acquired. I'll now talk about our cash flows and balance sheet and how we are investing for future growth. The cash generative nature of our companies means we are in a position to invest well over 600 million in the year to support future growth while maintaining a strong financial position. The group maintained good cash management and working capital control, with working capital at 18% of revenue in line with our normal range. Our first capital allocation priority is organic investment to support our long-term growth, represented here by investment through R&D and CapEx of £179 million. Together with good underlying working capital management, this delivered cash conversion of 93%. Our second capital allocation priority is continued value enhancing acquisitions. This year we invested a record £475 million on acquisitions. And our third is a progressive return to shareholders through the dividend, with £90 million returned representing our 47th consecutive year of dividend growth of 5% or more. And finally, our leverage is just over one times net debt EBITDA, reflecting the level of acquisitions made in the year and well within our operating range of up to two times. Moving on to my last slide, which is our guidance for this year. We've made a positive start to the 2027 financial year, and whilst the economic and geopolitical environment remains uncertain, and our companies continue to experience varied conditions in their end markets, we expect to deliver low double-digit percentage organic constant currency revenue growth. This includes an expected premium growth of approximately five percentage points from our photonics business. Adjusted EBIT margin is expected to be in line with FY26, excluding the one-off from UVonic. I will now hand you back to Mark.

Thanks, Carol. Fantastic to see the excellent performance delivering on all of our financial targets. In this section, as I mentioned earlier, I want to provide insight into how we think about continuous sustainable investment and why it's so important to our long term growth. Our sustainable growth model enables us to invest for future growth while maintaining our organizational agility and entrepreneurial culture. This means we can keep scaling our model while retaining the core elements of our DNA. As I've shared previously, we're also using this period of premium growth from our photonics business in the same way to further invest in the opportunities we see ahead. ensuring we keep growing sustainably for decades to come. Before I take you through these areas of investment, let me put them in the context of our long-term track record. Looking at our track record on the slide, we've compounded revenue and profit at a double-digit growth rate over the last 20 years, revenue at 11% annually and profit at 12%. This reflects the quality and consistency of execution across our companies, each focused on the delivery of their own strategies in attractive niches and underpinned by long term growth drivers. In recent years, our photonics business has provided a tailwind to that growth. That said, even if we were to exclude its contribution entirely, we would have still compounded at a double digit growth rate over this period. Our decentralized model allows us to maximize the opportunity with our hyperscaler customer while remaining focused on our group strategy of sustainable compounding growth and returns over the long term. Importantly, our model ensures that this premium growth delivered through local execution doesn't distract our other portfolio companies and management teams. They remain fully focused on their own growth strategies, including continued sustainable investment for future growth. And the broad based growth we've shared in our results today being a great example of this in action. Looking ahead, as we focus on maximising the photonics opportunity in front of us, we do so with an understanding that its growth profile differs from that of the wider group in pace, scale and longevity and may result in growth at the group level being more front end loaded. But for clarity, our growth ambition remains as strong as ever. Even from our now much higher base, our objective is to continue our track record of compounding at a double digit rate over the long term. As I've said, we're using this period of premium growth to do exactly that, reinvesting the premium cash flows to further strengthen the wider group as I'll now take you through. You heard from Carol how we've continued to invest significantly in the year. Let me break this down into three core areas. First, our companies continuously invest to grow. Second, we invest in talent, our network and new capabilities to help our companies grow faster. And third, we acquire purpose aligned companies for the long term and actively manage our portfolio. Let me now provide a little more detail on these key areas of investment. Firstly, and as you heard from Carol, our number one capital allocation priority, investing in organic growth. Our companies are already great businesses when they join the group. Our role is to support their growth and continued ability to scale over the long term. A key driver of this being our company's ongoing investment in R&D and innovation. We invested 123 million in R&D in this year. ensuring our businesses remain differentiated, relevant, and well-positioned in their niches in attractive long-term markets. Importantly, R&D is bottom-up, driven by our companies, close to their customers and markets, and aligned to their individual growth strategies rather than being centrally mandated. Ultimately, these investments reflect the confidence our leaders have in the opportunities they see in their markets and our commitment to supporting their long-term growth. Let me bring this to life with a few examples across three areas, new market access, new product development, and incremental R&D. In new market access, Suntec is a leader in clinical-grade motion-tolerant blood pressure monitoring. It's applied its expertise to animal care, extending its core capabilities into an adjacent, faster-growing market. A great example of exceptional agility in capturing a growth opportunity for a period of time whilst remaining focused on the long-term delivery in core markets. For new product development, BEA applied its automatic door sensor expertise to develop its EvoLoop product for automatic car barriers. It replaces the induction loops to improve efficiency and reduce installation time, supplementing organic growth in its core markets. In incremental R&D, Crocon has enhanced its gas detection IQ range by evolving an established product platform extending capability and customer value within its existing markets. The range simplifies gas detection with modular technology, fast servicing and smart connected insights, all without compromising safety or protection. So just three examples of how our companies are continuously investing for long-term growth. Moving to the second area of investment, talent. Talent is important in any business, but in a decentralized group like ours, it's vital. Our decentralized structure relies upon us continuing to attract, develop, and retain entrepreneurial leaders who can grow each business as if it were their own. We take a purposeful, long-term approach to developing leaders. combining internal development with external hires to build diverse, resilient and high performing teams over the long term. We're also making deliberate investments in building a pipeline of leaders through the group, which gives us agility and resilience. During the year, 20 leaders were promoted onto company boards. Nearly 300 leaders participated in our development programs. All of our most recent sector and divisional chief executive appointments were internal promotions. We're doubling our Catalyst graduate program and expanding our rotational placements to focus on AI in our tech team. A great example of strengthening our capabilities while developing the next generation of AI business leaders. We're also investing ahead of need in talent platforms and tools that help our companies develop their own people and reinforcing accountability for talent and culture at a local level to maintain our agility. We further invested in our network. We held our annual Accelerate Senior Leadership Conference in April. and we've facilitated a number of in-person conferences for many of our functional networks, including finance, talent, supply chain, and digital. These events enable leaders to connect, to share experience and access expertise across Helmer, helping them solve problems faster, spot opportunities earlier, and scale proven ideas more effectively. And as the group grows, the value of our network increases and it's becoming an increasingly important source of competitive advantage. But don't take it from me. Let's hear about the strength of the network from some of our leaders at our most recent Accelerate conference.