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20 Jun 2022
The end of an era
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The end of an era
Halma plc (HLMA:LON) | 2,179 -370.4 (-0.8%) | Mkt Cap: 8,272m
- Published:
20 Jun 2022 -
Author:
Gjani Bruno BG -
Pages:
8
Andrew Williams to step down following a stellar 18-year track record
The biggest news to emerge from Halma''s FY''22 results was the announcement of Andrew Williams'' retirement at the end of FY''23. Marc Ronchetti, CFO, will step up to lead the Group. Andrew Williams'' track record speaks for itself. Under his tenure Halma delivered an average of ~6% organic sales growth p.a (vs. the Cap Goods Sector at ~3%), and 3% sales growth via acquisitions, meaning that Halma''s sales will be 5x larger and group profit 7x larger than when Andrew joined. It is Andrew''s consistent delivery of strong results that may leave some investors nervous around the transition, despite Marc being well known and highly regarded.
H2 underlying numbers were relatively in line with Consensus expectations
H2 sales came in 4% ahead of Consensus expectations. Organically, sales grew by 12% in H2 (Consensus at 9%). H2 adjusted operating profit came in 5% ahead of Consensus driven by a solid performance at Environmental and Analysis (12% beat) and lower central costs. On central costs, we note that Halma had guided to GBP11-12m of IT-related cost for the full year and so ~GBP10m in H2. However, incremental IT-related costs only amounted to ~GBP6m in H2. This is a ~GBP4m delta relative to what Consensus were likely modelling. In addition, Halma also benefitted from a GBP3m provision release. Stripping this out we calculate that the ''clean'' H2 profit beat was closer to ~1%.
The outlook message may lead to a tempering of margin expectations
Halma guides to delivering single digit organic sales growth and for margin to remain similar to H2''22. The lack of expected margin progression in FY''23 is in part down to a step up in technology investments. Given Consensus models an FY''23 margin of 21.6%, +60bps relative to H2''22, we expect margin expectations to reduce modestly.
We make slight changes to our numbers; TP falls to 2250p
We adjust our organic sales growth rate assumptions slightly higher...