Strategy in Action
During 2014 we initiated a strategic review to develop a five year plan to harness the Group’s full potential to deliver sustainable accelerated growth and shareholder value. The opportunities are significant and that is reflected in our ambition to double the Group’s operating profits. This is how we plan to achieve our goal.
1. Capitalising on significant organic growth opportunities
The Group currently operates in attractive end-markets and to achieve our ambitions we must focus on those that offer the greatest potential in terms of delivering top and bottom line growth. Our priority is to capitalise on those end-markets where we already are, or have the potential to be, in a leading position – markets where we can grow and where there are significant higher margin aftermarket opportunities.
Focusing on markets that offer the greatest growth
Driving growth with a new go-to-market strategy
Broadening our market presence and customer reach
2. Improving operational performance
The benefits of moving towards and achieving best in class operational performance are very significant. As we improve how our businesses operate we will better utilise capacity, enhance our competitiveness, reduce working capital and generate cost savings by operating more efficiently. By doing this, we will also improve services for our customers. Our ambition is to progressively self-fund our organic growth initiatives using the benefits generated from our operational improvements. We are on a self-help lean journey, underpinned by the engagement of management and employees at all levels and we remain absolutely confident that embedding lean across the whole of IMI is the best way to deliver and sustain our achievements.
The operational performance of every site in the Group is benchmarked every six months against the ten areas of lean and significant progress has already been achieved. A world-class operational performance score is 85% or higher. At the time of the first benchmark in 2014, none of our facilities came close to achieving this, with the average score being 31%. At the most recent review, the average score reached 66%, and our Hydronic Engineering division now has two facilities with a world-class score. All of our businesses continue to implement detailed plans to achieve world-class performance by 2018.
The 10 areas of lean
All sites are benchmarked against these areas of lean every six months
Status as of December 2016:
Driving efficiency to offset market conditions
Establishing a strong foundation for future accelerated growth
Accelerating operational excellence further enhancing competitiveness
3. Increasing investment in new product development
Having successfully established the new systems and disciplines essential to effective new product development – including advanced product quality planning ('APQP'), rigorous competitor product tear-down and Value Engineering – all three divisions are increasingly delivering on our promise to introduce great new products and solutions for our customers, more quickly and more effectively than ever before.
Continuing to innovate to secure leadership positions
Enhancing our competitiveness by offering compelling solutions
Building a sustainable competitive advantage
4. Expanding our addressable markets through targeted acquisitions
We will supplement our organic growth initiatives with targeted acquisitions, capable of producing returns in excess of the Group's weighted average cost of capital within three years. Beyond our existing business portfolio, we have identified the potential to double the Group's addressable market by making acquisitions in adjacent non-valve product markets. Criteria for such acquisitions include a focus on North American revenues, strong aftermarket dynamics and critical products that create significant barriers to entry.
Our acquisition strategies for each of the divisions are as follows:
Within Critical Engineering, bolt-on acquisitions to extend both our product range of semi-severe and configured products and our geographic footprint in both our existing and adjacent markets remain our focus. Opportunities with attractive aftermarkets are always important, but particularly given recent market conditions.
We remain pleased with the acquisition of IMI Bopp & Reuther, which has helped us address a number of our strategic objectives. The business is now fully integrated into IMI Critical Engineering and provided a vital foundation to consolidating Critical Engineering's global Nuclear Power business into its Mannheim facility.
Precision Engineering continues to simplify its organisation, implementing robust systems and lean improvements, while developing a list of value enhancing potential acquisitions. At the same time, the Precision Executive, supported by the IMI Business Development team, are building senior level relationships in readiness for both large and small scale acquisitions.
Our product strategy is well underway in Hydronic Engineering, as we start to focus on high quality well run European acquisition opportunities. We have developed a well-defined pipeline of opportunities, many of which are family owned which would fit well with IMI's culture, whilst enabling us to leverage their strong brands and management capabilities.
Broadening the acquisition universe
- Potential to double addressable market
- Leverage existing positions in attractive end-markets
- Non-valve related products and businesses