- Strong second half growth
- Favourable mix helps margins
- Long-term growth drivers
Specialist technology group Halma (HLMA) pleased investors by nudging up its guidance for the year to the end of March thanks to strong second-half demand.
The shares, which have staged an impressive rally from their late-2023 lows but earlier this week hit a three-month low, resumed their upward progress, strengthening through the session to trade up 109p or 4% by late morning.
STRONG SALES AND ORDERS
The firm, which owns a portfolio of companies developing innovative technology in high-growth niche markets, said it had ‘made good progress in the second half of this financial year to date, in varied trading conditions across our end markets amidst an evolving economic and geopolitical backdrop’.
The group’s organic revenue growth has been supported by order intake which is ahead of both revenue in the year to date and the prior-year period, while the adjusted EBIT (earnings before interest and tax) margin has benefitted from a better-than-expected performance across its businesses.
Thanks to a favourable product mx and good operational delivery, the company now expects its EBIT margin to be ‘modestly above’ its previous target of around 21% and is on track to deliver its 22nd consecutive year of record adjusted profit.
GROWTH POTENTIAL
Halma benefits from long-term growth drivers in its markets, as well as its Sustainable Growth Model which is aimed at delivering reliable compound organic growth over the long term.
Alongside this, and consistent with its buy-and-build approach, Halma has made seven acquisitions during the year for a total maximum consideration of £158 million, all financed from free cash flow, and it continues to have a ‘healthy’ pipeline of opportunities across its specialties.
Analysts at Shore Capital describe Halma as ‘a high-quality and defensive business with long-term growth drivers (increasing health/safety regulation, increasing demand for healthcare services/life-critical resources, the need to improve operational productivity and efficiency, reducing waste/pollution and the renewables/green energy transition)’.
Disclaimer: The author owns shares in Halma.
