Halma has released a trading statement ahead of its financial year end on 31 March 2025. Organic revenue growth has been driven by new orders, which remain ahead of levels seen in the prior year.
Seven acquisitions have been completed so far this financial year, with a total cost of £158mn.
Better performance across all three sectors means underlying operating margin is expected to be modestly above 21% for the full year, compared to the prior guidance of around 21%. Revenue guidance was unchanged, pointing to “good” organic revenue growth.
The shares rose 2.2% in early trading.
Our view
Halma’s attraction is simple. It’s a mash-up of businesses working to provide technology solutions in the safety, health, and environmental markets. These may not be the most exciting businesses, but Halma’s clear purpose and quality of execution mean performance has been impressive.
As we close in on full-year results, trading has been resilient in a tough environment. Testament to how well management run things, margins are improving and with guidance pushed up, analysts will likely be adjusting profit expectations higher.
It’s not been plain sailing all year, but that’s kind of what Halma does well - consistent delivery in the face of varied economic climates.
This differentiated business model, geared toward non-discretionary and sustainability-related demand, offers exposure to some resilient long-term growth drivers. These include increasing demand for healthcare, tighter safety regulations, and growing global efforts to address climate change, waste and pollution.
Halma has shown itself to be a safe pair of hands, on track for its 22nd consecutive year of record profit. This provides some comfort that it can prosper even in a challenging economic environment. But there are no guarantees and not all its markets are in great shape. Healthcare being a prime example where budget constraints are keeping a lid on customer orders.
Acquisitions are key to the strategy, so cash conversion (the level of operating profit backed up by cash) is essential, and Halma continued its strong history of cash generation into the first half of the current year. One of the first things we look at in a buy-and-build business model is its ability to throw off cash flow. Buying businesses isn't cheap; it's much more sustainable if it can be funded by internally generated cash.
Activity in the latter parts of last year was a bit quiet, but management have sounded a confident tone about the pipeline. We don’t want Halma to buy for the sake of it, but having a healthy pipeline of deals and being able to execute is key.
The balance sheet looks in good shape and with net debt at 1.27 times cash profit last we heard, plus strong cash flow, there's plenty of room for investment should the right opportunities arise.
All in, we're supportive of Halma's business model and growth drivers. But we aren't alone, and while the valuation has come down from its pandemic highs, it's still at the top of its peer group. There's plenty of pressure to deliver.
Environmental, social and governance (ESG) risk
General Industrial companies are medium risk in terms of ESG but can trend up to the higher end of the spectrum depending on subindustry. The primary risks can include labour relations, emissions (either product or production-based), business ethics and product governance. Other concerns are waste and health & safety.
According to Sustainalytics, Halma’s management of material ESG issues is strong.
Halma has appointed a dedicated management committee to oversee these areas and implemented a strong environmental policy. While its ESG reporting doesn't fully align with leading standards yet, there is a clear link between executive pay and sustainability goals. Additionally, Halma has a robust whistleblower program in place to ensure accountability.
Halma key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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