Halma PLC (LSE:HLMA) was once seen as simply a play on the growth of health and safety compliance, but has more recently been tied into the wider artificial intelligence story, through its photonics business, which provides important interconnections used in data centres.
In today's half-year results, the FTSE 100 company said its Avo Photonics business saw demand from a long-standing 'hyperscaler' technology company that accounted for 19% of group revenue in the period, up from 14% a year ago.
Broker Stifel said Halma is "one of the UK's few AI/ datacentre beneficiaries", adding that "what is impressive is that group performance is not just about exceptional growth in Avo Photonics".
UBS agreed that the results served as a reminder that the group is "not just a photonics story".
First-half results saw sales rise 15% year-on-year, with organic growth at 17%, outpacing consensus of 12%.
Adjusted EBIT grew 23% organically, excluding one-offs, with margins at 22.3%.
"We note that growth was broad-based," said UBS.
While Environmental & Analysis (E&A) was a "key driver", with photonics growing organically by about 60%, contributing roughly eight percentage points to group organic revenue growth.
Excluding photonics, the segment grew circa at around an 18% organic rate, implying a beat of at least 10 percentage points relative to market expectations for this segment.
"Meanwhile, Healthcare grew organically by 7% (200bps ahead of consensus), and Safety grew by 6% (in line with consensus), despite some uncertainty in large Infrastructure projects.
"As suc,h we think about half of the topline beat in H1 was due to performance outside Photonics and think the broad areas of growth ought to be rewarded."
After Halma upped guidance for organic revenue growth and margins, this prompted UBS to lift its price target to 4,100p, reiterating its 'buy' rating.
Stifel said the guidance suggested full-year EBITA in the region of £560 million, above the £542 million it had been expecting.
"Another impressive performance with momentum continuing into 2H and into 1H next fiscal year."
Stifel said the valuation was "full" at 31 times 2026 earnings on current forecasts, "this kind of performance fully justifies a substantial premium in our view".
** The author is a Halma shareholder **