Transcript
Introduction
Matt
This is Matt Reustle, and today we're breaking down Diploma. Diploma is a specialist distributor of medical equipment and industrial components listed in the UK. It's a business you're unlikely to be familiar with. And at first glance may appear mundane, but when you dig a little deeper, you'll find a high quality operator generating significant free cash flow through a mix of organic and inorganic growth channels. To break down Diploma. I'm joined by Charlie Huggins an investor in the business and head of equities at Wealth Club.
Diploma's History and Business Lines
Matt
So Charlie, I thought a nice place to start would be with just a basic history of Diploma, what they do, size and scale, and what originally attracted you to their business model.
Charlie
Diploma is a business I've been following for the best part of a decade. In my view, it is one of the highest quality businesses listed on the UK stock market. I think it's under the radar of most investors. It's a distributor of industrial and life sciences products. It's highly diversified by geography sector and market. So US and Europe are about 40% each of sales, and then developed markets make up the remainder, like Canada and Australasia. It's got three main sectors, controls, seals, and life sciences, which I know probably won't mean a great deal, but I'll drill into that later. Those end markets across each of those sectors are quite different, but there are three common themes that connect them. So firstly, the products that Diploma supplies are very low cost, but critical to the end application. That is a key part of its business model. It's very focused on low cost, but critical components. The second lead products are funded by customers' operating budgets, not capital budgets. That lends a large degree of recurring or repeating Matt
Can you just provide some context in terms of the size and scale of the business, perhaps its market capitalization?