The Investment Column: Halma remains a risky bet
Wednesday 23 June 1999
It seems the market doesn't feel safe with the company - ironic, given it specialises in safety devices for a wide range of industries. While Halma's underlying businesses are solid, the City feels Halma is insufficiently transparent in its reporting. The market's caution is understandable. Halma's business is spread over 40 subsidiaries. These can be subdivided by geographical region, or by industry (water, gas, petrochemicals) or by activity (equipment to detect hazards or protection equipment).
Stephen O'Shea, the chief executive, says that both water and gas-related activities turned in a record result this last year. The petrochemical businesses overcame the industry downturn by pioneering new clients in, oddly, the communications market, he says.
But confusingly, the only sales breakdown in the group's results is according to "protection" and "detection". Such asymmetries deter analysts from following the company.
Despite the record performances, overall pre-tax profits fell 1 per cent as Halma's UK-based Keeler subsidiary, which makes opticians' instruments, lost a customer after delivering product six months late. Keeler's problems have since been addressed.
Halma is already the largest player in the safety business. Its margins are 19 per cent. The investment case for the group depends now on its ability to strike up alliances in new markets. Last year it spent pounds 15m making acquisitions, including a US locomotive breaks business and another elevator safety company. It acquired a partner in fire detection. These sound like piecemeal deals, but they enable Halma to leverage its existing product and marketing strengths.
Now Mr O'Shea is upping the pace. He plans a pounds 60m shopping spree this year. He is buying back the company's preference shares and is seeking authority to buy back ordinary shares in the market. Meanwhile, the company is introducing new products. Severn Trent has placed a pounds 2m order for Halma's new leaks detection system. Global sales should follow. Analysts expect pre-tax profits of pounds 44.1m and earnings of 8.4p per share this year.
The market's reaction to Halma's news is unpredictable. The shares closed up 14.5p at 113p yesterday on hopes of a share buyback, even though that's at the bottom of Halma's priorities. The shares were almost unmoved in April when Halma issued a trading statement. The group's fundamental strengths should not lead investors into seeing Halma as a safe play.
- 2 California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
- 3 School kitchen manager 'fired from Colorado school for giving hungry students free lunches'
- 5 Charles Kennedy 'had better judgement drunk than many sober politicians' says Ian Hislop
California man brutally beat 82-year-old Sikh grandfather he mistook for 'one of those people'
Amber Peat: Body found in search for missing 13-year-old who left house after argument with her parents
School kitchen manager 'fired from Colorado school for giving hungry students free lunches'
Isis executes three gay men by dangling them from top of 100ft building and letting go
Alton Towers crash: Four guests seriously injured as Smiler ride carriages collide
Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination
Migrants in Kos: Photos show real tragedy after Brits abroad complain of 'awkward' holidays
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
Michael Gove determined to scrap the Human Rights Act – even if Scotland retains it
Threat to scrap Human Rights Act could see UK follow Nazi example, warns UN official
Church of England 'one generation away from extinction' after dramatic loss of followers
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...
£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...
£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...
£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...