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Continuing to deliver
Halma plc (HLMA:LON) | 2,237 693.5 1.4% | Mkt Cap: 8,493m
- Published:
22 Nov 2021 -
Author:
Mounsey Jonathan MJ | Gjani Bruno BG -
Pages:
8
Halma delivered a solid H1''22 beat driven by yet another exceptional EandA performance
Sales in H1 came in 6% ahead of Consensus expectations, with Halma delivering 23% organic sales growth. All divisions looked strong and grew close to or above 20%. Environmental and Analysis (EandA) delivered a stand-out performance with organic sales growing by 25% (despite the relatively tougher comp). Headline profit came in c.8% ahead of expectations driven by a strong performance at EandA; lower central and IT costs also helped. On IT costs, we would note that Halma had guided to GBP11-12m of IT related costs for the full year but only booked c.GBP1m of costs in H1. While we don''t know how Consensus had phased IT costs, and so how ''clean'' the H1 beat was, we are encouraged by the fact that Halma managed to beat our expectations by c.3%, excluding the IT cost effect.
Guidance reiterated; margin is still expected to normalise in H2''22E
Despite the strong H1 print, Halma reiterated its guidance. On the conference call, Halma''s CFO gave a detailed overview of margin trends, noting that the strong H1 margin was driven by a slower than expected return in overhead variable costs in Q1. By Q2, such costs were noted to have been in line with management expectations and margin had returned to a more typical level. Looking forward, the message is that the H2 margin should also be close to more normalised levels.
Restocking likely offered some support in H1; however underlying demand is still strong
Halma noted that restocking of distribution channels/customers pre-buying might have also supported the high organic sales growth seen in H1. However, it managed to reassure investors by highlighting that a recovery in markets that are still relatively depressed (areas of elective in Medical) should act to offset any potential headwinds associated with restocking effects dissipating. In our view, the strong order development (book-to-bill 1.0x) is also likely to offer...