Halma (HLMA)

Hello,

I recently read a presentation by David Barber of Halma, who co-founded the company in 1972. It dates from 1997 but is still relevant today. It highlights (amongst other things) why a buy and build strategy works in practice to create shareholder value. This is partly why I personally believe HLMA is a quality business and may remain so over the longer term.

david-barber-halma-strategy-speech.pdf

(maybe start from page 4 because he initially refers to charts which aren’t provided).

Mr Barber believed that to create value for the shareholder, any company purchases should be;

  • paid for by internally generated cash.

  • a replica of one already owned by the purchaser (i.e. within the circle of expertise, knowledge and competence of the purchasing company)

  • a bolt-on or quasi bolt-on (i.e. smaller than the purchasing company, because large acquisitions carry with them a large amount of risk if things don’t turn out as expected).

  • likely to improve the quality as well as the quantity of earnings.

This contrasts starkly with the buy and build strategy of some companies I can think of, and it’s certainly something I will use as a filter in the future for ‘buy and builds’ in the future!

Just for context, Halma’s total return over 25 years is 13% and 10 years 26%, which is pretty staggering imo.

Co-incidentally I stumbled across a blog post by Chris Meyer (of ‘100-BAGGERS’ book fame) who puts the above (a little more eloquently) here;

How They Did It: Halma, Plc (woodlockhousefamilycapital.com)
Looking at all of the content in this blog, it seems like a blog worth following?

(In my search for compounders, and based on my research, I have purchased some HLMA shares, but of course they may crash tomorrow -who knows! :grinning: :grinning:)

Regards,

Ben

4 Likes

That speech is a great find! Thanks for sharing.

1 Like