Halma mounts broad response to Covid-19 crisis
Halma updated the market on the impact of the Covid-19 coronavirus pandemic on Tuesday, saying it was still expecting its adjusted profit before tax for the year ended 31 March to be between £265m and £270m, in line with its guidance on 19 March.
The FTSE 100 company said it was anticipating revenues of around £1.33bn, and year-end net debt, excluding the impact of IFRS16, to be about £320m.
Looking at the balance sheet, Halma said its financial position remained “robust”, with committed facilities totalling £750m at current exchange rates.
The earliest maturity in those facilities was for £74m in January 2021, with the remaining maturities from 2023 onwards.
It said the financial covenants on those facilities were for net debt-to-adjusted EBITDA leverage to be no more than three times, and for adjusted interest cover to be no less than four times.
“Currently, we do not intend to utilise the UK government's Covid Corporate Financing Facility, although we have taken the prudent step of confirming Halma's eligibility in principle, subject to establishing an appropriate commercial paper programme,” the board said in its statement.
On its response to the coronavirus crisis, Halma said it had a “long track record” of adapting to societal shifts and changes in markets.
“We believe that our agile business model, and our focus on critical safety, health, and environmental market niches, will enable us to perform relatively resiliently and contribute to the global efforts to deal with Covid-19.”
It explained that, partnering with its central and regional Covid-19 support groups, the first of which was established in January following the initial outbreak in China, each of its companies was implementing an operating plan to suit its market and local circumstances.
Halma’s 43 operating companies had a total of 54 principal operating facilities spread across the UK, the United States, mainland Europe and Asia.
More than 30 of its companies delivered critical safety, healthcare and environmental protection solutions, and had a mandate or permission from regional or national authorities to continue to operate during shutdown restrictions.
Currently, following the reopening of its fire safety business in Italy last week, there were only two facilities - in California and Tunisia - that were closed due to government shutdown restrictions.
“However, all our businesses are having to address their specific supply chain and distribution challenges that are being caused by the pandemic, as well as responding to the similar challenges faced by their customers.”
It said there had been a “significant” focus on ensuring a safe working environment for all Halma company employees.
Measures taken included working from home wherever possible, a ban on non-essential travel and visitors to facilities, increased spacing between workstations, appropriate protective equipment, staggered shifts and breaks, as well as enhanced cleaning processes and contingency planning.
In accommodating those changes, the firm said its operational teams continued to show “exceptional commitment and dedication” to ensure that customer needs were met and to contribute to the global fight against Covid-19 directly and indirectly.
It said at least 10 companies from across every Halma sector were using rapid prototyping capabilities to manufacture personal protective equipment for health workers, in their local communities and nationally in the UK, Europe and the US.
Alicat, Perma Pure and Maxtec were making components for ventilators and respiratory health devices for hospitals, while Diba and Bio-Chem were supplying parts which are used in new medical diagnostic test instruments.
SunTech, Riester and Cardios were supplying primary care devices to test the blood pressure and cardiac health of patients, and CenTrak's technology was being used in healthcare facilities and care homes to track the movement of people and ensure compliance with hand hygiene regimes.
BEA was making sensors, including those specifically designed for healthcare facilities, to ensure that doors could be opened and closed automatically without human contact.
Halma said its water businesses including HWM, Mini-Cam, Palintest, Sensorex and UV companies were ensuring that water utilities could preserve continuity of a safe supply to homes and critical infrastructure.
Its fire businesses, meanwhile, were helping to ensure that fire safety was maintained in critical infrastructure across the world, and one of Halma’s most recent acquisitions, Sensit, was supporting gas utilities in the US to ensure that their residential supply pipelines are safe.
“As in previous downturns, we have sought to act quickly to mitigate potential impacts by reducing costs, optimising cash flow, protecting liquidity and, where necessary, changing how we operate,” the board explained.
“These actions are expected to result in a cost reduction - net of the cost to implement them - of over £20m in the first quarter of the new financial year, compared to the previous fourth quarter's run-rate.
“We will review these mitigating actions at the end of the first quarter.”
Halma said it had sought to limit the impact of those actions on its employees, and protect their employment, in anticipation of trading conditions improving later in the financial year.
Company, sector and group leaders had agreed to temporary salary reductions from 1 April for an initial three-month period, including the Halma plc board and the executive board, both of which agreed to a 20% reduction in salaries or fees.
While the company had furloughed a small percentage of its workforce, it currently said it intended to fund that without any support from the UK government's Coronavirus Job Retention Scheme.
“We have implemented a widespread hiring freeze, a reduction in the use of contractors and a significant reduction in discretionary overhead spending.
“We are ensuring that our companies continue to manage their working capital effectively, while maintaining productive relationships with customers and suppliers.
“We are limiting capital investment to essential projects and research and development only, and do not expect to complete any acquisitions during the first quarter, though our mergers and acquisitions search efforts are continuing.”
The Covid-19 pandemic was expected to have a net adverse impact on Halma’s markets and its full year financial results to 31 March 2021, which the board said were likely to have a “significant” second half weighting, even though the timing and profile of recovery remained uncertain.
It added that, in what are “challenging and changing” times, Halma had taken a considerable number of actions to date and would continue to monitor matters closely.
It said it would provide a further update in its full-year results announcement.
“Through this current challenging period, many of our companies are demonstrating how they are living Halma's purpose of 'growing a safer, cleaner, healthier future for everyone, every day', by supporting the fight against Covid-19 directly and indirectly,” said chief executive Andrew Williams.
“Our agile business model, strong positions in markets with long-term growth drivers and the talent and dedication of our people are expected to ensure that we will perform relatively resiliently in the short term and be well positioned to resume growth as markets recover.”
Halma said it was expecting to release its preliminary results on 14 July.
At 0810 BST, shares in Halma were up 1.24% at 2,117p.