Good morning everyone, and welcome to our results announcement this morning. Before we present the results to you, let me address our other announcement we made this morning, and that is that I've decided to retire next year as Group Chief Executive after 18 years in that role and almost 30 years in Halma. Firstly, I've got to say that I'm delighted that after a really rigorous succession process, the board has chosen Marc Ronchetti as my successor. I know that many of you know Marc well. Having worked with him closely over the last 6 years, I know that he's an outstanding leader and will do a fantastic job leading our strong executive board, and he's only gonna be the fourth Halma 's CEO in the last 50 years.
In terms of our transition, Marc will become the Chief Executive Designate with immediate effect, but will remain as our Chief Financial Officer until we appoint his successor. The plan is for him to take over from me on the first of April, 2023. Until that time, I'll continue as Halma 's CEO and support Marc through the transition process, including that CFO succession. While I'm sad obviously to be leaving Halma, this is something which I've been working towards over many years by building a strong leadership, executive board, a strong sector board, as well as embedding our Halma Sustainable Growth Model throughout our organization because that's what delivers our success year- in, year- out. I also think it's the right time.
I think it's the right time for me to hand over to a new CEO because as you see from today's results, the group is performing strongly and better placed than ever to capitalize on the many opportunities we see for growth in our markets. With that in mind, I'd like now to turn our attention to tell you how we performed over this past year and where we're gonna be heading next. This has been a year of notable achievements, and we've passed some significant milestones. We've had a strong financial performance with substantial growth and returns. Our revenue has increased to over GBP 1.5 billion for the first time, and it's our nineteenth consecutive year of record profit. It's also gonna be our 43rd consecutive year of dividend growth of 5% or more. It's also been a year of record strategic investment.
We've spent over GBP 250 million in the considerable growth opportunities we see in our markets, and that's backed up by maintaining a strong balance sheet. You'll see we've made record investment in technology and R&D. We made a record number of acquisitions this year. We've also continued to build the strength and diversity of our leadership team, and one of the things we've really focused on in recent months has been re-emphasizing the importance of our entrepreneurial and collaborative culture. There's a lot more face-to-face meetings going on to rebuild that coming out of the pandemic. We all know it's been a tough couple of years, a tough year.
Multiple challenges this past year, both economically, geopolitically, and I think our companies have really demonstrated with great skill and agility how to overcome those challenges and indeed find new growth opportunities through those periods. For this and for their continued dedication and commitment, I want to say a big thank you to all my Halma colleagues for what they delivered over this past year and making sure that Halma is in a really strong position as we look to the future. Finally, in summary, this combination of strong growth, returns, the investment in our operational operations, and also the agility that we have both strategically and operationally, means that Halma is well-positioned to deliver further progress this new financial year and in the longer term. How do we do it? Well, I mentioned earlier our Sustainable Growth Model, and this is what drives our success.
It's a well-established system. It's got six interdependent elements, and the important thing to realize here is it's a system. It's not about optimizing each individual element. Every decision we take has to consider its impact on the whole system, not just a single component. At the top you can see is our purpose, our purpose of growing a safer, cleaner, healthier future for everyone, every day. It answers why Halma exists. It gives us significant opportunities for growth and helps us to create value for our stakeholders. Halma has always had a purpose that's been addressing those significant long-term global issues. Indeed, our founder, David Barber, who sadly passed away this year, passionately believed in a purpose-driven long-term approach. Of course, things have gradually evolved over the last 50 years. You know, the ever-changing whirlwind, challenges, opportunities, they change.
Today, you can see through climate change, the increasing demand for life critical resources, the need for better healthcare, just how relevant that purpose is even in today's world. I'm taking the next three elements together because they give you an insight into how we deliver that sustained success. Our DNA is important because it defines our organizational and cultural characteristics. Our growth strategy just allows us to focus on where our strategic investment priorities should be on those long-term growing markets. Our business model gives us agility to respond rapidly to those changes in markets and technologies, as I mentioned, both operationally at the company level and strategically through our portfolio management. I think together, those four elements, together with our purpose, they really empower our leaders and teams to make decisions, to be innovative, and to create a winning culture in their business.
That's been particularly critical over these past couple of years. I'm gonna cover the next two elements in a bit more detail later on, but let me just say two brief comments on leadership and sustainability. Firstly, I believe that investing in development of leadership and people has been a key differentiator for Halma for many years, and certainly, during my time as CEO. Then on sustainability, again, I know from David Barber's early strategic plans that Halma has always had sustainability at its very heart. You only have to look at our self-sustaining financial model. Look at our easily scalable organizational model. In fact, from the very beginning, David identified environmental monitoring as one of our first target markets and key growth drivers. Let's come up to date now and look at what we've achieved this past year. Here are some of the detailed highlights.
I mentioned earlier, record revenue and profit, with revenue up by 16%, profit up by 14% to GBP 316 million, and our statutory profit up by 20%. It's great to see growth across all our sectors and all our major regions and really strong underlying organic constant currency growth, which Marc will explain a bit later on. We substantially increased that strategic investment. We talked about new products. Our R&D spend up by more than GBP 15 million to 5.6% of revenue. A total of 13 acquisitions completed for a spend of GBP 164 million.
We also backed that up with really solid cash conversion of 84%, which had to reflect the increased investment, but also the fact that our companies faced with increasing demands on their working capital due to high growth and also due to some of their supply chain disruptions that they saw. Overall, this ensured, however, that we maintained that strong balance sheet, and our gearing was marginally lower than at the last half year and full year-end periods. Finally, we continued to deliver high returns. Our return on sales at 20.7%, well within our 18%-22% target range. That all-important ROTIC, return on total invested capital, of 14.6%, more than double our weighted cost of capital.
It's that strong performance, the confidence we've got in the future, that supports an increase in our full-year dividend to 7%. Overall, a year of excellent progress, and now I'm gonna hand over to Marc, who's gonna give you more details on our financial progression. Marc.
Morning, everyone, and thank you, Andrew, for those incredibly kind words. While the focus of today is on our FY22 results, it would be remiss of me not to take the opportunity to say just how incredibly privileged and excited I feel about being given the opportunity to lead such a fantastic group, to lead an excellent, diverse, and talented team through our next phase of our sustainable growth journey. There's absolutely no doubt in my mind that we are starting from a position of strength. We've got momentum, and we'll certainly hear more about that today. We've got a hugely talented and diverse leadership team. We consistently deliver value through our Sustainable Growth Model.
Our end markets that we operate in are all well-aligned to the opportunities that we're seeing from those accelerating long-term global trends of safety regulation, of scarcity of life-critical resources, of technology, of climate change, and of course, the increasing demand for healthcare. You put all of that together, and it is truly a fantastic opportunity and one which I'm really looking forward to. That said, the immediate focus of today is our 2022 financial results, which actually are a really great reflection of that momentum that I've just referred to. As you've heard, we've delivered record revenue and profit, continued high returns, and solid cash flow while also substantially increasing our investment to support future growth.
A great set of results of which I'm particularly proud given the multiple economic, geopolitical, health, and social challenges that our teams have faced over the last 12 months. This performance once again underlined the value of our Sustainable Growth Model, ultimately enabling the group to deliver long-term sustainable value for all our stakeholders. This is represented well by the first slide. This shows our revenue and profit growth over the last decade. A period which has included the ongoing challenges arising from events such as Brexit, the COVID pandemic, and more recently, the conflict in Ukraine. It's excellent to see that compound annual growth rates of both revenue and profit in excess of our KPI at 11%. Importantly, for creating long-term sustainable value, this growth is delivered alongside consistent strong returns and continuous reinvestment for future growth.
Let's now look at the drivers behind this strong performance in the last year, and I'll focus first on the group level before giving a little bit more insight into the three sectors. We'll start with group revenue. As you can see on the right-hand side, revenue increased 15.7%, an improvement of over GBP 200 million year-on-year. Working from left to right, organic constant currency revenue grew 17.4%. This growth widespread, reflecting strong demand across all sectors and all major regions. This no doubt, in part benefiting from customers protecting themselves against disruption, but more fundamentally being driven by continued underlying market demand, supported by the long-term growth drivers in our end markets.
It's also great to see the contribution of 4.8% from acquisitions driven by a high level of activity with 13 acquisitions completed in the year, plus the acquisition of Deep Trekker Inc. shortly after the year-end. This was partly offset by the effect of two disposals, Fiberguide Industries, Inc. in the second half of the previous year and Texecom in August, both part of our ongoing portfolio management. This, together with a 3.3% negative effect from currency as sterling strengthened, completes the bridge to our reported revenue increase of 15.7%. Looking now at our revenue performance by destination. The chart on the left shows reported revenue split by destination and reported growth by region, and the table on the right shows the evolution across the year of reported revenue growth.
Starting with the chart on the left, as I say, great to see widespread growth with strong performances across all major regions. The rate of growth in each region mainly reflected the strength of demand in particular end markets, as opposed to any specific geographical differences. For example, the very strong growth in the U.K. was driven by fire detection within the safety sector, pipeline inspection and maintenance within the Environmental & Analysis sector. This together with strong performances in the smaller medical sector. These reported growth rates also include the contribution from acquisitions. This includes Static Systems Group in the U.K. from the prior year and the 13 acquisitions that we've made this year. This offset in part by the disposals of Fiberguide and Texecom, which principally affected the U.S. and the U.K. respectively, and from currency, as we saw at the group level.
Looking at the performance through the halves, that top right-hand box, great to see further sequential revenue growth of over GBP 50 million in the second half, with revenue 7% higher than in the first half and 13% higher than in the second half of last year. Let's look now at the organic constant currency growth rates between, by region spread across H1 and H2. As you can see, strong rates of widespread growth across all major regions, with the half years showing exceptional growth in the first half and continued strong growth in the second half. The main driver of the difference in growth rates between, the periods is the strength of the comparative period in the prior year. Bringing that to life a little.
For the group, there was a 23% increase in the first half against an 11% reduction in the same period last year, while further strong growth of 12% in the second half compared to a flat performance in the second half of last year. That said, it's worth noting here that if we take a step back from all of the detail around specific markets, around specific, H1, H2 comparators, and we look at the two-year CAGR growth rate, this has been circa 7%. Ahead of our KPI and reflecting the underlying growth and resilience of our model through what has been a very challenging period. I'll pull out some of the detail behind the regional trends as part of the sector reviews. Switching to adjusted profit.
We delivered a record profit with strong growth on both the reported and organic constant currency basis. Profit grew sequentially in the second half of the year. This despite the return of discretionary variable overheads and other costs as our business activity recovered through the second half. Looking at the detail and again working from left to right, organic constant currency profit was up 15.4%. As with revenue, profit growth in the half years was heavily influenced by the strength of comparative, an effect we're also likely to see next year, especially given the very strong return on sales performance that we saw in the first half of this year. The second half includes a net release of GBP 3 million from provisions.
This comprises a GBP 5 million release of the centrally held provision for the risk of customer bad debt as a result of the COVID pandemic, offset in part by an increase of GBP 2 million in provisions in relation to bad debt and contract risk relating to our decision to cease trading in Russia. The effects on profit of acquisitions, net of disposals and currency was similar to those on revenue, which then completes our bridge to the headline profit growth of 13.6%. Let me now give some more detail on the return on sales trends. Here you can see the return on sales trends for the 5 years prior to the pandemic. This is the same historic data that I shared at the half year.
As a reminder, we can see there was a very high level of consistency prior to the pandemic. With an average return on sales of 20.2% in the middle of our target range of 18%-22%. That's indicated on the slide by the gray shading. In the beginning of the pandemic, in reaction to the declines in revenue as a result of the first lockdown, the agility in the group enabled us to make material reductions in discretionary overhead costs, thereby ensuring that we maintained our return on sales. This shown via those lighter green columns. We then saw that period of exceptionally high return on sales. This during the second half of last year and the first half of this year, the blue columns. This driven by the delivery of stronger revenue dynamics, coupled with slower return of variable overhead costs.
Finally, in the new information, in the second half of this year, we saw a more balanced dynamic between revenue and costs as revenue grew strongly and variable overhead costs returned. The second half return on sales of 20.5% was more in line with historical levels and also included, as we previously flagged, incremental technology costs of GBP 6 million, as well as the GBP 3 million net release of provisions previously mentioned. This, together with the unusually high return on sales of 21% in the first half, resulted in a strong performance for the year as a whole, with return on sales at 20.7%. Looking forward, for the 2023 financial year, we plan to invest GBP 20 million in group-wide technology, up from GBP 11 million this year.
This investment focused on delivering enhanced security, improved data and analytics capabilities, and support for our companies in upgrading their operating technology and creating new digital models. That said, even with this investment, I expect 2023 to deliver a strong return on sales at levels in line with the second half of this year. Turning now to cash flow and net debt. I was pleased with our cash conversion at 84%, a solid performance given the growth in the year. This enabled us to maintain a strong balance sheet despite significantly increasing our organic and inorganic investment. Just to highlight a few of the key areas on the net debt bridge, and looking first at working capital, where we saw a higher than usual outflow of GBP 63 million. This was largely a result of the strong growth in the year, underpinned by strong underlying working capital control.
It was this discipline that allowed our companies to make selective investments in their stock of components and raw materials, which ensured the continuity of production and the ability to manage price increases, significantly benefiting our top-line growth. Moving on to CapEx. This was largely flat year on year, with both 2021 and 2022 reflecting a lower spend as a result of pandemic constraints. With these now easing, I expect capital expenditure to increase to approximately GBP 34 million in the coming year. This reflecting a more normal level of spend relative to the increased size of the group. The investment is largely focused on the expansion and automation of manufacturing facilities to support future growth. Moving on to net acquisition spend.
Great to see the increase to GBP 108 million, reflecting the 13 acquisitions completed in the period, earn-out payments from previous acquisitions, net of the funds received for the Texecom disposal. With other elements such as tax, pension contributions, and dividends in line with expectations, net debt at the year-end was GBP 275 million, representing a net debt to EBITDA ratio of 0.74 times, essentially unchanged in the year despite that significant organic and inorganic investment, and well within our typical operating range of up to 2 times gearing. Since the year-end, we've refinanced our syndicated revolving credit facility, which remains at GBP 550 million and matures in May 2027. We also completed a new private placement issuance of approximately GBP 330 million, with a 7-year average life.
Once the January 2023 tranche of our existing private placement matures, this will give us additional funding capacity of GBP 260 million. Together, our strong balance sheet and these new facilities give us significant liquidity and capacity to support organic and inorganic investment for future growth. Turning now to the sectors. Noting that I've included a revenue and profit bridge by sector in the appendices, and we'll start with safety, where we saw a strong performance reflecting strong demand for technologies that protect people, assets, and infrastructure. This strong performance was widespread across the majority of subsectors and all major regions. Revenue growth was 9%, with organic constant currency revenue growth of 16%. This included a reduction of 5% relating to the disposal of Texecom.
From a regional perspective, the UK saw the strongest revenue growth, led by fire detection and people and vehicle flow. This includes the successful execution of ongoing road safety contracts at Navtech and continued demand for touchless and automated entry devices, supporting good growth at BEA. Revenue growth in the USA was also strong and broadly spread by sub-sector. The principal drivers were in fire detection and strong demand from logistics customers for interlock products within industrial access and control. Also worth noting, good growth from products addressing the decarbonization of energy sources within pressure management and good momentum in emergency communication within elevator safety. Return on sales was consistent at 22.8%. This included increased investment in R&D, which rose to 5.6% of revenue, and also in technology, which included investment in enterprise system implementations at some of the sector's largest companies.
Moving now on to Environmental & Analysis, which I'm pleased to report delivered a really strong performance across all sub-sectors and this reflecting our focus on improving the quality and availability of life-critical resources and the ongoing impacts of climate change. This demand was widespread geographically with double-digit growth in all regions. Excellent progress, making E&A the second-largest sector in the group. Revenue was 25% higher on an organic constant currency basis. Breaking that down by region, the USA, which accounts for nearly half of the sector's revenue, reported the strongest organic constant currency growth. This was driven by further growth in photonics within optical analysis and in gas detection, which benefited from the post-pandemic recovery and some large new customer orders in the second half of the year.
Asia-Pacific also grew strongly, benefiting from customer demand for products supporting new fuel cell technology, a recovery in the pharmaceutical and beverage markets, and good progress in our gas detection businesses. The UK reported the slowest growth with a larger contract win in wastewater infrastructure, partly offset by lower order intake in clean water technologies from UK utilities. The sector delivered strong profit with growth of 23% and return on sales consistent at 24.8%. This with a reduction in gross margin as a result of product mix offset by continued strong overhead control. While there was a reduction in R&D expenditure as a percentage of sales from 5.7% to 5.1% driven by product mix, it's important to note that absolute expenditure on R&D increased by 11% to GBP 23 million.
Fantastic to see that continued momentum in M&A alongside that very strong organic performance with five acquisitions in the sector during the year and a further acquisition of Deep Trekker completed shortly after the year end. This good momentum reflected the investment that we made in a dedicated sector in M&A team, and also the increasing ability of our individual companies to identify and execute bolt-on acquisitions. Now completing the sector reviews with Medical, where we saw a reversal of the dynamics that we saw last year with strong growth in those sub-sectors with exposure to elective and discretionary procedures, and a reduction to more normal levels of demand for products and services in those companies related to the treatment of COVID-19. The net result was a strong and widespread performance with double-digit revenue growth across all major regions.
Revenue was 19% higher, 13% on an organic constant currency basis, with acquisitions making a strong contribution of 10% to revenue growth. Picking out some headlines by destination, the USA, which accounts for half of the sector's revenue, delivered good growth on an organic constant currency basis. This, reflecting increasing customer demand and a strong order book. On a reported basis, there was also the benefit from recent acquisitions, most notably PeriGen. I was pleased to see very strong growth in the UK, particularly in ophthalmology, with the region also benefiting from the acquisition of Static Systems Group in the prior year, with the UK now representing 10% of sector revenue. Switching to profit, this grew by 15% and 11% on an organic constant currency basis, with return on sales lower at 22.5%.
This reduction in return on sales include a substantial increase in R&D spend to GBP 27 million, representing 6.1% of revenue. This driven by an intensification of new product development and new product launches during the year. This increased investment was partly offset by an increase in gross margin driven by mix, ongoing overhead control, and also the benefit of the sector successfully managing pressures resulting from supply chain disruptions. Really pleased to see a good level of M&A activity in the sector with 5 acquisitions during the year, including PeriGen, which is a new standalone company, and 4 bolt-on acquisitions to enhance the capabilities of existing sector companies. Turning now to our performance against our financial KPIs. Overall, a really pleasing and very strong performance with revenue and profit growth significantly ahead of our KPIs and continued high returns.
This delivered while significantly increasing our investment for future growth, supported by solid cash conversion and the continued strength of our balance sheet. In summary, we delivered record revenue and record profit for the 19th consecutive year. There was strong growth on both the reported and on a constant currency basis. This was widespread across all sectors and all major regions. This growth delivered while significantly increasing both our organic and inorganic investment to support our future growth. Our cash performance was solid, and we maintained a strong balance sheet and liquidity position with significant headroom to support future investment. Importantly, this growth in investment delivered alongside continued high returns with strong return on sales and return on total invested capital at more than double our weighted average cost of capital. I'll now hand you back to Andrew for a strategy update.
Thanks, Marc. At the beginning, I outlined how Halma's Sustainable Growth Model is really key to our success, and I now wanted to provide you with a bit of an insight into the progress we've made on some of the components of that model. To start with, I want to look at two main parts of our growth strategy. That is our organic investment and also then after that, what we're doing with M&A. I think one of Halma's key strengths is by deploying this model, we are able to deliver a strong performance in the shorter term, and yet at the same time simultaneously increase our investment to build growth for the longer term. Alongside that CapEx that Marc mentioned earlier on, let's drill down in a bit more detail to look at what we've invested with from an organic perspective. Firstly, R&D.
Our R&D expenditure is determined by each of our operating companies. It's not a top-down driven process. This year they spent GBP 85 million, which is a 21% increase on what they spent in the prior year, which really reflects their confidence in the growth prospects of their business. Within that, we spend money on digital solutions, digital products and solutions, and it was really pleasing this past year to see digital revenue increase by 15% and representing over 40% of total group revenue. Revenue from IoT solutions and from software and services were up by over 40% and now constitute around 7.5% of total group revenue. That's no surprise 'cause we're helping to accelerate our company's adoption of IoT and digital product development solutions through several initiatives.
For example, using external partnerships to identify some common technology building blocks that they can very quickly integrate into their solutions. As you've heard in previous results, making minority investment in early-stage businesses through our Halma Ventures program. Finally, we're investing in technology. Technology that supports our operations and our business activities. This year, that increased by GBP 7 million to GBP 11 million. We're upgrading our IT infrastructure, and that really will enable us to simplify the way in which our central functions can collect the data we need from our operating companies. Examples of that include a new treasury management platform, and we're starting on a new platform for our finance as well as for talent management.
You wouldn't be surprised to know that we also continue to invest in our global security architecture, and that's also given us the added benefit of a more secure connectivity between our operating companies. I think with all of that going on across the group, it's been really pleasing to see that the operating companies themselves are now looking at how they can invest more in their own systems as they become more digitally enabled businesses for the future. That's the organic investment. Let's take a look at the M&A investment. Marc touched on this earlier because our business model and our organizational structure is built to support continuous M&A activity. It's purpose-driven, and you can see some of those growth drivers on the right-hand side of this slide.
We're focusing on companies and markets where growth opportunities are driven by these factors such as these, which really are real global challenges. Whether it's climate change or protecting people at work, the growing demand for healthcare, we want businesses that are meeting those demands. We also look at M&A as not only adding revenue and profit, but also adding capabilities to the group. It also allows us to de-risk our exposure to markets which may no longer be aligned with our purpose or no longer give us good growth and high returns in the longer term. What you saw this year was a great example of all of that in action. It was really pleasing. They were broadly based geographically, so we made acquisitions in the UK, in the USA, in several mainland European countries, in Australia.
They were also spread across all three of our sectors, and as Marc mentioned, that was really pleasing to see after adding that dedicated resource to the E&A sector. There were three standalone companies and 10 bolt-ons enhancing the existing company's technologies and market reach. Many of our companies now have the size and capability to grow through acquisition as well as organically, which has been a really important development, I think, in the group's growth potential in recent years. We mentioned the disposal of Texecom for GBP 65 million, and also following the year-end, we completed the acquisition of Deep Trekker for GBP 37 million. As we look ahead, I can still see how M&A will continue to be a strong contributor to Halma's growth. Each sector's got a healthy pipeline. Our search effort is still targeting those private owner-managed businesses which are not necessarily for sale.
We're adding M&A resources, not only in each of our sectors, but also building that in Asia-Pacific. Finally, we can see a larger growth opportunity in our medical sector. In fact, from now on, we're gonna rename that sector our healthcare sector to reflect that wider playing field and more a better alignment with our purpose. Let's now look at our business model because it gives us the agility we need in a fast-changing world. I think it's fair to say it's probably been tested like never before over the last couple of years, and it's been a huge benefit to us. Because we face many of the challenges that many businesses have faced, whether it's substantial increases in demand coming out of the pandemic or indeed through new opportunities or disruptions to our supply chain or increasingly competitive labor markets or indeed rising costs.
It's our companies led by their boards that have the resource, the agility, and the authority to respond quickly to changes in their markets. They can also benefit from the collaborative culture that we've got, so they can address new opportunities or solve problems by collaborating with other Halma companies. Of course, they've got access to Halma's growth enablers, which gives them access to high-level expertise of a large global business, while at the same time retaining the advantages of being small and agile and close to their markets. I want to share some specific examples just to bring this to life a little bit. We're gonna start off with an example where we've been developing new products and solution. Ocean Insight is our Florida-based spectroscopy company, and they're using their optical sensing technology to enter the metal recycling market, a new opportunity.
They've developed a new solution to rapidly sort specific alloys during the recycling process. This is allowing for significant 95% energy savings over the cost of mining for primary aluminum. We've then got some good examples of introducing new working patterns, and I think the companies have collaborated particularly well on this. An example of that would be Fortress Interlocks, our safety interlock business based in the U.K., and HWM, our utility telemetry company, also based in the U.K. They've both put in place new shift patterns working around a four-day week for their manufacturing operations. Indeed, Fortress Interlocks, having done that, have added a new three-day shift from Friday to Sunday, which is not only allowing them to attract a new pool of talent, but also increase capacity.
It's fair to say I think we've seen some unexpected benefits from this. Not only are we seeing improving employee engagement, but also the manufacturing staff now feeling that they've also gained greater flexibility to their working week in working alongside their office-based colleagues who obviously are enjoying the benefits of new hybrid working arrangements. Mini-Cam have been investing in new production capabilities. That's our UK-based pipeline inspection company. They've had to quickly adjust to supply chain challenges by adding new in-house manufacturing. One of the challenges they have was that they had to source an alternative camera chip that required a completely new soldering process for their, one of their core products. With our help, they were able to very quickly order that new equipment, install it, and keep production running so that they could keep serving their customers.
Finally, a number of our businesses have been flexing their global operational footprint as regional changes have happened over the past couple of years. I think a good example of this is BEA, our motion and safety sensor company. Ahead of the lockdowns in China, they were able to build stock ahead of that and ship it into Belgium, into their plant in Belgium before the lockdowns took effect, and at the same time increase their manufacturing in Belgium and their other location in the USA to meet the increase in demand for their products and de-risk their operational footprint and ability to serve their customers. These are just a few simple examples, but they're a great way of showing the power of Halma's business model, which gives our local leaders the agility and the autonomy to act in their best interest without seeking approval first.
Now I want to look at a particularly important topic in my mind, and that is how we invest in our leadership and people. It's vital because Halma's decentralized organizational structure puts a premium on the quality of leadership we have in our sectors and in our companies. On the left-hand side of this slide, I've summarized what I believe are the qualities we look for in our leaders and our teams. We attract and retain people who are passionate about creating innovative solutions to make the world a safer, cleaner, healthier place. People who have that entrepreneurial spirit, who are agile thinkers, and who also have that strong sense of ethics and integrity.
They need to really want that sense of empowerment, but at the same time understand that they need to be accountable for the performance that they deliver. Finally, we need people who actually enjoy being part of teams where diverse viewpoints enable better decisions and better business performance. Where have we been focusing our investment recently? Well, firstly, we're really focusing on proactive succession planning, as well as identifying and developing our high potential leaders. That would include moving people around the group to broaden and deepen their leadership experience before taking on bigger roles. We provide leadership training for all our senior leaders, particularly as we come out of new challenges such as the pandemic. One of the things I've been really pleased about is throughout the last two years, we've kept our graduate program running.
It's our Halma Future Leaders program, and that's continued throughout the pandemic and is now in its 10th year. It's great to see the progress there. We've now got 11 of our former future leaders sitting on company boards, and this year we appointed our former HFL, our first former HFL, to an MD role with one of our businesses. We've always got to work to continually strengthen and deepen our culture, and it's all about finding ways to support our leaders to make rapid progress on the big issues that they're facing, whether it's innovation or digitalization, sustainability or inclusion. Given the impacts of the pandemic, we're working hard now to reconnect the group together, to reconnect our Halma leaders through face-to-face programs, reestablishing that collaborative culture, embedding the Sustainable Growth Model that, particularly for people who've joined us recently, it's important that they understand.
Finally, you can see the benefits, the outcomes from all of this activity. First and foremost, Halma leaders are committed to sustaining success over both the short term as well as the longer term. That's exemplified by this past year, where you've seen very strong growth in returns and increased strategic investment. Secondly, we've seen this past year the benefits of effective succession planning. All three of our sector CEOs are internal promotions from the divisional CEO role. We've appointed two new divisional CEOs from within the group. We've seen the seamless transition of Louise Makin from Paul Walker as the Chair of our board, and I'm sure it's gonna continue now with the transition from me to Marc as the Group CEO.
Next, I think something I'm particularly proud of over the last five or six years has been the strong progress that we've made in diversity, equity, and inclusion because it really has transformed our business and made us a better business. We can see the tangible results of that through reducing our gender pay gap, through the female representation on our boards and leadership groups getting stronger and deeper. For example, 50% of the Halma 's board, 60% of our executive board, and 55% of Halma Future Leaders are women. We've got a current priority of helping our operating companies build gender diversity on their boards, and we're making good progress there. Our female representation this past year has increased from 22% to 26% on the way to our 40%-60% gender balance target by March 2024.
Of course, it's not just about gender. We're also focused on ethnic diversity and at board level, we are meeting the target of at least one racially diverse board member at both Halma and executive board levels. In the wider group, 20% of our senior leaders and 13% of our Halma Future Leaders are from an ethnically diverse background. In fact, we believe DEI is so central to our success that from this year forwards, we're folding that into our remuneration plans from me down to the operating company boards. You don't make progress, you don't have continued high engagement scores without supporting it with global programs across different roles, functions, geographies.
We shouldn't underestimate the value and the power of having a new global gender neutral parental leave policy or creating that flexibility at work which also enables greater gender parity in the caring responsibilities. As I mentioned earlier, just equipping our leaders with the skills to manage high-performing, more diverse and inclusive leadership teams. This year, our employee engagement score was 76%, retaining most of the improvements that we made last year coming out of the pandemic, and we had a high response rate of 85%. I think that's a considerable achievement, particularly considering the impacts of the pandemic and obviously the ongoing economic factors that everyone's facing. Finally, a few brief words about sustainability and our sustainability framework because as I've mentioned earlier, it's always been, I think, at the heart of Halma's approach.
Our new sustainability framework is part of our sustainable growth model, and we've created it to really help our companies think about how to address the needs of ESG and climate change. We've identified our three key sustainability objectives, all highly aligned with our purpose, all aligned with the key issues that are facing us and also our stakeholders. They include our circular economy, DE&I, which I've just talked about, and then climate change, which I can give you a bit more on now. On climate change, we've started to make real tangible progress this year, developing the roadmap we need towards hitting our 2050 net zero target. For the first time, we've reported against TCFD. The exciting thing there is it not only identifies the challenges, but also the growth opportunities that are available to Halma by helping other people address their TCFD challenges.
We've also made some really good progress towards our 2014 net zero and 2030 1.5-degree Scope 1 and 2 emissions targets. In this past year, we saw a 35% absolute reduction in our GHG emissions from our 2020 baseline, and that's despite the fact our revenue has obviously grown strongly by 14% over that two-year period. We're rapidly increasing our use of renewable electricity. That's increased from 8% in 2020 to now 42% this past year. Again, well on the way to our 80% target by 2025. From 2023, we are targeting to at least have 4% improvement in our energy productivity each year.
We recognize that Scope 1 and 2 emissions, however, are just a small proportion of our total carbon footprint, and reducing Scope 3 emissions requires a significant and new effort from everyone. One thing I know from leading this group for the last 18 years is if we get the right mindset in our leaders, we will make very positive and rapid progress. I think we've certainly seen that on DE&I as a great exemplar of that over the last four or five years. This past year has really been spent getting that mindset right. Each of our companies has either developed or is developing their individual sustainability plans, which address both increasing their positive impact as well as reducing the negative. Each sector is assessing their challenges and opportunities and incorporating that into their M&A strategies.
It's for these reasons that I really believe that we can start to show strong progress towards setting those appropriate Scope 3 goals during the coming financial years. Let's finish up with a summary of what we've heard this morning, as well as our outlook for the year ahead. We've really given you an insight into how the elements of Halma's Sustainable Growth Model have enabled us to make really substantial progress this past year and provide us with a really strong platform for the longer term, driven by our purpose, our culture, our DNA, but with that continued focus on markets which offer us sustainable long-term growth. You've also heard our organizational model gives us both scalability and agility that we need to have, that you need to have to be successful in a fast-changing world.
We've also seen that we're substantially increasing our investment, whether it's organically or in M&A. That, together with our financial strength, will ensure that we can continue to meet those growing customer needs both now and in the future. To bring things right up to date, I'm pleased to say that we've had a positive start to the current financial year. We have a strong order book, and order intake is ahead of revenue and in line with the very strong order intake we saw in the same period last year. Therefore, we expect to make further progress in financial year 2023 and to deliver good single-digit organic constant currency revenue growth and a return on sales similar to the second half of financial year 2022. That's the end of the presentation, and now we've got some time for questions.
There are two ways you can ask questions this morning. You can either raise your hand using the tool at the bottom of your screen, and I invite you to ask your question verbally. Alternatively, you can just type the question in which Marc Ronchetti or I will read out, and then we can answer that. To kick off, our first question, I think comes from Mark Davies Jones. Mark?
Sorry, I'm now unmuted, hopefully. Morning, both, and thank you. Can I ask about those central technology investments? I think a year ago, we were thinking that the year just done was gonna be something of a peak year of spend with the Software as a Service costs coming through and all the rest of it. You're looking at another substantial step up again. How do you look at payback on those big central investments? Is the suggestion that we should not be looking for kind of more operating leverage going forward, even on some very strong top-line trends, that you can continue to find profitable ways to redeploy that in higher investments centrally?
Yeah. Morning, Mark. Marc Ronchetti . Yeah, just picking up on that. The first point to make was really the reason that we called it out separately last year was much more driven by change in accounting policies, in that we had that shift that said that a large amount of spend that historically would have been capitalized was going to be expensed. That said, your point remains that historically at the center of the group, our technology costs have been around sort of GBP 5 million per annum. That increased this year up to GBP 11 million as we look to invest in areas such as security and starting to invest in our central systems.
It was much more of a catch up and an upgrade in terms of treasury management systems, looking at the ways that we collect data from our operating companies to streamline that to allow them to focus on growth, and also in terms of talent and people management. In addition, we're looking at making investments centrally, very much along the lines of the central growth enablers, where we're looking at building out centers of excellence and having expertise in the center that can help our operating companies move towards new digital business models. I guess there's two or three different elements there. As I look forward into FY23, we're seeing
Those head office projects come through next year to the tune of circa GBP 5 million. We've then got the centers of excellence and the upgrade spend on security that will be a similar amount. Outside of that, as I called out in my presentation, we're also doing upgrades to ERP systems in our individual operating companies. Again, similar amount of that coming through, which helps you build up to the GBP 20 million that we flagged. I guess the important thing is looking forward. Clearly, a lot of those things that I've talked to are one-off investments that are coming through in a single year. That said, with where everyone's going in terms of business, in terms of digital and technology, I see there being a continuing trend of investment in technology.
I wouldn't necessarily see it at that higher level of GBP 20 million, probably closer to between GBP 10 million and GBP 15 million moving forward, and there's just gonna be different areas that we're looking to invest to either enable that growth or to upgrade. Then I guess the final point to your question, which is looking for a return on that investment. All of the investments that we're making, we're thinking through, is that about catching up? Is that about building in future ambition for growth? Is that about customer needs? What are they requiring? We're looking at that individually. I think as a whole, as I said in my presentation, the important way to think about this is we're spending and investing that amount of money and maintaining our return on sales at above 20%.
We see that very much as an ongoing cost for the business.
I think just one thing to add. I think part of the return on investment of part of that investment, particularly in the central investment, the central functions, is, you know, one of the things we're always working hard to do is to ensure that we're not placing a huge burden on our operating companies to keep reporting all the information we require as a FTSE 100 group and the things we need to report on. So arguably, a lot of the benefit of our central investment is gonna come through less of a time burden, if you like, on the operating companies giving us what we need because we'll be able to lift that automatically off their system.
Yeah, I think there is gonna be benefits directly or indirectly off of all three of the elements of investment that Marc mentioned.
Thanks very much.
Thanks, Mark. Should now move over to David Farrell. David, over to you for your question.
Hi, morning, and congratulations on your tenure, and I really hope you look forward to your retirement. I just had a quick question on the M&A strategy. If I look back over the last 7 years, in 5 of those years, you haven't actually achieved the 5% incremental growth at a profit level from M&A. Just wondering if you could talk around that. Is that just specific circumstances, or is that a KPI which is actually increasingly hard to hit because you have to do so many M&A transactions to get there? Thank you.
Yeah. I think, you know, the reality is the last couple of years in particular have been particularly tough just because of that, you know, the disruption in everyone's business lives and markets and companies to sort of get that consistency. There is no doubt that M&A is a lumpy activity. I suppose I'd take a step back. As I said in the presentation, absolutely I believe that looking at the markets that we're in, the sectors that we're in, the fact that we're putting even greater resource into the M&A search effort reflects the fact that we and I still see a very strong M&A component to our growth strategy in the future. There's no doubt that looking for privately owned businesses operating in niches within those three sectors, there are plenty of opportunities out there.
It comes down to that capital allocation question of making sure we're finding the right kind of companies to fit in the group. We've always looked at it through that lens rather than we've got capital to deploy, therefore, we must deploy the capital. I think one of the things that we've been working harder on over the last 18 months has been recognizing on the one hand, we've got the additional lever of growth of doing more bolt-ons for our existing businesses. At the same time, we do need to keep a healthy element in our pipeline of, let's say, GBP 5 million-plus profit businesses that can turn the dial and give you that on average, that 5%+ component to our growth model. I think we're doing.
What we're actually doing at the moment is positioning ourselves to get closer and above that target that we've had in the group for many years. I don't think that the underperformance over the last five years is below that KPI has been down to lack of opportunities. I think it's probably been certainly in the last couple of years, more down, just the external environment has made it quite difficult. Looking forward, as I say, very confident that can continue. Sorry, that we can continue to have that as our KPI and deliver against it.
Okay. Thanks. Sorry, just a very quick follow-up. In terms of China and the disruptions that maybe you're encountering there currently, that'd be useful to get some insight, please.
Yeah. Take a big step back. From a revenue point of view, China is around 7% of the group. From a manufacturing footprint point of view, we've never been a group, as I mentioned in the presentation, who's offshored our manufacturing. The bulk of our manufacturing all happens in Europe, in the USA and other parts of the world. Having said that, clearly there's been some impacts on individual businesses through the disruption of lockdowns initially in Shanghai, which as we know have been released and there's been some sporadic, there's been some new lockdowns brought in place, and then there's been one or two areas of Beijing.
So far the companies have found a way to deal with that, either through the buildup in working capital that Marc mentioned in his side of the presentation, or indeed I mentioned one of our businesses, BEA, they're building ahead and transferring some of the manufacturing to other plants elsewhere in the world. You know, it comes back to that fundamental thing that the agility in the business, the fact that we are decentralizing the way we manufacture, we manufacture close to our markets, and the agility that gives us has proved to be, at least so far, adequate to be able to compensate for any of the disruption that we're seeing.
Great. Thank you very much.
Thanks, David. We've got a couple of questions that have been sent in now. First of all, should take the ones from Mike Tindall. Mike had two questions, and the first one is: Is it reasonable to expect the higher R&D spend and investment in technology will drive an acceleration organic growth in the future? Maybe if I take that one. We've touched a little bit on the return on investment in the technology spend. From an R&D point of view, you know, there are two ways, two things I think which drive a higher R&D spend. One is obviously our M&A activity can bring higher R&D content businesses into the group, and divestments can also have an impact. You know, I do think that there.
That the uptick in R&D investment does reflect a growing ambition in our business, coming out of the pandemic. That there is this sense that we are very well attuned to where many of the growth opportunities are coming over the next five or 10 years, whether it is safety, healthcare or the environment. Obviously, the expectation from that is that we will get a return on the investment. It's interesting. We're certainly having the conversation internally as to whether you know, to what extent the organic growth opportunity has improved further, from before the pandemic as a result of some of the changes that we're seeing. Certainly at the individual company level, we're seeing that higher ambition come through in terms of their own strategic growth plan.
You know, time will tell what we actually deliver on that organic growth and whether we get that uptick in performance. As I say, certainly the ambition is there, reflecting both in terms of the growth strategies that the companies have and also the way in which that's translated into that higher R&D spend. The next question is f rom Mike, Can you talk about cost inflation and the benefit you may have seen in revenue from pass-through pricing? Marc, would you like to handle that?
Yeah, of course. I think the first thing to say is that it certainly varied across our companies, which is a huge benefit of that diversity in the portfolio and the decentralized nature of the business. I also think as you sort of take a step back, yes, we've been facing them, but at the same time, we can see from the results this year in terms of the growth and the returns, how resilient we have been and what a great job the operating companies have been doing in terms of finding a way through. That said, digging in a little bit deeper, I think it's worth saying certainly on the pricing side, a reminder that we are often selling critical components, and we're also selling high margin products.
We've maintained our gross margin at just over 62%, so that does give us relative pricing power. In terms of the impact on the revenue in FY22, I would estimate that around 1%. Going forward into FY23, based on actions that have been taken and forecasts of actions that may need to be taken, we're looking at somewhere between 2% and 2.5% for the year ahead in terms of that pricing. If I then think about where are the inflationary pressures that we're seeing, as I say, they are different across all of the individual companies, but I think we could characterize those. Firstly, around supply chain. To that point, you know, we've got the decentralized businesses who have got the agility and the authority, and we've also got the ability to move quickly.
We don't have a global supply chain. We have individual supply chains. We're seeing in those areas of semiconductors and packaging, certainly businesses are either designing out or they're looking for alternative supplies, whether that be on their own or whether that be reaching out to other companies across the group to help. That's certainly helped from a supply chain perspective. From an energy cost perspective, we are a relatively low capital and production capacity business, and therefore energy is a small percentage of our total cost. Not as material, but seeing some flow through. Then finally, with labor, there's no doubt that we're seeing increased labor costs, whether that be to attract new talent or whether that be to retain existing talent.
Again, very much a bottom-up exercise in terms of what's required at those local businesses. I think it's fair to say
That we've seen a little bit more pressure in the US than we have elsewhere. Again, the individual operating companies are working their way through. I guess then the final point that I would make is that across the Halma group, we're built for growth. Therefore we do have that opportunity to make some improvements around productivity and efficiency as we work our way through the inflationary pressures, moving forward.
Thanks, Mark. Now I've got actually one question from Andre Kukhnin from Credit Suisse. Actually, this is one for me. It says, "Looking back through your tenure, Andrew, are there any areas of your focus that you would say pay back surprisingly strongly?" It's a great question.
I think off the top of my head, there's probably three areas I look back on and think, "Thank goodness I did that." I think first one would be very early on when I took over in the first couple of years was just being really clear on the portfolio. In the first couple of years I took over, we had about a quarter of the portfolio businesses that didn't align with our strategy. Our long-term growth strategy weren't giving us the financial returns, and just being really clinical around divesting those and making sure we were left with a business that was all aligned to delivering what we wanted and all aligned with our growth strategy and who we said we were, I think was really important. Not wasting time and management time on things that weren't taking us forward.
I think the second point is probably you could argue that the most critical decision I had to make would've been about six, seven, eight years ago, where we had to answer that question around scalability, the organizational model. Do we become a group that has capacity to own 50 companies and it's all about consolidating around that base and M&A and all the rest of it? Or do we build scalability into the organization by adding another management layer? Deciding to create the sectors and the sector CEOs with their sector boards has proven to be a really, really powerful way forward because it's allowed us to add greater expertise at the sector level. It's really accelerated the M&A activity at the sector level.
The one thing I didn't fully appreciate was that it gave me the ability at the executive board level to move from having a very operational executive board to having an executive board that had that combination of operational leaders with then some real deep functional experts. Whether that's on the talent side, the digital side, the legal side, the technology side. It's given us an executive leadership team, and it felt very different these last five or six years, effectively leading and running a group through a group, through a leadership team, rather than it being very much feeling as if it was the CEO's job to make all the key decisions. That's been an important change I think that's worked out really well.
I think the final one, and it's probably really come to the fore in the last three or four years, is having then thought about how do you scale up the organization was the importance of clarity. The importance of clarity over the purpose of the business, the importance of clarity over our Sustainable Growth Model. Because as you're growing, the inevitable happens. You have less, as a CEO, direct involvement and interaction with people in your organization. Really nailing down why the business exists, how we do things, what it means to be successful in the group, has been hugely helpful as we've continued to grow and develop the talent within our organization and bring businesses into the group.
Those would be the three things off the top of my head that I think about. The discipline around the portfolio, understanding how we should scale our organizational model as we grow, and then thirdly, just making sure that we really have clarity over the purpose and also the DNA, the Sustainable Growth Model that really underpins Halma's success over the longer term. With that, I think we've come to the end of our questions. Thank you everyone for joining the call today. Thanks for your support, and look forward to seeing you at the half year results. Thank you. Thank you.