ii view: FTSE 100 safety products expert Halma stays on track

An enviable dividend track record and exposure to potentially less cyclical health and safety sectors. We assess prospects. 

First-half trading update to 30 September

ii round-up:

Health and safety product maker Halma (LSE:HLMA) today flagged "good" trading during its first half to the end of September, despite the operational environment remaining challenging. 

Organic revenue growth on a currency adjusted basis had been seen across all sectors, with expectations for full-year revenue growth unchanged. 

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Halma shares fell by around 4% in UK trading having come into this latest announcement down by around a third year-to-date. Shares for fellow specialist engineers IMI (LSE:IMI) and Morgan Advanced Materials (LSE:MGAM) are down by a similar amount. The FT All World index is down by over a fifth year-to-date as investors fear a global economic slowdown. 

Halma’s safety technologies protect and save lives, allowing the safe movement of people in public areas along with protecting both assets and infrastructure across the workplace. Its medical devices enhance lives while the environmental business helps improve food, water, and air quality.

The fall in the value of the pound was highlighted as having a positive currency translation effect on Halma's results and is expected to continue doing so during the second half.

Having restarted bolt-on acquisitions following the pandemic and making 13 acquisitions during its last financial year, the FTSE 100 company has only made one acquisition year-to-date. In April, it paid about £36 million for Deep Trekker, the Ontario-based manufacturer of remotely operated underwater inspection robots.

First-half results are scheduled for 17 November.   

ii view:

Headquartered in Amersham, Buckinghamshire, Halma employs over 7,000 personnel across more than 20 countries. Safety products generate its biggest slug of sales at around two-fifths, with the balance split almost evenly between medical devices and environmental and analysis related products. Its customers include utility companies, healthcare providers, commercial and public buildings, and energy and resource corporations. 

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For investors, a highly uncertain economic outlook, with interest rates rising and a cost-of-living crisis battled by both consumers and corporations cannot be overlooked. The retirement of its chief executive of the last 18 years offers some uncertainty, while an estimated forward price/earnings (PE) ratio above the 10-year average suggests the shares are no bargain. 

More favourably, quality and consistent growth do not come cheap, health and safety and medical products are likely to prove less economically sensitive than others, while the group’s dividend record is enviable given more than 25 years of annual consecutive payment increases. 

On balance, and while some consideration for outlook uncertainty remains sensible, Halma continues to demonstrate attractive, robust defensive qualities.

Positives: 

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

Negatives:

• Economic and geopolitical outlook uncertainty
• Valuation not obviously cheap

The average rating of stock market analysts:

Hold