Halma: Full-Year Guidance Confirmed Following First-Half Order Growth

We are comfortable with our current estimates following narrow-moat Halma’s HLMA first-half trading update, which reiterated its full-year guidance of “good” organic revenue growth. While the update was light in quantitative detail, management indicated that order intake is ahead of the prior year, which we anticipate will support mid-single-digit organic revenue growth for the full year, having entered the year with a healthy order book. We maintain our GBX 2,310 fair value estimate and view shares as fairly valued.

Order intake in the safety segment and environmental and analysis segment is offsetting slower demand in the healthcare sector. The industry trend of destocking from healthcare customers—who are still working their way through excess inventories bought following the pandemic—is curtailing demand for its healthcare segment. However, first-half healthcare revenue remains in line with the prior year and thus the impacts will likely only be seen during the second half of the financial year. Bolt-on acquisitions remain a key component of Halma’s strategy, expanding its product offering within niche product offerings. Following the group’s record acquisition spending during the prior year, three acquisitions were made during the first half of the year for a maximum consideration of GBP 80 million.