Halma's amazing record run continues

If there was a prize for consistency, Halma would probably win it. I seem to write that, or something like it, every time I cover the smoke detectors and automatic door sensors firm, but now, more than ever, it's a point worth ramming home.

Halma delivered a thirteenth consecutive year of record revenue and profit in the 53 weeks to 2 April. It also increased the dividend by 7%, the 37th year in a row it's risen by 5% or more. It can do this because management has built a highly diversified, defensive business with four divisions. A tough year at one is offset by strength at the others.

Adjusted pre-tax profit grew by 8% to £166 million on revenue up 11% to £808 million, or up 3% and 6% respectively at organic constant currency. Three of the divisions - infrastructure safety, medical, and environmental and analysis - had a record year, which offset a 15% organic decline in constant currency profit at the oil-related process safety unit.

"Given the varied market conditions you're reminded of the strength of strategy and business model, like regulation, healthcare, demand for water," chief executive Andrew Williams told Interactive Investor on Tuesday. "We offer some certainty in an uncertain environment."

Crucially, Williams also said that order intake continues to exceed revenue and order intake last year, and at this early stage, the company is on track to meet expectations.

Halma is diversified geographically, too. Every major region posted top line growth and revenue grew by 22%, or 9% at organic constant currency, in the US, Halma's largest market.

More money was spent on Mergers and Acquisitions last year than ever before. Four deals got done last year, at a cost of £193 million, almost half of which went on American sensors firm CenTrak, which enables real-time monitoring of doctors and hospital assets. Expect more smaller deals in future as many large businesses are overpriced.

"We continue to believe in Halma's quality and today's results are further demonstration of its defensive growth traits, and remain positive on the shares on a long-term basis," wrote analysts at Barclays.

"Our only struggle, given our 12-month ratings horizon, is with the significant valuation premium the shares are already ascribed relative to its UK industrial peers."

Halma shares currently trade on a price/earnings (PE) ratio of 24.7 times consensus earnings estimates for 2017. That's a 43% premium to the UK industrial sector average compared with a five-year average premium of 27.5%.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser