Acquisitions Helped Halma Plc (HLMA) To Deliver Strong Growth

Halma Plc (HLMA) is a UK headquartered company engaged in the operations of manufacturing products that protect and enhance the life quality of people. The company operates on its 4 core values, which include Achievement, Innovation, Empowerment and Customer Satisfaction. The company currently operates around 40 businesses in over 20 countries and Europe, the USA and Asia being the major markets. The company operates around 50 subsidiaries globally. Halma presently has an employee base of 6,341 professionals catering to the needs of its customers from over 160 countries. Halma was founded in the year 1894 in Asia. The company’s operations are divided into four reportable segments being Infrastructure Safety, Environmental & Analysis, Medical and Process Safety.

On 20th June 2019, rating for Halma Plc has been raised by some analysts based on improved end-market signals and the company can achieve strong growth through its acquisitions. Analysts also raised the company’s share price target from 945 pence to 2,060 pence with upgraded ratings. The company’s share had reached its all-time new highs in the year 2019 with an upside of 40 per cent.

It’s been forecasted by the analysts that the Halma Plc would be able to achieve a growth up to 4 per cent from mergers and acquisitions. The growth will bring the company in line with its peers, such as Hexagon and Assa Abloy.

The forecast for organic growth had also been increased to 7 per cent by 100 basis points because of the significant increase in consumer demand. The company’s key market for growth remained in the US and the spending trends in the US non-residential segments such as water, wastewater and transport provide a positive outlook for its increasing demand.

With all the growth catalysts taken into consideration, the analysts had improved Halma’s estimates and assumed that the company’s sales growth will be up to 11 per cent for the duration of coming next 5 years. The new assumption in the sales growth is above the present consensus of 6 per cent of the average sales growth.

Financial Highlights – Financial Year 2019 (£, million)

(Source: Annual Report, Company Website)

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For the financial year ending 31st March 2019, the company’s reported revenue was up by 13 per cent to £1,210.9 million against £1,076.2 million in FY2018. On the constant currency basis, the revenue surged by 10 per cent. The strong growth in revenue was driven by an increase in revenue from all four reportable segments of the company. The revenue from all major geographic regions in which the company operates had grown. The USA and the UK had given robust performance whereas Mainland Europe had reported good growth and performance from the Asia Pacific had also been favourable in the current financial year.

The group’s operating profit (before adjustments) increased by 14.4 per cent to £255.8 million in FY2019 from £223.6 million in FY2018. The group’s reported operating profit increased by £36.6 million to £217.8 million in FY2019 from £181.2 million in FY2018.

The company’s reported PBT (Profit before Tax before adjustments) increased to £245.7 million in FY2019 from £213.7 million in the financial year 2018. The company’s reported PBT (Profit before Tax) increased to £206.7 million in FY2019 from £171.9 million in the financial year 2018.

The company’s profit for the year attributable to shareholders (before adjustments) stood at £200 million in FY2019 versus £171.6 million in FY2018. The company’s reported profit for the year attributable to shareholders stood at £169.8 million in FY2019 versus £154.2 million in FY2018.

Total basic and diluted Earnings per Share (before adjustments) increased by 16.53 per cent to 52.74 pence in FY2019 against 45.26 pence in FY2018. The company’s reported basic and diluted Earnings per Share increased by 10.05 per cent to 44.78 pence in FY2019 against 40.69 pence in FY2018.

The total dividend per share increased by 7 per cent from 14.68 pence in FY2018 to 15.71 pence in FY2019. The total dividend paid and proposed stood at £59.6 million in FY2019 versus £55.7 million in the financial year 2018.

The company’s net debt stood at £181.7 million in FY2019 against £220.3 million in FY2018. The company’s Return on Total Invested Capital stood at 16.1 per cent in FY2019 versus 15.2 per cent in the Financial Year 2018.

The company’s cash and bank balances stood at £81.2 million in the Financial Year 2019 against £70.7 million in the financial year 2018. The company’s net cash flow from operations was £219 million in the Financial Year 2019 versus £173.3 million in the financial year 2018.

Halma Plc - Share Price Performance

Daily Chart as at June-21-19, before the market closed (Source: Thomson Reuters)

At the time of writing (as on June 21, 2019, at 3:30 PM GMT), shares of Halma Plc were quoting at GBX 2,014.00/share and down by 0.69 per cent against the yesterday's closing price level. The company’s outstanding market capitalisation stood at around £7.6 billion with a dividend yield of 0.78 per cent.

In the last 52-wks, shares of Halma Plc have registered a high of GBX 2,050 (as on Jun 21, 2019) and a low of GBX 1,215.00 (as on Oct 11, 2018). At the current trading level, as quoted in the price chart, its shares were trading 1.75 per cent below the 52wk high price level and 65.76 per cent above the 52wk low price level.

Today's volume in the stock (before the market close, at the time of writing) stood at 1,234,113. However, the 5-day average daily volume traded in the stock was at 1,288,915.40, which was 45.86 per cent below the 30-day average daily volume of 2,380,851.90 traded on the London Stock Exchange.

From the SMA standpoint, at the time of writing, its shares were trading above 30-days SMA, 60-days SMA and 200-days SMA, which indicates a positive trend in the stock price and carrying the potential to move up from the current trading levels.

In the past 1 year, shares of the Halma Plc have delivered a positive price return of 43.32 per cent. However, on a year-to-date basis, the stock was up by approximately 48.68 per cent and 22.17 per cent in the past three months.

Share's RSI for the 30-days, 14-days and 9-days were hovering near overbought zone at 69.97, 72.80 and 74.20 respectively. However, 3-days RSI of the stock stood at 72.17.

The volatility of the stock for the 200-days, 90-days, 30-days and 10-days were stood at 23.24, 16.95, 21.77 and 26.02 respectively.

The company had delivered strong growth from its geographic segments. The company’s revenue from the United States of America, the United Kingdom, Mainland Europe, Asia Pacific and Africa, Near and the Middle East had increased in the current financial year.

The company had shown decent top-line and bottom-line performance in the current financial year. The company’s operations could be hampered by a recession in the economy and geopolitical changes, which will lead to a decline in financial performance. The company’s operations will further be impacted by the uncertainty created over the Brexit as it can disturb the supply chain of the company. With the ongoing trade tensions between the US and China, it will affect the profitability of the company.


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