ii view: safety conscious Halma on track for more growth

First-half trading update to 30 September

ii round-up:

Safety product maker Halma (LSE:HLMA) today flagged trading in line with management expectations, with further progress made during the first half to late September despite mixed end-markets. 

Revenue excluding acquisitions so far this financial year outpaced those seen during the first half of last year, with adjusted profit margin expected to be modestly higher. The City currently expects full-year organic revenue growth of close to 6%, driving adjusted profit for the current full year to a potential £460 million, up from £424 million last year. 

Shares in the FTSE 100 company rose 1% in UK trading having come into this latest announcement up by around 14% year-to-date. That’s significantly better than a 28% fall for measuring instrument maker Spectris (LSE:SXS). The FTSE 100 index itself is up 7% in 2024. 

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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.

Analysts currently expect good growth at the product safety and environment related businesses to more than offset headwinds for health, given the recent read across from other health related businesses.  

Halma continues to expect a strong full-year cash performance, supporting substantial investment in both organic and acquisition fuelled growth over the medium to longer term. 

Four bolt-on acquisitions this year have cost a total of £85 million. They included MK Test Systems, a UK marker of electrical testing equipment, and Advantronic, a Spanish fire alarms manufacturer.  

Broker UBS reiterated its ‘buy’ stance post the update, flagging price target of £31.50. First-half results to 30 September are due 21 November. 

ii view:

Established in 1894, Halma today 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, suspected headwinds for the health division are not to be dismissed. Asia Pacific sales retreated close to 3% over its last fiscal year given a challenged Chinese economy. An increase in the pound is providing some currency headwinds, while both global economic and geopolitical tensions persist. 

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To the upside, a diversity of both product and geographical regions exists. Health and safety related products are arguably required 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 a modest forecast dividend yield of just 0.9%.  

For now, and despite ongoing risks, this well managed FTSE 100 company continues to justify its place in many already diversified long-term focused 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