Halma: 22 Consecutive Years of Profit Growth

Halma PLC is a global group of life-saving technology companies, focused on growing a safer, cleaner, healthier future for everyone, every day. The company is listed on the LSE main market, is a constituent of the FTSE100 and has a market cap of £10.2bn. Full year results to 31 March 2025 were released on 12 June 2025.  

We were delighted to welcome Charles King, Co-Head of Investor Relations, and Melanie Horton, Co-Head of Investor Relations to a webinar for private investors to talk about these results and how the company is performing in the current environment. A recording of the webinar is available here.

It’s fair to say that Halma is very pleased with the FY25 results, delivering as they did a number of record performances. CEO, Marc Ronchetti, described them as the best results in the 9 years he’s been at the company and across the board this was an excellent set of results. It market the 22^nd consecutive year of profits growth delivered through the economic cycle and a variety of significant world events. Most results were underpinned by strong organic growth, ahead of the long term average. Margins and returns both increased and are now in the upper part of the target range. Cash generation was once again good and well ahead of the stated KPI for this metric. This strong cash generation helps support continued investment in driving future growth. Finally the dividend was increased by 7% which is the 46^th year of dividend growth above 5%. So no surprise that management are pleased with these results.

Looking at the financial performance in more detail, almost every metric is a record number. Revenues grew 11% to £2,248m, EBIT grew 15% and the margin grew 80bps to 21.6%. ROTIC improved 60bps to 15%. This strong financial performance enabled R&D spend of £108m, equating to 4.8% of revenues and acquisition spend of £157m on 7 separate companies. The annualised profit contribution from acquired companies was 3.5%. Looking forward there is a healthy pipeline of acquisition opportunities too. The company remains a prodigious cash generator with a cash conversion ratio of 112% and this means that the balance sheet is very strong at 0.97x ND/EBITDA despite all the investment and the 7% increase in the dividend.

In terms of sector highlights, Safety (40% of revenues) grew 9.5% and profits grew 13.7% with 12% organic growth. Environmental & Analysis (35% of revenues) grew 18% with profits growth of 25.4%. The optical analysis subsector was particularly strong and the photonics business also posted good growth whilst water had a mixed year. The healthcare sector (25% of revenues) had a tough year with revenue growth of 3.2% and profits growth of 4%. The company remains confident in the sector and the long term growth trends remain encouraging so this is not a concern, indeed the sector got better throughout the year.

M&A has long been an important part of the growth strategy and remains key to current and future growth. In the last year 7 acquisitions were completed in each of the 3 sectors. Halma made investments in its M&A capabilities and the teams are all busy dealing with a healthy pipeline of opportunities. One of the keys to success is to have a disciplined approach and this remains the case. One of the companies bought last year, MK Test systems was highlighted as an excellent acquisition.  Safety of workers and critical assets has been an area where Halma has been leading the way for many years and MK adds to their expertise in this area. There are a number of long term growth drivers including the increasing complexity of electrical systems, growing voltages, increased safety regulations, greater requirements for automated testing and an increasing need for data traceability. MK meets these requirements and has an impressive customer roster. Management have an entrepreneurial culture and Halma are confident that there will be good growth for many years.

Measuring financial performance against the company’s KPI’s, it has been another impressive year. 7 of the 8 KPI’s measures were above threshold with the only exception being profits from acquired companies which was below the threshold. Picking out a couple of metrics; Organic revenue growth of 9.4% was a long way above the 5% threshold and adjusted EBIT margin of 21.6% is now in the top half of the 19-23% range. Ultimately it is this consistent strong financial performance that creates long term value for shareholders.

Looking forward there has been a positive start to the FY26 (March) financial year. The order book is strong with order intake ahead of revenues and last year. Whilst the geopolitical and economic environment remains uncertain the company expects to deliver upper single digit percent growth in revenues (organic at constant currency). Another very strong year of growth in photonics is expected too which will be a good contributor to this growth. EBIT margins are expected to be modestly in the top half of the 19-23% range, probably not too dissimilar to that achieved in the last year.

The presentation finished on the slide that showed Halma’s long term track record of revenue and profits growth. This is such an impressive chart. 10 year revenue CAGR is 12% as is the 10 year EBIT CAGR. Compounding growth and returns over long periods, through a variety of economic cycles and macro events, delivers superior shareholder value.

Another impressive performance will have left the many shareholders in the audience quietly satisfied and non-holders wondering if the shares would have a pull back to enable them to buy into the shares.

A recording of the webinar is available here. If you would like further information on other webinars organised by Yellowstone Advisory, please contact info@yellowstoneadvisory.com