Halma (LSE: HLMA) shares fell 14% on 11 June after the FTSE 100 group released its full-year results for the year to 31 March 2026. The drop came despite 16.6% organic revenue growth and a record year across most of the group’s key financial metrics.
The sell-off reflected investor concern over two issues disclosed in the results: concentrated revenue exposure in the photonics division and a slower growth outlook for that business in the coming year. Both emerged from the report rather than being flagged in advance, and neither had featured in comparable announcements from FTSE 100 peers.
Why Halma Shares Fall 14% Despite Record Numbers
Halma’s photonics unit grew revenue 52% in the year to 31 March 2026, driven by demand from a single data centre customer. That customer accounted for roughly 20% of the group’s total revenue and approximately half of all organic growth.
Management guided that photonics growth is expected to slow to 30% in the coming year. A deceleration from 52% is not a reversal, but single-customer dependency concentrates the risk if that customer’s spending shifts.
Diploma, the FTSE 100 distributor, reported comparable data centre demand in its recent results and was well received by investors. Diploma’s announcement contained no equivalent single-customer revenue concentration, and Halma shares fell 14% while Diploma drew a positive market response.
The Numbers Behind the Share Price Move
The broader financial results were strong. According to Halma’s full-year results filing with the London Stock Exchange, total revenue for the year to 31 March 2026 reached £2,582.3m, up 15% on a reported basis.
Adjusted EBIT rose 22% to £594.5m, with the adjusted EBIT margin expanding 140 basis points to 23.0%. Adjusted earnings per share climbed 21% to 114.05p.
Adjusted return on total invested capital came in at 16.2%, up 120 basis points and towards the upper end of Halma’s 12-17% target range.
Adjusted cash conversion was 93%, down 19 percentage points from 112% in the prior year, but above Halma’s 90% target. Net debt to adjusted EBITDA rose to 1.16 times from 0.97 times a year earlier, within the company’s stated operating range.
The board recommended a 7% increase in the final dividend to 15.11p per share, up from 14.12p, bringing the full-year dividend to 24.74p against 23.12p in FY2025. That final dividend requires shareholder approval at the AGM on 23 July 2026 and, if approved, will be paid on 14 August 2026.
Avo Photonics: From a $9m Acquisition to a Group-Defining Division
The concentration unsettling investors traces back to Halma’s 2011 purchase of Avo Photonics. According to the Avo Photonics acquisition announcement, Halma paid an initial cash consideration of $9.0m (£5.6m) on 8 July 2011, with contingent consideration of up to $11.0m (£6.9m) payable on profit growth. At the time, Avo had revenues of $5.7m (£3.6m) and profit before tax of $1.0m (£0.6m) for the prior calendar year.
A business acquired for low single-digit millions of dollars fifteen years ago now generates roughly a fifth of group revenue. The risk that accompanies that outcome is inherent in the model: a single large customer relationship can move group-level metrics at scale.
Halma invested over £600m in total to support future growth in FY2026, including R&D expenditure of £123m (4.7% of revenue, up 13% year-on-year) and capital expenditure of £56m, up 24%. Two further acquisitions completed since the year end added approximately £75m in combined consideration, according to the full-year results press release.
Margin Guidance and the Photonics Test
The full-year results press release stated that adjusted EBIT margin for the coming year is expected to be in line with FY2026, excluding a one-off relating to the Nuvonic transaction.
The broader financial profile leaves Halma within its leverage range and cash conversion target. What it does not resolve is the market’s core question: whether 30% photonics growth in the coming year, if delivered, offsets the concentration risk investors repriced on 11 June.
Management’s 30% photonics guidance and the AGM on 23 July 2026 are the immediate events to watch. Whether the market’s reaction on 11 June proves to be a reset or a rerating will depend on what the next trading update shows.
