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Halma dividend jumps again

The safety equipment manufacturer achieved record full-year revenue and profit for the 16th year in a row
Halma dividend jumps again

Halma (HLMA) raised its final dividend by 7 per cent after a year of growth across its four divisions, representing the 40th consecutive year its dividend has increased by 5 per cent or more.

IC TIP: Hold at 1,933p

The safety equipment manufacturer secured record full-year revenue and profit for the 16th year in a row, although growth slowed slightly after an exceptional first half. It observed a slowdown in its process safety arm during the second half, which achieved profit growth of 5 per cent for the full year in spite of unfavourable conditions in the US oil and gas market, where Halma sells its safety products into the domestic fracking industry. Pipeline constraints in the Permian Basin, located in western Texas and southeastern New Mexico, limited output, which restricted Halma’s sales here, according to chief executive Andrew Williams.

Halma made four acquisitions over the period across its infrastructure safety, environmental & analysis and medical divisions, which contributed 3 per cent to overall revenue growth. The group is eyeing opportunities across its sectors, Mr Williams said, adding that “the medical and environmental sectors are very motivated to find deals this year”. Halma’s largest cash outflows were put down to acquisitions, dividends and taxation, while its working capital outflow fell by around £8m this year, owing to changes in inventory, receivables and creditors, which totalled £16.3m. Prudent working capital management ensured that revenue growth outstripped a rise in working capital, which went up by 8 per cent.

In April, the European Commission ruled that the Finance Company Partial Exemption (FCPE) – a UK corporate tax arrangement that allows HM Revenue and Customs (HMRC) to redirect profits from an offshore subsidiary back to its UK parent company where they can be taxed accordingly – amounted to state aid. Halma has benefited from the arrangement and expects to pay around £16m in cash. Halma and the UK government are weighing up an appeal.

House broker Investec forecasts full-year 2020 pre-tax profits of £268m and EPS of 56.5p for the March 2020 year-end, rising to £289m and 61p in FY2021.

HALMA (HLMA)   
ORD PRICE:1,933pMARKET VALUE:£7.3bn
TOUCH:1,933-1,93412-MONTH HIGH:1,949pLOW: 1,215p
DIVIDEND YIELD:0.8%PE RATIO:43
NET ASSET VALUE:259p*NET DEBT:19%
Year to 31 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20150.7313427.511.96
20160.8113628.812.81
20170.9615834.313.71
20181.0817240.714.68
20191.2120744.815.71
% change+12+20+10+7
Ex-div:11 Jul   
Payment:14 Aug   
*Includes intangible assets of £939m, or 247p a share