Halma, Avire, & History of the Elevator Sensor Market

Halma is a UK-listed serial acquirer of niche highly engineered industrial or medical products that dominate their respective small markets.The company was founded by David Barber who pioneered the model of rolling up and integrating industrial businesses that have strong market power and durable earnings. Barber’s philosophy, which still underpins Halma’s culture today, is best explained in this short speech.

Today, Halma is structured into three sectors with 50 operating companies: Safety, Medical, and Environmental and Analysis. Each sector has ~20%+ net margin and the group aims for 16% growth in profit before tax every year, half from organic growth and half driven by acquisitions. Halma aims to acquire 15-20 profitable, high quality companies each year and between 2003-13 the company paid on average ~8x EBIT.

The 20-year FCF CAGR is 15% and the 33-year dividend per share CAGR is 5%. This has led Halma to become one of the top performing UK businesses over the last 40 years.

Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

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Well, it's going to be one to watch. I'm very curious about the elevator space and the sensor space. So I'm sure we'll be in touch again at some point.

Yes, it is an evolving situation right now. I do believe that the big OEMs are only just coming to grips with the requirements on the sensor front. However, I think as soon as they do, the price pressure will return. The emergency communication piece is also similar in that there's a lot of market pressure because an elevator-specific emergency phone that might have previously sold for $150 has now turned into a $3,000 system. I don't believe this kind of pricing is sustainable in the long term. There's already been pushback. For example, the state of New Jersey adopted the 2019 emergency communication code and probably within six months rescinded that decision under pressure from the real estate market.

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