We want to connect investors and consumers with fast growth, highly innovative sustainable companies.
In this second instalment in a new series profiling some of the most promising ones from an investment perspective, Ketan Patel, senior socially responsible investment analyst from Ecclesiastical Investment Management talks about Halma, a specialist in hazard detection and life protection products.
Halma can trace its history back to 1894, beginning life as the Nahalma Tea Estate Company in Ceylon, and later switching to rubber production. Listed in 1972, by which time it had long exited commodities, Halma became focused instead on a series of mechanical and electrical engineering companies.
Today, it employs just over 4,000 people, and operates through 40 subsidiary businesses in 23 countries; its markets centre on speciality safety, health and environmental technologies. Halma operates in four discrete sectors: process safety, infrastructure safety, medical, and environmental and analysis.
Ethical investment ethos and why it is an attractive investment for sustainable investors
Halma is a good example of a company where the ethical positives and the investment proposition go hand-in-hand. A leader in many of its chosen markets, Halma has achieved five-year average organic growth of 8%+. It has retained record profit growth through the economic cycle with return on sales averaging 16% for more than 25 years. Halma also has a record of sustained dividend growth of around 5% for over 30 years. Demand is underpinned by long-term resilient growth drivers in each of its specialist markets, with Asia especially strong.
The company has a very strong balance sheet allowing active portfolio management and carefully targeted acquisitions. Total shareholder return (TSR) over five years was 203% compared to 114% for the FTSE 250, and 180% for the FTSE 350 electronic and electrical equipment sector.
The company scores positively across seven of our nine Amity pillars, particularly healthcare and environmental performance and management; this makes it an attractive investment choice for sustainable investors. Ecclesiastical Investment Management has supported all recent governance proposals.
Performance in investment terms
The company achieved revenues of £619m in 2013 across its four divisions: process safety (20%), infrastructure safety (33%), medical (22%) and environmental and analysis (25%). The company’s portfolio of businesses all lend themselves as being seen as strong ethical positives.
The process safety division is concerned with safety diagnostics in the area of flammable and hazardous gases as well as explosion protection devices. Infrastructure safety manufactures sensors for lifts and automatic doors in transportation and buildings. It also supplies fire and smoke detectors, security devices and audible/visual warning activators. In medical, Halma manufactures devices used principally in eye health and eye surgery. It also supplies instrumentation such as pumps, probes valves and compressors used in medical diagnostics. Finally, environmental and analysis is a market leader in opto-electronic technology used in monitoring water networks, UV disinfecting and water quality testing.
Halma continues to be well-positioned to take advantage of longer-term trends – climate change, regulatory demands, health and safety and a growing and ageing population – by developing its market leading positions. This augurs well for shareholders who are focused on investing in companies that deliver sustainable long-term returns.
Halma is one of the world’s leading manufacturers of fire detectors, protecting people in large buildings such as schools, hospitals and offices. Over 3m are sold annually in more than 100 countries. Halma gas detectors include portable products to protect entire industrial sites from gas leaks and flammable or toxic gases. A particular application is detectors used in confined spaces such as tunnels.
Halma manufactures non-chemical water treatment systems based on UV technology for disinfecting drinking and waste water, swimming pools, and industrial water supplies, such as food processing and electronics manufacture. The company is a leading maker of leak detection instrumentation in underground water pipes, sold to utilities worldwide. The company’s medical specialism is ophthalmic instrumentation used by eye surgeons and optometrists to test vision and diagnose disease. Principal products include examination lenses, ophthalmoscopes, and pressure testing instrumentation.
Halma has developed a specialist portfolio of businesses which contribute towards resource efficiency, monitoring changes in the environment, reducing energy, saving water, minimising waste and checking emissions and leaks. The company’s own footprint is relatively modest, and is subject to reduction targets in the areas of energy, waste and water. Approximately 22% of group revenues are currently ISO14001 accredited, and this is being further developed. Despite strong growth, the group has managed to reduce carbon emissions by 9% over two years.
For more about Ecclesiastical, its Amity fund range and other sustainable companies it invests in, visit its website.