Bob Beeston, chief executive of FKI, has good reason to be pleased. His company has just announced pre-tax profits that grew 6.2% to £172.6m for the year to March 2000, on a 12.3% rise in turnover to £1.3bn. The success is affirmation of Beeston’s strategy of focusing on selective growth markets.
Beeston, 58, a chartered electrical engineer, joined the FKI board in 1992 from BTR’s valve group, where he was managing director
You say FKI is focusing on growth markets. What are they?
Over the years we’ve operated in mainly mature markets. We recently decided that our focus should be to go into markets with opportunities for real growth, exactly where there were market growth opportunities.
We recognised that our margins had got to quite reasonable levels, and it became progressively more difficult to just go on increasing margins. The analysts used to tell us exactly the same thing, but it’s not anything that we didn’t already understand. So our intention was always to get into growth businesses once we thought we’d got well up the route to having a profitable business.
Over the past 12 months we have made a significant change to the business. The logistics business was created – a terrific business which is going to give us huge growth, somewhere in the range of 10-15% organic growth.
What does FKI Logistics supply?
We supply fully automated handling systems and sortation systems to companies like FedEx and Amazon. You’ll get your book on time from Amazon – they use our equipment.
You emphasise blue-chip clients – is that to stress that it is not a risky enterprise?
Absolutely, yes. We deal with customers who have the ability to pay us and who have established positions and well-known brand names in the industry, companies like Nike and Gap.
We supply baggage handling equipment to the airports, we’ve just landed contracts from Madrid, and we’ve done work in Hong Kong. It’s all about sortation and control of packages.
Does the ability to focus on growth markets depend on developing strategies and implementing them fast – something manufacturing has not always been noted for?
Absolutely. Look at the changes we’ve made in the past 12 months, creating a new division within FKI.
We’ve always been quick on our toes, and if you look at the past nine years or so you will see progressive growth in our earnings and top line. We’ve been very successful at producing cash flow as well, which has enabled us to expand the business overall.
Would you say that a successful business is one that can change focus, that can recognise an opportunity, because some of the traditional large companies are slow to react and grasp an opportunity before it’s taken up by other people?
This is vitally important. Our head-office team is 13 people, and we all sit closely together. We’re not a lumbering great organisational structure, we can make decisions quickly, react quickly, and we do that.
An example of that is what we’ve done in our UK engineering businesses. We recognised the potential for growth in our turbogenerator business. We increased the capacity to manufacture, we reached long-term agreements with our major customers like Rolls-Royce and GE. And we increased the output of that factory last year by 66%.
FKI maintains investment in new product development and manufacturing efficiency. Is that a major driver?
It certainly is, and one of the things we’ve introduced is a product made in Denmark, what I would call the equivalent of the bank cash dispenser. We’d call it an APM machine, which is an Automated Parcel Machine. We will provide the ability to post a parcel 24 hours a day when post offices are shut.
Has the relationship between traditional engineering companies and the stock market had to change with the emphasis on dotcom companies?
Obviously we’ve needed to be in growth businesses and to convince the City that we have a business with growth potential. As a UK engineering company that is really difficult.
All we see is knocking copy in the press about UK engineers under pressure because of the strength of sterling and, okay, it is. But if you’ve got the right product and it’s a technologically advanced product that customers want, you can sell it.
Our turbogenerators have a potential for growth – over 90% of that product is exported from the UK.