2016_Halma_ARA_160610_2

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Chairman’s introduction to Governance Leading the governance agenda Our success is underpinned by the robust and meaningful corporate governance framework that we have in place. Paul Walker Chairman Good governance is essential for promoting the success of the Company and it sits at the heart of how we manage our Group. Our success is underpinned by the robust and meaningful corporate governance framework that we have in place, supported by our Group-wide culture of openness, transparency, constructive challenge and support. The Board is committed to maintaining the highest standards of corporate governance and, on their behalf, I am pleased to present Halma’s Corporate Governance Report for 2016. This report provides an explanation of the framework within which the Group is governed and sets out how we have applied the main principles and relevant provisions of the UK Corporate Governance Code 2014. LEADERSHIP Developing effective leadership throughout the Group is essential for attracting and retaining talent and aiding succession planning. The additional focus that has been given to improving the quality and performance of Halma’s management talent over the past two years has been invaluable. The Board’s support of executive activity surrounding talent has reinforced this strategic imperative across the entire business. Equally, at Board level, it is important to have the right balance of skills and experience, while enabling a refresh of non-executive Directors over time. Over the past year, we have had the opportunity to change the composition and responsibilities within the Board. Following Stephen Pettit’s retirement from the Board after last year’s annual general meeting, Tony Rice, non-executive Director, became the Chairman of the Remuneration Committee and Senior Independent Director. Jane Aikman will step down as a non-executive Director and Chairman of the Audit Committee after our Annual General Meeting in July, and Carole Cran, who was appointed a non-executive Director in January 2016, will assume the role of Audit Committee Chairman. I would like to thank Jane for her valuable contribution to the Company over the last nine years, in particular in her role as Audit Committee Chairman and for her support with Carole Cran’s induction. I am delighted to have Carole as a member of our Board and welcome her further contribution as she prepares for and takes up the role of Audit Committee Chairman. I believe that we have the right balance of skills, experience and knowledge on our Board to deliver strong leadership, make clear and effective decisions and harness an open and transparent culture which encourages an entrepreneurial approach at a business level. Biographies for each of the Directors are set out on pages 56 and 57 and for those Directors standing for election or re-election at the Annual General Meeting, are also contained within the Notice of Meeting. EFFECTIVENESS Building on the externally facilitated Board evaluation that was concluded last year, I have continued to work closely with my fellow Directors to improve the effectiveness of the Board. The competence and culture of open challenge that lies within our Board enables us to deliver effective decision-making within a governance framework which is fit for the future growth of the Company. 54 Halma plc Annual Report and Accounts 2016
PEOPLE AND CULTURE I reported in last year’s Chairman’s statement that we were upgrading our talent and education programmes to ensure that we have the best people to meet the growing demands of our business and customers. I am pleased to report that we have made considerable progress in this area and have continued to foster a culture which is more diverse and inclusive. You can read more about our talent and leadership initiatives on pages 50 and 51. REWARDING SUCCESS We recognise that recruiting and retaining talent that can deliver the capabilities that we need to match Halma’s growth requires a reward structure that motivates our people to outperform and enables them to share in Halma’s success. The executive share plan adopted at last year’s annual general meeting was designed to incentivise our executives and senior management to achieve superior returns for the Company and align their How the Board supported strategy Governance at Halma, like its business model, is ingrained in the operating culture throughout the organisation and within the Board of Directors. With a model that has had great success in terms of consistent dividend growth and TSR performance in the UK, the Board has not needed to oversee any large scale changes but has not been complacent and has continued to improve its processes and procedures to ensure that they are fitting for a company that is near the top of the FTSE 250. Strategy Grow Acquire reward with the interests of shareholders. Further information on the Company’s remuneration policy and approach is set out in the Remuneration Report on pages 73 to 90. COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE 2014 (THE CODE) Throughout the year ended 2 April 2016, the Company has fully complied with the provisions as set out in the Code (a copy of which is available on the Financial Reporting Council’s website at www.frc.org.uk). The Group’s approach to risk management and internal control is summarised on pages 28 and 29. The Directors confirm that they consider the Annual Report and Accounts, taken as a whole, to be fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position and performance. The Group’s business model is set out on page 12 and an explanation of the strategy and longer-term objectives of the Company is contained within the Strategic Review on pages 4 to 41. BOARD PRIORITIES Our priorities for 2017 are to continue to: improve focus on our customers and their needs through innovation and our go-tomarket strategies; seek acquisition opportunities in existing and new markets which complement our current portfolio and which can deliver the growth that we expect; and improve the capabilities and diversity of our talent. Paul Walker Chairman 14 June 2016 The Board’s governance role The Board monitors the diversity of the Group’s portfolio of businesses to ensure that proposed acquisitions or new market niches of strategic interest complement the strategic objectives of the Group and do not dilute the resources of the management teams. The Board also provides sufficient challenge to the internal resources dedicated to identifying and evaluating the deal pipeline. STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS Innovate Empower Grow Acquire The Board exemplifies the autonomous culture of the Group as one of providing our employees with the space to exercise control and authority having given them the guidance and tools to operate. The Board’s support in such endeavours underpins the right behaviours. Innovate Empower Grow Acquire The Board recognises that part of Halma’s fundamental strength not only derives from our selection of specialist technologies in markets with resilient growth drivers, but also in our targeting of investment in the right opportunities and deliberately placing that investment close to our end markets. The Board endorses the agile operating structure which is best suited to deliver successful innovation. Innovate Empower Grow Acquire The Board provides each business with the necessary investment to meet our growth targets, but equally, subjects them to rigorous scrutiny so that investment priorities can be evaluated. Innovate Empower Halma plc Annual Report and Accounts 2016 55
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Halma plc Annual Report and Account
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Highlights Another record year of r
Page 5 and 6: Infrastructure Safety Products whic
Page 7 and 8: Revenue from outside the USA, UK an
Page 9 and 10: Our decentralised organisational st
Page 11 and 12: INCREASING HEALTH AND SAFETY REGULA
Page 13 and 14: INCREASING DEMAND FOR LIFE-CRITICAL
Page 15 and 16: Acquisition focus Insight Our marke
Page 17 and 18: Insight Trapped key interlocking is
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Page 27 and 28: GROW INNOVATE ACQUIRE EMPOWER STRAT
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Page 31 and 32: process and one which is subject to
Page 33 and 34: Mitigation Increased risk No change
Page 35 and 36: Mitigation Increased risk No change
Page 37 and 38: a considerable impact on the oil an
Page 39 and 40: towards the use of more sensors, no
Page 41 and 42: A third of American adults suffer f
Page 43 and 44: Today 1.8 billion people drink faec
Page 45 and 46: Adjusted profit bridge £m 160 155
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Page 49 and 50: The Group accounts for post-retirem
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Page 59 and 60: CAROLE CRAN NON-EXECUTIVE DIRECTOR
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Page 67 and 68: The Board and Committee evaluations
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Page 71 and 72: Audit Committee COMMITTEE CHAIRMAN
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Consolidated Statement of Changes i
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Consolidated Cash Flow Statement Co
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Accounting Policies continued KEY A
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Critical accounting judgements Good
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Segmental reporting An operating se
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Accounting Policies continued Cash
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Cash and cash equivalents Cash and
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Notes to the Accounts continued 1 S
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Notes to the Accounts continued 1 S
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Notes to the Accounts continued 3 N
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Notes to the Accounts continued 6 P
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Notes to the Accounts continued 9 T
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Notes to the Accounts continued 11
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26 FINANCIAL INSTRUMENTS continued
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Company Statement of Changes in Equ
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Notes to the Company Accounts conti
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C12 RESERVES The Capital redemption
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C14 EXPLANATION OF TRANSITION TO FR
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2009/10 £000 2010/11 £000 2011/12
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Principal locations Telephone E-mai
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Principal locations Telephone E-mai
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DIVIDEND REINVESTMENT PLAN The Comp
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