The sale of Invensys Rail to Siemens for £1,742 million has been transformational for Invensys. In summary, it has enabled us to deal with the Group’s legacy UK pension issues, return cash to shareholders and enable significant investment in our refocused strategy on our higher-margin, faster-growth markets. The sale is also enabling us to simplify the Group’s management structure and make substantial cost savings, while creating an operational and financial structure that provides greater transparency as to the true value of our market-leading businesses.
In our Appliance segment we will be looking to build upon the significant investments that we have made in restructuring and product development over the last five years.
We will now be focusing our investment on growing those lines of business within our Software, Industrial Automation and Energy Controls business segments, which offer attractive long-term growth prospects with high returns on investment and excellent cash conversion. Our long-term sustainable growth will therefore be driven by:
Growth in software
We will be focusing on expanding the breadth and depth of our higher-margin software businesses, which represent a major engine of future growth. We will do this through acquisitions and additional investment in research and development.
Maintaining and developing leading technologies
As a leading technology company, research and development is fundamental to what we do so we will continue to invest in our state-of-the-art technologies to ensure that they remain ‘best in class’ and are evolving to meet the needs of our customers in both the developed world and in rapidly developing economies, such as China and India. During the year, we invested 4.5% of continuing operations revenue on research and development (2012: 4.3%); in Software, the investment was 19.3% of segment revenue.
Project and commercial execution excellence
Project and commercial execution excellence sits at the heart of our long-term sustainable growth strategy and it will continue to drive our reputation as a partner of choice. We will therefore be continuing to invest in employing the best people for each project and providing them with the delivery support they need to achieve consistently high levels of customer satisfaction.
Developing our portfolio through acquisition
We will supplement our organic growth by pursuing an active but disciplined programme of bolt-on acquisitions designed to broaden and enhance our market positions and product ranges, predominantly in our Software and Energy Controls business segments.
Supporting and expanding our customer base
We have a considerable base of customers whose prime focus is on maximising the reliability and efficiency of their existing plants and facilities. As a result, the opportunities for upgrading or replacing their control and safety technologies are significant and we will continue to provide them with outstanding service and support in order to capitalise on this. We will also continue to secure new greenfield contracts to expand our base of installed technologies and provide further opportunities for selling other products. In addition, we will seek to expand into new industry sectors. Currently, 39% of our revenue from continuing operations comes from the oil & gas, petrochemicals and utilities & power sectors. Our aim is to acquire strong positions in new sectors by broadening our Software product range.