COMPANIES 

Halma, reassuringly expensive

Halma’s (HLMA) enviable track record remained firmly intact after an undeniably strong set of full-year numbers. Record revenue and profit for the past 11 years; operating margin above 16 per cent for 29 years in a row; dividend increases of at least 5 per cent for 35 years, and rising sales in 38 of the past 40 years. These are important reminders why shares in the acquisitive engineer deserve to trade at a significant premium to those of peers, and reasons why the price has further to rise.

Every core regional market and each of Halma's four divisions grew organically last year. Sales in China were up over a quarter to £47m, helped by the acquisition of syringe and gear pump maker Longer Pump. "We expect to see good organic growth and acquisitions there in future," chief executive Andrew Williams told the Investors Chronicle. That's unsurprising given that China's health system, environmental controls and workplace safety are government priorities. Sales of pressure release devices to fracking companies are flying off the shelves, too.

With a £100m of recent acquisitions to bed-in, broker Investec Securities expects adjusted pre-tax profit of £153m in 2015, giving adjusted EPS of 30.8p (from £140m/28.5p in 2013).

HALMA (HLMA)

ORD PRICE:619pMARKET VALUE:£2.34bn
TOUCH:618-619p12-MONTH HIGH:630pLOW:  477p
DIVIDEND YIELD:1.8%PE RATIO:22
NET ASSET VALUE:129p*NET DEBT:15%

Year to 29 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20104598116.18.5
20115189819.29.1
201258011223.09.74
201361912024.810.43
201467713928.111.17
% change+9+16+13+7

Ex-div: 16 Jul

Payment: 20 Aug

*Includes intangible assets of £448m, or 119p a share

IC View

Halma's shares trade on 20 times forward earnings, dropping to 18 times the year after. That’s a 20 per cent premium to its peers, but Investec thinks it should be 30 per cent. We think it’s a price worth paying for reliability and consistency. Buy.

Last IC view: Buy, 597p, 3 June 2014

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