Engineering Advantage

“Rarely do you see such a well positioned and aligned business.”

Engineering group IMI is doing rather well. It has just posted pre-tax profits of £301.4 million, on revenues of £2.1 billion and says it is going to increase its dividends.

IMI, formerly Imperial Metal Industries, was founded in 1862 and has had a fascinating history since. At one time it merged with Nobel Industries; then in 1927 as Nobel Explosives it was one of four companies that merged to form Imperial Chemical Industries. IMI floated in 1966, with ICI retaining a majority stake until 1978. It is focused on the precise control and movement of fluids in critical applications.

The Financial Times article I read quoted Martin Lamb, IMI’s chief executive, as saying: “Our game plan has been consistent for about 10 years: we have kept focusing on niche markets. We have kept on investing in R&D, and about 70 per cent of our revenues come from bespoke products, which gives us strong relationships with our customers and a good barrier to competition.”

What strikes me about this is just how clearly the business has focused on a particular niche; how consistently it has pursued and developed its engineering competence, by investing in R&D; and the awareness of the need to protect their strong competitive advantage in the market. It uses the term “engineering advantage” which sums this strategy up perfectly.

I have listened to a lot of managers talking about their businesses but very rarely do I come across such clarity of thought about the things that I think are important for building a great business. IMI has chosen to position itself as the expert in the “precise control and movement of fluids” and stuck to it.

Lamb also said that the firm had spent about £90m on the acquisition of two overseas businesses recently and that it still has £800m, or so, available for more acquisitions. You have to think that with such clarity of thought and alignment it is likely to be money well spent.

This is an example of a business with a long “imperial” history that has managed very successfully to change with the times and stay different 150 years after it was founded. Not many British companies can claim that.


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