ii view: superstar stock Halma proves resilience

Why this tech conglomerate is one of the FTSE 100's top 10 performers this year.

Covid-19 trading update

• Adjusted profit for 2019/20 year to be in a range of £265 to £270 million
• Revenue of approximately £1.33 billion expected
• Full-year results now due on 14 July 2020

Chief executive Andrew Williams said:

"Through this current challenging period, many of our companies are demonstrating how they are living Halma's purpose of 'growing a safer, cleaner, healthier future for everyone, every day', by supporting the fight against Covid-19 directly and indirectly.

"Our agile business model, strong positions in markets with long-term growth drivers and the talent and dedication of our people are expected to ensure that we will perform relatively resiliently in the short term and be well positioned to resume growth as markets recover."

ii round-up:

Maker of safety devices such as smoke detectors and equipment which detects flammable and hazardous gases, FTSE 100 constituent Halma (LSE:HLMA) has seen only two of its 53 facilities close under Covid-19. 

Over 30 of its 43 subsidiaries deliver important safety, healthcare and environmental protection solutions, meaning most of its businesses are classified as critical under various government lockdowns. 

Prior to its full-year results Halma, which has customers in over 160 countries, reiterated last month’s profit forecast of between £265 million to £270 million - an outcome above last year’s £245.7 million. Sales are expected to grow by around 10% to £1.33 billion year-over-year.

Measures to combat Covid-19 include temporary pay cuts for directors, reductions in the use of contractors and cutting discretionary spending wherever possible. 

Financing facilities totalling £750 million are available to support the balance sheet, with the earliest repayment of £74 million not due until January 2021. 

Halma shares rose by more than 2% in UK trading and are one of the 10 best-performing FTSE 100 companies year-to-date. Other risers include food technology group Ocado (LSE:OCDO) and Dettol maker Reckitt Benckiser (LSE:RB.). 

Full-year results have been rescheduled from mid-June to 14 July given Covid-19 challenges and travel restrictions for its auditors.   

ii view:

Offering diversity in both product and geographical terms and pursuing a strategy to grow both organically and by bolt-on acquisitions, Halma is a business which has developed a reputation for steady growth. 

The last financial year saw Halma reporting record revenue and profits for the 16th year running. The group’s progressive dividend policy has seen 26 years’ worth of consecutive increases achieved. 

Under Covid-19, Halma has halted its bolt-on acquisitions programme, a move which looks sensible as cash is now king in these uncertain times. For investors, the group’s enviable track record speaks for itself. But such quality does not come cheap, with the shares sat on a forward price/earnings (PE) ratio comfortably above both the three and 10-year averages. 

Positives: 

• Diversity in both products and geographical sales 
• A progressive dividend policy

Negatives:

• Lofty valuation
• Subject to currency fluctuations 

The average rating of stock market analysts:

Strong hold