The group argues that it does not need specific technical expertise because the people come with the contract

The group argues that it does not need specific technical expertise because the people come with the contract. It then spent three months persuading the unions to swap all their overtime arrangements for a higher salary. Serco had no previous experience of managing such installations and was up against civil engineering specialists. Nevertheless it won the largest of three contracts accounting for more than half the total.

But chief executive Richard White argues that the group’s specialisation is in outsourcing almost any activity. He describes this as introducing competitive disciplines to what otherwise – whether as a government department or an internal part of a company – would be a monopoly supplier.As an example he cites the group’s recent bid to manage the water and sewage facilities for Melbourne, Australia, a city of two million people. At first sight the group seems to be a confusing hodgepodge of activities with responsibilities ranging from maintaining the park at Kensington Gardens to looking after Britain’s four-minute warning system against nuclear attack. It has the same growth potential, though it is a very different company.

Sales, profits and earnings per share have grown at a 20 per cent-plus compound rate for more than a decade with more to come.A specialist in facilities management and systems engineering, Serco is a service rather than a manufacturing business but shares with Halma a strong management culture. The biggest subsidiary, Apollo, makes fire detection equipment and has grown dramatically since it was acquired in the early 1980s after repaying its purchase price in just three years.Acquisitions play a key supporting role in the group’s growth with a regular flow of moderate-sized deals. These deals, which are almost invariably financed out of cash flow, either strengthen existing subsidiaries or take the group into new areas with the same niche-dominant high-return characteristics.Latest interim figures showed a 15 per cent increase in pre-tax profits and, with many opportunities beckoning for the group, prospects look excellent.Investors in search of a new Halma should look at another of my favourites, Serco at 493p. The group is actually a collection of businesses with 45 different subsidiaries covering many product areas, each with its own, autonomous management. Out of a total workforce of 2,500 around 180 are directors of subsidiaries.The group is primarily a manufacturing operation with each of its companies a market leader in a profitable niche area. This leaves it plenty of room to grow further; especially since more than 60 per cent of sales are into overseas markets.