HALMA Annual Report and Accounts 2005
HALMA
Annual Report
& Accounts 2005
Halma p.l.c.
Misbourne Court
Rectory Way
Amersham
Bucks HP7 0DE
Tel: +44 (0) 1494 721111
Fax: +44 (0) 1494 728032
www.halma.com Halma p.l.c.
Annual Report and Accounts 2005
Financial Highlights 1
Halma at a glance 2
Chairman’s Statement 4
Chief Executive’s Review 6
Financial Review 9
Directors and Advisers 13
Management Team 14
Operating Review 16
Report of the Directors 28
Corporate Responsibility Report 31
Corporate Governance 34
Report on Remuneration 39
Responsibilities of the Directors 46
Independent Auditors’ Report 47
Consolidated Profit and Loss Account 48
Consolidated Balance Sheet 49
Statement of Total Recognised
Gains and Losses 50
Movements in Equity Shareholders’ Funds 50
Consolidated Cash Flow Statement 51
Halma p.l.c. Balance Sheet 52
Accounting Policies 53
Notes on the Accounts 55
Notice of Meeting 74
Summary 1996 to 2005 76
Group Directory 78
Shareholder Information 80
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Financial Highlights
Halma p.l.c. 2005 1
Highlights of the year
• Pre-tax profits
(1)
of £50.4m marginally exceed last year’s
record level (2004 – 53 week period: £50.3m). On a
statutory basis, profit before taxation was £44.9 million
(2004: £36.9 million).
• Turnover from ongoing operations up 7% at £299.1m
(2004: £279.6m), reflecting an increased contribution
from the Group’s enlarged Optics and Specialist
business.
• Healthy margins maintained as Halma consistently
delivers strong returns, with return on capital employed
(5)
of 62% and return on total invested capital
(4)
of 13%.
• Strong cash generation with two high quality acquisitions
made and no gearing at year end (net cash £12m).
• Continuation of progressive dividend policy with an
increase of 5%.
Change 2005 2004
Turnover +2% £299.1m £292.6m
Profit before taxation
(1)
0% £50.4m £50.3m
Earnings per share
(2)
0% 9.42p 9.44p
Earnings per share – statutory +31% 7.97p 6.09p
Dividend per share +5% 6.50p 6.19p
Return on sales
(3)
16.8% 17.2%
Return on total invested capital
(4)
13.1% 13.7%
Return on capital employed
(5)
62.4% 52.4%
Pro-forma information:
1. Before goodwill amortisation of £5,491,000 (2004: £4,220,000) and exceptional items on disposal of non-core
businesses of £nil (2004: £9,149,000).
2. Before goodwill amortisation of 1.45p (2004: 1.07p) and exceptional items of nil (2004: 2.28p) per share.
3. Return on sales is defined as profit
(1)
before taxation expressed as a percentage of turnover.
4. Return on total invested capital is defined as profit before goodwill amortisation and exceptional items and after
taxation of £34,690,000 (2004: £34,557,000) expressed as a percentage of net assets plus goodwill in reserves
of £70,931,000 (2004: £70,931,000) and cumulative goodwill amortisation of £18,668,000 (2004:
£13,177,000).
5. Return on capital employed is defined as profit
(1)
before taxation expressed as a percentage of net tangible
assets (being equity shareholders’ funds less intangible assets). HALMA
Halma at a glance
2 Halma p.l.c. 2005
Business profile Halma is a strongly cash generative and highly profitable group which develops,
makes and markets products that are used to protect lives, or improve the
quality of life, for individuals and businesses worldwide.
Our six specialist business groupings are:
Fire and Gas detection
Water leak detection and UV treatment
Elevator and Door Safety
Bursting discs and sequential locking for Process Safety
High power electrical Resistors
Optics and Specialist technology
Value creation strategy Our over-riding objective is to create shareholder value by:
Building global businesses that sustain a leading position in specialised markets
in areas of long-term sales growth
Concentrating on high margin activities where products and services are
differentiated on the basis of performance, not price, and where barriers to entry
are high
Tightly managing our asset base in order to maintain our outstanding operating
ratios and powerful cash generation
Investing in marketing, new product development and innovation to create high
organic growth
Acquiring businesses and intellectual assets that extend our existing activities,
add value, contribute to growth and will produce our exceptional operating ratios
Maintaining a high return on capital employed to fund organic growth,
acquisition activity and rising dividends
Recruiting and retaining top quality management by preserving an
entrepreneurial culture within a framework of rigorous financial planning,
reporting and control HALMA
Halma at a glance continued
Halma p.l.c. 2005 3
Dividend growth
0
£5m
£15m
£25m
96 99 02 05
An exceptional record of unbroken
dividend growth over more than
20 years.
0
£20m
£40m
£60m
96 99 02 05
Long-term profit growth
accompanied by excellent cash
generation.
0
£100m
£200m
£300m
96 99 02 05
Growing sales worldwide.
Profit growth
(before goodwill
amortisation and
exceptional items)*
Sales
0%
10%
20%
96 99 02 05
ROTIC
WACC
ROTIC* consistently 
above weighted average cost 
of capital (WACC) delivering 
real shareholder value.
ROTIC*
*see Financial Highlights HALMA
Chairman’s Statement
4 Halma p.l.c. 2005
The Group produced a profit before
tax* of £50.4 million, another record
profit for Halma – just.
The year was characterised by
significant change within the Group –
some of it visible, some less so. The
most visible change was the
appointment of Andrew Williams as
CEO at the end of February 2005,
having been appointed Deputy CEO in
December 2004. Andrew succeeded
Stephen O’Shea who reaches the
normal retirement age for Halma this
year, and on behalf of the Board I
should like to record our gratitude to
Stephen for all that he has contributed
to the Group during his career with us.
The succession process has gone
extremely smoothly and Andrew is
bringing a fresh impetus to our
operations – I encourage those of you
that can, to meet him at our AGM.
Last year I referred to a number of
factors that the Board and senior
management felt could possibly be
holding back our performance. Some
of them were issues that could be
quickly addressed e.g. incentives, span
of control; others were more long-term,
such as resource allocation and the
efficiency of our balance sheet. We are
continuing to upgrade the quality of
our management right across the
Group and particularly at subsidiary
board level.
All aspects of selling have received
particular attention and we are
disappointed not to see better
progress on the revenue line.
However, in common with many
sectors, we face continuing pressure
from price transparency via the
internet and deflationary trends
through lower manufacturing costs.
Our response is the continual re-design
and improvement of our products,
allowing more outsourcing and ‘off-
shore’ production as we re-double our
efforts on innovation. We are having
success but it is patchy, we need to do
more – faster.
In terms of our sectoral performance
(more detail is given in the Chief
Executive’s Review): Resistors
continued to have a difficult year and
the problems there are being tackled
“We are having success but it 
is patchy, we need to do more –
faster.”
*see Financial Highlights HALMA
Chairman’s Statement continued
Halma p.l.c. 2005 5
in new ways and with renewed
vigour. Water too had a tough year.
Other sectors held their own or
better.
Our two new acquisitions Diba
Industries, Inc. and Ocean Optics,
Inc. performed extremely well,
exceeding our expectations.
The results
Profit before tax* was a record
£50.4 million (previous year
£50.3 million) and earnings per
share* were slightly down at 9.42p
(previous year 9.44p). On a
statutory basis, profit before taxation
and earnings per share were
£44.9 million and 7.97p respectively.
These results were produced despite
adverse currency translation impacts
and raw material movements of the
order of £2.5 million. The return on
the capital* that our managers
control was a clear all time record
for a full year at 62% – a staggering
achievement, and return on total
invested capital* (including all
goodwill) was 13.1% – far exceeding
our cost of capital. Net cash at the
year end was £12 million. Turnover
edged ahead by 2% to £299 million
(previous year £293 million).
Excluding discontinued operations,
sales increased by 7%.
The Board recommend a final
dividend of 3.92 pence per share
giving an increase of 5% for the
year.
On behalf of the Board, I should like
to thank all our employees for their
dedication in producing this record
result, and also for their imagination
in continually improving our products
and service to our customers.
Prospects
We have strong market positions
and we are highly cash generative.
We are accelerating our own rate of
change – particularly on innovation.
Overall, despite little fundamental
help from our markets, we remain
cautiously optimistic for the year
ahead.
Geoff Unwin
*see Financial Highlights HALMA
Chief Executive’s Review
6 Halma p.l.c. 2005
Record sales, profits and ROCE,
but …..
The Group delivered record sales,
record profits and a ROCE* of 62%
despite the headwind of currency and
rising raw material prices – particularly
stainless steel. It is always pleasing to
report such achievements together
with a record dividend payment for
shareholders, but there is more to be
done if we are to achieve the
performance levels we really aspire to.
The Group did do well to compensate
for some adverse factors, achieve
excellent cash generation and make
two high quality acquisitions. However,
the underlying level of organic growth
was inconsistent with parts of the
business failing to make satisfactory
progress, thereby eroding the growth
delivered elsewhere.
We take encouragement from our
achievements but do not shy away
from the challenges. Setting high
standards and expectations of our
performance has been a key element
of Halma’s continuing success in
delivering outstanding returns.
Strong cash generation and a
record dividend
The Group’s excellent cash generation
and outstanding ROCE* record is not
achieved easily but by the disciplined
management of our assets at all levels.
During the year this enabled us to
make £9 million of capital investment
in our existing operations, pay a record
dividend to shareholders for the
twenty-sixth consecutive year, make
two significant acquisitions and still
have £12 million of net cash available
at the year end.
Flat sales performance in
continuing operations
Sales from continuing operations,
excluding acquisitions, increased to all
territories except for the US where
turnover fell by 10%. Clearly currency
was a key factor, but again, is not the
whole story. We must become more
“Actions to reposition the 
Group for higher growth will
continue both operationally 
and structurally.”
*see Financial Highlights HALMA
Chief Executive’s Review continued
Halma p.l.c. 2005 7
active in the way we build the
distribution channels of our
businesses, particularly in the US
and other key markets. We have
sometimes lacked clarity and speed
of action in this area in the past and
not allocated a significant proportion
of our resources to make it happen.
Exciting value-adding
acquisitions strengthen Optics
and Specialist sector
During the year we acquired Ocean
Optics, based in Florida, and Diba
Industries, based in Connecticut, for
a total of £22 million. They have
significantly enhanced our capability
in optical sensing and fluid
technology and have performed well
since joining the Group. We remain
committed to making such high
quality acquisitions as they become
available in accordance with our
strategy of focussing more closely on
those markets offering the best
growth opportunities.
Excluding these acquisitions and
costs of holding companies, the
Optics and Specialist sector achieved
underlying profit growth of 12%.
New product innovation, improved
sales processes and increasing
efficiencies in manufacturing
contributed to an excellent result.
Elevator and Door safety
maintains market leadership
At constant currency, the sector
reported marginal increases in both
profits and sales. In the US, our
voice communications equipment
sales fell significantly. Since the year
end we have merged this business
with our US elevator safety products
company to benefit from its well-
developed sales channels. 
BEA, the door safety business,
performed slightly better in the
second half than flagged at the
Interim stage. After rapid growth
since acquisition, this was
encouraging and underpinned a
reasonable sector performance
overall.
Water sector repositioned for
new market needs
We have taken actions to position the
business for better growth in the
future. There were significant changes
to senior management and to the
product range, which had short-term
consequences for operating costs and
margins. For example, it was
necessary to rationalise our range of
instruments which measure flow and
pressure in water networks to meet
more precisely the growing demand
for these products worldwide. This
resulted in additional costs associated
with stock write downs, field service
replacements, and adjustments to
product design and selling resources.
In addition, there was no repeat of a
major US leak detection contract this
year following last year’s success in
Las Vegas. However, we continue with
our investment in the US for leak
detection, UV treatment and water
quality. Our water business is now in
better shape to meet the
opportunities presented by this long-
term growth market.
Resistors struggle against impact
of currency and raw material
prices
As indicated at the half year, the
margins on our Resistor business
came under intense pressure from
stainless steel price increases. In the
second half, we had some success in
mitigating these increases although
in certain cases long-term contract
terms proved difficult to renegotiate.
We have recognised for some time
that our Resistors business has been
struggling against rising raw material
prices, currency and tough market
conditions. Since the year end, more
vigorous action is being taken and
already we have consolidated two of HALMA
Chief Executive’s Review continued
8 Halma p.l.c. 2005
our manufacturing operations based
near Cincinnatti, Ohio.
Fire and Gas delivers solid result
in changing market
We responded positively to the major
M&A activity in the global Fire and Gas
market. New product developments
and industry-leading customer service
levels helped us to compete with US
based rivals who benefited from a
weaker dollar when selling into export
markets. Whilst the market is
undergoing a period of significant
consolidation we continue to find, and
exploit, new opportunities.
Process Safety introduces new
products for new applications
A number of products were launched
targeting new applications for our
safety interlock products. The roll out
was more gradual than expected in
some cases, but the year ended with
greater momentum than it started,
particularly in the oil and
petrochemical market. Overall, the
sector continues to deliver a
satisfactory return on sales and
excellent ROCE.
Talented people and excellent
products
During the year, I visited all of Halma’s
principal subsidiaries and saw how
hard our people are working towards
our goal of higher growth. Halma has a
talented workforce that creates, builds
and sells excellent products covering a
huge range of applications. Improving
the timing of new product
introductions is an area we need to
improve continually and, although
great strides have been made recently,
a further improvement will have a
significant impact on our organic
growth prospects.
It is encouraging to see the increasing
commitment of our businesses towards
exceeding the expectation of
customers. Our innovation often makes
a big difference to our customers’
success and quicker new product
introduction is another way in which
we can exceed their expectation for
our mutual benefit.
Stephen O’Shea’s retirement
I would also like to record my thanks
to Stephen O’Shea for his generous
help during the recent handover period
and for his contribution to the Group’s
many successes since he joined us as
MD of Apollo Fire Detectors 22 years
ago. I am sure you will join me in
wishing him a long and happy
retirement.
A robust strategy although striving
for greater growth
Our ability to maintain strong returns
reflects well on our strategy of creating
unique, high value products which
protect lives, or improve the quality of
life, for individuals and businesses
worldwide. We will continue to invest
in, and develop, high return
technology businesses which operate
in niche, ‘demand driven’ global
markets with strong barriers to entry.
Actions to reposition the Group for
higher growth will continue both
operationally and structurally. I am
looking for greater consistency of
performance across the Group to
deliver the sustained organic growth
which provides valuable returns for
shareholders. Whilst there is still much
work to be done, there are good
opportunities available to us and I am
very much looking forward to leading
the Group in the year ahead.
Andrew J Williams HALMA
Financial Review 
Halma p.l.c. 2005 9
Some underlying organic sales
growth with marginal profit growth
to a new high
Group turnover was 2% higher than
last year at £299 million (2003/04:
£293 million) and ongoing turnover
grew by 5% on a constant currency
basis, excluding the turnover of new
businesses at the time of acquisition.
Profit before tax* at £50.4 million
(2003/04: £50.3 million) was the
highest ever made by the Group, by 
a small amount. On a statutory basis
profit before taxation increased to
£44.9 million (2003/04: £36.9 million).
These results were achieved in 52
weeks rather than 53 weeks last year.
We maintained healthy margins,
strong returns and good cash flow, but
we aim for greater improvement.
The currency headwind played 
a notable part in the results 
this year
Around one-third of Halma’s turnover
and profits are made in US Dollars and 
US Dollar-related currencies, with
around 15% in Euros. The average
rate at which we translate US Dollars
has deteriorated by 9% in the year
and even though the Euro translation
rate was reasonably stable, the total
currency impact reduced turnover by
£10 million (3.7%) and profits by £1.6
million (3.2%). The commercial effects
of currency movements on
transactions, which show themselves
for example in the advantage gained
by US competitors, are difficult to
quantify, but have a notable adverse
impact on our business.
Measured at constant exchange rates,
four of our sectors moved ahead in
sales and profits, the exceptions being
Resistors and Water – these are
discussed in the Chief Executive’s
Review.
Whilst the adverse currency effect was
not as bad as we feared at the Interim
stage, it impeded our progress.
“We maintained healthy
margins, strong returns and
good cash flow, but we aim for
greater improvement.”
*see Financial Highlights HALMA
Financial Review continued
10 Halma p.l.c. 2005
Our acquisitions exceeded
expectations and helped
development of the Optics sector
In May 2004 we acquired Diba
Industries, Inc. for £8 million and in
June 2004 we paid an initial
consideration of £14 million for Ocean
Optics, Inc. In both cases the purchase
price was approximately equal to their
turnover at the time of acquisition, and
pro-rata they would have added
£17 million to our 2004/05 turnover.
Up to a further £14 million is payable
for Ocean Optics, with the maximum
reached if it doubles its profit in the
two years post acquisition. In the first
year, it met its target.
Both are high-return businesses and
have developed well since acquisition,
contributing to the ongoing
development of our Optics and
Specialist sector which started with the
disposal of three non-core businesses
last year. Within the Optics and
Specialist sector we also report holding
company costs which increased this
year, in part due to the cost of
management changes.
Healthy margins and high returns
continue shareholder value
creation
Return on sales* at 16.8% was slightly
below last year’s figure of 17.2%. High
and consistent margins are a feature
of the Group and all sectors except
Resistors and Water maintained their
return on sales. The benefit to Group
margins from the disposals mentioned
above was eliminated this year by the
impact of those two sector
performances. One important factor
which affected the Resistors sector in
particular, was the increase in stainless
steel prices this year taking
£0.9 million from Group profit.
A key indicator used internally in
managing our businesses is Return on
Capital Employed (ROCE*) and we
have therefore published its progress
over many years. It demonstrates the
effectiveness of our managers in
utilising the tangible assets under their
direct control. At 62% for the Group
this year, ROCE* is high even for
Halma reflecting the good
management of resource at operating
company level.
We recognise the value to
shareholders in reporting Return on
Total Invested Capital (ROTIC*) and so
this year we are also reporting that
figure. We are reporting a post-tax
ROTIC* which includes goodwill going
back over the years. ROTIC*
recognises that businesses must use
both retained earnings and debt wisely
to give shareholders good returns. As
the graph on page three of this Annual
Report shows, this year’s ROTIC* of
13.1% is far in excess of our weighted
average cost of capital, continuing 
the trend established over many years.
Our strong cash flow funded
increased dividends with no
year end net debt
Halma has a history of good cash
generation and this year was no
exception. Operating cash flow net of
capital expenditure as a percentage of
operating profit was 101%. We
finished the year with net cash of
£12 million. As noted below we do
carry loans to hedge our currency
assets but overall we are currently
ungeared.
These strong cash flows will finance
another record dividend. The Board
recommends a final dividend of 3.92p
per share, giving a dividend for the full
year of 6.5p, 5% up on last year. We
have continued our progressive
dividend policy, dividends having
increased every year for more than
25 years.
As the dividend increase is above the
earnings increase, dividend cover has
reduced a little. Our task is to deliver
*see Financial Highlights HALMA
Financial Review continued
Halma p.l.c. 2005 11
the earnings growth in the coming
years so that we can raise that cover
again. If approved, this final dividend
will be paid on 24 August 2005 to
shareholders on the register at the
close of business on 22 July 2005.
Treasury, tax and pensions
continue on a prudent path
Our operating companies hedge their
trading transactions back into their
local reporting currency. Our policy
is to hedge our US Dollar and Euro
net investment in overseas
operations through currency
denominated loans, but not to hedge
the effects of currency movements
on the translation of overseas
earnings into Sterling. The
philosophy behind our treasury
activities is one of risk management
and control; no speculative
transactions are undertaken.
As anticipated, the effective tax rate
on profits* was in line with last year
at 31.2%. Depending on the precise
mix of profits earned in various tax
jurisdictions, we expect the effective
rate going forward to be broadly
similar but perhaps a little higher.
Pending the introduction of
International Financial Reporting
Standards (IFRS) next year, we have
continued to adopt the transitional
provisions of FRS 17 (Retirement
Benefits) and these disclosures are
given in Note 26. Under FRS 17, the
net pension deficit has remained at
£29 million net of the related
deferred tax. The increase in the
market value of scheme assets has
been offset by higher calculated
liabilities in part due to lower
discount rates. New cash going into
the main (defined benefit) pension
scheme is being invested in fixed
interest securities so that over time
the profile of assets is more closely
matched with the scheme’s
liabilities, the scheme having been
closed to new members several
years ago.
Internal audit builds on a history
of sound Group controls
A critical feature of Halma is the
entrepreneurial and autonomous
nature of our operating companies.
To underpin that approach we install
high-quality finance executives in
each business to monitor and assist
development.
Responsibility and accountability of
local management has always been
paramount but this has been further
emphasised over the past year with
strengthened local accounts sign-off
and by widespread use of relevant
financial warning signs across the
Group.
We have further enhanced our
internal review procedures this year,
continuing to use senior finance staff
to review other operating businesses
but adding more rigorous feedback
and follow-up. Together with the
independent reporting route to the
Audit Committee introduced in
2003/04, I can now confirm that our
internal audit function is fully
established.
IFRS preparations are well
advanced
For 2005/06 the Group is required to
prepare its consolidated accounts in
accordance with International
Financial Reporting Standards
(IFRS). Halma’s Interim Report and
Annual Report and Accounts for
2005/06 will therefore contain
financial statements for 2005/06 and
comparatives for 2004/05 prepared
under IFRS. There will be some
presentational differences, but in
summary the impact on trading
results is not expected to be
material and net assets will be
reduced mainly by the inclusion in
the Balance Sheet of the pension
deficit noted above. Cash flows and
*see Financial Highlights HALMA
Financial Review continued
12 Halma p.l.c. 2005
the underlying economics of the
business remain unchanged.
In a little more detail, the main effects
of IFRS on Halma are as follows: since
Research and Development is an
important part of our business (we
spend 4% of sales on R&D) we will
recognise this asset by capitalising
appropriate costs, although we
anticipate expensing most of the cost
as we go; share-based payments will
add a new charge against our profits,
starting off low but expected to
increase as each new year falls under
these rules and as we transition away
from share options to our proposed
performance share plan; goodwill on
acquisitions will be frozen, goodwill
amortisation no longer appearing in
the Profit and Loss Account; pension
costs are likely to be a little more
volatile and as mentioned above, the
pension deficit will come onto the
Balance Sheet. The new rules on
financial instruments will have a
negligible effect on us.
In late summer, ahead of our half year
end, we will publish a full
quantification, reconciliation and
explanation of the impacts on Halma 
of IFRS.
We continue to focus on high
returns for our shareholders
This year has seen a fair amount of
change, with some repositioning and a
lot of investment – there has been
associated cost. Our pursuit of positive
change and improvement will continue.
Our key objective is to continue
creating wealth for our shareholders
through investment in high
performance businesses and the
generation of strong cash flows.
Kevin J Thompson HALMA
Directors and Advisers
Halma p.l.c. 2005 13
Board of Directors E Geoffrey Unwin Chairman
Andrew J Williams Chief Executive
Kevin J Thompson BSc FCA
Neil Quinn BSc
Richard A Stone MA FCA*
Keith J Roy MSc
Andrew J Walker MA CEng*
Stephen R Pettit MSc*
*Non-executive
Secretary Carol T Chesney BA FCA
Executive Board Andrew J Williams Chief Executive
Nigel J Young Specialist Products
Neil Quinn Fire
Kevin J Thompson Finance Director
John S Campbell Resistors
Keith J Roy Water and Gas Technology
William J Seymour Elevator and Door Safety
Adam J Meyers Fluid Technology
Nigel J B Trodd Process Safety
Andrew J Richardson Water Management
Registered Office Misbourne Court Rectory Way
Amersham Bucks HP7 0DE
Telephone: +44 (0)1494 721111
Fax: +44 (0)1494 728032
Website: www.halma.com
Registered Number 40932
Auditors Deloitte & Touche LLP
Abbots House Abbey Street
Reading Berks RG1 3BD
Bankers The Royal Bank of Scotland plc
280 Bishopsgate
London EC2M 4RB
Financial Advisers Lazard Brothers & Co., Limited
50 Stratton Street
London W1J 8LL
Brokers and Joint Dresdner Kleinwort Wasserstein Limited
Financial Advisers 20 Fenchurch Street
London EC3P 3DB
Solicitors CMS Cameron McKenna
Mitre House 160 Aldersgate Street
London EC1A 4DD
Registrars Computershare Investor Services PLC
PO Box 82
The Pavilions Bridgwater Road
Bristol BS99 7NH
Telephone: +44 (0)870 702 0000 HALMA
Halma Management Team
14 Halma p.l.c. 2005
1 Andrew Williams
(aged 38) is Chief Executive of the Halma Group. He
joined Halma in 1994 as Manufacturing Director of Reten
Acoustics (now Palmer Environmental) and became
Managing Director of that company in 1997. He became
Divisional Chief Executive of the Optics and Water
Instrumentation Division and a member of the Executive
Board in 2002. He was appointed as Deputy Chief
Executive in 2004 and Group Chief Executive in February
2005. Andrew is a Chartered Engineer and a production
engineering graduate of Birmingham University.
2 Geoff Unwin
(aged 62) is Chairman of the Halma Group and serves on
the Audit Committee, Remuneration Committee and the
Nomination Committee (Chairman). He was appointed
Deputy Chairman and Chairman Elect in September 2002
and Chairman in July 2003. He is Chairman of United
Business Media plc and Liberata plc and a non-voting
board director of Capgemini Group. He is also an advisory
board member of Hartwell plc and Palamon Capital
Partners LLP.
3 Kevin Thompson
(aged 45) is Finance Director of the Halma Group. He
joined the Group in 1987 as Group Financial Controller and
in 1995 was appointed to the Executive Board as Finance
Director. In 1997 he became Group Finance Director and
in 1998 was appointed to the Halma p.l.c. Board. An
economics and accounting graduate of Bristol University,
Kevin qualified as a Chartered Accountant with Price
Waterhouse.
4 Andrew Walker
(aged 53) was appointed a non-executive Director of
Halma in May 2003 and serves on the Audit Committee
(Chairman) and Remuneration Committee. He is Chairman
of Bioganix Limited, a non-executive Director of Ultra
Electronics Holdings plc, Manganese Bronze plc, 
API Group plc, Delta plc and Porvair plc.
5 Keith Roy
(aged 55) is Chief Executive of the Water and Gas
Technology Division. He joined Halma having been joint
owner of Reten Acoustics when Halma acquired it in 1992
and was appointed Managing Director and subsequently
Chairman of Palmer Environmental Limited. He became an
Assistant Divisional Chief Executive in 1998. In 2000 Keith
was appointed Divisional Chief Executive of the Water
Technology Division and was appointed to the Halma p.l.c.
Board in 2001. He is an electronic engineering graduate of
both Nottingham University (BSc) and Aston University
(MSc).
6 Neil Quinn
(aged 55) is Chief Executive of the Fire Division. He joined
the Group as Sales Director of Apollo Fire Detectors
Limited in 1987, becoming Managing Director in 1992. In
1994 he was appointed Chief Executive of the Fire
Detection Division and was appointed to the Halma p.l.c.
Board in 1998. He is a material science graduate from
Sheffield University.
7 Adam Meyers
(aged 43) is Chief Executive of the Fluid Technology
Division. He joined Halma in 1996 as President of Bio-
Chem Valve Inc. He was appointed Assistant Divisional
Chief Executive in April 2001 and became Divisional Chief
Executive of the newly formed Fluid Technology Division
and a member of the Executive Board in April 2003. He is
a systems engineering graduate of the University of
Pennsylvania and gained his MBA from Harvard Business
School.
8 Nigel Young
(aged 55) is Chief Executive of the Specialist Products
Division. He joined Halma as Managing Director of Fortress
Interlocks Limited when the company joined the Group in
1987. Nigel was appointed Assistant Divisional Chief
Executive in 1990 and took up his current position as
Divisional Chief Executive in 1992. He was appointed to
the Executive Board in 1994. He has an MBA from Aston
University.
9 Richard Stone
(aged 62) was appointed a non-executive Director of
Halma in January 2001. He serves on the Audit
Committee, Remuneration Committee (Chairman) and
Nomination Committee and is the Senior Independent
Director. He is Chairman of CSW Group Limited, a non-
executive Director of Gartmore Global Trust p.l.c., Trust
Union Finance (1991) plc, Engandscot Limited and TR
Property Investment Trust plc.
10 Carol Chesney
(aged 42) is Company Secretary of Halma p.l.c. She spent
three years with English China Clays p.l.c. before joining
Halma in 1995 as Group Finance Manager. Carol was
appointed Company Secretary in 1998. She is a maths
graduate of Randolph-Macon Woman’s College, Virginia and
qualified as a Chartered Accountant with Arthur Andersen.
11 Andrew Richardson
(aged 40) is Chief Executive of the Water Management
Division. He joined Halma in April 2004 and is a member
of the Executive Board. Andrew is an engineering graduate
of Cambridge University. Prior to joining Halma he was
Divisional Managing Director of the Clutch Division for the
Automotive Products Group.
12 Nigel Trodd
(aged 47) is Chief Executive of the Process Safety
Division. He joined Halma in July 2003 and is a member of
the Executive Board. Prior to joining Halma he was V.P.
Europe, Middle East and Africa for Tyco Suppression
Systems based in Frankfurt. Nigel is a business studies
graduate of Thames Valley University and is a member of
the Chartered Institute of Marketing.
13 Bill Seymour
(aged 45) is Chief Executive of the Elevator and Door
Safety Division. He joined Halma on the acquisition of
Janus Elevator Products in December 1990 and became
Vice President of that company in 1991. In 1993 he was
appointed Joint President of Janus and in 1999 became an
Assistant Divisional Chief Executive. In 2000 Bill was
appointed Divisional Chief Executive of the Elevator
Electronics Division and a member of the Executive Board.
He is an electrical engineering graduate of Limerick
College of Technology.
14 John Campbell
(aged 46) joined the Group in 1995 as President of IPC
Resistors Inc. and became Chief Executive of the Resistors
Division upon its formation in 1998 and a member of the
Executive Board. He is an electrical engineering graduate
of the University of Toronto and before joining Halma was
a senior sales and marketing executive within the
Industrial Power Group of Rolls-Royce p.l.c.
15 Stephen Pettit
(aged 54) was appointed a non-executive Director of
Halma in September 2003 and serves on the Audit
Committee and Remuneration Committee. He is Chairman
of ROK Property Solutions plc and a non-executive
Director of National Grid Transco plc and National Air
Traffic Services. 2
Halma Management Team continued
Halma p.l.c. 2005 15
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15 HALMA
Operating Review – Fire and Gas
16 Halma p.l.c. 2005
Sector Overview
We are world leaders in sensors that
detect life-threatening fire and gas
hazards. Our products warn people
of imminent danger and give them
time to escape. Now sold in 80
countries, our fire detectors protect
people and buildings from the risk of
fire. Our gas detectors safeguard
the lives of industrial workers by
alerting them to the presence of
toxic or explosive gases. We also
make specialist products for
conditioning gas samples. The
principal sales channels for fire
detectors are distributors and fire
alarm installers; gas detector
customers range from lone
contractors to multinationals. During
2004/05 our Fire and Gas sector
companies produced 25% of Group
turnover and 33% of operating
profit*.
Our businesses in the Fire and Gas
sector achieved record sales during
2004/05, with profits slightly ahead.
The fire detector market is a very
competitive environment mostly
dominated by large multinationals.
During 2004/05 there were many
competitor acquisitions and
consolidations. Despite such market
pressures, we increased market share
and remain the second largest maker
of commercial grade fire detectors
worldwide.
We achieved double-digit fire detector
sales growth in Eastern Europe and
major increases in the Middle East,
India and the Far East. This
compensated for subdued sales in
Central Europe. A key differentiator for
our fire products companies is industry-
leading customer service. To reinforce
this competitive advantage, in 2004/05
we set up technical centres in Spain,
the US, Ireland, India and China.
Increasing regulatory product testing
and approval is a major driver in the
fire industry (and a powerful barrier to
market entry). Our businesses invest
considerable time in maintaining close
relations with approval and regulatory
authorities. To sell fire detectors on a
worldwide basis, we hold 1500 product
approvals. An important recent project
has been product development to
satisfy the new EU Construction
Products Directive. This applies to all
25 member states from June 2005.
Continuous product innovation is a 
key sales growth factor in this sector.
Alongside new fire detector ranges, 
we launched new emergency
evacuation products, including
directional and programmable
sounders, and devices to guide people
out of smoke-filled buildings.
Gas detector profits continued to rise,
supported by new product launches in
the portable and fixed systems
markets. Gasman, a single gas
detection instrument and market
leader in terms of size, weight and
performance, is a key new product.
Last year’s restructuring of our
European gas detector sales operations
delivered improved sales and profits.
We strengthened our sales routes in
the US, producing record revenues and
an excellent platform for future
growth. Pricing pressure, particularly in
portable gas detectors, remained
strong, but operational improvements
ensured an increase in gross margins.
The small-scale power generation
market based on fuel cells is now
commercialised and sales of gas
conditioning products are growing.
However, most business continues to
be for prototyping projects. Within this
market, our hydrogen humidification
systems are being extended to handle
high pressure fuel cells as developers
attempt to produce more efficient,
lower cost systems. This is a long-term
growth opportunity.
Fire and Gas turnover Fire and Gas turnover
2005 £75.5m
2004 £75.0m
Fire and Gas profit* Fire and Gas profit*
2005 £16.7m
2004 £16.6m
Segmental turnover, 2005 Segmental turnover, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 75.0
Segmental profit*, 2005 Segmental profit*, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 20.0
*before interest, tax and goodwill 
  amortisation – see Note 1 on the 
  Accounts Our fire and gas products
protect people and plant
worldwide.
Halma p.l.c. 2005 17 HALMA
Operating Review – Water
18 Halma p.l.c. 2005
Sector Overview
We own world-leading businesses in
three water industry sectors:
ultraviolet light (UV) water
treatment, instruments for
monitoring and controlling water
distribution, and water quality
analysis. These markets are global
and we make substantial sales
worldwide. Our principal customers
are drinking water supply
companies, municipal authorities,
food manufacturers and the process
industries. Based in the UK, the
Netherlands, France and the US,
during 2004/05 our Water sector
companies produced 11% of Group
turnover and 5% of operating profit*.
While Water sector sales were
maintained at a slightly reduced level,
profits in this sector were substantially
below the prior year.
During 2004/05 we saw significant
changes in the market for instruments
to conserve water in distribution
networks. Our water supply customers
faced pressures to cut costs. This
created demand for lower margin
instruments to monitor and control
water networks in a preventative way,
in addition to diagnostic leak location
instruments. In response, we
restructured the product ranges and
organisation of several companies in
this sector. As part of this process we
upgraded a number of products in the
field which led to some stock write-
offs. This involved substantial costs but
has produced a much stronger base for
growth. An important contract for leak
detection equipment in the city of El
Paso, Texas, was smaller in scale than
the very successful Las Vegas contract
in the previous year. However, it
represented useful progress in a
market where we continue to make a
significant investment in anticipation of
future returns. Acquisition of data
logging and data transmission
businesses in recent years has led to a
50% increase in sales of these
instruments in 2004/05 and allowed us
to penetrate the fast-growing market
for monitoring wastewater and flow.
Sales of UV equipment outside of the
US market returned to growth.
However, delays in closing US
contracts led to a decline in total UV
equipment sales. We won an important
contract, phase II of the Houston
CrossFlow drinking water project. A
reorganisation of the US sales
operation has started to deliver major
improvements, with the 2005/06 order
book substantially ahead.
Outbreaks of water-borne disease
create demand for our disinfection
technology. Following an outbreak of
giardiasis in the Norwegian city of
Bergen’s drinking water supply, we
won a significant order. UV sales to the
swimming pool sector, where our
companies are dominant, continued
strongly, benefiting from increased
awareness of health risks from
chlorination by-products. Continued
investment in product approvals has
created an excellent foundation for
securing future drinking water
projects. We believe we are the first
company with medium pressure UV
technology that complies with the new
European testing criteria. UV sales to
South East Asia continued to grow
because our equipment provides
significant performance advantages
and lower capital costs than competing
systems. Further capital investment
expanded our UV lamp manufacturing
capacity to meet growing demand.
Sales and profits at our water testing
business reached record levels. We
launched an innovative new product,
called Cool Pool Tester. This transfers
advanced photometric water analysis
technology developed for professional
laboratory users into the domestic
swimming pool market.
Water turnover Water turnover
2005 £32.5m
2004 £34.5m
Water profit* Water profit*
2005 £2.6m
2004 £5.8m
Segmental turnover, 2005 Segmental turnover, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 75.0
Segmental profit*, 2005 Segmental profit*, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 20.0
*before interest, tax and goodwill 
  amortisation – see Note 1 on the 
  Accounts We are the world leader in
UV treatment of swimming
pool water.
Halma p.l.c. 2005 19 HALMA
Operating Review – Elevator and Door Safety
20 Halma p.l.c. 2005
Sector Overview
Our businesses in this sector are
world leaders in products that
protect people using elevators and
automatic doors from harm. We
make infrared and microwave based
sensors that control the operation 
of elevator doors and automatic
pedestrian and industrial doors.
They safeguard users, improve
accessibility for the disabled and
optimise traffic flow. We also make
voice communication and display
products for elevators. These
businesses are based in Belgium,
the UK, New Zealand, the US,
Singapore and China.
The elevator and automatic door
markets separate into new
construction and building
refurbishment, with our sales equally
split between the two. Customers in
the new-build sector are generally
multinational elevator and door
manufacturers. Refurbishment
customers tend to be local
contractors. During 2004/05, this
sector produced 21% of Group
turnover and 23% of operating
profit*.
Although overall sales and profit in this
sector fell slightly, we generated
significant sales growth in the core
elevator and door product groups,
particularly in Asia and Europe. An
underlying sector-wide advance in sales
and profit was offset by unfavourable
currency movements and a
disappointing performance by our
emergency telecoms business. With
less than 10% of sales in this sector in
the UK, its headline performance is
vulnerable to Sterling exchange rates.
We maintained our market share in
automatic door control sensors despite
lower door control sales in the US (due
to a large refurbishment contract in
2003/04). Record profits were
achieved, aided by rising sales in China
and also in Japan where we now have
three sales offices.
We won worthwhile new business from
the New York City Transit Authority for
station platforms emergency
communications systems, most of
which will be shipped in 2005/06.
However, voice communication
equipment sales fell significantly. To
turn this around, we have merged this
telecoms business with our US elevator
safety products company to benefit
from its strong sales management
skills and well developed sales
channels.
Recent European legislation mandates
that elevators must be fitted with
emergency voice communication
systems. This has created a valuable
new market; we estimate that 90,000
new elevators are commissioned every
year in the EU. We have developed a
new elevator telephone system which
enables building operators to comply
fully with the new regulations. We
have also opened a new sales office in
Italy where an estimated 90% of
elevators do not meet EU standards.
The more prominent risk in this sector
relative to others is the unpredictable
impact of the proposed Chinese
currency revaluation. A significant
proportion of our elevator and door
products are made in China and a
revaluation of the Yuan may increase
production costs and squeeze margins.
Given continued global economic
development, market prospects for
elevator and automatic door safety
products are positive in the long term.
The key drivers are urbanisation,
population growth and accessibility for
the disabled. These factors create
demand for high rise buildings,
requiring elevator controls, and also
large buildings with automatic doors.
Demand for our products is continually
rising due to concern in most countries
about public safety.
Elevator and Door Safety turnover Elevator and Door Safety turnover
2005 £62.5m
2004 £65.1m
Elevator and Door Safety profit* Elevator and Door Safety profit*
2005 £11.5m
2004 £12.1m
Segmental turnover, 2005 Segmental turnover, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 75.0
Segmental profit*, 2005 Segmental profit*, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 20.0
*before interest, tax and goodwill 
  amortisation – see Note 1 on the 
  Accounts At the Jin Mao Tower,
Shanghai, visitors are
protected by our door
safety products.
Halma p.l.c. 2005 21 HALMA
Operating Review – Process Safety
22 Halma p.l.c. 2005
Sector Overview
Our Process Safety businesses help
customers protect their human and
capital assets. We create safe
workplaces where employees are
safeguarded from injury and plant is
protected from damage. We are
world leaders in access control
products called trapped-key
interlocks. These separate people
from hazards, such as moving
machinery, and prevent dangerous
operation of industrial equipment.
Our second Process Safety specialism
is bursting discs. These products
minimise explosion risks, for example
in chemical plants, protecting
workers and capital investment, and
preventing environmental pollution.
Customers for Process Safety
products range from one-man
businesses to multinational
corporations; the markets are global.
Based in the UK, the US, Mainland
Europe and Australia, our Process
Safety companies generated 12% of
Group turnover and 13% of
operating profit* in 2004/05.
Overall sectoral performance was in
line with the prior year. Bursting disc
sales moved significantly ahead,
benefiting from last year’s
reorganisation and investment.
Interlock sales in the US and France
were disappointing although in the UK
and the rest of Europe they grew
modestly. Our growth strategy in this
sector centres on increasing sales of
our established technologies into the
new markets of the developing world,
where increased safety awareness and
health and safety legislation is
following industrial expansion. We aim
to maintain our position of niche
market leadership in the mature
industrial markets through innovative
new products and new applications.
The oil and gas business is an
important market where our products
safeguard exploration, production and
refining operations worldwide. We are
the world leader in valve interlock
control systems and satisfy a
significant percentage of total world
demand. With steady global economic
development, demand for oil and gas
will continue to rise, with production
set to double by 2020. Gas flaring,
where gas from oil wells is simply
burned, will be outlawed worldwide 
by 2008 and new infrastructure
projects should underwrite long-term
market growth.
In the general industrial market, sales
and profit growth will be achieved by
product innovation and penetration of
new markets. The Chinese process
safety market is growing, but not as
fast as more developed parts of
Eastern Europe. Our Salvo safety
system is an example of product
innovation and entry into a completely
new market. This product ensures that
a vehicle cannot leave a loading bay
until it is safe to do so, preventing
potentially fatal accidents to fork-lift
operators. Salvo has generated
substantial sales in its first year, in a
market sector with significant potential.
With double-digit profit growth our
bursting disc businesses had an
excellent year. Further growth will
come from extending sales into high
growth markets in Eastern Europe 
and Asia.
A slowdown or reverse in global
economic development, or slow
adoption of health and safety
legislation in Eastern Europe and Asia,
could delay progress in this sector, 
as could a downturn in key markets.
However, we believe that prospects 
for steady growth in this sector still
exist. With continued global economic
development, and rapid industrial
development in the enlarged EU 
and China, the longer term market
drivers remain.
Process Safety turnover Process Safety turnover
2005 £36.2m
2004 £36.0m
Process Safety profit* Process Safety profit*
2005 £6.5m
2004 £6.6m
Segmental turnover, 2005 Segmental turnover, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 75.0
Segmental profit*, 2005 Segmental profit*, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 20.0
*before interest, tax and goodwill 
  amortisation – see Note 1 on the 
  Accounts Our valve interlocks help
ensure that oil and gas
plants are operated safely.
Halma p.l.c. 2005 23 HALMA
Operating Review – Resistors
24 Halma p.l.c. 2005
Sector Overview
Our high power resistors are used to
dissipate excess electrical energy,
control the speed of large electric
motors, protect electrical power
distribution systems from damage
and for electrical safety.
The combined engineering and
marketing resources of our five
businesses in this sector make us
the world leader in power resistors.
Our customers in this sector are
mainly in power generation, the
process industries and transit
systems manufacturers. Large
contracts, won via competitive
tendering, account for a higher than
average proportion of sales. Based
in the US, Canada, Australia and the
UK, our Resistor businesses
contributed 9% of Group sales and
3% of operating profit* in 2004/05.
While overall sales edged 7% ahead in
this sector, profits fell back. This was
partly due to a steep rise in stainless
steel raw materials costs. We were
able to increase prices, but part of the
steel price rise had to be absorbed and
margins suffered. Together with the
impact of unfavourable exchange rate
movements, these factors hindered
any underlying profit progress. Our
long-term goal of reducing dependency
on the US market by increasing the
proportion of US export sales is
succeeding. Resistor exports rose by
40% in 2004/05 and non-US sales now
contribute 51% of sectoral sales.
A major growth target is the
development of new markets and
products to safeguard workers and
protect capital equipment from
damage caused by electrical earth
faults. Recognition of the danger posed
by earth faults is growing among
heavy electrical users and our products
are the most efficient method of
mitigating this hazard. A positive trend
is the adoption of this technology in
hospitals and data centres. Sales into
this market rose 15% in 2004/05 and
we sold earth fault protection systems
into South East Asia for the first time.
During 2004/05 sales of transit
resistors, which are used to control
braking on locomotives and trams,
generated poor margins. We took
action to cut overheads and increase
manufacturing efficiency by
consolidating all transit resistor
production at a single US location.
However, a combination of competitive
pricing and margin volatility due to
unpredictable raw material costs has
made this niche market relatively
unattractive. We may consider
withdrawing from transit resistor
production during 2005.
A market targeted for growth two
years ago, braking resistors on the
huge trucks used to transport ore in
open-cast mines, is now generating
significant sales. We are now the
established leader in the replacement
aftermarket and we are working with
several truck makers to become the
original equipment supplier too.
We plan to maintain sales growth in
2005/06, focussing on the launch of
innovative dynamic braking and
electronic ground fault relay products.
We will also aim to grow sales of filter
resistors which are used by power
companies to control the quality of
their electrical supplies. Our primary
geographical growth target is Asia,
particularly China where we have
established a local partnership.
While returns and prospects for
Resistors are still good by peer
standards, the sector is under
particular scrutiny as part of our
normal strategic reviews.
Resistors turnover Resistors turnover
2005 £27.7m
2004 £27.2m
Resistors profit* Resistors profit*
2005 £1.4m
2004 £2.2m
Segmental turnover, 2005 Segmental turnover, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 75.0
Segmental profit*, 2005 Segmental profit*, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 20.0
*before interest, tax and goodwill 
  amortisation – see Note 1 on the 
  Accounts Internet switching and data
centres are a growing
market for our resistor
systems.
Halma p.l.c. 2005 25 HALMA
Operating Review – Optics and Specialist
26 Halma p.l.c. 2005
Sector Overview
We are world leaders in two areas of
optical technology. We make
ophthalmic instruments and special
lenses for the medical market.
These test eyesight, diagnose ocular
disease and enable eye surgery. Our
second optical specialism is electro-
optical instruments (spectrometers)
mainly used for colour measurement
and material analysis. We sell our
optical products into global markets
and exports are a high proportion of
sales. Our other main focus in this
sector is on high precision,
miniature fluid control products used
in analytical instrumentation. These
fluid technology products are sold
primarily to high tech instrument
manufacturers. Based in the US and
the UK our Optics and Specialist
companies contributed 22% of
Group turnover and 23% of
operating profit*.
The Optics and Specialist businesses
produced excellent results, establishing
new sales and profit records. Overall
sectoral profit growth was reduced by
increased corporate management
charges which are included as part of
this sector and a lower level of
performance from certain Specialist
businesses.
Our ophthalmic optics companies
benefited from market expansion due
to global population growth and
produced strong results. Export sales
grew significantly; future export
growth is targeted on Asia. Ophthalmic
lens sales produced record profits,
aided by a very successful new product
launch. Demand for ophthalmic
instruments was boosted by a new
cordless, battery-powered indirect
ophthalmoscope. A unique product, it
continues to sell very well in the US,
its target market. Close relationships
with leading ophthalmologists help us
develop new products that complement
medical advances.
Our fluid technology companies
maintained growth in core markets and
in new applications, delivering record
sales. The primary market, life science
instrumentation, continues to grow in
the high single digit range. We expect
this growth pattern to continue, driven
by increased testing and discovery
requirements due to increases in
population, and both pharmaceutical
and biotech research. During 2004/05
the United States Postal Service
completed installation of biological
hazard detection equipment containing
our components, creating an ongoing
spares business. The acquisition of
Diba Industries in May 2004
strengthened our presence in this
market. The company continues to
perform to expectations and recently
won an important contract to supply a
world-leading manufacturer of blood
analysis instruments, with deliveries
starting in 2005/06.
Since its acquisition in June 2004,
spectrometer manufacturer Ocean
Optics has achieved record sales and
profits, exceeding expectations at the
time of acquisition. Strong growth
continued in all export markets,
including Europe and Japan. This
company has maintained its market
position of “disruptive innovator”,
extending the analytical capability of
its core product line.
During 2004/05 we launched an
unrivalled optical colour changing
system for theatrical and
entertainment industry lighting based
on patented thin film coating
technology. Significant sales were
achieved into research laboratories of
products based on an advanced
analytical technique which uses lasers
to vaporise samples for analysis. The
product line is now being developed for
volume production to open up this
market in 2005/06. Our spectrometers
will be built into a forthcoming NASA
space project designed to search for
signs of life on the planet Mars.
Optics and Specialist turnover Optics and Specialist turnover
2005 £65.4m
2004 £42.8m
Optics and Specialist profit* Optics and Specialist profit*
2005 £11.6m
2004 £7.1m
Segmental turnover, 2005 Segmental turnover, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 75.0
Segmental profit*, 2005 Segmental profit*, 2005
Fire and Gas
Water
Elevator and Door Safety
Process Safety
Resistors
Optics and Specialist
£m 20.0
*before interest, tax and goodwill 
  amortisation – see Note 1 on the 
  Accounts Our spectrometers will
analyse rocks on a future
NASA mission to Mars.
Photo: NASA/Science Photo Library.
Halma p.l.c. 2005 27 HALMA
Report of the Directors 
28 Halma p.l.c. 2005
The Directors present their annual report on the affairs of the Group, together with
the Accounts and the Independent Auditors’ Report, for the 52 weeks to 2 April
2005.
Activities Halma p.l.c. is a holding company. A list of its principal subsidiary companies and
their activities is set out on pages 78 and 79.
Results of the period The Consolidated Profit and Loss Account for the 52 weeks to 2 April 2005 is set
out on page 48. The Group profit before taxation, goodwill amortisation and
exceptional items is £50,389,000 (2003/04: £50,284,000). The profit after
taxation amounts to £29,358,000 (2003/04: £22,322,000).
Ordinary dividends The Directors will submit a resolution at the Annual General Meeting proposing a
final dividend of 3.92p per share and if approved this dividend will be paid on 24
August 2005 to ordinary shareholders on the register at the close of business on
22 July 2005. Together with the interim dividend of 2.58p per share already paid,
this will make a total of 6.5p per share for the financial year.
Review A review of activities together with business and future developments is included
on pages 4 to 12 and 16 to 27 inclusive.
Share capital Details of share capital issued in the financial year are set out in note 19 on the
Accounts.
Performance share plan The Directors will propose a resolution at the Annual General Meeting
recommending the approval and adoption of a Performance Share Plan (“PSP”),
details of which are contained in the circular which has been sent to shareholders.
Allotment authority The special business of the Annual General Meeting includes a special resolution to
disapply Section 89(1) of the Companies Act 1985 with respect to certain
allotments. The effect of this special resolution, if approved, will be to give the
Directors authority until the date of the next Annual General Meeting, firstly to
issue shares to employees under share schemes previously approved in general
meeting, and secondly, to allot up to 5% of the issued ordinary share capital for
cash otherwise than pro-rata to existing shareholders.
Purchase of own shares The Company was authorised at the 2004 Annual General Meeting to purchase up
to 36,000,000 (approximately 10%) of its own 10p ordinary shares in the market.
This authority expires at the end of the 2005 Annual General Meeting. In
accordance with the Directors’ stated intention to seek annual renewal, a special
resolution will be proposed at the Annual General Meeting to renew this authority
until the end of the next Annual General Meeting. The Directors consider it
desirable that the possibility of making such purchases, under appropriate
circumstances, is available. If the Performance Share Plan is approved, the
Directors intend to make routine purchases of Halma shares in the market and
hold them in treasury until required for shares that vest under the PSP. Otherwise,
the Directors have no present intention of using this authority. In reaching a
decision to purchase shares, the Directors will take into account the Company’s
cash resources, capital requirements and the effect of any purchase on the
Company’s earnings per share. It is anticipated that renewal of the authority will
be requested at subsequent Annual General Meetings. HALMA
Report of the Directors continued
Halma p.l.c. 2005 29
Supplier payment policy The Company does not follow any particular supplier payment code of practice.
The Company has due regard to the payment terms of suppliers and generally
settles all undisputed accounts within 30 days of the due date for payment. At
2 April 2005 the Company’s trade creditors represented 34 days (2004: 35 days)
of its annual purchases.
Employees Matters which affect the Group are communicated to employees through formal
and informal meetings, internal announcements, the Group Intranet, the Group
bulletin board on our secure Virtual Private Network (VPN) and regular contact
with Directors and Divisional Chief Executives.
An employee share scheme is open to all UK employees of the Group following a
qualifying period and has been operating since 1980.
The Company is an equal opportunity employer with particular reference to
non-discrimination and non-harassment on the basis of ethnic origin, religion,
gender, age, disability and sexual orientation. Halma gives disabled people the
same consideration as other individuals.
Directors’ remuneration The Directors support shareholders approving the remuneration of Directors as set
out in the Report on Remuneration on pages 39 to 45. An ordinary resolution will
be proposed at the Annual General Meeting seeking such shareholder approval.
Corporate responsibility The Group’s Corporate Responsibility report is set out on pages 31 to 33.
Research and Group companies have continuous research and development programmes 
development established with the objective of the improvement of their product ranges and
increasing the profitability of their operations.
Donations Group companies made charitable donations amounting to £11,913
(2003/04: £9,923) during the financial year. There were no political donations
(2004/05: £nil).
Directors The Directors of the Company are listed on page 13. Brief biographies are set out
on page 14.
Mr S R O’Shea retired from service with the Group and resigned as a Director and
Group Chief Executive on 28 February 2005. Following the resignation of
Mr O’Shea, Mr A J Williams, who was appointed a Director on 13 July 2004, was
appointed Group Chief Executive with effect from 28 February 2005.
Directors proposed Mr K J Thompson, Mr N Quinn and Mr E G Unwin retire by rotation and being
for re-election eligible offer themselves for re-election.
Mr A J Williams, who joined the Board between the date of issue of the Notice of
Meeting and the last Annual General Meeting, retires under Clause 95 of the
Articles of Association and being eligible offers himself for re-election. HALMA
Report of the Directors continued
30 Halma p.l.c. 2005
Shareholdings As at 10 June 2005 the Company has been notified under Section 198 of the
Companies Act 1985 of the following notifiable holdings of the Company's ordinary
shares:
shares per cent
Silchester International Investors Limited 65,887,378 17.8
Sprucegrove Investment Management Limited 25,267,545 6.8
Legal & General Investment Management Limited 12,320,633 3.3
No other notification has been received in respect of a holding of 3% or more of
the Company's ordinary share capital.
Auditors Resolutions will be proposed at the Annual General Meeting to re-appoint Deloitte
& Touche LLP as Auditors and to authorise the Directors to determine their
remuneration.
By Order of the Board
C T Chesney Secretary
Misbourne Court  Rectory Way  Amersham  Bucks HP7 0DE
21 June 2005 Socially responsible Investing in Halma shares meets the criteria of many professional and private
investment investors who base their decisions on environmental, ethical and social
considerations. The Group is a world leader in several key environmental
technologies and has a reputation for honesty and integrity in its relationships with
employees, customers and business partners.
Social conditions can be improved for all through the creation of wealth. Halma
creates wealth responsibly allowing our employees, customers, business partners
and shareholders to determine where this wealth is best distributed.
In each of the following areas, the regulatory demands upon us vary considerably
around the world, so Halma establishes the core structure to ensure that Group
companies fully comply with regulatory requirements while permitting them to
tailor the solutions to their particular needs.
The environment Within Halma, we have an excellent long-term record and a clear strategy for
addressing environmental issues that affect our businesses and for developing
products that protect the environment and improve safety at work and in public
places.
Our products
Many of our innovative products play a very positive role in monitoring and
improving the environment. Halma brands lead the world in a number of
technologies which help to minimise environmental damage.
Our principal environmental technologies are water leakage detection, gas
emissions monitoring, water and effluent analysis, UV water treatment and fibre
optic spectrometers. We tirelessly promote the use of UV water sterilisation which
eliminates the need to use dangerous chemicals, as well as products that minimise
the waste of clean water.
Our commitment to the development of equipment for measuring environmental
changes and controlling the damaging impact of industrial activities is long term.
We make safety equipment for use at work, in public places and in transportation
systems that contribute to increased personal safety by ensuring safe practice at
work, protecting people from fire and making elevators and automatic doors safe
and effective. We are the major world supplier in several of these areas.
Environmental policy
The Group’s policy on environmental issues is published on our website and has
been distributed and explained to all Halma business units.
A senior executive in each of our business units is responsible for implementing
the environmental policy at local level. The Group Finance Director, Mr K J
Thompson, has principal responsibility for coordinating and monitoring the policy.
Environmental management system
We are committed to developing and implementing an environmental
management system (“EMS”) throughout the Group to measure, control and,
where practical, reduce our environmental impacts. We are developing
performance indicators that will assist local management in implementing the
policy and developing an EMS. The requirement for an EMS and the related
HALMA
Corporate Responsibility Report 
Halma p.l.c. 2005 31
In response to the December
2004 South East Asian
tsunami, Hanovia directed its
efforts into converting existing
technology designed for fixed
installations into a standalone
UV water disinfection system.
UV water disinfection systems
are particularly effective in
killing cholera and typhoid
bacteria and other water-
borne bacteria and viruses
that may be immune to
chlorine. The system is fully
portable and can be used to
provide primary disinfection of
contaminated water or be
used as a point-of-use
disinfection barrier from
storage tanks. It can produce
up to 6 tonnes per hour of low
quality filtered drinking water.
It may also be combined with
chemical treatment to provide
multi-barrier disinfection. The
first system was donated to
Mercy Malaysia for use at an
Internally Displaced Person
camp in Banda Aceh province.
Across the Group we continue
to operate programmes, where
commercially viable, to ensure
the responsible disposal of
packaging, including the 
re-use and recycling of all
packaging types and, where
necessary, the use of licensed
contractors to dispose of 
non-recyclable waste
packaging safely. HALMA
Corporate Responsibility Report continued
32 Halma p.l.c. 2005
reporting has been rolled out to all UK business units which represent over 50%
of Group production facilities in terms of external turnover. All Group companies
are encouraged to undertake ISO 14001, the international environmental
standard, accreditation where warranted. During the year, Fortress Interlocks
obtained ISO 14001 approval. The requirement to implement an EMS will be
extended to the rest of the Group in the medium term.
Our impacts
We support the concept of sustainability and recognise that, in common with all
businesses, our activities have an environmental impact. Our products do not
require capital-intensive manufacturing processes, so the environmental effect of
our operations is relatively low compared to manufacturers in other sectors.
During the year, the Group successfully introduced an Innovation Initiative which
encourages the research and development teams at each Group company to re-
examine their product designs with a view to being more efficient and effective
using components which are more environmentally acceptable. The winning team
in 2004 comprised Roger Copeland, Duncan Johnson and Stan Ramage from
Volumatic whose Compact Counter Cache product development was voted, by a
peer group, as the most successful product innovation of the year.
Group companies are encouraged to improve energy efficiency, reduce waste and
emissions and to reduce the use of materials in order to reduce their
environmental impact. The Group carried out an exercise in 2004/05 to establish
baseline data on emissions to air and water, water and energy consumption and
waste production. The data collected will enable the Group to set objectives for
reducing its environmental impacts in those areas and to look at setting targets
for reduction in key areas. The Group plans to publish the results of this exercise
on its website in July 2005.
The baseline data has confirmed that the main areas of impact on the environment
are energy consumption and waste disposal. The Group does not operate a fleet
of distribution vehicles although we do own a number of company cars. Few of our
assembly processes require water, so there are not large quantities of waste water
to manage.
After the results of the 2004/05 exercise are analysed and targets have been set
in key areas of environmental impact, the Group is committed to examining the
establishment of “green” procurement policies.
The Group’s environmental performance will continue to be reported in both the
Annual Report and on our website.
Health and safety The Group recognises the necessity of safeguarding the health and safety of our
own employees whilst at work and operates so as to provide a safe and
comfortable working environment for employees, visitors and the public. The
Group has a health and safety policy, which is set out on the Company’s website.
It is the Group’s policy to manage its activities to avoid causing any unnecessary
or unacceptable risks to health and safety. The policy is understood by all Group
companies. Given the autonomous structure of the Group, operational
responsibility for compliance with relevant local health and safety regulations is
delegated to the board of directors of each Group company. Health and safety
training is carried out within companies as appropriate. Adequate internal
The BEA group of companies
has always sought to minimise
the environmental impact of
their buildings. This objective
was designed into BEA SA’s
main facility in Liège, which
already uses collected
rainwater for everything other
than drinking water, and heat
exchangers to minimise the
energy needed to heat and cool
the building. During this year
the technologies used in the
heating and lighting systems of
the building have been further
upgraded to improve their
energy efficiency. These kinds
of initiatives to reduce energy
use, applied across the Group,
lead to the double benefits of
lower environmental impact
and lower costs.
Demonstrating the Group’s
commitment to ensure all
companies comply with
applicable regulations, Apollo
Fire Detectors is now well
advanced in its compliance
plan for the Waste Electrical
and Electronic Equipment
(‘WEEE’) Directive that comes
into force in August 2005.
Apollo will be introducing new
product labelling this year to
meet its immediate obligations
under the WEEE Directive and
is arranging to join a
collaborative compliance
scheme early next year by
which Apollo can offer its
customers a simple product
return service. HALMA
Corporate Responsibility Report continued
Halma p.l.c. 2005 33
reporting exists in order that the Group Finance Director may monitor each
company’s compliance with this policy.
The Group has collected details of its worldwide reported health and safety
incidents which will be available on its website in July 2005.
Ethics Halma encourages its employees to act fairly in their dealings with fellow
employees, customers, suppliers and business partners. We aim to have suppliers
of high quality and operate to acceptable international standards. Halma operates
a confidential “whistleblowing” policy, which enables all Group employees to raise
any concerns they may have.
FTSE4Good index Halma was designated a member of the FTSE4Good UK index on its establishment
in July 2001. The FTSE4Good index measures and benchmarks the performance of
companies with good records of corporate social responsibility and aids investors
who use socially responsible investment criteria. The FTSE4Good Selection Criteria
cover three areas: working towards environmental sustainability; developing
positive relationships with stakeholders; and upholding and supporting universal
human rights.
Business in the Halma participated in the 2004 Environment Index for the first time signalling the
community Group’s commitment to integrating environmental considerations into the way that
the Group is operated. HALMA
Corporate Governance  
34 Halma p.l.c. 2005
The Board is committed to the maintenance of high standards of Corporate
Governance. The policy of the Board is to manage the affairs of the Company in
accordance with the principles of corporate governance contained in the Combined
Code on Corporate Governance which is appended to the Listing Rules of the
Financial Services Authority and for which the Board is accountable to shareholders.
Compliance with the Throughout the financial year, the Company complied with the Code provisions 
code of best practice set out in Section 1 of the July 2003 FRC Combined Code on Corporate Governance
except in respect of provisions A3.2, A4.1 and C3.1 all of which involve the
composition of the board or its committees and the number of members who are
independent non-executive directors. The Board re-affirmed its decision to maintain
the composition of the Board and its Committees based on its assessment that this
is the most appropriate structure for the Company. Furthermore, the Board believes
it important that the Chairman continue to serve on the Audit Committee to enable
him to contribute to the deliberations of the Committee and to enable him to
properly discharge his responsibilities.
Application of the The Group is controlled and directed by a Board consisting of a Chairman, 
principles of good four executive Directors and three non-executive Directors. Their biographies
governance appear on page 14. The Board considers the Chairman and each of the non-
executive Directors to be independent. In assessing independence, the Board
considers that the Chairman and non-executive Directors are independent of
management and free from business and other relationships which could interfere
with the exercise of independent judgment now and in the future. The Board
believes that any shareholdings of the Chairman and non-executive Directors
serve to align their interests with those of all shareholders. Mr Stone is
acknowledged as the Senior Independent Director. Upon appointment and at
regular intervals, all Directors are offered appropriate training. Each Director is
subject to re-election at least every three years.
The Directors retain responsibility for the formulation of corporate strategy,
investment decisions, and treasury and risk management policies. There is a
formal schedule of matters reserved for the Board’s decision and the Board meets
at least six times each year with further ad hoc meetings as required. Directors
are issued an agenda and comprehensive board papers in the week preceding each
Board Meeting. All Directors have access to the advice and services of the
Company Secretary as well as there being an agreed procedure for obtaining
independent professional advice.
Board and committee During the year attendance by Directors at Board and Committee meetings was as
meeting attendance follows:
Remuneration Audit Nomination
Board Committee Committee Committee
Total scheduled meetings 6 2 3 2
E G Unwin 6 2 3 2
S R O’Shea 6 N/A N/A 2
A J Williams 3 N/A N/A N/A
K J Thompson 6 N/A N/A N/A
N Quinn 6 N/A N/A N/A
R A Stone 6 2 3 2
K J Roy 6 N/A N/A N/A
A J Walker 6 2 3 N/A
S R Pettit 6 2 3 N/A HALMA
Corporate Governance continued
Halma p.l.c. 2005 35
AJWilliams attended three of the four Board meetings that he was eligible to
attend as he was abroad on residential corporate training. A J Williams was not a
member of the Nomination Committee when the two meetings were held.
Committees of the Board Halma has six committees of the Board: the Remuneration Committee, the Audit
Committee, the Nomination Committee, the Share Plans Committee, the Bank
Facilities and Guarantees Committee and the Acquisitions and Disposals
Committee. Each of these committees has terms of reference approved by the
Board, copies of which are available on request from the Company Secretary.
Remuneration Committee
Mr Stone chairs the Remuneration Committee of which the Chairman and each of
the non-executive Directors is a member. The Committee makes
recommendations to the Board on the framework for executive Directors’ and
senior executives’ remuneration based on proposals formulated by the Group Chief
Executive. The Committee meets at least twice per year. Further information about
the Committee is contained in the Remuneration Report on pages 39 to 45.
Audit Committee
Mr Walker chairs the Audit Committee. The Chairman and each of the non-
executive Directors is a member of the Committee. The Committee reviews the
interim and annual accounts and the disclosures contained therein, accounting
policies and matters of significant judgment, the statement on internal controls, the
process of Internal Audit and the Group whistleblowing procedures. The Committee
is also responsible for the relationship with the external auditors including terms of
engagement, fee levels, approval of the annual audit plan, a review of the findings
of the audit and assessing auditor effectiveness and independence. The Group Chief
Executive, Group Finance Director and representatives from the Auditors attend
Committee meetings by invitation in order to provide appropriate advice. The
Committee routinely meets with the Auditors without the involvement of the
executive Directors. The Committee meets at least three times per year.
Nomination Committee
Mr Unwin chairs the Nomination Committee. Mr O’Shea was a member of the
Committee until his resignation in February 2005. Mr Williams joined the
Committee on his appointment as Group Chief Executive in February 2005.
Mr Stone is also a member of the Committee. The Committee makes
recommendations to the Board on the appointment of new Directors. External
search consultancies are retained when recruiting non-executive Directors and are
used to evaluate internal and external candidates for executive succession
planning. The Committee meets at least annually.
The Group Chief Executive succession process undergone in the 2004/05 financial
year involved the Committee’s initial assessment of the candidates based on
criteria formulated in consultation with the Board. The comprehensive process also
involved each candidate being interviewed and assessed by an external search
consultant. The ultimate appointment decision rested with the Board.
Other Committees
The Share Plans, Bank Facilities and Guarantees and Acquisitions and Disposals
Committees’ terms of reference provide that certain Directors and the Company
Secretary may form sub-committees to cover administrative matters or to formally
enact matters which have already been determined by the Board in principle. HALMA
Corporate Governance continued
36 Halma p.l.c. 2005
Executive Board
Control of divisional operating matters is delegated to the Executive Board of
which the Group Chief Executive, Group Finance Director and all of the Divisional
Chief Executives are members. Biographies of Executive Board members appear
on page 14. The Group Chief Executive chairs the Executive Board, which meets
regularly, thereby ensuring the Board’s strategies are communicated to those
overseeing operations.
The Executive Board reviews operational activities, trading results, budgets, policy
matters, investment opportunities, resource allocation and risk exposures. Any
matters arising out of the Executive Board meetings are reported to the Board via
the Group Chief Executive’s report to the Board.
The Group Chief Executive and Group Finance Director also meet regularly with
each Divisional Chief Executive to monitor progress against key objectives and
review operational performance.
Individual operating company boards, chaired by the appropriate Divisional Chief
Executive, manage operating companies. These boards have clearly defined
responsibilities for the operation of their businesses, including compliance with
legislation and regulations, and for internal reporting. The system of internal
control exercised within the Group is described below.
Board effectiveness The Board evaluates its performance and that of the Remuneration, Audit and
Nomination Committees at least annually. In 2004/05 the evaluation commenced
with a self-assessment questionnaire, the results of which were compiled by the
Company Secretary and discussed by the Board at the next Board meeting. The
second phase of the evaluation involved the Chairman meeting with each Director
in order to address any individual concerns. The Board then met, separate from
any scheduled meeting, for a general discussion on Board effectiveness followed
by a meeting of the Chairman and non-executive Directors, and then a meeting of
the non-executive Directors without the Chairman present. The outcomes of these
meetings were then fed back to individuals by the Chairman, Senior Independent
Director or Group Chief Executive, as appropriate.
Investor relations In regular meetings with shareholders and analysts the Group Chief Executive
and Group Finance Director communicate the Group’s strategy and results,
disclosing such information as is permitted within the guidelines of the Listing
Rules. Such meetings ensure that institutional shareholders representing over
50% of the Company’s issued share capital meet with the Company on a regular
basis. Major shareholders are also offered the additional opportunity to meet with
the Chairman and/or Senior Independent Director.
The Company consulted with its largest shareholders prior to finalising the
proposed Performance Share Plan which is included in the Notice of Meeting for
approval at the 2005 AGM.
All shareholders are encouraged to attend the Annual General Meeting, and major
shareholders are also invited to briefings following the interim and annual results.
The content of presentations to shareholders and analysts at results
announcements and all Company announcements are contained on the Group
website, www.halma.com. HALMA
Corporate Governance continued
Halma p.l.c. 2005 37
The Group website also contains electronic versions of the latest Annual Report
and Accounts, Interim Reports, biographical information on key Directors and
Officers, share price information, and full subsidiary company contact details as
well as hotlinks to their own websites. The website also contains the facility to
request e-mail alerts relating to announcements made by the Group.
The Financial Calendar is set out on page 80.
Going concern After making enquiries, the Directors have a reasonable expectation that the
Company and the Group have 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 financial statements.
Internal control The Board of Directors has overall responsibility to the shareholders for the
Group’s system of internal control and responsibility for reviewing its effectiveness
has been delegated to the Audit Committee. Any system of internal control can
provide only reasonable but not absolute assurance against material misstatement
or loss.
Following publication by the Turnbull Committee of the guidance for directors on
internal control (“Internal Control: Guidance for Directors on the Combined
Code”), the Board confirms that there is an ongoing process for identifying,
evaluating and managing the significant risks faced by the Group, that this has
been in place for the year under review and up to the date of approval of the
Annual Report and Accounts. This process has been reviewed by the Board, and
the Group accords with the Turnbull guidance.
The Group’s external auditors, Deloitte & Touche LLP, have audited the financial
statements and have reviewed the internal financial control systems to the extent
they consider necessary to support their audit report.
The Board meets regularly throughout the year and has adopted a schedule of
matters which are required to be brought to it for decision. This procedure is
intended to ensure that the Directors maintain full and effective control over all
significant strategic, financial and organisational issues.
Group companies operate under a system of controls which includes but is not
limited to:
● a defined organisational structure with an appropriate delegation of authority
to operational management
● the identification and appraisal of risks both formally, through the annual
process of preparing business plans and budgets, and informally through close
monitoring of operations
● a comprehensive financial reporting system within which actual results are
compared with approved budgets and previous year’s figures on a monthly
basis and reviewed at both local and Group level
● an investment evaluation procedure to ensure an appropriate level of approval
for all capital expenditure
● self-certification by operating company management of compliance and
control issues
● a prescribed robust structure under which it is appropriate to adopt means of
electronic communication and to conduct e-commerce. HALMA
Corporate Governance continued
38 Halma p.l.c. 2005
The processes which the Board has applied in reviewing the effectiveness of the
Group’s system of internal control are summarised below.
● Operating companies carry out a detailed risk assessment each year and
identify mitigating actions in place or proposed for each significant risk. A risk
register is compiled from this information, against which action is monitored
through to resolution. In addition, Divisional Chief Executives carry out an
independent risk assessment for each operating company. A review of Group
risks is also conducted.
● Each month the board of each operating company meets, discusses and
reports on its operating performance, its opportunities, the risks facing it and
the resultant actions. The relevant Divisional Chief Executive chairs this
meeting. Divisional Chief Executives meet regularly with the Group Chief
Executive and Group Finance Director and report progress to the Executive
Board.
● A set of “warning signs” which are specifically relevant to every Halma
operating company has been developed and these are reported and monitored
each month with actions taken at senior level where required.
● The Group Chief Executive submits a report to each Halma p.l.c. Board
meeting which includes financial information, the main features of Group
operations and an analysis of the significant risks facing the Group at that
time.
● Cyclical internal control visits are carried out by senior finance staff resulting
in actions fed back to each company and followed up by Divisional Finance
Directors and Divisional Chief Executives with the feedback process having
been further strengthened during the year; visit reports are coded in terms of
risk with any significant control failings reported directly to the Audit
Committee and a summary of all such visits reported to the Audit Committee
regularly; senior finance staff also carry out financial reviews at each
operating company prior to publication of half year and year end figures.
● The Group Finance Director and Group Chief Executive report to the Audit
Committee on all aspects of Internal Control for its review. The Board receives
the minutes of the Audit Committee meetings and uses these as a basis for
its annual review of internal control.
As noted above, a programme of internal control visits is conducted. Following its
review of internal control activities in 2004, the Audit Committee established an
internal audit function for independent reporting of the outcome of these visits to
the Audit Committee.
Auditor independence The Audit Committee has responsibility for reviewing auditor independence and
objectivity annually. During 2003/04, the Committee set down the “Policy on
Auditor Independence and Services provided by the External Auditor”. This policy
states that the Group will only use the appointed external auditor for non-audit
services in cases where these services do not conflict with the auditor’s
independence. The policy also sets a fee level of £50,000 (£100,000 for taxation
compliance services) above which non-audit services are subject to a tendering
process. The above fee levels for non-audit services regarding the external
auditors are also subject to an annual cap equal to the audit fee. HALMA
Report on Remuneration 
Halma p.l.c. 2005 39
The following sections of the Report on Remuneration have been audited: the table
of Directors’ remuneration; pension benefits; Directors’ interests in shares.
Remuneration Committee The Remuneration Committee consists of the Chairman and the non-executive
Directors, the members being Mr R A Stone (Chairman of the Committee), Mr E G
Unwin, Mr A J Walker and Mr S R Pettit. The Board has re-affirmed its decision to
appoint Mr Unwin to the Committee as the Board believes that his Chairmanship of
the Board does not interfere with his independence as regards membership of the
Committee. No Director takes part in discussions concerning his own remuneration.
The Committee makes recommendations to the Board on the framework for
executive remuneration based on proposals formulated by the Group Chief
Executive and determines the terms of service and remuneration of executive
Directors and senior executives. The Committee’s Terms of Reference, which are
available from the Company Secretary on request, include:
● determining and agreeing with the Board the framework or broad policy for the
remuneration of the Group Chief Executive, the executive Directors, the
Company Secretary and such other members of the executive management as
it is designated to consider;
● approving the design of, and determining targets for, any performance related
pay plans operated by the Company and approval of the total annual payments
made under such plans;
● reviewing the design of all share incentive plans for approval by the Board and
shareholders. For any such plans, determining each year whether awards will
be made, and if so, the overall amount of such awards, the individual awards
to executive Directors and other senior executives and the performance targets
to be used;
● determining the policy for, and scope of, pension arrangements for each
executive Director and other senior executives.
The Committee also monitors the framework of remuneration for subsidiary chief
executives and directors.
The Committee has appointed Ernst & Young LLP to advise on certain aspects of
executive remuneration. This firm did not provide any other services to the
Company during the year.
Remuneration policy The policy on Directors’ Remuneration is to provide the remuneration packages
necessary to attract, retain and motivate Directors of the quality required to run the
Group successfully, manage the business of the Group and to align the interests of
the Directors with those of the shareholders. In determining such packages, the
Committee considers whether members of the executive management of the Group
are provided with appropriate incentives to encourage enhanced performance and
are, in a fair and responsible manner, rewarded for their individual contributions to
the success of the Group.
In accordance with rule 12.43A(c) of the Listing Rules of the Financial Services
Authority the Board presents its Report on Remuneration to the shareholders. The
Board confirms that when determining the remuneration policy for executive
Directors for 2004/05 full consideration was given to the Combined Code appended
to the Listing Rules of the Financial Services Authority. HALMA
Report on Remuneration continued
40 Halma p.l.c. 2005
Basic salary and benefits Basic salary levels for each individual are determined with reference to independent
surveys and other relevant data in order to relate remuneration levels to
comparable publicly quoted companies. The Group Chief Executive is responsible
for assessing the performance of each senior executive, the complexity of the
operations under their control and their opportunities for advancement within the
Group. He then formulates a remuneration proposal for the Committee’s approval.
Basic salary levels are set around the market median, and the Committee ensures
that a balance between fixed and variable remuneration is achieved.
Remuneration of subsidiary directors is set at competitive levels to reflect the size,
complexity and geographic locations of these businesses.
Share plans The Directors have long believed that share plans are an excellent way to align the
interests of senior management with those of shareholders and that share plans
provide excellent motivation. The Committee recognises the need to continually
assess and evaluate such incentives and therefore engaged Ernst & Young LLP to
assist them in developing the next phase of incentive arrangements to introduce
across the Group.
Included in the Notice of Meeting is a resolution for the approval of a Performance
Share Plan which would replace the existing share option plan for future share
incentives. The Plan contains provisions permitting share option grants, restricted
share awards and performance share awards, however, the Committee intends to
initially use the Plan to award performance shares only. Awards, which will be made
annually, will be determined by evaluating the financial performance of the
executive Directors’ and the Divisional Chief Executives’ operations and the
attainment of certain personal goals. The maximum award is fixed at 140% of
salary for executive Directors and 100% of salary for Divisional Chief Executives.
The expected level of award is 110% and 80% of salary respectively. Awards vest
after three years on a sliding scale subject to the Company’s relative TSR
performance against the Engineering and Machinery sector, combined with an
absolute Return on Total Invested Capital measure. Awards which do not vest on
the third anniversary of their award lapse. The Performance Share Plan will also be
extended to certain centrally based executives and subsidiary chief executives with
maximum awards of 40% of salary. More details of the Plan are contained in the
circular which has been sent to shareholders.
The 1990 and 1996 Share Option Plans and the 1999 Company Share Option Plan
all provide for the grant of two categories of option both of which are subject to
performance criteria. The exercise criteria for these three plans are noted in Note
19 on the Accounts. No further grants may be made from the first two of these
plans nor does the Company plan to make any further grants from the 1999 Plan
provided that the Performance Share Plan is approved by shareholders at the
Annual General Meeting in August 2005.
The granting of options was spread over the life of the plan. Executive Directors
received a triennial award of ‘A’ options, an annual award of ‘B’ options and the
possibility of further ‘A’ options under the Performance Related Bonus Scheme.
Performance related This scheme, which applies to executive Directors and Divisional Chief Executives,
bonus scheme is reviewed annually by the Remuneration Committee and approved by the Board.
Without approval of this scheme there is no alternative bonus arrangement for
Directors and Divisional Chief Executives. During the year the Remuneration
Committee carefully reconsidered existing bonus arrangements and determined
that incentive levels are appropriately set. HALMA
Report on Remuneration continued
Halma p.l.c. 2005 41
In the case of a Divisional Chief Executive a bonus would be earned if the profit of
the Division for which he is responsible exceeds a target calculated from the profits
of the three preceding financial years. The profits calculated for this purpose regard
each Division as a stand-alone group of companies charging it with the cost of
capital it utilises including the cost of acquisitions.
For the Group Chief Executive and Group Finance Director, bonuses are calculated
as above but based on the aggregated profit of the Divisions exceeding a target
calculated from the profits of the Divisions for the three preceding financial years.
A pre-determined percentage of the profit improvement is payable in cash, and, up
to and including 2004/05, a further percentage was granted in the form of Section
‘A’ share options. The percentage payable in cash commences at a low level for
modest growth increasing, in percentage terms, as performance improves. The
maximum cash bonus payable to any one Director or Divisional Chief Executive is
capped at 100% of his salary.
For 2005/06, executive Directors and Divisional Chief Executives may increase their
cash bonus, subject to the 100% of salary cap, by either 10% of salary if the Return
on Capital Employed of their Division (or aggregate thereof) exceeds 45%, or by
15% of salary if accompanied by absolute profit growth in their Division (or
aggregate thereof).
Subsidiary directors participate in bonus arrangements similar to those established
for senior executives.
Directors’ remuneration
Salaries 2005 2004
and fees Bonus Benefits Total Total
£000 £000 £000 £000 £000
D S Barber –––– 52
E G Unwin 112 – 12 124 124
S R O’Shea 604
+
166
+
40
+
810
+
429
A J Williams 170* 64 6 240 –
Lord McGowan –––– 8
K J Thompson 200 38 10 248 215
N Quinn 175 13 13 201 259
R A Stone 32 – – 32 32
K J Roy 150 73 14 237 155
A J Walker 32 – – 32 27
S R Pettit 29 – – 29 16
1,504 354 95 1,953 1,317
+to date of resignation, see below
*from date of appointment
The fees paid in relation to Mr E G Unwin were paid to Gunwin Limited.
Further to the succession planning process, Mr S R O’Shea resigned on 28 February
2005, and the figures above include £347,000 representing his contractual
entitlement to December 2005, his normal retirement date.
After inclusion of gains on the exercise of share options Mr S R O’Shea was the
highest paid director in the financial year. HALMA
Report on Remuneration continued
42 Halma p.l.c. 2005
Pension benefits The executive Directors participate in the appropriate section of the Halma Group
Pension Plan. This section is a funded, Inland Revenue approved, final salary
occupational pension scheme, which provides a pension equal to the lower of two-
thirds of final pensionable salary and the Inland Revenue maximum pension at normal
pension age (60). Pensionable salary is the greatest salary of the last three complete
tax years immediately before retirement or leaving service. Bonuses and other
fluctuating emoluments and benefits in kind are not pensionable. The scheme also
provides for life cover of three times pensionable salary, pensions in the event of early
retirement through ill health and dependants’ pensions of one-half of the member’s
prospective pension. Early retirement pensions, possible from age 50 with the consent
of the Company and the Trustees of the Halma Group Pension Plan, are subject to
actuarial reduction. Pensions in payment increase by 3% per annum for service up to
5 April 1997 and by price inflation thereafter subject to a maximum of 5%.
Details of the value of individual pension entitlements are shown below.
Accrued Accrued
Years of pension Increase pension
Age at service at 2004 in the year 2005
2.4.05 2.4.05 £000 £000 £000
S R O’Shea 59
+
29
+
165 18 188
+
A J Williams 37 10 17* 5 23
K J Thompson 45 17 51 6 59
N Quinn 55 17 60 9 71
K J Roy 54 12 33 5 39
+as at date of resignation
*as at date of appointment
The accrued pension shown is that which would be paid annually on retirement
based on service to the end of the year.
The increase in accrued pension during the year is the amount in excess of the
increase due to inflation.
Increase
Transfer in transferTransfer
value Directors’ value net of value
3.4.04 contributions contributions 2.4.05
£000 £000 £000 £000
S R O’Shea 2,722 24 528 3,274
+
A J Williams 103* 5 45 153
K J Thompson 444 13 98 555
N Quinn 812 13 181 1,006
K J Roy 439 12 106 557
+as at date of resignation
*as at date of appointment
The transfer values disclosed above do not represent a sum paid or payable to the
individual Director. Instead they represent a potential liability of the pension
scheme.
These values have been calculated on the basis of actuarial advice in accordance
with Actuarial Guidance Note GN11.
Further to Mr O’Shea’s resignation, the Company and Mr O’Shea each paid pension
contributions equating to those payable during the notice period up to Mr O’Shea’s
normal retirement date. The Company’s contributions amounted to £86,936. The
above table does not reflect this augmentation. HALMA
Report on Remuneration continued
Halma p.l.c. 2005 43
Total shareholder return The graph below shows the Company’s total shareholder return performance over
the five years to 2 April 2005 as compared to the FTSE 250 and Engineering &
Machinery indices which have been chosen as the Company is a constituent of both
of these indices. Over the period indicated, the Company’s total shareholder return
was 110% compared to 28% for the FTSE 250 and 32% for the FTSE Engineering
& Machinery sector.
At the commencement of the five-year period depicted in the graph, the
Halma p.l.c. ordinary share price was 95p and the total of dividends in respect of
the year ended 1 April 2000 was 3.993p per share. The Halma p.l.c. ordinary share
price at 2 April 2005 was 161p and the total of dividends in respect of the year then
ended was 6.5p per share.
Directors’ interests The beneficial interests of Directors and their families in the ordinary shares of
in shares the Company during the financial year were as follows:
Shares Shares
2.4.05 3.4.04
E G Unwin 38,250 38,250
A J Williams 19,493 –*
K J Thompson 60,857 49,749
N Quinn 43,586 33,788
R A Stone 5,000 5,000
K J Roy 744,587 744,587
A J Walker 5,500 35,714
S R Pettit 2,000 1,000
*as at date of appointment
There are no non-beneficial interests of Directors.
There were no changes in Directors' interests from 2 April 2005 to 21 June 2005.
40
60
80
100
120
140
160
180
200
220
240
2000 2001 2002 2003 2004 2005
HALMA – TOTAL RETURN INDEX
FTSE 250 – TOTAL RETURN INDEX
FTSE ENGINEERING & MACHINERY – TOTAL RETURN INDEX
Financial year end
Rebased total return index
Source: DATASTREAM HALMA
Report on Remuneration continued
44 Halma p.l.c. 2005
The movements in share options during the financial year were as follows:
As at As at Gains on
3.4.04 Granted Exercised 2.4.05 exercise (£)
S R O’Shea 1,409,960 522,099 (690,131) 1,241,928
+
198,834
A J Williams 159,470* 195,529 – 354,999 –
K J Thompson 738,156 150,726 (47,108) 841,774 17,886
N Quinn 864,080 148,370 (54,798) 957,652 18,155
K J Roy 461,114 50,216 (14,933) 496,397 7,331
+as at date of resignation
* as at date of appointment
There were no share option lapses during the financial year.
The gains are calculated by deducting the exercise price from the closing middle
market price at the date of exercise or the actual gross sales proceeds if
appropriate.
Options granted to Directors during the financial year were at an exercise price of
142.25p, and 157.92p in respect of 236,112 of Mr O’Shea’s options. The closing
middle market price of the Company’s ordinary shares on Friday, 1 April 2005, the
last trading day preceding the financial year end, was 161p per share and the range
during the year was 141.5p to 170p.
Details of Directors’ options outstanding at 2 April 2005 are set out in the table
below. The status of the options can be summarised as follows:
1 Exercisable at that date at a price less than 161p
2 Not yet exercisable, will only be exercisable when the performance criteria, set out
on note 19, have been met and have an exercise price per share of less than 161p.
3 Not yet exercisable, will only be exercisable when the performance criteria, set
out on note 19, have been met and have an exercise price per share of greater
than 161p.
Status of Weighted average
options Year of Number of exercise price
(see above) grant shares (p) per share
S R O’Shea 2 1997-00; 2002-05 1,141,128 140.30
3 2001 100,800 163.50
A J Williams 2 1997-00 2002-04 303,199 136.48
3 2001 51,800 163.50
K J Thompson 1 1995-98 213,098 122.54
2 1997-00 2002-04 580,276 129.59
3 2001 48,400 163.50
N Quinn 1 1995-99 242,832 119.87
2 1997-00 2002-04 617,920 128.11
3 2001 96,900 163.50
K J Roy 1 1995-99 154,632 122.22
2 1997-00 2002-04 287,065 134.30
3 2001 54,700 163.50
All options lapse if not exercised with 10 years from the date of grant.
The Company’s Register of Directors’ Interests, which is open to inspection at the
Registered Office, contains full details of Directors’ shareholdings and share options. HALMA
Report on Remuneration continued
Halma p.l.c. 2005 45
Service contracts It is the Company’s policy that executive Directors have contracts with an indefinite
term up to the normal retirement age of 60 and providing for a maximum of one
year’s notice. There are no exceptions to this policy. None of the contracts has pre-
determined compensation clauses in the event of early termination. The Board and
the Remuneration Committee confirm that these contracts are appropriate.
Chairman and Unless otherwise indicated, all non-executive Directors have specific three-year 
non-executive Directors terms of engagement which may be renewed for a further three years if both the
Director and the Board agree. The remuneration of the Chairman and the 
non-executive Directors is determined by the Board based on independent surveys
of fees paid to Chairmen and non-executive directors of similar companies. The
Chairman and the non-executive Directors receive a basic fee supplemented by
additional fees for membership and/or chairmanship of the Audit and Remuneration
Committees.
The contract in respect of Mr Unwin’s services provides for termination, by either
party, by giving not less than six months’ notice. Mr Unwin’s basic fee for 2004/05
was set at £108,000 per annum excluding Committee membership fees, and he
received a contribution of £1,000 per month towards his office costs.
The non-executive Directors do not have service contracts.
The Chairman’s and the non-executive Directors’ fees were last reviewed by the
Board of Directors in April 2005.
By Order of the Board
R A Stone  Chairman of the Remuneration Committee
Misbourne Court  Rectory Way  Amersham  Bucks HP7 0DE
21 June 2005 HALMA
46 Halma p.l.c. 2005
Responsibilities of the Directors
United Kingdom Company Law requires the Directors to prepare financial
statements for each financial year which give a true and fair view of the state
of affairs of the Company and the Group as at the end of the financial year
and of the profit or loss for that period.
The Directors have responsibility for ensuring that proper accounting records
are maintained which disclose with reasonable accuracy at any time the
financial position of the Company and the Group and which enable them to
ensure that the financial statements comply with the Companies Act 1985.
The Directors also have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities and are responsible for the system of
internal control.
The Directors consider that, in preparing the financial statements on pages 48
to 73 and the disclosures on pages 39 to 45 relating to the remuneration of
the Directors, appropriate accounting policies have been used, which have
been consistently applied and supported by reasonable and prudent
judgements and estimates, and that all accounting standards which they
consider to be applicable have been followed. HALMA Independent Auditors’ Report
To the Members of Halma p.l.c.
We have audited the financial statements of Halma p.l.c. for the 52 weeks to 2 April 2005 which comprise
the Consolidated Profit and Loss Account, the Balance Sheets, the Consolidated Cash Flow Statement, the
Statement of Total Recognised Gains and Losses and the reconciliation of Movements in Equity
Shareholders’ Funds together with the statement of Accounting Policies and the related Notes numbered
1 to 26. These financial statements have been prepared under the accounting policies set out therein. We
have also audited the information in the part of the Directors’ Remuneration Report that is described as
having been audited.
This report is made solely to the Company’s members, as a body, in accordance with section 235 of the
Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s
members on those matters we are required to state to them in an auditors’ report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company and the Company’s members as a body for our audit work, for this report, or for the
opinions we have formed.
Respective responsibilities of Directors and Auditors
As described in the statement of Directors’ Responsibilities, the Company’s Directors are responsible for the
preparation of the financial statements in accordance with applicable United Kingdom law and Accounting
Standards. They are also responsible for the preparation of the other information contained in the Annual
Report including the Directors’ Remuneration Report. Our responsibility is to audit the financial statements
and the part of the Directors’ Remuneration Report described as having been audited in accordance with
relevant United Kingdom legal and regulatory requirements and auditing standards.
We report to you our opinion as to whether the financial statements give a true and fair view and whether
the financial statements and the part of the Directors’ Remuneration Report described as having been
audited have been properly prepared in accordance with the Companies Act 1985. We also report to you
if, in our opinion, the Directors’ Report is not consistent with the financial statements, if the Company has
not kept proper accounting records, if we have not received all the information and explanations we
require for our audit, or if information specified by law regarding Directors’ remuneration and transactions
with the Company and other members of the Group is not disclosed.
We review whether the Corporate Governance statement reflects the Company’s compliance with the nine
provisions of the July 2003 FRC Combined Code specified for our review by the Listing Rules of the
Financial Services Authority, and we report if it does not. We are not required to consider whether the
Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness
of the Group’s corporate governance procedures or its risk and control procedures.
We read the Directors’ Report and the other information contained in the Annual Report for the above
period as described in the contents section including the unaudited part of the Directors’ Remuneration
Report and consider the implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing
Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements and the part of the Directors’ Remuneration Report described as
having been audited. It also includes an assessment of the significant estimates and judgements made by
the Directors in the preparation of the financial statements and of whether the accounting policies are
appropriate to the circumstances of the Company, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial statements and the part of the Directors’ Remuneration Report described as having been audited
are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our
opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements
and the part of the Directors’ Remuneration Report described as having been audited.
Opinion
In our opinion:
● the financial statements give a true and fair view of the state of affairs of the Company and the
Group as at 2 April 2005 and of the profit of the Group for the 52 week period then ended; and
● the financial statements and part of the Directors’ Remuneration Report described as having been
audited have been properly prepared in accordance with the Companies Act 1985.
Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
Reading
21 June 2005
Neither an audit nor a review provides assurance on the maintenance and integrity of the website, including controls used
to achieve this, and in particular whether any changes may have occurred to the financial information since first published.
These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from
legislation in other jurisdictions.
Halma p.l.c. 2005 47 HALMA
48 Halma p.l.c. 2005
Consolidated Profit and Loss Account £000
52 weeks to 2 April 2005 53 weeks to 3 April 2004
Before Before
goodwill Goodwill goodwill Goodwill
amortisation amortisation amortisation amortisation
and and and and
exceptional exceptional exceptional exceptional
items items Total items items Total
Turnover 1
Continuing operations 277,505 – 277,505 279,611 – 279,611
Acquisitions 21,614 – 21,614 –––
Ongoing operations 299,119 – 299,119 279,611 – 279,611
Discontinued operations – – – 13,029 – 13,029
299,119 – 299,119 292,640 – 292,640
Operating profit 3
Continuing operations 45,774 (4,280) 41,494 50,422 (4,209) 46,213
Acquisitions 4,570 (1,211) 3,359 –––
Ongoing operations 50,344 (5,491) 44,853 50,422 (4,209) 46,213
Discontinued operations – – – (370) (11) (381)
50,344 (5,491) 44,853 50,052 (4,220) 45,832
Exceptional items 4
Loss on sale of businesses – – – – (3,394) (3,394)
Associated goodwill – – – – (5,755) (5,755)
Loss on disposal of
discontinued operations – – – – (9,149) (9,149)
Profit on ordinary
activities before interest
and taxation 50,344 (5,491) 44,853 50,052 (13,369) 36,683
Interest 7 45 – 45 232 – 232
Profit on ordinary
activities before taxation 1 50,389 (5,491) 44,898 50,284 (13,369) 36,915
Taxation 8 (15,699) 159 (15,540) (15,727) 1,134 (14,593)
Profit for the financial
year 34,690 (5,332) 29,358 34,557 (12,235) 22,322
Ordinary dividends 9 (24,015) (22,725)
Profit/(loss) transferred
to/(from) reserves 10 5,343 (403)
Earnings per ordinary
share before goodwill
amortisation and
exceptional items 2 9.42p 9.44p
Earnings per ordinary
share 2 7.97p 6.09p
Diluted earnings per
ordinary share 2 7.96p 6.09p
The notes on pages 53 to 73 form part of these Accounts.
Notes Consolidated Balance Sheet £000
At 2 April At 3 April
2005 2004
Fixed assets
Intangible assets 11 94,848 71,425
Tangible assets 12 48,896 47,139
143,744 118,564
Current assets
Stocks 13 35,502 31,208
Debtors 14 69,062 67,080
Short-term deposits 35,581 33,898
Cash at bank and in hand 9,767 14,584
149,912 146,770
Creditors: amounts falling due within one year
Borrowings 15 33,344 26,934
Creditors 16 53,399 44,394
Current taxation 5,137 5,563
Dividends payable 14,457 13,762
106,337 90,653
Net current assets 43,575 56,117
Total assets less current liabilities 187,319 174,681
Creditors: amounts falling due after one year 17 5,535 1,254
Provisions for liabilities and charges 18 6,186 6,067
175,598 167,360
Capital and reserves
Called up share capital 19 36,880 36,677
Share premium account 10 10,111 7,768
Capital redemption reserve 10 185 185
Profit and loss account 10 128,422 122,730
Equity shareholders’ funds 175,598 167,360
Approved by the Board of Directors on 21 June 2005
E G Unwin K J Thompson Directors
HALMA
Halma p.l.c. 2005 49
Notes HALMA
50 Halma p.l.c. 2005
Statement of Total Recognised Gains and Losses £000
2005 2004
52 weeks 53 weeks
Profit for the financial year 29,358 22,322
Other recognised gains and losses
Exchange adjustments 349 (2,799)
Recognised gains and losses relating to the year 29,707 19,523
Movements in Equity Shareholders’ Funds
2005 2004
52 weeks 53 weeks
Profit for the financial year 29,358 22,322
Dividends (24,015) (22,725)
Profit/(loss) transferred to/(from) reserves 10 5,343 (403)
Total other recognised gains and losses 349 (2,799)
Net proceeds of shares issued 2,546 1,521
Goodwill transferred to the Consolidated Profit and
Loss Account in respect of businesses sold – 5,595
Increase in equity shareholders’ funds 8,238 3,914
Equity shareholders’ funds brought forward 167,360 163,446
Equity shareholders’ funds carried forward 175,598 167,360
Notes Consolidated Cash Flow Statement £000
2005 2004
52 weeks 53 weeks
Cash flow from operating activities 23 60,316 59,782
Return on investments and servicing of finance
Interest received 1,086 952
Interest paid (889) (731)
197 221
Taxation
Current taxation paid (14,494) (14,093)
Capital expenditure
Purchase of tangible fixed assets (9,419) (9,686)
Sale of tangible fixed assets 418 1,004
(9,001) (8,682)
Acquisitions and disposals
Acquisition of businesses 23 (25,026) (2,947)
Cash acquired 1,490 –
Disposal of businesses (1,681) 4,567
(25,217) 1,620
Equity dividends paid (23,320) (21,855)
(11,519) 16,993
Management of liquid resources
Increase in short-term deposits 23 (1,663) (19,662)
Financing
Issue of ordinary share capital 2,546 1,521
Increase in loans 5,764 2,683
8,310 4,204
(Decrease)/increase in cash 23 (4,872) 1,535
HALMA
Halma p.l.c. 2005 51
Notes HALMA
52 Halma p.l.c. 2005
Halma p.l.c. Balance Sheet £000
At 2 April At 3 April
2005 2004
Fixed assets
Tangible assets 12 4,191 3,136
Investments 21 48,967 40,959
53,158 44,095
Current assets
Debtors 14 133,867 124,042
Short-term deposits 22,950 32,410
Cash at bank and in hand 90 –
156,907 156,452
Creditors: amounts falling due within one year
Borrowings 15 33,104 26,758
Creditors 16 24,074 21,376
Current taxation 849 1,138
Dividends payable 14,457 13,762
72,484 63,034
Net current assets 84,423 93,418
Total assets less current liabilities 137,581 137,513
Creditors: amounts falling due after one year 17 1,266 1,157
Provisions for liabilities and charges 18 – 294
136,315 136,062
Capital and reserves
Called up share capital 19 36,880 36,677
Share premium account 10 10,111 7,768
Capital redemption reserve 10 185 185
Profit and loss account 22 89,139 91,432
Equity shareholders’ funds 136,315 136,062
Approved by the Board of Directors on 21 June 2005
E G Unwin K J Thompson Directors
Notes HALMA
Halma p.l.c. 2005 53
Basis of accounting
The accounts set out on pages 48 to 73 are prepared under the historical cost
convention and comply with applicable United Kingdom Accounting Standards. The
principal Group accounting policies have been applied consistently throughout the
current and preceding year and are described below. The accounts also reflect the
transitional requirements of FRS 17 (Retirement Benefits).
Basis of consolidation
The consolidated accounts include the accounts of Halma p.l.c. and its subsidiary
companies made up to 2 April 2005. The results of subsidiary companies acquired
are included from the month of acquisition.
Acquisitions
Fair values are ascribed to tangible assets and liabilities of subsidiary companies
and businesses at the dates of acquisition and the resultant goodwill is capitalised
as an intangible asset. Prior to 28 March 1998 any goodwill surplus or deficiency
was taken to reserves as a matter of accounting policy.
Intangible assets
Goodwill arising on acquisitions after 28 March 1998 is capitalised and is classified
as an intangible asset in the Consolidated Balance Sheet. Goodwill arising on
acquisitions prior to that date was written off to reserves, and would be included
in the determination of profit or loss arising from the sale or closure of the business
to which it relates. Capitalised goodwill is amortised through the Consolidated
Profit and Loss Account on a straight line basis over its estimated economic life of
20 years.
Foreign currencies
Transactions in foreign currency are recorded at the rate of exchange at the date
of the transaction unless matched by a forward currency contract. Monetary assets
and liabilities denominated in foreign currencies at the balance sheet date are
reported at the rates prevailing at that date, or, where appropriate, at the forward
currency contract rate. Any gain or loss arising from subsequent exchange rate
movements is included as an exchange gain or loss in the Consolidated Profit and
Loss Account.
Net assets of overseas subsidiary companies are expressed in Sterling at the rates
of exchange ruling at the end of the financial year, and trading results and cash
flows at the average rates of exchange for the financial year. Exchange gains or
losses arising on these translations, together with those on foreign currency
borrowings which are taken out to hedge the Group’s overseas investments, are
taken to the Statement of Total Recognised Gains and Losses.
Turnover
Turnover represents sales, less returns, by subsidiary companies to external
customers excluding value added tax. Transactions are recorded as sales when the
delivery of products or performance of services takes place in accordance with the
contracted terms of sale.
Investments
Investments are stated at cost less provision for impairment.
Accounting Policies  HALMA
54 Halma p.l.c. 2005
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less provisions for impairment and
depreciation which, with the exception of freehold land which is not depreciated,
is provided on all tangible fixed assets on the straight line method, each item being
written off over its estimated life. The principal annual rates used for this purpose
are:
Freehold buildings 2%
Leasehold properties –
more than 50 years unexpired 2%
less than 50 years unexpired Period of lease
Plant, machinery and equipment 8% to 20%
Motor vehicles 20%
Short-life tooling 33
1
⁄ 3%
Leases
The costs of operating leases of property and other assets are charged as incurred.
Pensions
The Group makes contributions to various pension schemes, covering the majority
of its employees, which are charged against profits on a systematic and rational
basis over the period during which benefit is derived from the service. Any
differences between this charge and amounts payable to the schemes are recorded
as provisions or prepayments as appropriate. Actuarial valuations of defined
benefit schemes are performed at least triennially.
Research and development
Expenditure on research and development is written off in the financial year in
which it is incurred.
Stocks
Stocks and work in progress of subsidiary companies are included at the lower of
cost and net realisable value. Cost includes the appropriate proportion of
production and other overheads considered by the Directors to be attributable to
bringing the stock to its location and condition at the year end.
Deferred taxation
The Group provides for taxation deferred because of timing differences between
profits as computed for taxation purposes and profits as stated in the accounts, on
an undiscounted basis. Deferred taxation is measured at the average tax rates that
are expected to apply in the periods in which the timing differences are expected
to reverse, based on tax rates and laws that have been enacted or substantially
enacted by the balance sheet date. Deferred tax assets are only recognised if
recovery is reasonably certain.
The principal timing differences in the Group accounts arise on the excess of tax
allowances on tangible fixed assets over the corresponding depreciation charged
in the accounts; and on goodwill arising in jurisdictions where it is eligible for
deduction against tax, where it has been charged against reserves in the Group
accounts but would be accounted for through the Consolidated Profit and Loss
Account on a sale or closure of the business to which it relates.
Accounting Policies continued HALMA
Halma p.l.c. 2005 55
Notes on the Accounts £000
1 Segmental analysis
Geographical analysis
By destination By origin
2005 2004 2005 2004
Turnover
United Kingdom 80,374 77,534 159,756 159,462
United States of America 90,477 84,047 102,564 87,958
Europe excluding UK 74,772 70,730 43,112 43,690
Far East and Australasia 31,648 28,054 14,536 14,133
Africa, Near and Middle East 10,392 9,944 – –
Other 11,456 9,302 3,688 2,853
Inter-segmental sales – – (24,537) (28,485)
Turnover from ongoing operations 299,119 279,611 299,119 279,611
Discontinued operations – 13,029 – 13,029
Group turnover 299,119 292,640 299,119 292,640
Profit before taxation
United Kingdom 26,425 26,601
United States of America 13,414 13,617
Europe excluding UK 7,039 7,111
Other countries 3,466 3,093
Ongoing operations 50,344 50,422
Discontinued operations – (370)
Segmental profit 50,344 50,052
Goodwill amortisation and exceptional items (5,491) (13,369)
Interest 45 232
Profit on ordinary activities before taxation 44,898 36,915
Net assets
United Kingdom 41,859 41,348
United States of America 10,113 16,873
Europe excluding UK 12,033 11,494
Other countries 4,741 4,672
68,746 74,387
Net cash 12,004 21,548
Net tangible assets 80,750 95,935
Intangible assets 94,848 71,425
Equity shareholders’ funds 175,598 167,360 HALMA
56 Halma p.l.c. 2005
1 Segmental analysis continued
Sector analysis
2005 2004
Turnover
Fire and Gas 75,539 74,998
Water 32,466 34,485
Elevator and Door Safety 62,529 65,070
Process Safety 36,214 36,030
Resistors 27,699 27,195
Optics and Specialist 65,442 42,824
Inter-segmental sales (770) (991)
Turnover from ongoing operations 299,119 279,611
Discontinued operations – 13,029
Group turnover 299,119 292,640
Profit before taxation
Fire and Gas 16,713 16,621
Water 2,616 5,767
Elevator and Door Safety 11,510 12,102
Process Safety 6,503 6,579
Resistors 1,419 2,218
Optics and Specialist including holding companies 11,583 7,135
Ongoing operations 50,344 50,422
Discontinued operations – (370)
Segmental profit 50,344 50,052
Goodwill amortisation and exceptional items (5,491) (13,369)
Interest 45 232
Profit on ordinary activities before taxation 44,898 36,915
Net assets
Fire and Gas 21,097 19,578
Water 11,424 14,279
Elevator and Door Safety 16,407 16,130
Process Safety 10,306 10,504
Resistors 7,780 7,347
Optics and Specialist including holding companies 1,732 6,549
68,746 74,387
Net cash 12,004 21,548
Net tangible assets 80,750 95,935
Intangible assets 94,848 71,425
Equity shareholders’ funds 175,598 167,360
Included within the net tangible assets of the sector described as Optics and Specialist including holding
companies are holding company net assets and all of the Group’s land and buildings, dividends payable,
taxation (including provisions for deferred taxation) and deferred purchase consideration which in 2005
amounted to a net liability of £15,650,000 (2004: net liability of £6,513,000).
Notes on the Accounts continued £000 Notes on the Accounts continued £000
2 Earnings per ordinary share
Earnings per ordinary share on a statutory basis are calculated by dividing the profit for the
financial year of £29,358,000 (2004: £22,322,000) by the weighted average of 368,181,035
shares in issue during the year (2004: 366,237,803).
Diluted earnings per ordinary share are calculated using the same earnings as for earnings
per ordinary share, divided by 368,697,347 shares (2004: 366,686,599) which includes
dilutive potential ordinary shares of 516,312 (2004: 488,796). The Company’s dilutive
potential ordinary shares are calculated from those exercisable share options where the
exercise price is less than the average price of the Company’s ordinary shares during the
year.
Earnings per ordinary share before goodwill amortisation and exceptional items as presented
on the Consolidated Profit and Loss Account, represents a more consistent measure of
underlying performance. A reconciliation of earnings and the effect on per share figures is
presented below:
Per ordinary share
2005 2004
2005 2004 p p
Earnings 29,358 22,322 7.97 6.09
Add back: goodwill amortisation (after tax) 5,332 3,880 1.45 1.07
exceptional items (after tax) – 8,355 – 2.28
Earnings before goodwill amortisation
and exceptional items 34,690 34,557 9.42 9.44
3 Operating profit
2005 2004
Operating profit comprises:
Turnover 299,119 292,640
Cost of sales (208,057) (205,118)
Gross profit 91,062 87,522
Distribution costs (7,392) (7,545)
Administrative expenses (including goodwill amortisation) (39,086) (34,320)
Other operating income 269 175
44,853 45,832
Included in the 2005 figures above are the folllowing amounts relating to acquired
operations: cost of sales £14,285,000; gross profit £7,329,000; distribution costs £217,000;
administrative expenses £3,901,000 (including goodwill amortisation £1,211,000); other
operating income £148,000.
Included in the 2004 figures above are the following amounts related to discontinued
operations: cost of sales £11,679,000;  gross profit £1,350,000; distribution costs £416,000;
administrative expenses £1,315,000 (including goodwill amortisation £11,000).
HALMA
Halma p.l.c. 2005 57 Notes on the Accounts continued £000
3 Operating profit continued
2005 2004
Operating profit is arrived at after charging:
Depreciation 7,901 7,879
Goodwill amortisation 5,491 4,220
Research and development 11,763 11,242
Auditors’ remuneration: Audit services 455 463
Non-audit services 58 44
Operating lease rents – property 3,261 3,138
other 446 300
Auditors’ remuneration includes £68,000 (2004: £65,000) in respect of the Company. A
further £193,000 (2004: £nil) of non-audit fees paid to the auditors in respect of acquisition
advice have been included in cost of investments.
4 Exceptional items
Exceptional items arose in 2004 on the sale of three non-core businesses.
5 Employee information
2005 2004
Number Number
The average number of persons employed by the Group during the year was:
United Kingdom 1,560 1,788
Overseas 1,442 1,137
3,002 2,925
Group employee costs comprise: £000 £000
Wages and salaries 68,496 68,207
Social security costs 10,684 10,137
Other pension costs (note 26) 5,115 5,095
84,295 83,439
6 Directors’ remuneration
Details of Directors’ remuneration are set out on pages 39 to 45 within the Report on
Remuneration and form part of these financial statements.
7 Interest
2005 2004
Interest receivable on short-term deposits 1,080 995
Interest payable on bank loans and overdrafts (780) (700)
Other interest payable (255) (63)
45 232
HALMA
58 Halma p.l.c. 2005 Notes on the Accounts continued £000
8 Taxation
2005 2004
Current tax
UK corporation tax at 30% (2004: 30%) 7,615 7,573
Overseas taxation 6,971 7,434
Adjustments in respect of prior years (28) (383)
Total current tax 14,558 14,624
Deferred tax
Origination and reversal of timing differences 963 (49)
Adjustments in respect of prior years 19 18
Total deferred tax charge/(credit) 982 (31)
15,540 14,593
Reconciliation of effective tax rate Before goodwill amortisation After goodwill amortisation
on ordinary activities: and exceptional items and exceptional items
2005 2004 2005 2004
% % % %
UK corporation tax rate 30.0 30.0 30.0 30.0
Higher tax rates on overseas profits 2.2 2.7 2.5 3.6
Adjustments in respect of prior years (0.1) (0.8) (0.1) (1.0)
Other timing differences (2.4) (2.0) – 7.0
Current tax 29.7 29.9 32.4 39.6
Deferred tax 1.5 1.4 2.2 (0.1)
Effective tax rate 31.2 31.3 34.6 39.5
9 Ordinary dividends
2005 2004
p p 2005 2004
Interim paid 2.58 2.44 9,510 8,945
Final proposed 3.92 3.75 14,457 13,762
Balance of final dividend – – 48 18
6.50 6.19 24,015 22,725
The accrual for the final dividend takes into account any shares issued since year end.
10 Reserves
Share Capital Profit
premium redemption and loss
account reserve account
At 3 April 2004 7,768 185 122,730
Profit transferred to reserves – – 5,343
Share options exercised 2,343 – –
Exchange adjustments – – 349
At 2 April 2005 10,111 185 128,422
HALMA
Halma p.l.c. 2005 59 Notes on the Accounts continued £000
11 Fixed assets – intangible assets
Goodwill
Cost
At 3 April 2004 84,602
Additions (note 20) 28,914
At 2 April 2005 113,516
Amortisation
At 3 April 2004 13,177
Charge for the year 5,491
At 2 April 2005 18,668
Net book amounts
At 2 April 2005 94,848
At 3 April 2004 71,425
12 Fixed assets – tangible assets
Land and buildings Plant
Freehold Long Short equipment
Group properties leases leases & vehicles Total
Cost
At 3 April 2004 26,406 1,448 2,593 64,372 94,819
Assets of businesses acquired – 171 – 2,478 2,649
Additions at cost 1,291 65 164 7,899 9,419
Disposals – – – (5,172) (5,172)
Exchange adjustments (16) – (16) (314) (346)
At 2 April 2005 27,681 1,684 2,741 69,263 101,369
Accumulated depreciation
At 3 April 2004 4,626 350 1,452 41,252 47,680
Assets of businesses acquired –47– 1,797 1,844
Charge for the year 416 112 233 7,140 7,901
Disposals – – – (4,775) (4,775)
Exchange adjustments (4) – (11) (162) (177)
At 2 April 2005 5,038 509 1,674 45,252 52,473
Net book amounts
At 2 April 2005 22,643 1,175 1,067 24,011 48,896
At 3 April 2004 21,780 1,098 1,141 23,120 47,139
HALMA
60 Halma p.l.c. 2005 Notes on the Accounts continued £000
12 Fixed assets – tangible assets continued
Land and buildings Plant
Freehold Short equipment
Halma p.l.c. properties leases & vehicles Total
Cost
At 3 April 2004 3,043 167 1,184 4,394
Additions at cost 1,174 – 152 1,326
Disposals – – (82) (82)
At 2 April 2005 4,217 167 1,254 5,638
Accumulated depreciation
At 3 April 2004 543 57 658 1,258
Charge for the year 54 11 178 243
Disposals – – (54) (54)
At 2 April 2005 597 68 782 1,447
Net book amounts
At 2 April 2005 3,620 99 472 4,191
At 3 April 2004 2,500 110 526 3,136
13 Stocks
2005 2004
Raw materials and consumables 19,086 15,337
Work in progress 5,474 6,000
Finished goods and goods for resale 10,942 9,871
35,502 31,208
14 Debtors
Group Halma p.l.c.
2005 2004 2005 2004
Falling due within one year:
Trade debtors 63,500 61,772 – –
Amounts due from Group companies – – 132,494 122,857
Deferred taxation (note 18) – – 349 –
Other debtors 1,508 1,705 71 89
Prepayments and accrued income 4,054 3,603 953 1,096
69,062 67,080 133,867 124,042
15 Borrowings
Group Halma p.l.c.
2005 2004 2005 2004
Falling due within one year:
Unsecured bank loans and overdrafts 33,344 26,934 33,104 26,758
HALMA
Halma p.l.c. 2005 61 Notes on the Accounts continued £000
16 Creditors
Group Halma p.l.c.
2005 2004 2005 2004
Trade creditors 28,743 26,971 410 428
Amounts owing to Group companies – – 19,663 15,163
Other taxation and social security 3,563 3,574 1,206 1,208
Other creditors 9,962 4,760 1,186 2,764
Accruals and deferred income 11,131 9,089 1,609 1,813
53,399 44,394 24,074 21,376
17 Creditors: amounts falling due after one year
Group Halma p.l.c.
2005 2004 2005 2004
Deferred purchase consideration 4,028 159 25 62
Other creditors 1,507 1,095 1,241 1,095
5,535 1,254 1,266 1,157
18 Provisions for liabilities and charges
Group Halma p.l.c.
2005 2004 2005 2004
Deferred taxation 6,186 6,067 – 294
Analysis of Group deferred tax provided is as follows:
2005 2004
Accelerated capital allowances 3,216 3,098
Short-term timing differences (3,176) (2,468)
Goodwill timing differences 6,146 5,437
Net deferred tax liability 6,186 6,067
Movement in deferred tax liability/(asset):
Group Halma p.l.c.
At 3 April 2004 6,067 294
Charge/(credit) to profit and loss account:
UK 202 (643)
Overseas 780 –
Acquired (note 20) (1,049) –
Exchange adjustments 186 –
At 2 April 2005 6,186 (349)
No provision is made for taxation which might become payable if profits retained by overseas
subsidiary companies are distributed as dividends. There are no plans to pay such dividends.
The deferred tax asset in the books of the Company represents short-term timing
differences.
HALMA
62 Halma p.l.c. 2005 Notes on the Accounts continued £000
19 Called up share capital
Authorised Issued and fully paid
2005 2004 2005 2004
Ordinary shares of 10p each 43,656 43,656 36,880 36,677
The number of ordinary shares in issue at 2 April 2005 was 368,800,919 (2004:
366,773,945).
Changes during the year in the issued ordinary share capital were as follows:
Issued and fully paid
At 3 April 2004 36,677
Share options exercised 203
At 2 April 2005 36,880
The total consideration received in respect of share options exercised amounted to
£2,546,000.
Options in respect of 380,061 ordinary shares remained outstanding at 2 April 2005 under
the share option plan approved by shareholders in 1990. Subject to the performance
restrictions on the exercise of options granted under this plan, options are exercisable for the
periods and at the prices set out below:
Number of shares Option price Five years from Seven years from
98,666 111.75p – 113.25p 1998
31,999 138.01p – 144.76p 1999
60,600 122.5p – 126.5p 2000
11,400 101.5p 2001
45,400 120p – 129p 2002
127,196 111.75p – 113.25p 2000
4,800 120p 2004
Options in respect of 2,909,529 ordinary shares remained outstanding at 2 April 2005 under
the share option plan approved by shareholders in 1996. Subject to the performance
restrictions on the exercise of options granted under this plan, options are exercisable for the
periods and at the prices set out below:
Number of shares Option price Five years from Seven years from
96,531 138p – 144.75p 1999
451,000 122.5p – 138.5p 2000
243,100 101.5p – 123.5p 2001
464,900 120p – 136p 2002
214,398 138p – 144.75p 2001
354,600 122.5p – 137p 2002
358,200 101.5p – 123.5p 2003
726,800 120p – 136p 2004
HALMA
Halma p.l.c. 2005 63 Notes on the Accounts continued £000
19 Called up share capital continued
Options in respect of 13,690,749 ordinary shares remained outstanding at 2 April 2005 under
the share option plan approved by shareholders in 1999. Subject to the performance
restrictions on the exercise of options granted under this plan, options are exercisable for the
periods and at the prices set out below:
Number of shares Option price Five years from Seven years from
1,733,400 111p 2003
970,300 163.5p 2004
1,733,331 132p – 144.33p 2005
2,378,603 134p 2006
2,078,237 142.25p 2007
256,692 157.92p 2008
888,300 111p 2005
665,600 163.5p 2006
924,081 144.33p 2007
978,828 134p 2008
1,083,377 142.25p 2009
The 1990, 1996 and 1999 Share Option Plans provide for the grant of two categories of
option, both of which are subject to performance criteria.
Section A options are exercisable after three years if the Company’s earnings per share
growth exceeds, for the 1990 Plan, the growth in the Retail Price Index, for the 1996 Plan,
the growth in the Retail Price Index plus 2% per annum and, for the 1999 Plan, the growth
in the Retail Price Index plus 3% per annum. Section B options are exercisable after five
years if the Company’s earnings per share growth exceeds the earnings per share of, for the
1990 and 1996 Plans, all but the top quarter of companies which were within the FTSE 100
at the date of grant of any option and for the 1999 Plan, all but the top quarter of companies
which were within a peer group at the date of grant of any option.
All options lapse if not exercised within 10 years from the date of grant.
HALMA
64 Halma p.l.c. 2005 Notes on the Accounts continued £000
20 Goodwill arising on acquisition
Book Fair value
value adjustments Total
Tangible fixed assets 848 (43) 805
Current assets:
Stocks 4,886 (1,321) 3,565
Debtors 3,803 (104) 3,699
Deferred tax 360 689 1,049
Cash 1,490 – 1,490
Total assets 11,387 (779) 10,608
Current liabilities
Bank loans (1,125) – (1,125)
Creditors (2,515) (630) (3,145)
Total liabilities (3,640) (630) (4,270)
Net assets of businesses acquired 7,747 (1,409) 6,338
Deferred purchase consideration (12,045)
Cash consideration, including costs (22,815)
Total consideration (34,860)
Goodwill arising on current year acquisitions (28,522)
Adjustments relating to prior years’ acquisitions (392)
Goodwill arising on acquisition (28,914)
The goodwill on current year acquisitions arose on the purchase, in May 2004, of the whole
of the issued share capital of Diba Industries, Inc. (‘Diba’) and in June 2004 of the whole of
the issued share capital of Ocean Optics, Inc. (‘Ocean Optics’). In the year to February 2004
Diba made profits before taxation, adjusted for non-recurring items, of $1.8 million on sales
of $12 million. Ocean Optics generated profits before taxation of $4.6 million on sales of 
$25 million in the year to December 2003. Total purchase consideration, including deferred
amounts, was £26,512,000 for Ocean Optics with the balance relating to Diba.
Adjustments were made to the book value of the net assets acquired to reflect their fair value
to the Group. Acquired stocks were valued at the lower of cost and net realisable value
adopting Group bases and any liabilities for warranties relating to past trading were
recognised. Other previously unrecognised assets and liabilities at acquisition were included
and accounting policies were aligned with the Group where appropriate.
Deferred purchase consideration is payable in cash to the vendors of Ocean Optics and has
been provided at the estimated amount payable. The amount ultimately payable is
dependent upon the profit growth of Ocean Optics between April 2004 and March 2006.
The adjustments to goodwill relating to prior years’ acquisitions comprise revisions to the
estimate of deferred purchase consideration payable.
Cumulative goodwill written off against reserves on acquisitions prior to 28 March 1998, net
of that attributable to closures and sales, amounts to £70,931,000 (2004: £70,931,000).
HALMA
Halma p.l.c. 2005 65 Notes on the Accounts continued £000
21 Investments
Shares in Group companies 2005 2004
At cost less amounts written off at beginning of year 40,959 42,760
Additions 8,090 –
Amounts written off in financial year (82) –
Disposals – (1,801)
At cost less amounts written off at end of year 48,967 40,959
The principal movement in the year relates to an increase in the Company’s investment in a
subsidiary undertaking.
Details of principal subsidiary companies are set out on pages 78 and 79. All these
subsidiaries are wholly owned and, apart from the following, are subsidiaries of Halma p.l.c.
and are incorporated in Great Britain where they principally operate.
Name of company Country of incorporation
Fortress Systems Pty. Limited Australia
*IPC Resistors Inc. Canada
*HF Sécurité S.A.S. France
*Hydreka S.A.S. France
*S.E.R.V. Trayvou Interverrouillage S.A.S. France
*Apollo Gesellschaft für Meldetechnologie mbH Germany
*Berson Milieutechniek B.V. The Netherlands
*Bureau D’Electronique Appliquée S.A. Belgium
*TL Jones Limited New Zealand
*E-Motive Display Pte Limited Singapore
*Halma Holdings Inc. USA
*Air Products and Controls Inc. USA
*Aquionics Inc. USA
*B.E.A. Inc. USA
*Bio-Chem Valve Inc. USA
*Diba Industries, Inc. USA
*Electronic Micro Systems Inc. USA
*IPC Power Resistors Inc. USA
*Janus Elevator Products Inc. USA
*Marathon Sensors Inc. USA
*Monitor Controls Inc. USA
*Mosebach Manufacturing Company USA
*Ocean Optics, Inc. USA
*Oklahoma Safety Equipment Co. Inc. USA
*Perma Pure LLC USA
*Post Glover Resistors Inc. USA
*Volk Optical Inc. USA
*Interests held by subsidiary companies.
HALMA
66 Halma p.l.c. 2005 Notes on the Accounts continued £000
22 Profit and loss account of Halma p.l.c.
As permitted by Section 230 of the Companies Act 1985, the Profit and Loss Account of
Halma p.l.c. is not presented as part of these accounts. The movements on that account
during the year were:
2005 2004
At beginning of year 91,432 77,733
Profit after taxation 20,763 34,094
Dividends (24,015) (22,725)
Exchange adjustments 959 2,330
At end of year 89,139 91,432
23 Consolidated cash flow statement
2005 2004
Reconciliation of operating profit to net cash inflow from
operating activities
Operating profit 44,853 45,832
Depreciation 7,901 7,879
Goodwill amortisation 5,491 4,220
(Profit)/loss on sale of tangible fixed assets (21) 109
Decrease in SSAP 24 pension prepayment 70 112
Property sale receivable – 1,100
(Increase)/decrease in stocks (1,000) 744
Decrease/(increase) in debtors 1,355 (1,404)
Increase in creditors 1,667 1,190
Net cash inflow from operating activities 60,316 59,782
The cash outflow of £25,026,000 on the acquisition of businesses includes the payment of
£2,211,000 of deferred purchase consideration which arose from acquisitions made in earlier
years, and where provision was made in prior years’ financial statements.
2005 2004
Reconciliation of net cash flow to movement in net cash/(debt)
(Decrease)/increase in cash (4,872) 1,535
Increase in liquid resources 1,663 19,662
Cash inflow from loans (5,764) (2,683)
Loans acquired (1,125) –
Exchange adjustments 554 3,127
(9,544) 21,641
Net cash/(debt) brought forward 21,548 (93)
Net cash carried forward 12,004 21,548
HALMA
Halma p.l.c. 2005 67 Notes on the Accounts continued £000
23 Consolidated cash flow statement continued
At Acquisition At
3 April Cash (excluding cash Exchange 2 April
2004 flow and overdrafts) adjustments 2005
Analysis of net cash/(debt)
Cash 14,584 (4,896) – 79 9,767
Overdrafts (258) 24 – (6) (240)
(4,872)
Short-term deposits 33,898 1,663 – 20 35,581
Bank loans (26,676) (5,764) (1,125) 461 (33,104)
21,548 (8,973) (1,125) 554 12,004
24 Financial instruments
Policy
The Group does not use complex derivative financial instruments. No trading or speculative
transactions in financial instruments are undertaken. Where it does use financial instruments
these are mainly to manage the currency risks arising from normal operations and its
financing. Operations are financed mainly through retained profits and in certain
geographical locations, bank borrowings. Foreign currency risk is the most significant aspect
for the Group in the area of financial instruments. It is exposed to a lesser extent to other
risks such as interest rate risk and liquidity risk. The Board reviews and agrees policies for
managing each of these risks and these policies are summarised below. Policies have
remained unchanged since the beginning of the financial year.
Foreign currency risk
The Group has transactional currency exposures. These arise on sales or purchases by
operating companies in currencies other than the companies’ operating (or ‘functional’)
currency. Significant sales are hedged at the date of invoicing by means of matched
borrowings and forward currency contracts. Significant purchases are hedged by means of
forward currency contracts.
The Group which is based in the UK and reports in Sterling, has a significant investment in
overseas operations in the USA and Europe, with further investments in Australia, New
Zealand, Canada, Malaysia, Singapore, China and India. As a result, the Group’s balance
sheet can be affected by movements in these countries’ exchange rates. Where significant
and appropriate, currency denominated net assets are hedged by currency borrowings.
These currency exposures are reviewed regularly. The Group does not hedge future currency
profits, so the Sterling value of overseas profits earned during the year is sensitive to the
strength of Sterling, particularly against the US Dollar and the Euro.
Finance and interest rate risk
The Group does not have significant exposure to interest rate fluctuations. Where bank
borrowings are used to finance operations they tend to be short-term with floating interest
rates. Borrowings used to manage foreign currency risk are drawn on the Group’s loan
facilities and have fixed interest rates with maturities of not more than one year.
HALMA
68 Halma p.l.c. 2005 Notes on the Accounts continued £000
24 Financial instruments continued
Surplus funds are placed on short-term fixed rate deposit or in floating rate deposit accounts.
Liquidity risk
The Group has a strong cash flow and the funds generated by operating companies are
managed regionally based on geographic location. Funds are placed on deposit with secure,
highly-rated banks. For short-term working capital purposes, most operating companies
utilise local bank overdrafts. These practices allow a balance to be maintained between
continuity of funding, security and flexibility. Because of the nature of their use, the facilities
are typically ‘on demand’ and as such uncommitted. Borrowing facilities, including the
Group’s revolving loan facilities, are typically renewed annually.
Currency exposures
The table below shows the Group’s net foreign currency monetary assets and liabilities.
These are the assets and liabilities of Group companies which are not denominated in the
functional currency of the company involved. They comprise cash and overdrafts, and certain
debtors and creditors. These foreign currency monetary assets and liabilities give rise to the
net currency gains and losses recognised in the Profit and Loss Account as a result of
movement in exchange rates. As at year end these exposures were as follows:
2005 Net foreign currency monetary assets/(liabilities)
Functional currency
of operation Sterling US Dollar Euro Other Total
Sterling – 1,137 (387) (568) 182
US Dollar 829 – 288 – 1,117
Euro (60) 536 – 505 981
Other (24) 699 78 200 953
Total 745 2,372 (21) 137 3,233
2004 Net foreign currency monetary assets/(liabilities)
Functional currency
of operation Sterling US Dollar Euro Other Total
Sterling – 747 1,850 (115) 2,482
US Dollar 5 – (3) – 2
Euro (79) 1,509 – 77 1,507
Other 79 1,249 13 (2) 1,339
Total 5 3,505 1,860 (40) 5,330
The amounts shown in the tables above take into account the effect of any forward currency
contracts entered into to manage these currency exposures.
Interest rate risk profile
The Group’s financial assets which are subject to interest rate fluctuations comprise cash
deposits which totalled £35,581,000 at 2 April 2005 (2004: £33,898,000). These comprised
Sterling denominated deposits of £24,073,000 (2004: £32,531,000), US Dollar denominated
deposits of £3,663,000 (2004: £nil), Euro and other currency deposits of £7,845,000 (2004:
£1,367,000) which are placed on local money markets and earn interest at market rates.
HALMA
Halma p.l.c. 2005 69 Notes on the Accounts continued £000
24 Financial instruments continued
The financial liabilities which are subject to interest rate fluctuations are bank loans, bank
overdrafts and certain unsecured loans, which totalled £33,344,000 at 2 April 2005 (2004:
£26,934,000). All are subject to floating rates of interest. These comprise US Dollar
denominated bank loans of £19,577,000 (2004: £20,218,000) which bear interest with
reference to the US Dollar LIBOR rates, US Dollar denominated bank overdrafts of £13,000
(2004: £76,000) which bear interest at rates referenced to US Dollar base rates, Euro
denominated bank loans of £13,527,000 (2004: £6,458,000) which bear interest with
reference to the Euro LIBOR rates, Euro denominated bank overdrafts of £111,000 (2004:
£142,000) which bear interest at rates referenced to Euro base rates and Sterling
denominated bank overdrafts of £116,000 (2004: £40,000) which bear interest at rates
referenced to UK base rates.
Maturity of financial liabilities
With the exception of the deferred purchase consideration and other creditors due after one
year, all of the Group’s financial liabilities mature in one year or less or on demand. The total
of deferred purchase consideration due after one year includes £3,948,000 (2004: £44,000)
due between one and two years, with the balance of £80,000 (2004: £115,000) due between
two and five years. Other creditors due after more than one year include £507,000 (2004:
£105,000) due between one and two years, £786,000 (2004: £379,000) due between two
and five years, with the balance of £214,000 (2004: £611,000) due after more than five
years.
Borrowing facilities
The Group’s principal source of borrowing facilities is through ‘on demand’ bank overdrafts
which are, by definition, uncommitted. These facilities are generally reviewed on an annual
or ongoing basis and hence the facilities expire within one year or less.
The Group also has committed borrowing facilities which are used for the purpose of
managing foreign currency risk. At 2 April 2005 committed facilities of this type amounted
to £53,757,000 of which £33,104,000 was drawn down. The borrowing facilities are reviewed
annually, and as such the weighted average maturity of the facilities is less than one year.
Fair values of financial assets and financial liabilities
As at 2 April 2005 there was no significant difference between the book value and fair value
(as determined by market value) of the Group’s financial assets and liabilities.
Hedging
As explained above, the Group’s policy is to hedge significant sales and purchases
denominated in foreign currency using forward currency contracts. The gains and losses on
these instruments are recognised upon recognition of the underlying exposure. The amounts
of unrecognised gains or losses on instruments used for hedging at 2 April 2005 and 3 April
2004 are not significant.
With the exception of currency exposures, the disclosures in this note exclude short-term
debtors and creditors.
25 Commitments
Capital commitments
Capital expenditure authorised and contracted at 2 April 2005 but not provided in these
accounts amounts to £2,070,000 (2004: £523,000).
HALMA
70 Halma p.l.c. 2005 Notes on the Accounts continued £000
25 Commitments continued
Commitments under operating leases
Annual commitments under non-cancellable operating leases expire as follows:
Land and buildings Other
2005 2004 2005 2004
Within one year 457 352 196 39
Within two to five years 2,186 1,482 262 193
After five years 838 930 1 8
3,481 2,764 459 240
Total annual commitments under non-cancellable operating leases amount to £3,940,000
(2004: £3,004,000).
26 Pensions
Group companies operate both defined benefit and defined contribution pension schemes.
The Halma Group Pension Plan and the Apollo Pension and Life Assurance Plan have sections
of the defined benefit type with assets held in separate trustee administered funds. During
2002/03, both of these defined benefit sections were closed to new entrants and a defined
contribution section was established within the Halma Group Pension Plan. Defined
contribution schemes are mainly adopted in overseas subsidiaries. Pension contributions for
the Group are paid in accordance with the advice of professionally qualified actuaries.
The total pension cost for the Group was £5,115,000 (2004: £5,095,000) of which
£1,143,000 (2004: £812,000) relates to overseas schemes.
The Halma Group Pension Plan was last assessed as at 1 December 2002, and the Apollo
Pension and Life Assurance Plan as at 1 April 2004, using the projected unit method. The
principal actuarial assumptions adopted in the valuations were firstly that the investment
return would exceed the rate of salary growth by 3.25% (Apollo: 2.50%) per annum
dependent on the scheme membership category, and secondly that pensions in the course
of payment would increase at 2.5% (Apollo: 2.75%) per annum or, for future service, in
accordance with the requirements of the Pension Act 1995.
At 1 December 2002 the market value of the Halma Group Pension Plan’s assets was
£42,533,000. The actuarial value of the scheme’s assets represented 69% of the benefits
that had accrued to members after allowing for expected future increases in earnings. The
shortfall is being addressed by increased company contributions.
At 1 April 2004 the market value of the Apollo Pension and Life Assurance Plan’s assets was
£8,278,000. The actuarial value of the scheme’s assets represented 59% of the benefits that
had accrued to members after allowing for expected future increases in earnings. The
shortfall is being addressed by increased company contributions.
Financial Reporting Standard 17 (Retirement Benefits)
The Group has adopted the transitional provisions of FRS 17 (Retirement Benefits), and the
following transitional disclosures are required.
HALMA
Halma p.l.c. 2005 71 Notes on the Accounts continued £000
26 Pensions continued
The financial assumptions used to calculate scheme liabilities at 2 April 2005 under FRS 17 are:
2005 2004 2003
Rate of increase in salaries 4.25% 4.25% 4.00%
Rate of increase in pensions in payment (pre April 1997) 2.75% 2.75% 3.00%
Rate of increase of pensions in payment (post April 1997) 2.75% 2.75% 2.50%
Discount rate 5.40% 5.50% 5.50%
Inflation assumption 2.75% 2.75% 2.50%
The expected rates of return and the aggregated assets in the UK defined benefit schemes
were:
Expected Expected Expected
rate Market rate Market rate Market
of return value of return value of return value
2005 2005 2004 2004 2003 2003
Equities 7.75% 55,649 7.75% 51,323 7.50% 37,301
Bonds 4.75% 13,876 4.75% 8,349 4.50% 7,569
Property 6.25% 2,544 6.25% 1,755 6.00% 1,704
Total market value of assets 72,069 61,427 46,574
Present value of scheme
liabilities (112,914) (102,196) (90,545)
Deficit in schemes (40,845) (40,769) (43,971)
Related deferred tax asset 12,253 12,231 13,191
(28,592) (28,538) (30,780)
Analysis of the amount that would have been charged to operating profit under FRS 17 in
respect of the UK defined benefit schemes:
2005 2004
Current service cost 2,919 3,160
Curtailment gain – (979)
Total operating charge 2,919 2,181
Analysis of the amount that would have been charged to net finance income under FRS 17:
2005 2004
Expected return on pension scheme assets 4,583 3,377
Interest on scheme liabilities (5,680) (5,032)
Net finance cost (1,097) (1,655)
Analysis of the actuarial (loss)/gain that would have been recognised in the Statement of
Total Recognised Gains and Losses:
2005 2004
Actual return less expected return on scheme assets 2,821 7,717
Experience losses arising on scheme liabilities 52 –
Changes in assumptions (2,921) (4,731)
Net (loss)/gain recognised (48) 2,986
HALMA
72 Halma p.l.c. 2005 Notes on the Accounts continued £000
26 Pensions continued
Movement in deficit during the year:
2005 2004
Deficit at beginning of year (40,769) (43,971)
Current service cost (2,919) (3,160)
Contributions paid 3,988 4,052
Curtailment gain – 979
Net finance cost (1,097) (1,655)
Actuarial (loss)/gain (48) 2,986
Deficit at end of year (40,845) (40,769)
History of experience gains/(losses):
2005 2004 2003
Difference between expected and actual return on scheme 2,821 7,717 (17,042)
Percentage of scheme assets 4% 13% (37)%
Experience gains/(losses) on scheme liabilities 52 – (3,260)
Percentage of scheme liabilities –% –% (4)%
Total actuarial (loss)/gain recognised in the Statement of 
Total Recognised Gains and Losses (48) 2,986 (32,729)
Percentage of scheme liabilities –% 3% (36)%
If the above amount were recognised in the accounts, the Group’s net assets and profit and
loss account reserve would be as follows:
2005 2004
Net assets excluding pension liability 175,598 167,360
SSAP 24 pension prepayment (860) (930)
SSAP 24 accrual in respect of discontinued operations 627 1,557
Pension liability (28,592) (28,538)
Net assets including pension liability 146,773 139,449
Profit and loss account reserve excluding pension liability 128,422 122,730
SSAP 24 pension prepayment (860) (930)
SSAP 24 accrual in respect of discontinued operations 627 1,557
Pension liability (28,592) (28,538)
Profit and loss account reserve including pension liability 99,597 94,819
Other post retirement benefits liabilities are already fully included in net assets.
HALMA
Halma p.l.c. 2005 73 Notice of Meeting
Notice is hereby given that the one hundred and eleventh Annual General Meeting of
Halma p.l.c. will be held at The Ballroom, The Berkeley Hotel, Wilton Place, London SW1X
7RL on Wednesday, 3 August 2005 at 12 noon for the following purposes:
Ordinary business
1 To approve the Report of the Directors, the audited part of the Report on Remuneration
and the Accounts for the period of 52 weeks to 2 April 2005.
2 To declare a dividend on the ordinary shares.
3 To approve the Report on Remuneration as set out on pages 39 to 45 of the Report and
Accounts for the 52 weeks to 2 April 2005 be approved.
4 To re-elect as a Director Mr K J Thompson who retires from the Board by rotation and
being eligible offers himself for re-election.
5 To re-elect as a Director Mr N Quinn who retires from the Board by rotation and being
eligible offers himself for re-election.
6 To re-elect as a Director Mr E G Unwin* who retires from the Board by rotation and
being eligible offers himself for re-election.
7 To re-elect as a Director Mr A J Williams who was appointed in July 2004 and who retires
in accordance with the Articles of Association.
8 To re-appoint Deloitte & Touche LLP as Auditors.
9 To authorise the Directors to determine the remuneration of the Auditors.
Special business
To consider, and if thought fit, pass the following ordinary resolution:
10 That:
(a) the Halma p.l.c. Performance Share Plan 2005 (the “Plan”), a summary of the
proposed Rules of which is set out in the Appendix to the Circular from the
Chairman to shareholders dated 4 July 2005, be and is hereby approved and
adopted and that the Directors be authorised to establish and carry the Plan into
effect;
(b) the Directors be and are hereby authorised to vote, and to be counted in the
quorum, in relation to any resolution of the Board of Directors of the Company on
any matter concerning or connected with the Plan notwithstanding that they may
be interested in the same (except that no Director may be counted in the quorum
or vote in respect of his own participation in the Plan) and that the prohibitions on
voting by interested Directors contained in the Articles of Association of the
Company be accordingly relaxed to that extent;
(c) that the Directors be authorised to establish schedules to the Plan or to establish
other plans based on the Plan but modified to take account of local tax, exchange
control or securities laws outside the UK, provided that any shares issued under
the schedules or other plans must be treated as counting against any individual or
overall limits on participation contained in the Plan.
To consider, and if thought fit, pass the following special resolutions:
11 That the Directors be and are hereby empowered pursuant to Section 95 of the
Companies Act 1985 to allot or to make any offer or agreement to allot equity securities
(as defined in Section 94(2) of the Companies Act 1985) of the Company pursuant to
the authority contained in Resolution 10 passed at the Company’s Annual General
Meeting on 1 August 2002 and/or sell equity securities held as treasury shares for cash
pursuant to Section 162O of the Companies Act 1985, in each case as if Section 89(1)
of the Companies Act 1985 did not apply to any such allotment or sale, provided that
such power shall be limited to the allotment and/or sale of equity securities:
(a) pursuant to the terms of any share scheme for employees approved by the
Company in general meeting; and
HALMA
74 Halma p.l.c. 2005 Notice of Meeting continued
(b) otherwise than pursuant to sub-paragraph (a) above, up to an aggregate nominal
amount of £1,844,000,
and shall expire at the conclusion of the next Annual General Meeting of the Company,
save that the Company may make any offer or agreement before such expiry which
would or might require equity securities to be allotted or equity securities held as
treasury shares to be sold after such expiry; and the Directors may allot equity
securities and/or sell equity securities held as treasury shares in pursuance of any such
offer or agreement notwithstanding that the power conferred hereby has expired; words
and expressions defined in or for the purposes of Section 89 to 96 inclusive of the
Companies Act 1985 shall bear the same meanings in this resolution.
12 That the Company be and is hereby generally and unconditionally authorised to make
market purchases (within the meaning of Section 163(3) of the Companies Act 1985)
of ordinary shares of 10p each (“ordinary shares”) provided that:
(a) the maximum number of shares hereby authorised to be acquired is 36,000,000
ordinary shares, having an aggregate nominal value of £3,600,000;
(b) the maximum price which may be paid for any ordinary share is an amount equal
to 105 per cent of the average of the middle market quotations for such an
ordinary share as derived from the London Stock Exchange’s Daily Official List for
the five business days immediately preceding the day on which the share is
contracted to be purchased and the minimum price which may be paid for any such
ordinary share shall be the nominal value of that share; and
(c) the authority hereby conferred shall expire at the conclusion of the Company’s next
Annual General Meeting (except in relation to the purchase of ordinary shares the
contract for which was concluded before such date and which would or might be
executed wholly or partly after such date), unless such authority is renewed prior
to such time.**
A shareholder entitled to attend and vote at the meeting is entitled to appoint a proxy or
proxies to attend and on a poll, vote on his or her behalf. A proxy need not be a shareholder
of the Company. A personalised form of proxy is enclosed. Completion of a form of proxy (or
submission of proxy instructions electronically) will not prevent a shareholder from attending
the meeting and voting in person.
By Order of the Board
C T Chesney Secretary
Misbourne Court Rectory Way Amersham Bucks HP7 0DE
4 July 2005
In accordance with the requirements of the Companies Act 1985, a summary of any
transactions during the past year by the Directors and their family interests in the Company’s
shares and copies of Directors’ service contracts will be available for inspection at the
registered office of the Company from the date of the above notice until 3 August 2005 and
at The Berkeley Hotel from 11:45 am on the day of the meeting until the close of the
meeting.
Copies of the proposed Rules of Halma p.l.c. Performance Share Plan 2005 are available for
inspection at the offices of CMS Cameron McKenna LLP, Mitre House, 160 Aldersgate Street,
London EC1A 4DD from the date of the above notice until the close of the meeting and will
also be available for inspection at the Berkeley Hotel 15 minutes prior to and during the
meeting.
Full biographical information of the Directors proposed for re-election appears on page 14 of
the Report and Accounts.
* denotes Chairman and membership of the Remuneration, Audit and Nomination Committees of the Board
** The Board’s present intention is that the shares purchased under the authority will (to the extent statutory
requirements are met) be held in treasury for future cancellation, sale for cash or transfer for the purposes
of, or pursuant to, an employee share scheme, although in the light of circumstances at the time it may
be decided to cancel them immediately on repurchase.
HALMA
Halma p.l.c. 2005 75 Summary 1996 to 2005
95/96 96/97 97/98 98/99 99/00 00/01
Turnover 173,652 200,140 213,777 217,758 233,485 268,322
Overseas sales 104,432 119,235 126,863 134,189 150,727 181,831
Profit before taxation,
goodwill amortisation and
exceptional items 33,619 37,076 42,391 41,823 43,751 49,698
Net tangible assets 77,650 81,209 98,249 102,101 89,755 99,991
Borrowings 8,350 3,763 2,784 7,730 14,700 7,758
Cash and short-term deposits 27,459 13,447 22,639 29,894 21,900 21,484
Employees 2,384 2,677 2,861 2,827 2,975 3,059
Earnings per ordinary share
(Note 1) 6.44p 7.01p 6.87p 7.91p 6.08p 8.91p
Earnings per ordinary share
before goodwill amortisation
and exceptional items (Note 1) 6.44p 7.01p 8.26p 7.99p 8.41p 9.34p
Year on year increase/(decrease)
in earnings per ordinary share
before goodwill amortisation and
exceptional items 15.2% 8.9% 17.8% (3.3%) 5.3% 11.1%
Net tangible assets per ordinary
share (Note 1) 21.7p 22.5p 27.1p 28.2p 24.9p 27.7p
Year on year increase/(decrease)
in net tangible assets per ordinary
share 21.2% 3.7% 20.4% 4.1% (11.7%) 11.2%
Return on sales (Note 2) 19.4% 18.5% 19.8% 19.2% 18.7% 18.5%
Return on capital employed
(Note 3) 43.3% 45.7% 43.1% 41.0% 48.7% 49.7%
Year on year increase in dividends
per ordinary share 20% 20% 20% 20% 20% 15%
Ordinary share price at financial
year end (Note 1) 138p 134p 124p 92p 95p 129p
Market capitalisation at financial
year end £492.1m £479.2m £447.3m £330.6m £340.1m £465.7m
Notes:
1. Restated for the capitalisation issue made in 1997.
2. Return on sales is defined as profit before taxation, goodwill amortisation and exceptional items expressed as a
percentage of turnover.
3. Return on capital employed is defined as profit before taxation, goodwill amortisation and exceptional items expressed
as a percentage of net tangible assets (being equity shareholders’ funds less intangible assets).
4. Figures prior to 2000/01 have not been restated for the adoption of FRS 19 (Deferred Taxation).
HALMA
76 Halma p.l.c. 2005 £000
01/02 02/03 03/04 04/05
267,597 267,293 292,640 299,119
183,259 188,161 206,102 218,745
48,255 46,508 50,284 50,389
117,515 86,854 95,935 80,750
15,047 27,667 26,934 33,344
45,657 27,574 48,482 45,348
2,859 2,793 2,925 3,002
8.58p 7.76p 6.09p 7.97p
9.10p 8.55p 9.44p 9.42p
(2.6%) (6.0%) 10.4% (0.2%)
32.2p 23.8p 26.2p 21.9p
16.2% (26.1%) 10.1% (16.4%)
18.0% 17.4% 17.2% 16.8%
41.1% 53.5% 52.4% 62.4%
15% 10% 7% 5%
164p 114p 149p 161p
£598.2m £416.7m £546.5m £593.8m
HALMA
Halma p.l.c. 2005 77
0p
2p
6p
10p
96 99 02 05
Earnings per share
(before goodwill amortisation 
and exceptional items)
£0m
£50m
£150m
£250m
96 99 02 05
Overseas sales
0%
10%
30%
50%
70%
96 99 02 05
Return on capital 
employed Halma Group Directory
78 Halma p.l.c. 2005
Main products
Air Products and Controls Inc. Duct detectors and control relays for smoke control systems
Apollo Fire Detectors Limited Smoke and heat detectors for commercial fire alarm systems
Apollo Gesellschaft für Meldetechnologie mbH Smoke and heat detectors for commercial fire alarm systems
Aquionics Inc. Ultraviolet light equipment for water sterilisation
Berson Milieutechniek B.V. Ultraviolet light equipment for treating waste water and process water used in the
manufacture of food and drinks
Bio-Chem Valve Inc. Miniature valves, micro pumps and fluid components for medical, life science and scientific 
instruments
Bureau D’Electronique Appliquée S.A. Sensors for automatic doors
Castell Safety International Limited Safety systems for controlling the use of and access to dangerous machines
Cressall Resistors Limited High power electrical resistors
Crowcon Detection Instruments Limited Gas detection instruments for personnel and plant safety
Diba Industries, Inc. Specialist components and complete fluid transfer subassemblies for medical, life science and
scientific instruments
Electronic Micro Systems Inc. Emergency communication systems
Elfab Limited Pressure sensitive relief devices to protect process plant
E-Motive Display Pte Limited Electronic displays for providing information to elevator passengers
Fire Fighting Enterprises Limited Beam smoke detectors and specialist fire extinguishing systems
Fortress Interlocks Limited Safety systems for controlling access to dangerous machines
Fortress Systems Pty. Limited Machinery and process safety systems and high power electrical resistors
Halma Holdings Inc. American holding company
Hanovia Limited Ultraviolet light equipment for treating drinking water and water used in the manufacture
of food, drinks, pharmaceuticals and electronic components
HF Sécurité S.A.S. Safety systems and high security locks
Hydreka S.A.S. Equipment and software for flow analysis of water and sewerage systems and leak
detection systems
IPC Resistors Inc. High power electrical resistors and ground fault detection equipment
Janus Elevator Products Inc. Infrared safety systems for elevator doors and elevator electronic displays
Keeler Limited Ophthalmic instruments for diagnostic assessment of eye conditions
Klaxon Signals Limited Audio/visual warning systems for industrial security
Marathon Sensors Inc. Sensors and instruments for combustion control and heat treatment processes
Memco Limited Infrared safety systems for elevator doors and elevator emergency communications
Monitor Controls Inc. Elevator signal fixtures
Mosebach Manufacturing Company High power electrical resistors
Ocean Optics, Inc. Miniature fibre optic spectrometers for consumer electronics, process control, environmental 
monitoring, life sciences and medical diagnostics
Oklahoma Safety Equipment Co. Inc. Pressure sensitive relief devices to protect process plant
Palintest Limited Instruments for analysing water and measuring environmental pollution
Palmer Environmental Limited Instrumentation for quantifying, detecting and controlling leakage in underground water pipelines
Perma Pure LLC Gas dryers and humidifiers for fuel cell, medical, scientific and industrial use
Post Glover IPC Resistors High power electrical resistors
Post Glover Lifelink Electrical isolation panels and electrical raceways for hospital, laboratory and
industrial facilities
Radcom (Technologies) Limited Instrumentation for recording data, and detecting and controlling leakage, in water
distribution pipelines
SEAC Limited Specialist fasteners for the building trade
Secomak Limited Industrial heaters, fans, drying systems, heat tunnels, loudspeakers and microphones
SERV Trayvou Interverrouillage S.A.S. Safety systems for controlling access to dangerous machines
Smith Flow Control Limited Process safety systems for petrochemical and industrial applications
TL Jones Limited Infrared safety systems for elevator doors
Volk Optical Inc. Ophthalmic lenses as aids to diagnosis and surgery
Volumatic Limited Cash security and handling from point-of-sale to cash office www.halma.com visit the Halma website and register for e-mail news alerts
Halma p.l.c. 2005 79
Location Contact Telephone E-mail Website
Pontiac, Michigan Jim Ludwig +1 (1)248 332 3900 info@ap-c.com www.ap-c.cc
Havant, Hampshire Michael Hamilton +44 (0)23 9249 2412 enquiries@apollo-fire.co.uk www.apollo-fire.co.uk
Gütersloh, Germany Falk Blödorn +49 (0)524 133060 info@apollo-feuer.de www.apollo-feuer.de
Erlanger, Kentucky Jon McClean +1 (1)859 341 0710 sales@aquionics.com www.aquionics.com
Eindhoven, The Netherlands Sjors van Gaalen +31 (0)40 290 7777 sales@bersonuv.com www.bersonuv.com
Boonton, New Jersey George Gaydos +1 (1)973 263 3001 info@bio-chemvalve.com www.bio-chemvalve.com
Liège, Belgium Philippe van Genechten +32 (0)4361 6565 info@bea.be www.beasensors.com
Kingsbury, London David Milner +44 (0)20 8200 1200 sales@castell.com www.castell.com
Leicester David Boughey +44 (0)116 273 3633 info@cressall.com www.cressall.com
Abingdon, Oxfordshire Allan Stamper +44 (0)1235 553057 crowcon@crowcon.com www.crowcon.com
Danbury, Connecticut Chuck Dubois +1(1)203 744 0773 salesdept@dibaind.com www.dibaind.com
Hauppauge, New York Mike Byrne +1 (1)631 864 4742 sales@emscomm.com www.emscomm.com
North Shields, Tyne & Wear Simon Keenan +44 (0)191 293 1234 sales@elfab.com www.elfab.com
Singapore Steven Black +65 6776 4111 sales@emotive.com.sg www.emotive.com.sg
Stevenage, Hertfordshire Warren Rees +44 (0)1438 317216 info@ffeuk.com www.ffeuk.com
Wolverhampton, West Midlands Mike Golding +44 (0)1902 499 600 sales@fortress-interlocks.co.uk www.fortress-interlocks.co.uk
Melbourne, Australia Andy Cochran +61 (0)3 9587 4099 vicfsp@fortress.com.au www.fortress.com.au
Cincinnati, Ohio Steve Sowell +1 (1)513 772 5501 halmaholdings@halmaholdings.com www.halmaholdings.com
Slough, Berkshire Darren Bentham +44 (0)1753 515300 sales@hanovia.com www.hanovia.com
Cluses, France Gérard Denis +33 (0)4 50 98 96 71 hfsecurite@hfsecurite.com www.hfsecurite.com
Lyon, France Alain Soulié +33 (0)4 72 53 11 53 hydreka@hydreka.fr www.hydreka.com
Toronto, Canada Albert Renaud +1 (1)905 673 1553 info@ipc-resistors.com www.ipc-resistors.com
Hauppauge, New York Mike Byrne +1 (1)631 864 3699 sales@januselevator.com www.januselevator.com
Windsor, Berkshire Mark Lavelle +44 (0)1753 857177 info@keeler.co.uk www.keeler.co.uk
Oldham, Lancashire Barry Coughlan +44 (0)161 287 5555 sales@klaxonsignals.com www.klaxonsignals.com
Cincinnati, Ohio Eric Boltz +1 (1)513 772 1000 sales@marathonsensors.com www.marathonsensors.com
Maidenhead, Berkshire Peter Bailey +44 (0)1628 770734 sales@memco.co.uk www.memco.co.uk
Hauppauge, New York John Farella +1 (1)631 543 4334 sales@mcontrols.com www.mcontrols.com
Pittsburgh, Pennsylvania Gordon Denny +1 (1)412 220 0200 info@mosebachresistors.com www.mosebachresistors.com
Dunedin, Florida Mike Morris +1(1)727 733 2447 info@oceanoptics.com www.oceanoptics.com
Broken Arrow, Oklahoma Joe Ragosta +1 (1)918 258 5626 info@oseco.com www.oseco.com
Gateshead, Tyne & Wear John Lever +44 (0)191 491 0808 palintest@palintest.com www.palintest.com
Cwmbran, South Wales Michael Tennant +44 (0)1633 489 479 sales@palmer.co.uk www.palmer.co.uk
Toms River, New Jersey David Leighty +1 (1)732 244 0010 info@permapure.com www.permapure.com
Erlanger, Kentucky Richard Field +1 (1)859 283 0778 sales@postglover.com www.postglover.com
Erlanger, Kentucky Judy Kathman +1(1)859 283 5900 sales@postgloverlifelink.com www.postgloverlifelink.com
Romsey, Hampshire Richard Pollard +44 (0)1794 528 700 sales@radcom.co.uk www.radcom.co.uk
Leicester David Buckley +44 (0)116 273 9501 enquiries@seac.uk.com www.seac.uk.com
Stanmore, Middlesex Ian Roffe +44 (0)20 8952 5566 sales@secomak.com www.secomak.com
Paris, France Stéphane Majerus +33 (0)1 48 18 15 15 sales@servtrayvou.com www.servtrayvou.com
Witham, Essex Mike D’Anzieri +44 (0)1376 517901 sales@smithflowcontrol.com www.smithflowcontrol.com
Christchurch, New Zealand Chris Stoelhorst +64 (0)3 349 4456 info@tljonesltd.com www.tljonesltd.com
Mentor, Ohio Pete Mastores +1 (1)440 942 6161 volk@volk.com www.volk.com
Coventry, West Midlands Paul Bonné +44 (0)247 668 4217 info@volumatic.com www.volumatic.com HALMA
Shareholder Information
80 Halma p.l.c. 2005
Investor information
Visit our website, www.halma.com, for investor
information and company news. In addition to
accessing financial data, you can view and download
analyst presentations and find contact details for
Halma senior executives and subsidiary companies.
E-mail news alert
You can subscribe to an e-mail news alert service on
our website www.halma.com to automatically receive
an e-mail when significant announcements are made.
Shareholding information
Please contact our registrars directly for all
enquiries about your shareholding. Visit
www.computershare.com for online information about
your shareholding. (You will need your shareholder
reference number which can be found on your share
certificate).
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol BS99 7NH
Tel: +44 (0)870 702 0000
Fax: +44 (0)870 702 0005
E-mail: web.queries@computershare.co.uk
Investor relations contacts
Andrew Williams
Halma p.l.c.
Misbourne Court
Rectory Way
Amersham
Bucks HP7 0DE
Tel: +44 (0)1494 721111
Fax: +44 (0)1494 728032
E-mail: halma@halma.com
Rachel Hirst/Andrew Jaques
Hogarth Partnership Limited
2nd Floor  Upstream
No. 1 London Bridge
London SE1 9BG
Tel: +44 (0)20 7357 9477
Fax: +44 (0)20 7357 8533
Brokers
Dresdner Kleinwort Wasserstein Limited
20 Fenchurch Street
London EC3P 3DB
Tel: +44 (0)20 7475 7319
Fax: +44 (0)20 7283 4667
E-mail: halma@drkw.com
Annual General Meeting
The 111th Annual General Meeting of Halma p.l.c. will
be held at The Ballroom, The Berkeley Hotel, Wilton
Place, London SW1X 7RL on Wednesday, 3 August
2005 at 12 noon. The Notice convening the Meeting is
on page 74.
Financial calendar
2004/05 Interim results 7 December 2004
2004/05 Interim dividend paid 8 February 2005
Trading update 28 April 2005
2004/05 Preliminary results 21 June 2005
2004/05 Report and Accounts issued 4 July 2005
Annual General Meeting 3 August 2005
2004/05 Final dividend payable 24 August 2005
Trading update end October 2005
2005/06 Interim results 6 December 2005
2005/06 Interim dividend payable February 2006
Trading update end April 2006
2005/06 Preliminary results June 2006
Analysis of shareholders 
at 2 June 2005
Shareholders Shares
Number % Number %
Number of shares held
1 – 7,500 5,289 79.6 10,180,548 2.7
7,501 – 25,000 766 11.5 10,020,319 2.7
25,001 – 100,000 335 5.0 16,553,861 4.5
100,001 – 750,000 183 2.9 52,978,212 14.4
750,000 and over 67 1.0 279,067,979 75.7
6,640 100.0 368,800,919 100.0
Share price
London Stock Exchange, pence per 10p share
2005 2004 2003 2002 2001
Highest 170 151 166 175 145
Lowest 142 109 97 126 82
Year end 161 149 114 164 129
Dividends
Pence per 10p share
2005 2004 2003 2002 2001
Interim 2.58 2.44 2.285 2.077 1.806
Final 3.92 3.75 3.527 3.206 2.787
Total 6.50 6.19 5.812 5.283 4.593
Share dealing facilities
A low cost telephone dealing service has been
arranged with Stocktrade which provides a simple
way of buying or selling Halma shares. Basic
commission is 0.5% up to £10,000, reducing to 0.2%
thereafter. For further information please call
0845 601 0995 and quote reference Low Co0198. HALMA Annual Report and Accounts 2005
HALMA
Annual Report
& Accounts 2005
Halma p.l.c.
Misbourne Court
Rectory Way
Amersham
Bucks HP7 0DE
Tel: +44 (0) 1494 721111
Fax: +44 (0) 1494 728032
www.halma.com