Health, safety and environmental electronics equipment maker Halma (HLMA) continues to do what is does best; solid, reliable growth, month after month, year after year.
In a trading update covering the period from 1 April 2019 to date the £7.25bn FTSE 100 company spelt out progress across all sectors (including a particularly firm Environmental & Analysis performance), widespread growth geographically and a chock-full acquisitions pipeline.
TRADING BANG ON TRACK
‘The group's performance was in line with the board's expectations and included further organic constant currency revenue growth against a strong comparative period in the first half of 2019’, the company said.
‘Order intake was ahead of revenue and was also ahead of the same period last year’, which will reassure investors too.
Halma is a big exporter of its equipment and services. Last year 83.5% of sales were earned outside the UK, with the US by far its largest single market worth more than a third of revenue, £443.2m of £1.21bn in total, or 36.6%.
So while the company talks in ‘constant currency’ terms, which sensibly strips out the effect of volatile global currencies to give a clearer underlying picture, in real terms it continues to get a major boost from the weak pound.
WEAK POUND POSITIVES
Halma helpfully gave some details today.
‘If current exchange rates continue throughout the rest of the current financial year the currency translation impact on the group's results is expected to be positive.’
The statement goes on to say that, as things stand for 2019, Halma will earned an extra £5.5m of revenue and £1.1m of profit for every 1% stronger the dollar gets versus sterling. Similarly, a 1% movement in the euro against the pound equates to £1.5m of extra sales and £0.3m of profit.
‘Halma is a great quality business that operates in secular growth markets with long-term drivers’, said Shore Capital analysts today. They point to increasing health and safety regulation, demand for healthcare services in developing economies and demand for life-critical resources. Halma also enjoys strong margins.
WHY THE STOCK IS DOWN
Yes, the share price fell on Wednesday, coming off about 3% to £19.085, but the stock has been trading close to all-time highs of £20.94 struck in July.
Investors should also consider the general market weakness today - the FTSE 100 is down about 63 points (or 0.7%) at 7,228.06 as investors grapple with political upheaval on both sides of the Atlantic, including a court vote against Boris Johnson's proroguing of parliament and launch of an impeachment inquiry of Donald Trump.
The results for the half year ending 30 September 2019 will be released on 19 November 2019.
