![]() ![]() ![]() Indebtedness may become a concern if management decide to change strategy and target large companies - but this does not seem highly likely. ![]() With this backdrop, a free cash flow yield of 2.1% for FY3/22 looks attractive enough for a business that executes a consistent growth model. Over a 10 year period the free cash flow growth has been 12% CAGR. However, when we consider the track record and the free cash flow generation, we believe the shares are worth a look.īetween FY3/16 and FY3/19, the company has grown free cash flow at 16% CAGR, effectively doubling every 5 years. These are premium valuations and at first glance does not look particularly attractive. The shares are trading on consensus forecasts of PER FY3/22 46.5x and a prospective dividend yield of 0.7%. From experience Halma knows how to support a small company with £25m annual revenue to go up 'to the next level'.Īll told this has led to a very strong track record, where Halma has managed to demonstrate pre-pandemic of delivering record high earnings for 17 consecutive years, and operating margins above 16% for 35 consecutive years. Over many years of practice the company has identified 'growth enablers' that they provide from a central team - things like M&A, international hubs for expansion, brand and marketing expertise, strategic, communications and finance. Once acquired Halma likes to keep the companies autonomous, entrepreneurial and provides help only if needed. This 15% YoY would be split between 5% organic and 10% M&A impact, but this balance can bounce around a bit. With this strategy Halma's topline aspiration is to double every 5 years (so 15% CAGR YoY). The preference is for smaller firms to buy as opposed to large which would invite concentration risk.
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