Halma PLC’s (LON:HLMA) final results surprised no one as the ever-dependable smoke detectors maker delivered double-digit growth in revenue and profit, while nudging up its dividend by more than 5% for the 40th year in a row.
The FTSE 100-listed company saw group revenue rise by 13% to £1.2bn in the 12 months to 31 March, with adjusted profit before tax up 15% to £245.7mln, bang in line with average analyst forecasts.
All four of Halma's business segments - Process Safety, Infrastructure Safety, Environmental & Analysis, and Medical - grew sales and adjusted profit, with three out of the four delivering double-digit profit gains.
By geography, the strongest performances were in the US and the UK, with mainland Europe remaining solid. Asia-Pacific growth slowed to 5% from 15% as China growth fell to 8% from 20% the previous year.
Adjusted earnings per share increased by 17% to 52.74p and the total dividend was hiked by 7% to 15.71p. Cash generation remained strong and investment was made in four acquisitions and two small asset purchases during the year, but net debt was still cut 18% to £181.7mln.
New year starts well
“The new financial year has started well, and order intake has continued to be ahead of both revenue and order intake for the comparable period last year,” said Halma's chief executive Andrew Williams. “We expect to make good progress in the year ahead.”
Broker Shore Capital said the headline numbers were all in line with forecasts and thinks Halma is "a great quality business with long-term growth drivers" such as increasing health and safety regulation and demand for healthcare services in developing economies.
But it whistled a note of caution as "the valuations continue to look stretched especially after recent share price strength and given the current growth rates".
Analysts and UBS reckoned Halma's underlying earnings (EBITA) was 1% ahead and adjusted EPS 4% ahead of forecasts, though they thought the divi was minutely behind expectations. Elsewhere, Credit Suisse upped its price target for the stock to 1,990p from 1,770p.
Russ Mould, investment director at AJ Bell, said while Halma was not a household name, its dividend record made it "a good example of how a company that gets the basics right can reward patient investors".
He admired Halma's long-term planning, careful investment in new products and services and prudent capital allocation, while noting the strong regulatory drivers associated with its hazard detection and life protection products.
"Investment in organic growth comes first, select acquisitions second and enhanced returns to shareholders next, which is the correct way around. If the first two are done well then the third will largely take care of itself."
He said the strong regulatory backing and ongoing investment to maintain the core competitive position were reflected in an operating margin range of 18% to 22% and strong cash flows to fund a unexciting dividend yield of less than 1% but keep debt down.
“While Halma’s shares have occasionally been buffeted by wider market forces, such as the bear market of 2007-09, they have provided strong total returns over time, combining capital growth and dividends, helping investors protect their wealth from the ravages of inflation.
“This is not to say the past will be a certain guide to the future but Halma does show that the stock market can be a get-rich-slowly tool, when it works well, when it is used properly and when a company management team puts customers first, in the knowledge they are there to manage the business and its operating assets and not the share price.”
Halma shares rose 2% to a new all-time high of 1,941.5p in early trade on Tuesday.
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