Interactive Investor

ii view: Halma rockets after 21st consecutive year of record profit

Aiding workplace safety and making products to tackle climate change and pollution. We assess prospects for this unsung hero of the FTSE 100.

13th June 2024 11:41

by Keith Bowman from interactive investor

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Full-year results to 31 March

  • Revenue up 10% to £2.03 billion
  • Adjusted profit (EBIT) up 12% to £424 million
  • Final dividend of 13.2p per share
  • Total dividend for the year up 7% to 21.61p per share
  • Net debt up 9% to £653 million

Chief executive Marc Ronchetti said:

"We have made a positive start to the new financial year. Our order intake in the year to date is ahead of both revenue and the comparable period last year. We expect to deliver good organic constant currency revenue growth in the year ahead."

ii round-up:

Safety product maker Halma (LSE:HLMA) today detailed a 21st consecutive year of record profit, with accompanying management guidance for the year ahead pointing to further growth in sales and profit. 

Adjusted profit for the year to late March rose 12% to £424 million, beating City forecasts, driven by increased sales at its environmental analysis equipment unit and a recovery in profit margins for health & safety products. A final dividend of 13.2p per share takes the total payment for the year up 7% to 21.61p per share, its 45th consecutive year of at least 5% growth.

Shares in the FTSE 100 company rose 10% in UK trading having come into this latest announcement up by close to 3% year-to-date. That’s less than a near 7% improvement for the FTSE 100 index itself in 2024. 

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

Environment related sales rose by a fifth year-over-year to £658 million, fuelled by demand for water analysis and photonics, or optics potentially linked to customers investing in digital and data capabilities.

Revenue from safety products climbed 6% to £823 million, with profit growth of a quarter year-over-year aided by a return to more normal supply chain functionality following disruption from the pandemic. 

Healthcare, or medical device sales declined by 2.6% to £553 million, hindered by ongoing destocking by customers and again following the pandemic. 

Eight bolt-on acquisitions were made over the year at a cost of £292 million compared to seven purchases last year for £397 million. 

Halma’s AGM is scheduled for 25 July. 

ii view:

Started in 1894, Halma today employs over 8,000 people across more than 20 countries. Customers include utility companies, commercial and public buildings, healthcare providers, as well as oil & gas and mining companies. Geographically, the US generates its biggest slug of sales at 44%, 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, Asia Pacific sales retreated close to 3% over this latest year, hindered by a more challenged Chinese economy. Uncertainty regarding the outlook for both the global economy and geopolitics persists, costs for businesses generally remain elevated, while the impact which currency movements can have should not be overlooked.   

On the upside, a diversity of both products and geographical regions exists and safety products are in demand whatever the economic backdrop. Ongoing bolt-on acquisitions continue to aid growth, while a dividend track record of more than 40 years of annual consecutive dividend increases is highly enviable, despite leaving the shares on a modest forecast yield of around 1%.  

In all, and despite ongoing risks, this well managed company continues to justify its place in 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

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