Safety technology group Halma (LON:HLMA) raised its FY27 operating profit margin forecast after ‘strong progress’ in H1. The firm now sees margins reaching 23.5% to 24% against 22.7% previously, which was flat on FY26.
‘Premium growth’ in photonics
In its H1 trading update, Halma said it had delivered ‘broad-based growth’ despite continued economic and geopolitical uncertainty. Based on its six-month performance, the company repeated its forecast of low double-digit organic FY revenue growth.
This guidance includes ‘premium growth’ of around 5% thanks to the photonics business, where organic sales growth is around 30%. The firm said its long-run organic revenue growth rate excluding photonics was 7%, implying 12% overall growth this year.
Thanks to a favourable product and portfolio mix, the FY adjusted EBIT margin is now seen between 23.5% and 24%. The firm said this guidance was supported by order intake, which is ahead of revenue year-to-date and compared with FY26.
We’re not surprised by today’s upgrade, which although the firm didn’t say it explicitly is thanks to its photonics business. With a 30% organic growth rate and high levels of profitability, it is surely the main driver of the margin improvement.
The group has warned before that the division’s ‘premium growth’ won’t last for ever, but it’s nice while it lasts. And given the massive global investment in semiconductor equipment manufacturing, it might last longer than the firm thinks, although it won’t say it.
Halma shares had a terrific run at the start of the year, adding around 40% from January through to the end of May. Since then, they have basically been in reverse, leaving them flat on the year.
The stock was clearly pushing its luck at over 40 times forward earnings in May, whereas today they trade on 31 times. That’s a fairer price, but it’s still not cheap compared with the stock’s history, even with today’s upgrade.
