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Halma extends record run

RESULTS: Difficult conditions threaten Halma’s long record of growth, but it’s faced worse and won
June 19, 2012

Halma’s record of increasing its dividend by over 5 per cent every year stretches back to 1980, and the fire alarms and smoke detectors firm has achieved return on sales of at least 16 per cent for a quarter of a century. And while conditions are tough now, Halma delivered record results through the last recession and could do so again.

IC TIP: Buy at 373p

Even without acquisitions, revenue grew 6 per cent and underlying pre-tax profit by mid-single digits. Selling more of its leak detectors to water companies and brisk business selling industrial safety products to North Sea oil & gas explorers had UK revenue up 18 per cent. Predictably, mainland Europe slowed during the second half, but the US picked up speed, helped along by two acquisitions.

The performance in developing markets was also encouraging, and sales to markets including South America and China now account almost a quarter of revenue, leaving Halma on course to meet its target of 30 per cent by 2015. Indeed, heavy spending on health, safety and environmental products by Beijing should double China’s contribution to 10 per cent within a few years. India, however, has different priorities and progress there is disappointingly slow.

Broker Numis expects underlying pre-tax profit of £134.8m and EPS of 27.4p in the year to March 2013 (from £120.5m and 24.5p last year).

HALMA (HLMA)

ORD PRICE:373pMARKET VALUE:£1.41bn
TOUCH:373-374p12-MONTH HIGH:432pLOW: 306p
DIVIDEND YIELD:2.6%PE RATIO:16
NET ASSET VALUE 106p*NET DEBT:5%

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200839568.013.07.55
200945672.814.17.93
201045981.416.18.50
201151898.319.29.10
201258011223.09.74
% change+12+14+20+7

Ex-div: 18 Jul

Payment: 22 Aug

*Includes intangible assets of £342m, or 91p per share