ii view: blue-chip Halma breaks records

First-half results to 30 September

• Revenue up 13% to £1.07 billion
• Adjusted pre-tax profit up 18% to £209 million
• Interim dividend up 7% to 9p per share
• Net debt/EBITDA of 1.27 times, down from 1.35 times in late March

Chief executive Marc Ronchetti said:

“It has been a successful first half for Halma. These results further extend our track record of delivering strong and compounding revenue and profit growth, substantial cash generation enabling continued investment, and returns well above our cost of capital, while growing a safer, cleaner, healthier future for everyone, every day.

“We are well positioned to make further progress in the remainder of the year and in the longer term.”

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ii round-up:

Manufacturer Halma (LSE:HLMA) today detailed new sales and profit records, led by growth at its environment and analysis business.

Revenue for the first half to late September rose 13% year-over-year, breaching £1 billion for the first time and driving up adjusted pre-tax profit by 18% to £209 million – its first time above £200 million. Both marginally beat City expectations, with the dividend hiked 7% to 9p per share. 

Shares in the FTSE 100 company rose 6% in UK trading having come into these latest results up 10% year-to-date. That’s way better than a 35% fall for measuring instrument maker Spectris (LSE:SXS). The FTSE 100 index is up 5% in 2024. 

Halma’s safety technologies protect lives, allowing the safe movement of people in public areas as well as protecting workplaces. The environmental business helps assess climate change and pollution while the health division makes medical devices to enhance lives.

Environmental related sales climbed 27% during the period to £361 million, fuelled by demand for optical analysis and technologies supporting the transformation of digital and data capabilities. 

Safety product revenues increased 11% to £445 million, driven by demand for arenas including fire and worker safety as well as solutions to control safe industrial access.   

Revenues for healthcare products stayed flat year-over-year at £269 million, and came given a broadly subdued healthcare backdrop, although with some early signs of modest improvement.   

Geographically, sales for the USA rose the most, up 22% at £492 million. Asia Pacific sales improved 11% to £148 million with UK sales improving 6% to £152 million.

Halma reiterated its prior full-year guidance, pointing towards ‘good’ organic currency adjusted revenue growth and an adjusted profit margin around 21%. That’s potentially up from 2023’s 20.8%. 

ii view:

Headquartered in Amersham, Buckinghamshire, Halma employs over 8,000 people across more than 20 countries. Group customers include utility companies, commercial and public buildings, healthcare providers, as well as oil & gas and mining companies. The US generated its biggest slice of revenues at 44% last year, followed by mainland Europe at 21%, the UK and Asia each at 14% and the rest of the world the balance of 7%. 

For investors, a subdued healthcare sector following the ups and downs of the pandemic warrants consideration. Mainland Europe sales declined 1.5% on a currency adjusted basis over this latest period. Significant overseas sales can generate currency headwinds, while both global economic uncertainties and geopolitical tensions persist. 

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More favourably, a diversity of products and geographical regions regularly sees challenges for one area offset by positives for another. Health and safety related products are arguably required whatever the economic backdrop. Ongoing bolt-on acquisitions continue to assist growth, while a record of more than 40 years of consecutive annual dividend increases is highly enviable, despite the shares trading on a modest forecast dividend yield of around 0.9%.  

On balance, and allowing for continued risks, this well managed FTSE 100 company continues to justify its place in many already diversified long-term focused investor portfolios.

Positives: 

• Diversity in both products and geographical sales 
• Ongoing bolt-on acquisitions

Negatives:

• Economic and geopolitical outlook uncertainty
• Currency movements can hinder performance

The average rating of stock market analysts:

Hold