Halma PLC (LSE:HLMA) shares plunged 11% on Thursday morning despite the FTSE 100 group posting annual revenues above £2.5 billion and adjusted profit over £500 million for the first time, both beating market expectations.
The provider of safety, environmental and healthcare technologies reported revenue of £2.58 billion in the year to March, up 15% from the previous year and ahead of the £2.56 billion average City forecast.
Adjusted earnings before interest and tax jumped 22% to £594.5 million, well ahead of the £567.9 million consensus analyst estimate. Statutory profit before tax and interest rose 27% to £520.7 million.
Growth was broad-based across all three of Halma's divisions, with organic revenue rising 16%. The company said its photonics business, where demand is driven by the data centre industry, made a particularly strong contribution, accounting for around eight percentage points of organic growth.
The group invested more than £600 million during the year, including a record £447 million on five acquisitions. Two further deals worth about £75 million have been completed since the year-end.
Net debt finished the year equivalent to 1.16 times adjusted EBITDA, comfortably below its target ceiling of two times.
The board proposed a final dividend of 15.11p per share, taking the total dividend to 24.74p from 23.12p the year before to continue its run of successive hikes to a 47th year, though slightly below the 25.9p that the City expected.
Looking ahead, the board said the company "made a positive start to the 2027 financial year, with a strong order book and order intake ahead of revenue and last year".
Organic revenue growth is expected to be at a low double-digit percentage, including premium growth of approximately five percentage points from our photonics business, with group margins broadly in line with 2026 levels.
The shares fell 11.3% to 4,116p, having risen around 32% since the start of the year.
Analyst Alex da Silva O'Hanlon at Panmure Liberum noted that Halma trades on around 36 times 2027 earnings, versus a sector average of 22 times, so leaving little room for disappointment even if he thinks it "remains justified".
Investors may have focused on ongoing concentration risk in the fast-growing photonics business, which serves the data centre industry and where revenue from a single customer rose from 15% to 20% of group sales during the year.
Management's guidance growth should drive modest upgrades to consensus forecasts, O'Hanlon said.
** UPDATE: Adds share price and broker comment **