Tapping into a Global Recovery

01/27/2010 12:01 am EST


John Snowden

Contributor, The IRS Report

HVAC and beverage-dispensing equipment maker IMI is benefiting from cost cuts and strong growth in Asia, writes John Snowden in The IRS Report.

IMI (LSE: IMI) is a company whose origins go back to 1862, when Scottish entrepreneur George Kynoch opened a percussion cap company at Witton in Birmingham. 

During the last two decades the group has gradually moved away from the construction and automotive sectors to refocus as a global company delivering innovative engineering products to international companies in clearly defined niche markets. The five businesses are as follows:

  • Severe Service, which was extended by the acquisition of Truflo Group in 2006 and expanded fluid power capabilities.
  • Indoor Climate [supplies] cost-effective heating, ventilation, and air conditioning (HVAC) systems for buildings and indoor environments. Many of the world's most famous buildings use IMI services. Examples include Terminal five at Heathrow and some of the tallest buildings, such as the Taipei Tower in Taiwan.
  • Beverage Dispense operates under the Cornelius brand to supply an extensive range of beverage dispensing and cooling equipment to the drinks industry and leads the market in delivering still and carbonated beverage dispensing solutions. IMI has acquired a reputation in this field for technical innovation which has been reinforced by successful new products for noncarbonated beverages and designs, such as the UltraFlow high-throughput system, which dispenses beer at treble the speed of standard systems.
  • 3Wire is the name of the US-based online parts system which maintains an inventory to provide after-sales support and efficient service in this important market. Expansion of the beverage dispense division is particularly strong in the Asian markets.
  • The Artform and DCI Marketing businesses influence consumer sales and help retailers by highlighting consumer brand leaders such as IMI’s Display Technologies and Cannon equipment, the latter bringing improved inventory control to enhance products and services for major retailers.

IMI issued a very positive trading statement in November ahead of the December year-end. The board reports operating margins for the second half to be better than expectations while overall demand remains broadly stable. The share price surged 44 pence to 504 pence on the news, as the company stated cash flow remained strong and inventories have been reduced almost 15%.

A broker comments that management is obviously doing a good job taking costs out of the business. The company paid a 12.7 pence final dividend last May and an interim dividend of five pence last September. The final results for 2009 will be announced on March 4th. I believe the statement from chief executive Martin Lamb accompanying the results will be positive, and I hope the share rerating will continue in tandem with the expected recovery in economies around the world. [Shares closed at 544.50 pence in London Tuesday—Editor]

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