The FTSE 100’s safest bet? Medical tech firm raises dividend for 42nd year in a row

·5-min read
 (Halma)
(Halma)

As a manufacturer of life-saving medical and safety equipment - from ventilator components to touch-free door sensors - Halma was well placed to thrive in the pandemic.

The FTSE100 group, which comprises a portfolio of more than 40 more-or-less autonomous companies in 23 countries under its global umbrella, posted a record annual profit in the year to April, up 4% to £278million.

It raised its total dividend per share by 7% to 17.65p, the 42nd consecutive year in which it has increased shareholder payouts by more than 5%.

That its shares have since dipped this morning, down 50p - or 1.75% - to 2632.0p perhaps only goes to show the high expectations to which the group - named Britain's Most Admired Company 2020 by Management Today - is held by investors.

Despite this it remains relatively little known among the broader public: quietly beavering away delivering life-saving tech and profits rather than updating its social media. (It has just over 1,000 followers on Twitter, compared to GSK’s 250,000).

Today’s annual results - in the context of the past 12 months - go some way to vindicating that approach, and have been applauded by analysts.

Investec says Halma “navigated Covid disruptions admirably and has impressively posted another year of record profits”, leaving its full-year 2022 profit forecast unchanged at a 4% upgrade and increasing forecasts for the next two years.

Shore Capital retained its Buy recommendation, highlighting strong operating margins and long-term growth drivers such as increasing health and safety regulation, and growing demand for healthcare services in developing economies.

Describing his firm’s performance as “simply terrific”, Halma CEO Andrew Williams said: “You don't survive and perform so well during a pandemic just by luck. It’s what you've done, in our case in the previous 50 years, that allows you to navigate the way through.

“It’s in our DNA, the way we operate, and it’s been really powerful. Looking forward, our focus on safety, healthcare and the environment is absolutely aligned with some of the main challenges facing the planet, today and in the future.”

 (halma)
(halma)

After generally pausing its relentless program of acquisitions through 2020, Halma intends to use the balance sheet firepower accrued over the past 12 months to restart its buy-up programme with a sharpened focus on those that meet its high standards for ESG credentials.

Its latest two purchases are US firm Perigen, whose AI protects mothers and their unborn babies by alerting doctors, midwives and nurses to potential problems during childbirth - for £42million.

And Wolverhampton’s Static Systems Holdings, whose tracking technology enables hospital patients to alert healthcare specialists in an emergency.

They joined the list of companies around the world broadly grouped into three sectors - healthcare, environment and safety - in the Halma portfolio.

In other hands such an arrangement could look unwieldy, but Williams - who has been with the firm for 25 years - believes exposure across different sectors and markets helped the group balance out its fortunes over the pandemic without requiring any government assistance.

It instead paid out around £2million in “furlough” cash from central funds to any employees unable to work due to site shutdowns. Given its role in maintaining building safety, only a handful of its 53 operating sites were closed for more than a week or two.

Williams said: “Society needs to keep moving forward, people need to have safe buildings to work in, the medical system needs to carry on operating.

“So for us, the story of the year was how variable that was across the different parts of the business.

“In the medical sector, in the first half of the year we saw really strong demand for businesses focused on respiratory care and primary care; very much directed to the treatment and diagnosis of Covid.

“At the same time, our elective surgery businesses involving in things like cataract and back surgery saw very little if any demand.

 (Halma Perigen)
(Halma Perigen)

"Now as elective procedures have started to come back and Covid has started to normalise a little bit we have seen those businesses bounce back.

“In some cases businesses have had to cope with massive surges in demand to find safe ways of working while others were finding ways to maintain and support the workforce through difficult times.

“That’s the agility within our model, which is effectively 50 SMEs each empowered to make the right decisions for their own market.”

Alongside the financial results, the group today announced new commitments to paying a Real Living Wage across UK operations from next year, signed up to the Change the Race Ratio diversity charter, and agreed to publish for the first time the gender pay gap in UK and US operations.

It is exploring ways of ensuring that workers on factory floors as well as those in offices can enjoy flexible working patterns in future.

And there is also a sharpening of its already keen sense of responsibility toward ESG commitments, which runs deep - particularly in its selection of future acquisitions.

Williams said: “We didn't do any deals in the first half of the year, until we saw the lay of the land. Now things have picked up and there’s a lot of activity going on.

"We are very much applying the filter of ESG: Is this a business that can not just deliver financial returns but also the positive impact we are looking for?

“Another of the challenges is agreeing valuations with business owners because they've also seen a lot of volatility in the past 12 months. The question is working out which ones are well placed to deliver growth over the next ten or 20 years.

“We now have more resources than ever across our three sectors, we are seeing more opportunities and we've got the firepower on the balance sheet.

"But part of the secret of our success is maintaining discipline and just making sure we buy companies that not only are aligned with our financial criteria but also our purpose to grow a safer, cleaner, healthier future, for everyone, every day.”

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