Reinvention pays off

Strong performances by its fluid power and climate control divisions helped IMI to a bright start to 2004.

The UK group – which is fast emerging as a case study of a highly-focused, technology-led international engineering business – shrugged off higher raw materials costs and adverse exchange rates to deliver a 14 per cent interim profits boost. It made £64m on sales of £801m in the six months to July.

IMI has spent three years reinventing itself by selling under-performing or commodity-led areas of its business and concentrating on those where investment in R&D can give it a competitive edge.

The group was able to report organic sales growth across almost all of its businesses, and cheered investors further by raising shareholder dividend by five per cent.

Fluid Power, dominated by IMI’s Norgren subsidiary, grew by eight per cent compared to the first half of 2003 thanks to increased market share and generally better trading conditions in those markets.

This, along with transfer of production to lower-cost regions, helped the division increase operating profits by a third to £21m. Alongside its organic growth strategy, IMI showed it is also prepared to make selective acquisitions when it announced the purchase of FAS, a Swiss specialist in miniature solenoid valve technology.

IMI’s indoor climate operations continued the recovery that began in 2003, the group said. Raw materials costs and the dollar exchange rate shaved £1m off the division’s profits, which still grew by five per cent to £11.7m.

There was further good news from the group’s beveragedispense division, particularly in the US where its Lipton iced teadispenser looks to have hit the spot with thirsty Americans. Beer dispenser sales in the UK were lower, but the division managed a five per cent sales increase to £13m.

There were, however, a few downsides. IMI’s severe service valves business saw a five per cent sales fall due to customer order patterns, but the group claimed the longer term position is healthy.

IMI was also hit with a £30m fine by the EU following an investigation into its former copper tube business and is awaiting the result of a separate inquiry into its copper fittings operation. Both have been sold off, and IMI said it would await details of the judgement before deciding whether to appeal.

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