RNSArticle

RNS Number : 4016R

Invensys PLC

03 November 2011

Invensys plc

3 November 2011

RESULTS FOR HALF YEAR ENDED 30 SEPTEMBER 2011

A solid start to the year despite the uncertain macroeconomic climate around the world

Business highlights

· Invensys Operations Management has sustained momentum supported in particular by the oil and gas industries in emerging markets; revenue and operating profit were up over 20% at CER¹

· Invensys Rail received major orders from Network Rail in the UK and, since period end, we have received substantial awards from new markets, particularly the Middle East

· Despite some resilience in the commercial and wholesale segments, Invensys Controls experienced a significant downturn due to a weak appliance market

Financial highlights - continuing operations

· Order intake was £1,086 million (H1 10/11: £1,148 million), down 5% (4% at CER), with circa £600 million of further awards at Invensys Rail since period end

· Revenue was £1,244 million (H1 10/11: £1,162 million), up 7% (8% at CER)

· Operating profit² was £102 million (H1 10/11: £100 million), up 2% (3% at CER), with a good performance from Invensys Operations Management offset by Invensys Controls

· Underlying earnings per share³ decreased 7% to 6.9p (H1 10/11: 7.4p) due in part to increased restructuring costs

· Operating cash outflow was £11 million (H1 10/11: £83 million inflow) mainly due to the cash profile of some major contracts and we expect a significant improvement in H2; net cash was £192 million

· Interim dividend increased by 10% to 1.65p per share (H1 10/11: 1.50p per share)

· The IAS 19 pension liability reduced by £140 million to £327 million (31 March 2011: £467 million)

Outlook

· We continue to expect that on a constant currency basis we will achieve a year of further progress

Contact:

Invensys plc Steve Devany tel: +44 (0) 20 3155 1301

Annabel Michie tel: +44 (0) 20 3155 1303

Financial Dynamics Andrew Lorenz

Richard Mountain tel: +44 (0) 20 7269 7291

Chief Executive's Statement

We have made a solid start to the year despite the uncertain macroeconomic climate around the world.

At Invensys Operations Management, order intake remained strong across each major region and each of our three business segments, namely control and safety, advanced applications and equipment. Excluding a large China Nuclear contract for two reactors booked in the first half of last year, order growth was 20% at constant exchange rates. Revenue growth was similar and, with maintained operating margins, profits grew strongly. Because of our broad global market exposure, we have maintained an order pipeline amounting to around £4 billion. Our second half performance is underpinned by our large order book for control and safety, where major projects are delivered over several accounting periods, and the exposure of our shorter-cycle advanced applications and equipment segments to emerging markets, which are expected to be less affected by the current uncertain macroeconomic climate.

At Invensys Rail, our UK awards in the first half included the large Thameslink framework agreement in London and an order for £28 million from Network Rail for work in Reading. Since the end of the period, we have won our second major order in Turkey with the £170 million contract for the Marmaray Project in Istanbul and our first order in Saudi Arabia with the £420 million contract for the Makkah to Madinah high-speed line. The level of bidding activity around the world remains substantial with an order pipeline at the period end of around £9 billion and I am hopeful that we will achieve a high level of orders for the year as a whole.

As expected, Invensys Controls experienced very difficult market conditions in the appliance sector, but produced a resilient performance with an operating margin of 5.7% and positive operating cash flow. Based upon customer comments, we expect our major appliance markets in North America and Europe be more stable in the second half, albeit at low levels, and we should see the traditional seasonal improvements in commercial and wholesale, supported by several key new product launches in the commercial business.

On pensions, we have had a reduction to the IAS 19 deficit, which re-emphasises the effectiveness of our strategy to ensure that our balance sheet is not unduly affected by market movements. We continue to investigate opportunities for mitigating our pension liabilities.

Our cash performance in the first half was disappointing, mainly due to the need to invest in working capital on some major projects ahead of payment milestones, delayed remittances by some customers and the absence of upfront payments as a result of the delay in the award of some large contract awards at Invensys Rail. We view this as a timing issue and we should improve the situation significantly by the year end and through next year.

With three strong divisions with a good mix of businesses and end markets, we are well positioned across the portfolio to adapt to macroeconomic uncertainty and changing market conditions. We continue to expect that on a constant currency basis we will achieve a year of further progress.

Wayne Edmunds

Notes

1. Unless otherwise stated, % change is measured at constant exchange rates (CER) as a percentage of the H1 10/11 adjusted base and is calculated based upon underlying amounts in £'000s.

2. All references to operating profit (OPBIT) and operating margin in this announcement are before exceptional items.

3. Underlying earnings per share is before exceptional post-retirement benefits past service credit and pension curtailments.

Presentation and conference call

Wayne Edmunds, CEO, and David Thomas, CFO, will be hosting a presentation and conference call for analysts and fund managers at 9.00 a.m. GMT this morning:

Venue: J.P. Morgan Cazenove
20 Moorgate
London
EC2R 6DA

Dial-in details (please note that the passcode is required).

UK: +44 (0)20 3427 1919

US: +1 646 254 3366

France: 0805 631 579

Germany: 0800 589 2674

Italy: 800 089 737

Spain: 800 699 526

Confirmation Code: 7643997

The presentation will also be available via audio webcast both live and for replay purposes. To access the audio webcast please go to http://www.invensys.com and follow the Half Year Results link.

A recording will be available at this address shortly after the completion of the call. This announcement and the presentation materials are also available at http://www.invensys.com

Safe harbor

This announcement contains certain statements that are forward-looking. These statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Forward-looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and liquidity, and the development of the industries in which the Group operates, may differ materially from those made in or suggested by these statements and a number of factors could cause the results and developments to differ materially from those expressed or implied by these forward-looking statements.

Business Review

Performance highlights

Half year ended 30 September All data relates to continuing operations (other than free cash flow)	H1 11/12	H1 10/11
	H1 11/12	H1 10/11	% Total change	% Change at CER¹
Orders (£m)	1,086	1,148	(5%)	(4%)
Order book (£m)	2,057	2,204⁴	(7%)	(7%)
Revenue (£m)	1,244	1,162	7%	8%
Operating profit² (£m)	102	100	2%	3%
Operating margin² (%)	8.2%	8.6%
Operating cash flow - (outflow)/inflow (£m)	(11)	83	(113%)	(117%)
Cash conversion (%)	(11%)	83%
Earnings per share - basic (p)	6.9p	7.4p	(6.8%)
Earnings per share - underlying (p)	6.9p	7.4p	(6.8%)
Free cash flow - (outflow)/inflow (£m)	(103)	13	(892%)
Return on operating capital³ (%)	35.2%	38.7%

1. % change is measured as the change at CER as a percentage of the H1 10/11 adjusted base and is calculated based on underlying amounts in £'000s.

2. All references to operating profit and operating margin are arrived at before exceptional items, unless otherwise stated.

3. Return on operating capital at CER is calculated as OPBIT divided by capital employed excluding goodwill, net pension liabilities, non-operating provisions and net taxation liabilities.

4. Data at 31 March 2011.

Board

On 19 May 2011, Deena Mattar was appointed to the Board as a non-executive director. She was formerly Group Finance Director of Kier Group plc.

On 28 July 2011, David Thomas was appointed to the Board as Chief Financial Officer. He had been Acting Chief Financial Officer of the Group since 24 March 2011.

The Board recognises the importance and benefits of diversity and will continue to take this into account in our recruitment process whilst ensuring that candidates are selected on merit and ensuring there is an appropriate range and balance of skills, experience and background on the Board. We have noted the recommendations of the Davies Report, which was published in February 2011, and aim to increase the proportion of female representation on the Board by 2015.

Pensions

Despite the instability in the financial markets, the IAS 19 net pension liability at 30 September 2011 was reduced in the period by £140 million to £327 million reflecting the success of our strategy to minimise the impact of market volatility on our balance sheet.

We have continued to pursue plans for further mitigating our pension liabilities. Macroeconomic conditions are clearly an important factor and we will continue to assess solutions on an ongoing basis.

Dividend

The Board has declared an interim dividend of 1.65 pence per share (H1 10/11: 1.50 pence per share) payable on 9 December 2011 to shareholders on the register on 11 November 2011.

Outlook

We expect Invensys Operations Management to continue to perform well in the second half underpinned by our large order book for control and safety, where major projects are delivered over several accounting periods. In addition our shorter-cycle advanced applications and equipment segments have significant exposure to emerging markets which are expected to be less affected by the current uncertain macroeconomic climate.

Following the recent successes in Turkey and Saudi Arabia, Invensys Rail is expected to continue to build its order book. We expect continued revenue growth in the second half which, together with a more favourable revenue mix, should ensure that we achieve operating margins for the year as a whole in line with FY 10/11.

Based upon customer comments, we expect Invensys Controls' major appliance markets in North America and Europe to be more stable in the second half, albeit at low levels, and we should see the traditional seasonal improvements in commercial and wholesale, supported by several key new product launches in the commercial business.

We continue to expect that on a constant currency basis we will achieve a year of further progress.

Invensys Operations Management

Invensys Operations Management is a leading global technology, software and consulting business that creates and applies advanced technologies to enable the safe and efficient operation of industrial and commercial operations such as oil refineries, fossil fuel and nuclear power plants, petrochemical works and other manufacturing sites.

Our product offerings can be broadly divided into three areas: control and safety systems (61% of revenue), advanced applications (19% of revenue) and equipment (20% of revenue). Our Enterprise Control System (ECS) offering is spread across all three product categories.

Half year ended 30 September	H1 11/12	H1 10/11	% Total change	% Change at CER
Orders (£m)	599	590	2%	4%
Revenue (£m)	618	521	19%	21%
Operating profit (£m)	54	45	20%	26%
Operating margin (%)	8.7%	8.6%
Operating cash flow (£m)	13	59	(78%)	(78%)
Operating cash conversion (%)	24%	131%
Employees at period end (numbers)	9,309	8,456	10%

Revenue by sector

Half year ended 30 September	H1 11/12	H1 10/11
Oil and gas	28%	26%
General industries	26%	27%
Utilities and power	17%	17%
Discrete manufacturing	9%	7%
Petrochemicals	6%	10%
Other	14%	13%

Revenue by destination

Half year ended 30 September	H1 11/12	H1 10/11
UK	5%	6%
Rest of Europe	21%	21%
North America	28%	32%
South America	7%	6%
Asia Pacific	25%	24%
Africa/Middle East	14%	11%

Markets

The strength shown by Invensys Operations Management's markets last year continued into the first half of this year across all regions and business segments.

Regionally, there was especially strong growth in the emerging markets of the Middle East, Asia and South America with the continued increase in energy demand driving investment in the power, upstream and downstream oil & gas and petrochemical sectors. In North America growth was strong across all of our markets due to increased investment in ageing assets, transfer of knowledge and replacement of assets.

Across our business segments, control and safety continued to grow based on services and upgrades of ageing assets. Additionally, the prospects for the larger project business remain strong with some schemes in emerging markets deferred in recent years being reactivated. The equipment business is still seeing strong growth driven by the energy industries which are continuing to invest, particularly by upstream oil & gas investment in North America; the downturn heavily depleted supply and when the demand returned the growth was better than expected. The advanced applications business is seeing faster than expected recovery in areas such as optimisation, Human Machine Interface (HMI) and Manufacturing Execution Systems (MES) as users continue to improve the efficiency of existing assets.

Despite the events at the Fukushima nuclear plants in Japan, the prospects for the nuclear energy market remain strong with several countries remaining publicly committed to significant investment in nuclear. This has led us to create a separate nuclear business within Invensys Operations Management (see below).

Looking forward, although macroeconomic conditions remain uncertain, we believe that the demands for new capacity in emerging markets and the need to improve the efficiency of brownfield operations in the developed world will continue to drive growth in this division.

Developments

· Invensys Operations Management signed two contracts with TNK-BP, the third largest oil company in Russia and among the top 10 private oil companies in the world by production volumes. We will provide comprehensive automation solutions and services to help drive control, environment and safety excellence at TNK-BP's Saratov oil refinery in western Russia, a seven million tonnes per year refinery.

· We signed a multi-million dollar contract to implement an integrated refinery information system (IRIS) for Saudi Aramco Total Refining & Petrochemical Company (SATORP). A joint venture between Saudi Aramco and Total France, SATORP is constructing a state-of-the-art, 400,000 barrel-per-day refinery in Jubail, Saudi Arabia, that is expected to be operational before the end of 2013. In a strategic alliance with Wipro Arabia Limited, we will provide an integrated InFusion® enterprise control system solution.

· The U.S. Department of Energy has deployed a first-of-its-kind operator training simulator for an integrated gasification combined cycle (IGCC) power plant with carbon capture using our innovative simulation software-based training solutions. Our SimSci-Esscor® DYNSIM® high-fidelity simulator will help train operators for new IGCC plants now being built in the United States. IGCC with carbon capture holds tremendous promise as a low-cost, clean energy source so IGCC plants are expected to be a key resource for the provision of clean fossil power in the near future.

· Recognising the significance of the nuclear industry to the division, with a number of contracts being executed and bid for in China and the potential elsewhere in the world, we have formed a separate nuclear business within Invensys Operations Management. This business will be responsible for the global nuclear business, including business strategy, all commercial activities and the operational delivery of major nuclear projects around the world. The nuclear industry represented 9% of the division's revenue in the period.

· During the period, we acquired the 30% minority interest in our Chinese subsidiary, Shanghai Foxboro Company Limited for £10 million. This company will now become the focus of all the division's business development activities in China.

Performance

Order intake in the first half was strong across all regions and business segments and, excluding the large China nuclear order in the first half of last year, the underlying rate of order increase was 20% at CER. Reported order intake was £599 million (H1 10/11: £590 million), up 4% at CER. The order book at 30 September 2011 was £1,121 million (31 March 2011: £1,124 million), a decrease during the period of 1% at CER. In addition, the pipeline of order prospects remains strong at around £4 billion.

Revenue in the period was up 21% at CER to £618 million (H1 10/11: £521 million) driven by the near doubling of revenue from our large projects, which accounted for 17% of revenue in the period, together with good growth in advanced applications and equipment.

Operating profit was up 26% at CER at £54 million (H1 10/11: £45 million) and operating margin was in line with the corresponding period last year at 8.7% (H1 10/11: 8.6%). Growth in operating margins was held back due to the expected large volume of revenue now being generated by large greenfield projects, which typically have lower margins.

Operating cash flow was £13 million (H1 10/11: £59 million) resulting in cash conversion for the half year of 24% (H1 10/11: 131%). The reduction in operating cash flow was due mainly to the need to invest in working capital in the large greenfield projects ahead of the incidence of payment milestones; we expect this situation to improve significantly over the next twelve months.

Invensys Rail

Invensys Rail is a multinational technology leader, providing state-of-the-art software-based signalling, communication and control systems that enable the operation of trains in mainline and mass transit networks across the world. Our aim is to deliver higher capacity safely and in many cases reduced travel times.

Half year ended 30 September	H1 11/12	H1 10/11	% Total change	% Change at CER
Orders¹ (£m)	250	277	(10%)	(11%)
Revenue (£m)	382	352	9%	7%
Operating profit (£m)	53	51	4%	0%
Operating margin (%)	13.9%	14.5%
Operating cash flow (£m)	(1)	28	(104%)	(103%)
Operating cash conversion (%)	(2%)	55%
Employees at period end (numbers)	4,013	3,980	1%

1. Orders and order book exclude framework agreements

Revenue by sector

Half year ended 30 September	H1 11/12	H1 10/11
Mainline engineering and contracting	46%	48%
Mass transit engineering and contracting	30%	26%
Products	24%	26%

Revenue by destination

Half year ended 30 September	H1 11/12	H1 10/11
UK	26%	24%
Rest of Europe	19%	32%
North America	21%	20%
South America	12%	6%
Asia Pacific	22%	18%
Africa/Middle East	0%	0%

Markets

There have been no significant long-term changes to the global market for rail signalling and train control in the first half of the year with prospects remaining strong due to industrialisation, urbanisation, increasing capacity needs and the recognition of rail as an environmentally sustainable and efficient means of transport.

In our major traditional core markets, the UK market is supported by government commitments to continue to fund Network Rail and other rail infrastructure projects such as Crossrail. Network Rail is currently retendering its signalling framework agreements covering the UK. We were awarded the first framework agreement for Thameslink in London (see below) and the awards for the other eight framework agreements are due within the next few months. Activity levels in Spain remain subdued due to government austerity measures and future investment will be reliant upon private sector financing. In the US, the market for grade crossings remains robust and we are looking to build our presence in the mass transit and mainline signalling markets.

Outside our traditional core markets, there is a significant level of rail infrastructure investment being made, especially in South America, the Middle East and Asia, and we have a high level of bidding activity in those regions. In China for example, major mass transit schemes will be implemented in many regional cities over the next few years and we are confident that we will participate in this market through our agreements with CSR, China's largest rolling stock manufacturer.

Developments

During the period, Invensys Rail received two large orders from Network Rail, who recently named us their 'Supplier of the Year':

· We were selected to deliver the Thameslink resignalling project, one of Britain's largest ever resignalling schemes covering London Bridge Station and the approaching railway. This overarching contract, under which will be a series of individual commission contracts, commenced in August 2011 and runs through to the completion of the Thameslink project in December 2018.

· We were also awarded the £28 million signalling contract for the Reading Western Mainline programme. The scope of the overall programme covers the remodelling of the Reading Station area from Sonning to Pangbourne, a new train care depot and four new platforms which will provide increased capacity at and through the station.

Since the period end, the large amount of bidding activity has already produced two export orders:

· The Saudi Railways Organization (SRO) has announced that the Al Shoula consortium had been awarded the contract to provide the superstructure, systems, rolling stock, signalling, operation and maintenance for the Haramain High-Speed Line linking the two Holy Cities of Makkah and Madinah. This consortium is a Saudi-Spanish group which will implement the successful high-speed line model and technology applied in Spain to this new line. As a member of the Al Shoula consortium, Invensys Rail will provide the full turnkey signalling and train control systems, including its FUTUR 3000 and FUTUR 2500 Level 2 ERTMS solution. The contract includes a 12 year maintenance period. Invensys Rail's share of the three year construction phase is valued at €298 million (around £260 million). Its share of the 12 year maintenance phase is €185 million (around £160 million).

· DLH, the Turkish Directorate of Railways, Harbours and Airports Construction, has awarded us the contract to provide the signalling technology for Istanbul's CR3 Marmaray Project, a 77km commuter line linking Gezbe and Halkali under the Bosphorus. The value of the contract is €195 million (approximately £170 million). In a joint venture with Spanish civil construction company OHL, we will be responsible for designing and supplying a new signalling and Automatic Train Protection (ATP) system for the line. The project will utilise a range of Invensys Rail's state of the art signalling and communication solutions including SIRIUS CBTC (Communication Based Train Control) and FUTUR ERTMS Level 1.

Performance

Orders in the first six months were £250 million (H1 10/11: £277 million), down 11% at CER, due to the delay in several contract awards around the world (NB we do not include framework agreements in order intake or order book). Following the Turkish and Saudi Arabian contracts already awarded in the second half, we are in detailed negotiations for several other significant projects around the world that should be decided by year end and we are hopeful that we will achieve a high level of orders for the year as a whole. Our order book at 30 September 2011 was £884 million (31 March 2011: £1,021 million).

Revenue in the period was up 7% at CER to £382 million (H1 10/11: £352 million) with good growth in the UK, North America and new markets more than offsetting an anticipated reduction in Spain.

Operating profit was flat at CER at £53 million (H1 10/11: £51 million) and operating margin was 13.9% (H1 10/11: 14.5%). Operating margin in the first half was below our medium-term target range due to an adverse mix with a greater proportion of revenue arising from lower margin projects. However, we expect a good improvement in the second half due to a more favourable mix of revenue. We remain confident that margins for the year as a whole will be in line with FY 10/11.

Operating cash outflow was £1 million (H1 10/11: £28 million inflow) due to the investment in working capital on some of our major export contracts ahead of reaching payment milestones, continued delayed payments from customers in Spain and the absence of upfront payments on large contract awards, which should now be received in the second half of the year. We expect a significant improvement during the second half and a return to normal levels over the next twelve months.

Invensys Controls

Invensys Controls designs, engineers and manufactures products, components, systems and services used in appliances, heating, air conditioning/cooling and refrigeration products across a wide range of industries in residential and commercial markets.

Half year ended 30 September	H1 11/12	H1 10/11	% Total change	% Change at CER
Orders (£m)	237	281	(16%)	(15%)
Revenue (£m)	244	289	(16%)	(15%)
Operating profit (£m)	14	24	(42%)	(41%)
Operating margin (%)	5.7%	8.3%
Operating cash flow (£m)	5	25	(80%)	(83%)
Operating cash conversion (%)	36%	104%
Employees at period end (numbers)	7,033	7,522	(7%)

Revenue by sector

Half year ended 30 September	H1 11/12	H1 10/11
Appliance	60%	63%
Wholesale	22%	19%
Commercial	18%	18%

Revenue by destination

Half year ended 30 September	H1 11/12	H1 10/11
UK	7%	8%
Rest of Europe	27%	24%
North America	44%	47%
South America	13%	12%
Asia Pacific	7%	8%
Africa/Middle East	2%	1%

Markets

The weakness seen in Invensys Controls appliance markets during the second half of last year continued into the first half of this year with greater than expected reductions in demand by customers across all segments. In the US, appliance industry shipments were down compared with the corresponding period last year, reflecting weak consumer sentiment and low levels of activity in the housing market. Our target market at the mid- to higher-end saw greater reductions with some purchasers buying lower end products and this effect was exacerbated by manufacturers adjusting inventory levels to reflect the lower levels of demand. The trends in the European and Asian appliance markets were similar to those experienced in the US but South America was less affected.

The commercial markets in North America and Europe held up well but the wholesale market experienced a decline mainly due to distributors reducing their levels of inventory.

Looking forward based upon customer comments, we expect our major appliance markets in North America and Europe be more stable in the second half, albeit at low levels, and we should see the traditional seasonal improvements in commercial and wholesale, supported by several key new product launches in the commercial business.

Developments

The division has increased its focus upon the higher-margin commercial and wholesale segments to reduce the impact of the cyclicality of the consumer-led appliance market and this is beginning to be reflected in its sales mix.

For example, it has been carrying out a joint development programme with Wonderware, part of Invensys Operations Management, to create an offering for large retailers to help them improve their energy efficiency, particularly for lighting, heating and the large refrigerated food display cabinets, which together account for a significant proportion of energy usage in food retail outlets. The new offering not only monitors energy usage but also controls each component. This control capability in conjunction with advanced algorithms provides the potential for 30-40% energy savings per store.

In the appliance segment, its global engineering team continues to work with customers to help them produce the most advanced, efficient and consumer-friendly appliances and we have continued to invest in research and development. Although the current economic climate has led to some delays by the customers in launching new ranges containing advanced components, new products were around 11% of revenue.

Performance

Orders during the period were £237 million (H1 10/11: £281 million), down 15% at CER reflecting the downturn in end markets and the effect of customers reducing inventory. Revenue was £244 million (H1 10/11: £289 million), also a 15% decrease at CER. Our order book at 30 September 2011 was £52 million (31 March 2011: £59 million).

Operating profit was down 41% at CER to £14 million (H1 10/11: £24 million) with the effect of the reduced revenue offset by tight control of operating costs and overheads. Operating margin was 5.7% (H1 10/11: 8.3%). Operating cashflow was £5 million (H1 10/11: £25 million) with cash conversion at 36% (H1 10/11: 104%).

Risks and uncertainties

As part of our routine procedures, the principal risks and uncertainties of the Group are kept under review. In particular we have considered developments in the world's economic situation and financial markets upon both the Group's financial position and that of its customers and suppliers. We have concluded that the principal risks and uncertainties for the remaining six months of the financial year remain as detailed on pages 32 to 36 of the 2011 Annual Report and Accounts, a copy of which is available from www.invensys.com. The principal risks are summarised below as required by DTR 4.2.7R of the Disclosure and Transparency Rules:

Risk	Description
Failure to maintain a competitive and technologically advanced product range could reduce margins and revenue growth	Invensys operates in highly competitive markets and the Group's products and services are characterised by continually evolving industry standards and rapidly changing technology, driven by the demands of the Group's customers. As illustrations of this, Invensys Rail continues to invest in the development of the European Rail Traffic Management System (ERTMS) and Communication Based Train Control (CBTC) to evolve the capabilities to meet the needs of the "Railway of Tomorrow". Invensys Operations Management continues to invest in enhancements to its control and safety systems, advanced applications and Enterprise Control System to optimise plant performance for our global customers.
The timing and frequency of substantial contract awards are uneven	The revenue of Invensys Rail depends on a small number of large railway operators, both in our traditional core markets in the UK, Iberia, North America and Australia and in new markets. New contract awards are often associated with major transport infrastructure upgrades, and as a result are by nature large and infrequent. Invensys Operations Management is associated with the supply of technology, software and consulting to the oil and gas, chemical and nuclear industries. Capital expenditure requirements from customers in these industries are often highly cyclical and linked to the international supply, demand and pricing of hydrocarbons. Also the timing of new contract awards in the nuclear industry may be impacted if certain nuclear programmes are subject to delay or cancellation.
Undertaking large, long-term projects exposes the Group to risk of loss	A significant amount of the Group's business involves long-term projects that can take many months or even years to complete. These projects may be subject to delays and cost overruns due to delays in equipment deliveries, engineering problems, work stoppages, unanticipated cost increases, shortages of materials or skilled labour or other unforeseen problems inherent in the nature of such projects. An increasing number of projects have been secured in new markets including Asia, South America and the Middle East where the execution risks may be greater.
The Group may be subject to liability as a result of product liability claims	Errors and defects in the Group's products, systems or applications, which may be used in safety-critical applications, could cause injury to persons or damage to property and equipment or be the subject of product recalls.
The Group may be exposed to liability through the actions of consortium partners, cosource partners or its supply chain	The business activities of the Group are often conducted in conjunction with consortium, codevelopment or cosource partners whose day-to-day management actions are outside of the control of the Group. A significant element of the Group's risk profile is the delivery performance of its supply chain. These partnerships exist across our businesses. The Invensys Rail high-speed line contracts are often undertaken with consortium partners and the development of wireless solutions for all divisions often rely on local or global partnerships.
The Group may be exposed to additional liabilities with respect to the UK and US pension plans	The UK Main Pension Scheme has a high proportion of pensioners relative to its active workforce.
The Group is subject to ongoing litigation and environmental liabilities	As a consequence of the past disposal of a significant number of businesses, the Group has certain liabilities in relation to environmental claims (including the cost associated with the remediation of contaminated sites no longer owned by the Group), disputed taxes, litigation (including personal injury claims arising from alleged exposure to asbestos and silica), indemnity claims and other disposal costs relating to the disposed businesses. These risks have receded over time as warranties and indemnities in relation to past disposals have expired, existing disputes have been settled and remediation work on contaminated sites has been completed. The Group also has environmental liabilities in relation to the remediation of vacant sites which it owns.

Additional Financial Information

Orders

A summary of orders and changes at CER by division is set out below:

For the half year ended 30 September	H1 10/11 Orders £m	Exchange movement £m	H1 10/11 at CER £m	Change at CER £m	H1 11/12 Orders £m	Change at CER¹ %
Invensys Operations Management	590	(15)	575	24	599	4%
Invensys Rail	277	4	281	(31)	250	(11%)
Invensys Controls	281	(3)	278	(41)	237	(15%)
Continuing operations	1,148	(14)	1,134	(48)	1,086	(4%)

The order book for continuing operations was £2,057 million at 30 September 2011 (31 March 2011: £2,204 million). This includes 48% in emerging markets.

Revenue

A summary of revenue and changes at CER by division is set out below:

For the half year ended 30 September	H1 10/11 Revenue £m	Exchange movement £m	H1 10/11 at CER £m	Change at CER £m	H1 11/12 Revenue£m	Change at CER¹ %
Invensys Operations Management	521	(10)	511	107	618	21%
Invensys Rail	352	4	356	26	382	7%
Invensys Controls	289	(3)	286	(42)	244	(15%)
Continuing operations	1,162	(9)	1,153	91	1,244	8%

Operating profit

A summary of operating profit and changes at CER by division is set out below:

For the half year ended 30 September	H1 10/11 OPBIT £m	Exchange movement £m	H1 10/11 at CER £m	Change at CER £m	H1 11/12 OPBIT £m	Change at CER¹ %
Invensys Operations Management	45	(2)	43	11	54	26%
Invensys Rail	51	2	53	-	53	0%
Invensys Controls	24	-	24	(10)	14	(41%)
Corporate	(20)	-	(20)	1	(19)	(7%)
Continuing operations	100	-	100	2	102	3%

5. % change is measured as the change at CER as a percentage of the H1 10/11 adjusted base and is calculated based on underlying amounts in £'000s.

Operating cash flow and cash conversion

A summary of operating cash flow and cash conversion by division is set out below:

For the half year ended 30 September	Operating Cash Flow		Cash Conversion
For the half year ended 30 September	H1 11/12 £m	H1 10/11 £m	H1 11/12 %	H1 10/11 %
Invensys Operations Management	13	59	24%	131%
Invensys Rail	(1)	28	(2%)	55%
Invensys Controls	5	25	36%	104%
Corporate	(28)	(29)	-%	-%
Continuing operations	(11)	83	(11%)	83%

Exceptional items

The exceptional charge for the period totalled £24 million (H1 10/11: £15 million). This included restructuring costs of £20 million, and £4 million of other operating exceptional items.

Restructuring costs comprise the business improvement project in the UK Rail business, the integration of the Invensys Operations Management businesses in Europe, the global human resources service delivery project, and other rationalisation projects across the Group.

The comparative period included £11 million of restructuring costs and £4 million of intangible asset impairments, and £1 million loss on the sale of property, plant and equipment, offset by £1 million of other operating exceptional items.

Net finance costs

Net finance costs were £4 million in the period (H1 10/11: £3 million).

Taxation

The tax charge for continuing operations was £16 million (H1 10/11: £14 million), which comprises a current year income tax charge of £23 million (H1 09/10: £17 million), offset by prior year credits of £2 million (H1 10/11: £1 million) and a deferred tax credit of £5 million (H1 10/11: £2 million). Invensys is subject to several factors which affect the tax charge including the levels and mix of profitability in different jurisdictions and the availability of tax losses.

Discontinued operations

The loss from discontinued operations of £2 million (H1 10/11: £2 million) relates to a provision in respect of a prior year disposal.

Net profit

Net profit for the period was £55 million (H1 10/11: £59 million).

Earnings per share

Basic EPS from continuing operations were 6.9 pence per share (H1 10/11: 7.4 pence per share). Underlying earnings per share from continuing operations were also 6.9 pence per share (H1 10/11: 7.4 pence per share).

Free cash flow

The free cash flow for the period was an outflow of £103 million (H1 10/11: £13 million inflow). The reduced free cash flow was driven by lower operating cash flow as the businesses absorbed working capital on major projects.

Financial position

Capital structure

The Group's capital structure is as follows:

	30 September 2011 £m	30 September 2010 £m	31 March 2011 £m
Capital employed	481	49	201
Cash and cash equivalents	194	342	349
Borrowings	(2)	(6)	(1)
Net cash	192	336	348
Total equity - funds	673	385	549
Comprising:
- Equity holders of parent	652	307	514
- Non-controlling interest	21	78	35
	673	385	549

Total equity

Total equity increased by £124 million, principally represented by the net profit of £55 million and the IAS 19 actuarial gain of £147 million, offset by the movement in the irrecoverable element of potential future pension surplus of £51 million and dividends paid of £20 million.

Non-controlling interests

The non-controlling interest balance is £21 million (31 March 2011: £35 million), the majority of which relates to the interests of the non-controlling interest in Ranco Japan Limited. The reduction in the non-controlling interest balance since 31 March 2011 is due to the final distribution of £6 million to the minority interest in Baan Company NV (in liquidation) and the acquisition of the minority interest in a Chinese subsidiary, Shanghai Foxboro Co Limited.

Net cash

Net cash was £192 million (31 March 2011: £348 million). This included borrowings of £2 million (31 March 2011: £1 million).

Capital employed

Capital employed increased by £280 million to £481 million in the period, mainly attributable to the decrease in the net pension liability of £140 million and increased working capital. The return on operating capital employed was 35.2% (30 September 2010: 38.7%, 31 March 2011: 49.9%).

Pension liabilities

The IAS 19 valuation of pension assets and liabilities has been updated as at 30 September 2011, resulting in a net pension liability of £327 million (31 March 2011: £467 million). The overall decrease in the pension liability of £140 million is driven by an actuarial gain of £147 million as a result of a reduction in discount rates used for the actuarial valuation of pension liabilities and a reduction in inflation assumptions.

Dividend

The Board has declared an interim dividend of 1.65 pence per share (30 September 2010: 1.5 pence per share).

Invensys plc

Consolidated income statement (unaudited)

For the half year ended 30 September 2011

		Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
	Notes		£m		£m	£m
Continuing operations
Revenue		2	1,244		1,162	2,486
Operating expenses before exceptional items			(1,142)		(1,062)	(2,224)

Operating profit before exceptional items		2	102		100	262
Exceptional items		4	(24)		(15)	(21)

Operating profit		3	78		85	241
Finance costs			(5)		(4)	(9)
Finance income			1		1	4
Other finance charges - IAS 19			(1)		(7)	(14)
Profit before taxation		2	73		75	222
Taxation - UK			-		-	-
Taxation - overseas			(16)		(14)	(37)

Profit after taxation - continuing operations			57		61	185
Loss after taxation - discontinued operations		6	(2)		(2)	(7)
Profit for the period			55		59	178

Attributable to:
Profit after taxation - continuing operations
- Equity holders of the parent			56		60	181
- Non-controlling interests			1		1	4
			57		61	185

Loss after taxation - discontinued operations
- Equity holders of the parent			(2)		(2)	(7)

Profit for the period
- Equity holders of the parent			54		58	174
- Non-controlling interests			1		1	4
			55		59	178

Earnings/(loss) per share
Continuing operations
Earnings per share (basic)	7	6.9p	7.4p	22.4p
Earnings per share (diluted)	7	6.9p	7.4p	22.2p

Discontinued operations
Loss per share (basic)	7	(0.2)p	(0.2)p	(0.9)p
Loss per share (diluted)	7	(0.3)p	(0.3)p	(0.9)p

Total Group
Earnings per share (basic)	7	6.7p	7.2p	21.5p
Earnings per share (diluted)	7	6.6p	7.1p	21.3p

Invensys plc

Consolidated statement of comprehensive income (unaudited)

For the half year ended 30 September 2011

		Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
	Note		£m		£m	£m
Profit for the period			55		59	178

Other comprehensive income/(loss)
Cash flow hedges:
Losses taken to equity			(2)		-	(2)
Transferred to the income statement - cost of sales			1		2	-
Exchange differences on translation of foreign operations			2		(22)	(20)
Actuarial gain/(loss) recognised on defined benefit pension schemes			147		(84)	30
Movement in irrecoverable element of potential future pension surplus		9	(51)		27	-
Taxation on components of other comprehensive income			7		-	13
Other comprehensive income/(loss) for the period, net of tax			104		(77)	21
Total comprehensive income/(loss) for the period			159		(18)	199

Attributable to:
Equity holders of the parent			156		(18)	198
Non-controlling interests			3		-	1
			159		(18)	199

Invensys plc

Consolidated balance sheet (unaudited)

As at 30 September 2011

			30 September 2011	30 September 2010	31 March 2011
	Notes		£m	£m	£m
ASSETS
Non-current assets
Property, plant and equipment			235	254	237
Intangible assets - goodwill			295	292	291
Intangible assets - other			173	138	160
Deferred income tax assets			53	28	46
Trade and other receivables			24	22	22
			780	734	756
Current assets
Inventories			168	159	155
Amounts due from contract customers			305	193	233
Trade and other receivables			506	507	526
Cash and cash equivalents		12	194	342	349
Income tax receivable			7	6	8
Derivative financial instruments			2	3	2
			1,182	1,210	1,273
Assets held for sale		10	10	7	11
TOTAL ASSETS			1,972	1,951	2,040

LIABILITIES
Non-current liabilities
Borrowings		12	-	(1)	-
Provisions			(76)	(85)	(88)
Income tax payable			(32)	(33)	(31)
Deferred income tax liabilities			(17)	(12)	(18)
Amounts due to contract customers			(8)	(12)	(11)
Trade and other payables			(9)	(10)	(10)
Pension liabilities		9	(327)	(593)	(467)
			(469)	(746)	(625)
Current liabilities
Trade and other payables			(501)	(524)	(546)
Amounts due to contract customers			(222)	(192)	(203)
Borrowings		12	(2)	(5)	(1)
Derivative financial instruments			(4)	(5)	(4)
Income tax payable			(27)	(20)	(27)
Provisions			(74)	(74)	(85)
			(830)	(820)	(866)
TOTAL LIABILITIES			(1,299)	(1,566)	(1,491)
NET ASSETS			673	385	549

EQUITY
Capital and reserves
Equity share capital			81	81	81
Treasury shares			(1)	(2)	(2)
Other reserves			2,526	2,527	2,527
Retained earnings			(1,954)	(2,299)	(2,092)
Equity holders of the parent			652	307	514
Non-controlling interests			21	78	35
TOTAL EQUITY			673	385	549

Invensys plc

Consolidated statement of changes in equity (unaudited)

For the half year ended 30 September 2011

				Other reserves
	Issued share capital		Treasury shares	Share premium account	Capital reserve	Special reserve	Cash flow hedge reserve	Foreign exchange reserve	Total other reserves	Retained earnings	Attributable to equity holders of the parent	Non-controlling interests	Total Equity
	£m		£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 April 2011	81		(2)	348	1,582	495	(8)	110	2,527	(2,092)	514	35	549
Profit for the period	-		-	-	-	-	-	-	-	54	54	1	55
Other comprehensive (loss)/income for the period	-		-	-	-	-	(1)	-	(1)	103	102	2	104
Total comprehensive (loss)/income for the period	-		-	-	-	-	(1)	-	(1)	157	156	3	159

Share-based payment	-		-	-	-	-	-	-	-	3	3	-	3
Purchase of own shares by Employee Share Trust	-		(1)	-	-	-	-	-	-	-	(1)	-	(1)
Distribution of own shares under share-based payment arrangements		-	2	-	-	-	-	-	-	(2)	-	-	-
Dividends paid to equity shareholders	-		-	-	-	-	-	-	-	(20)	(20)	-	(20)
Dividends paid to non-controlling interests	-		-	-	-	-	-	-	-	-	-	(1)	(1)
Purchase/disposal of non-controlling interests	-		-	-	-	-	-	-	-	-	-	(16)	(16)
Balance at 30 September 2011	81		(1)	348	1,582	495	(9)	110	2,526	(1,954)	652	21	673




Balance at 1 April 2010	81		(2)	348	1,582	495	(6)	127	2,546	(2,285)	340	80	420
Profit for the period	-		-	-	-	-	-	-	-	58	58	1	59
Other comprehensive income/(loss) for the period	-		-	-	-	-	2	(21)	(19)	(57)	(76)	(1)	(77)
Total comprehensive income/(loss) for the period	-		-	-	-	-	2	(21)	(19)	1	(18)	-	(18)

Share-based payment	-		-	-	-	-	-	-	-	5	5	-	5
Purchase of own shares by Employee Share Trust	-		(3)	-	-	-	-	-	-	-	(3)	-	(3)
Distribution of own shares under share-based payment arrangements		-	3	-	-	-	-	-	-	(3)	-	-	-
Dividends paid to equity shareholders	-		-	-	-	-	-	-	-	(17)	(17)	-	(17)
Dividends paid to non-controlling interests	-		-	-	-	-	-	-	-	-	-	(2)	(2)
Balance at 30 September 2010	81		(2)	348	1,582	495	(4)	106	2,527	(2,299)	307	78	385




Balance at 1 April 2010	81		(2)	348	1,582	495	(6)	127	2,546	(2,285)	340	80	420
Profit for the year	-		-	-	-	-	-	-	-	174	174	4	178
Other comprehensive (loss)/income for the year	-		-	-	-	-	(2)	(17)	(19)	43	24	(3)	21
Total comprehensive (loss)/income for the year	-		-	-	-	-	(2)	(17)	(19)	217	198	1	199

Share-based payment	-		-	-	-	-	-	-	-	8	8	-	8
Purchase of own shares by Employee Share Trust	-		(4)	-	-	-	-	-	-	-	(4)	-	(4)
Distribution of own shares under share-based payment arrangements		-	4	-	-	-	-	-	-	(4)	-	-	-
Dividends paid to equity shareholders	-		-	-	-	-	-	-	-	(28)	(28)	-	(28)
Dividends paid to non-controlling interests	-		-	-	-	-	-	-	-	-	-	(3)	(3)
Disposal of non-controlling interests¹	-		-	-	-	-	-	-	-	-	-	(43)	(43)
Balance at 31 March 2011	81		(2)	348	1,582	495	(8)	110	2,527	(2,092)	514	35	549
¹ Includes £41 million interim distribution made to the non-controlling shareholders of Baan

Invensys plc

Consolidated cash flow statement (unaudited)

For the half year ended 30 September 2011

		Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
	Notes		£m		£m	£m
Operating activities

Operating profit:
Continuing operations		3	78		85	241
Depreciation of property, plant and equipment			19		21	41
Amortisation of intangible assets - other			15		12	26
Provision for impairment charged to operating profit		4	-		4	10
Loss on sale of assets and operations		4	-		1	-
Sale of property, plant and equipment			-		-	2
Non-cash charge for share-based payment			3		5	8
Cash payments on swap contracts			(1)		-	-
Increase in inventories			(13)		(8)	(5)
Decrease/(increase) in receivables			19		(12)	(49)
Decrease in net amounts due to contract customers			(55)		(5)	(40)
(Decrease)/increase in payables and provisions			(69)		(3)	55
Difference between pension contributions paid and amounts recognised in operating profit			(49)		(37)	(82)
Cash generated from operating activities			(53)		63	207

Income taxes paid			(15)		(11)	(30)
Interest paid			(4)		(3)	(6)
Net cash flows from operating activities			(72)		49	171

Investing activities

Interest received			1		1	5
Purchase of property, plant and equipment			(16)		(12)	(32)
Expenditure on intangible assets - other			(27)		(25)	(61)
Sale of trade investments			-		1	1
Purchase/disposal of non-controlling interests			(16)		-	(43)
Purchase of subsidiaries			-		(7)	(6)
Net cash flow arising on disposal			(4)		(4)	(4)
Cash payments on swap contracts			-		(3)	(9)
Net cash acquired on purchase of subsidiaries			-		1	-

Cash flows from investing activities			(62)		(48)	(149)

Financing activities

Purchase of Invensys plc shares			(1)		(3)	(4)
Repayment of short-term borrowings			-		5	-
Dividends paid to equity holders of the parent			(20)		(17)	(28)
Dividends paid to non-controlling interests			(1)		(2)	(3)

Cash flows from financing activities			(22)		(17)	(35)

Net decrease in cash and cash equivalents			(156)		(16)	(13)
Cash and cash equivalents at beginning of period			349		364	364
Net foreign exchange difference			1		(6)	(2)
Cash and cash equivalents at end of period			194		342	349

Invensys plc

Notes (unaudited)

1 Basis of preparation

Statement of compliance

The Group's condensed Consolidated Financial Statements for the six months ended 30 September 2011 have been prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union (EU). They do not include all the information and disclosures required in the Annual Report and Accounts, and should be read in conjunction with the Group's Annual Report and Accounts as at 31 March 2011 that are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

Significant accounting policies

The accounting policies adopted in the preparation of the condensed Consolidated Financial Statements are consistent with those followed in the preparation of the Group's Annual Report and Accounts for the year ended 31 March 2011, except for the following new standards, amendments to existing standards and new interpretations which have been adopted by the Group for the half year:

IAS 24 Related Party Disclosures (revised)

Amendment to IFRS 1 Limited Amendment from Comparative IFRS 7 Disclosures

Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

Improvements to IFRSs (annual improvements May 2010)

These standards and interpretations have had no material impact on the Consolidated Financial Statements.

2 Operating segment information

For management purposes, the Group is organised into divisions based on their products and services and has three reportable operating segments as explained in the Business Review; Invensys Operations Management, Invensys Rail and Invensys Controls. The composition of the operating segments has not changed compared to the last annual financial statements for the year ended 31 March 2011. Operations presented as discontinued are explained in Note 6.

Management monitors the operating results of each of these divisions separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated primarily on operating profit or loss before exceptional items as identified in the consolidated income statement. Restructuring costs and impairment losses on operating assets, which are reported in the consolidated income statement as exceptional items, are also monitored at the segment level. Other exceptional items together with foreign exchange gains or losses, finance costs, finance income, finance charges relating to pension arrangements under IAS 19 Employee Benefits and income tax are managed on a Group basis and are not allocated to operating segments. The basis of measurement of segment profit or loss has not changed compared to the last annual financial statements.

Segment net assets/(liabilities) are determined based on the net operating assets/(liabilities) monitored by the divisional chief executives on a segment basis.

The following tables set out the information relating to revenue, profit or loss, assets and liabilities employed for each operating segment that IAS 34 requires to be disclosed in the interim financial statements of an entity that applies IFRS 8 Operating Segments in its annual financial statements. Restructuring costs by operating segment are disclosed in Note 4.

Invensys plc

Notes (unaudited)

2 Operating segment information (continued)

Operating segments	Half year ended 30 September 2011	Half year ended 30 September 2011	Half year ended 30 September 2011	Half year ended 30 September 2010	Half year ended 30 September 2010	Half year ended 30 September 2010	Year ended 31 March 2011	Year ended 31 March 2011	Year ended 31 March 2011
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Segment revenues	Total revenue	Inter-company revenue¹	External revenue	Total Revenue	Inter-company revenue¹	External revenue	Total revenue	Inter-company revenue¹	External revenue
Division
Invensys Operations Management	623	5	618	526	5	521	1,156	9	1,147
Invensys Rail	382	-	382	352	-	352	772	-	772
Invensys Controls	244	-	244	289	-	289	567	-	567
Eliminations	(5)	(5)	-	(5)	(5)	-	(9)	(9)	-
Total Group	1,244	-	1,244	1,162	-	1,162	2,486	-	2,486


Segment profit		Operating profit/(loss)²	Operating profit/(loss)³		Operating profit/(loss)²	Operating profit/(loss)³		Operating Profit/(loss)²	Operating profit/(loss)³
Division
Invensys Operations Management		54	49		45	44		123	123
Invensys Rail		53	43		51	46		129	118
Invensys Controls		14	13		24	18		56	35
Total segment		121	105		120	108		308	276
Corporate		(19)	(27)		(20)	(23)		(46)	(35)
Total Group		102	78		100	85		262	241

Reconciliation to profit before taxation:
Finance costs			(5)			(4)			(9)
Finance income			1			1			4
Other finance charges - IAS 19			(1)			(7)			(14)
Profit before taxation - continuing operations			73			75			222

¹Inter-company revenue is invoiced at market prices

²Before exceptional items

³After exceptional items

Invensys plc

Notes (unaudited)

2 Operating segment information (continued)

	Half year ended 30 September 2011	Half year ended 30 September 2010	Year ended 31 March 2011
	£m	£m	£m
	External	External	External
Geographical analysis by destination	revenue	revenue	revenue
United Kingdom	147	134	299
Other countries:
Rest of Europe	270	297	604
United States	300	323	623
North America - other	58	49	123
South America	125	86	213
Asia Pacific	256	209	453
Africa and Middle East	88	64	171
	1,097	1,028	2,187

Total revenue	1,244	1,162	2,486


	Net assets/	Net assets/	Net assets/
Segment net assets/(liabilities)	(liabilities)	(liabilities)	(liabilities)
Division
Invensys Operations Management	256	183	216
Invensys Rail	166	87	121
Invensys Controls	190	205	169
Total segment net assets	612	475	506
Corporate	(83)	(96)	(107)
Total Group	529	379	399

Reconciliation to total net assets/(liabilities):
Intangible assets - goodwill	295	292	291
Cash and cash equivalents	194	342	349
Pension liabilities	(327)	(593)	(467)
Other (borrowings, current and deferred income tax assets/(liabilities))	(18)	(35)	(23)
Total net assets	673	385	549

Invensys plc

Notes (unaudited)

3 Operating profit

	Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
		£m		£m	£m
Revenue		1,244		1,162	2,486
Cost of sales		(859)		(782)	(1,649)
Gross profit		385		380	837
Distribution costs		(6)		(7)	(14)
Administrative costs		(224)		(226)	(466)
Research and development costs		(53)		(47)	(95)
Operating profit before exceptional items		102		100	262
Exceptional items (note 4)		(24)		(15)	(21)
Operating profit		78		85	241

4 Exceptional items

	Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
		£m		£m	£m

Restructuring costs		(20)		(11)	(21)
Other operating exceptional items:
Past service credit on post-retirement benefits¹		-		-	20
Curtailment gains on pension benefits		-		-	1
Other operating exceptional items²		(4)		1	(11)
Total other operating exceptional items		(4)		1	10
Impairment: property, plant and equipment		-		-	(4)
Impairment: intangible assets - other		-		(4)	(6)
Loss on sale of assets and operations		-		(1)	-
Exceptional items		(24)		(15)	(21)


Restructuring costs by business division:
Invensys Operations Management		(5)		(1)	-
Invensys Rail		(10)		(2)	(5)
Invensys Controls		(1)		(5)	(8)
Corporate		(4)		(3)	(8)
		(20)		(11)	(21)

¹Arose as a result of amendments made to the benefits payable under the terms of the US Healthcare Plan.

²Year ended 31 March 2011: includes net £10 million of costs to settle a legal case.

5 Foreign exchange on financial items

Foreign exchange on financial items continues to be £nil, as in previous periods, as foreign exchange differences arising on derivatives used in the management of the Group's cash are offset by foreign exchange differences on corresponding cash balances and intra-Group loans which do not form part of the lender's net investments in foreign operations.

6 Discontinued operations

No operations have been discontinued in the half years to 30 September 2011, 30 September 2010, or in the year ended 31 March 2011. In the half year ended 30 September 2011, net £2 million (H1 10/11: £2 million, FY 10/11: £7 million) of additional costs were incurred in respect of prior year disposals.

Invensys plc

Notes (unaudited)

7 Earnings/(loss) per share

	Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
Earnings/(loss) per share (pence)
Continuing operations
Basic		6.9p		7.4p	22.4p
Diluted		6.9p		7.4p	22.2p

Before exceptional post-retirement benefits past service credit and pensions curtailments
Basic		6.9p		7.4p	19.8p
Diluted		6.9p		7.4p	19.6p

Discontinued operations
Basic		(0.2)p		(0.2)p	(0.9)p
Diluted		(0.3)p		(0.3)p	(0.9)p

Total Group
Basic		6.7p		7.2p	21.5p
Diluted		6.6p		7.1p	21.3p

Weighted average number of shares (million)
Basic		811		808	808
Effect of dilution - share awards		6		7	8
Diluted		817		815	816

Earnings (£m)
Continuing Operations
Basic		56		60	181

Before exceptional post-retirement benefits past service credit and pensions curtailments
Operating profit		78		85	241
Exceptional past service credit		-		-	(20)
Exceptional curtailment gains		-		-	(1)
Finance costs		(5)		(4)	(9)
Finance income		1		1	4
Other finance charges - IAS 19		(1)		(7)	(14)
Operating profit less net finance costs		73		75	201
Taxation on operating profit less net finance costs		(16)		(14)	(37)
Non-controlling interests		(1)		(1)	(4)
		56		60	160

Discontinued operations
Basic		(2)		(2)	(7)
Total Group
Basic		54		58	174

The basic earnings/(loss) per share for the half year has been calculated using 811 million shares (H1 10/11: 808 million, FY 10/11: 808 million), being the weighted average number of shares in issue during the half year and the profit after taxation and non-controlling interests for continuing operations, discontinued operations and total Group as shown above.

An additional earnings per share calculation for continuing operations has been included since the directors consider that this gives a useful additional indication of underlying performance.

The diluted earnings/(loss) per share has been calculated in accordance with IAS 33 Earnings per Share without reference to adjustments in respect of certain share awards which are considered to be anti-dilutive.

8 Business combinations and business disposals

There were no acquisitions or disposals in the half year ended 30 September 2011.

In the year ended 31 March 2011, the Group acquired Skelta Software Private Limited and disposed of a small European business in Invensys Controls. Details of this business combination and disposal were disclosed in the 2011 Annual Report and Accounts.

Invensys plc

Notes (unaudited)

9 Pensions and post-retirement benefits

Changes in the present value of the defined obligation for the half year ended 30 September 2011 were as follows:

	Funded schemes			Unfunded schemes		Total	Total	Total
	Invensys Pension Scheme (UK)	Invensys Pension Plan (US)	Other		Other	Half year ended 30 September 2011	Half year ended 30 September 2010	Year ended 31 March 2011
	£m	£m	£m		£m	£m	£m	£m
Opening present value of defined benefit obligation	(4,118)	(959)	(262)		(122)	(5,461)	(5,470)	(5,470)
Current service cost	(5)	-	(3)		(1)	(9)	(10)	(19)
Past service credit	-	-	-		-	-	-	20
Contributions by employees	(1)	-	-		-	(1)	-	(1)
Benefit payments	117	30	6		4	157	150	309
Interest on plan liabilities	(106)	(26)	(7)		(2)	(141)	(147)	(293)
Net liabilities transferred on disposal	-	-	-		-	-	-	1
Actuarial gains/(losses)	66	(72)	8		-	2	(305)	(85)
Curtailments	-	-	-		-	-	1	1
Exchange adjustments	-	(33)	1		(1)	(33)	65	76
Closing present value of defined benefit obligation	(4,047)	(1,060)	(257)		(122)	(5,486)	(5,716)	(5,461)

Changes in the fair value of plan assets for the half year ended 30 September 2011 were as follows:

	Funded schemes			Total	Total	Total
	Invensys Pension Scheme (UK)	Invensys Pension Plan (US)	Other	Half year ended 30 September 2011	Half year ended 30 September 2010	Year ended 31 March 2011
	£m	£m	£m	£m	£m	£m
Opening fair value of plan assets	3,988	834	202	5,024	4,919	4,919
Expected return on plan assets	107	26	7	140	140	279
Contributions by employer	24	27	3	54	37	70
Contributions by employees	1	-	-	1	5	1
Benefit payments	(117)	(30)	(6)	(153)	(145)	(299)
Actuarial gains/(losses)	73	80	(8)	145	221	115
Exchange adjustments	-	31	(2)	29	(51)	(61)
Closing fair value of plan assets	4,076	968	196	5,240	5,126	5,024

The Group is committed to make payments to the UK Main Pension Scheme under a deficit funding contribution schedule agreed with the trustees. Where the present value of the agreed funding payments exceeds the liability in respect of the scheme as measured under IFRS, and would therefore, when paid, give rise to a surplus as measured under IFRS, a provision is recognised for any part of that surplus that would not be recoverable. Any surplus on the UK Main Pension Scheme ultimately repaid by the trustees would currently be subject to a 35% tax charge prior to being repaid, so a liability for this tax is recognised at the relevant balance sheet date. At 30 September 2011 the present value of the agreed funding payments exceed the liability of the scheme under IFRS and consequently the irrecoverable element of the pension surplus is £81 million (30 September 2010: £3 million, 31 March 2011: £30 million).


	Half year ended 30 September 2011	Half year ended 30 September 2010	Year ended 31 March 2011
	£m	£m	£m
Surplus/(deficit) in the scheme	29	(223)	(130)
Future minimum funding requirements	202	231	215
Potential future pension surplus	231	8	85
Irrecoverable element of potential future pension surplus	(81)	(3)	(30)
Recoverable element of potential future pension surplus	150	5	55
Movement in irrecoverable element of potential future pension surplus	(51)	27	-

Reconciliation of assets and liabilities recognised in the balance sheet as at 30 September 2011:

	Funded schemes			Unfunded schemes		Total	Total	Total
	Invensys Pension Scheme (UK)	Invensys Pension Plan (US)	Other		Other	Half year ended 30 September 2011	Half year ended 30 September 2010	Year ended 31 March 2011
	£m	£m	£m		£m	£m	£m	£m
Present value of defined benefit obligation	(4,047)	(1,060)	(257)		(122)	(5,486)	(5,716)	(5,461)
Fair value of plan assets	4,076	968	196		-	5,240	5,126	5,024
Surplus/(deficit) in the plan	29	(92)	(61)		(122)	(246)	(590)	(437)
Irrecoverable element of potential future pension surplus	(81)	-	-		-	(81)	(3)	(30)
Net liability	(52)	(92)	(61)		(122)	(327)	(593)	(467)

Changes in key assumptions

The following assumptions have been updated for the Invensys Pension Scheme (UK):

The discount rate applied is 5.10% (30 September 2010: 4.90%, 31 March 2011: 5.30%). The inflation assumption is based on RPI and has been assessed at 3.30% (30 September 2010: 3.30%, 31 March 2011: 3.70%). An additional inflation rate assumption for CPI is now required to reflect the UK Government's change of the inflation measure used to determine minimum pension increases which impacts on some of the pension increases within these schemes. This has been assessed as 2.55% (30 September 2010: not applicable, 31 March 2011: 2.95%). With regards to mortality tables, PA92 has been projected by year of birth allowing for future improvements in life expectancy in line with medium cohort improvements subject to a 1.00% floor for males and 1.25% floor for females and applying multipliers of 122% for males and 135% for females, consistent with the half year and full year 10/11.

The following assumptions have been updated for the Invensys Pension Plan (US):

The discount rate applied is 4.95% (30 September 2010: 5.20%, 31 March 2011: 5.65%). The inflation assumption is no longer applicable (30 September 2010: 2.50%, 31 March 2011: not applicable).

Invensys plc

Notes (unaudited)

10 Assets held for sale

At 30 September 2011, 30 September 2010 and 31 March 2011, assets held for sale relate to surplus freehold properties that are vacant, no longer in used for operational purposes and are being actively marketed for sale. These properties are expected to be sold within a year of the date of their classification as held for sale.

11 Reconciliation of cash flows

	Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
		£m		£m		£m
Net cash flows from operating activities - (outflow)/inflow		(72)		49		171
Capital expenditure included within investing activities		(43)		(37)		(93)
Interest paid		4		3		6
Cash payments on swap contracts		1		-		-
Taxation paid (operating)		15		11		30
Restructuring		13		14		25
Other operating exceptional item: costs to settle legal case		10		-		-
Legacy items:
Pension contributions		49		37		62
Other legacy payments		12		6		12
		61		43		74
Operating cash flow - (outflow)/inflow		(11)		83		213
Restructuring		(13)		(14)		(25)
Net finance costs paid		(3)		(2)		(1)
Taxation paid (operating)		(15)		(11)		(30)
Legacy items		(61)		(43)		(74)
Free cash flow - (outflow)/inflow		(103)		13		83

Operating cash flow attributable to:
Continuing operations		(11)		83		213
		(11)		83		213

The directors consider that the best measure of the Group's cash performance is free cash flow, as calculated above.

12 Net cash and deposits

	Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
		£m		£m		£m
Cash and cash equivalents		194		342		349
Borrowings:
Non-current		-		(1)		-
Current		(2)		(5)		(1)
Net cash and deposits		192		336		348

The Group has operations in a number of territories including China, Brazil and India which place restrictions on the ability of subsidiaries to lend money to other Group entities outside those territories. However, distributions to the Group are permitted from audited reserves. At 30 September 2011 restricted cash and cash equivalents held in such territoriestotalled £46 million (30 September 2010: £57 million, 31 March 2011: £58 million).

Cash and cash equivalents include £31 million (30 September 2010: £31 million, 31 March 2011: £31 million) of collateral held in the ordinary course of business to provide security for local bonding facilities.

Invensys plc

Notes (unaudited)

12 Net cash and deposits (continued)

As at 30 September 2011, the committed syndicated loan facility available to the Group was a £400 million multicurrency credit facility with a term of five years from July 2008. The facility is available for drawdown as loans, letters of credit or guarantees. The available facility at 30 September 2011, 30 September 2010 and 31 March 2011 was £400 million of which £258 million was drawn at 30 September 2011 for the provision of bonds and guarantees (30 September 2010: £234 million, 31 March 2011: £254 million).

As at 30 September 2011, the committed bilateral local loan facility available to the Company was a £25 million subordinated multicurrency credit facility with a term of two years and seven months from December 2010. The facility is available for utilisation as loans, letters of credit or bank guarantees. The available facility at 30 September 2011 and 31 March 2011 was £25 million of which £nil was drawn at 30 September 2011 (30 September 2010: N/A, 31 March 2011 £nil).

In addition, at 30 September 2011, the Group has bonds and guarantees totalling £218 million (30 September 2010: £199 million, 31 March 2011: £219 million) issued under uncommitted facilities. Of these, £31 million (30 September 2010: £31 million, 31 March 2011: £31 million) are supported by cash collateral and a further £17 million (30 September 2010: £20 million, 31 March 2011: £17 million) are supported by guarantees issued under the Group's committed syndicated loan facility.

13 Contingent liabilities

There have been no material changes in the Group's contingent liabilities since the last annual balance sheet date, 31 March 2011.

14 Related party disclosures

The key management comprises the directors as disclosed in the 2011 Annual Report and Accounts. The changes to the Board of non-executive directors since the year end are also detailed on pages 38 and 39 of the 2011 Annual Report and Accounts. Subsequent to the publication of the 2011 Annual Report and Accounts, David Thomas was appointed Chief Financial Officer on 28 July 2011. The remuneration of the directors who served during the half year consisted of short-term and other benefits for the half year of £0.6 million (H1 10/11: £0.9 million) and share based payments of £0.4 million (H1 10/11: £0.7 million).

There are no other related party transactions, or changes to related parties since the last Annual Report and Accounts for the year ended 31 March 2011, that have a material effect on the financial position or performance of the Group in the year.

As disclosed in Note 33 of the 2011 Annual Report and Accounts, a loan was made to Mr Henriksson while he was a director of the Company. Mr Henriksson left the Company on 24 March 2011. In view of the double taxation suffered in relation to his US employment duties in 2009/10, Invensys Systems Inc. advanced £312,691 on 29 June 2010 to Mr Henriksson, being an amount equal to the expected refunds due from HMRC. This loan is free of any interest and will be repayable within five business days from the date of HMRC making the expected refund to Mr Henriksson. Mr Henriksson's repayment obligations are not affected by the termination of his employment with the company.

Invensys plc

Notes (unaudited)

15 Dividends paid and proposed

	Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
		£m		£m		£m

Paid during the half-year/year
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2011: 2.5p (FY 09/10: 2.0p)		20		16		16
Interim dividend for the year ended 31 March 2011: 1.5p		-		-		12
		20		16		28


Proposed
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2011: 2.5p		-		-		20
Interim dividend for the year ending 31 March 2012: 1.65p (FY 10/11: 1.5p)		13		12		-
		13		12		20

The final dividend for the year ended 31 March 2011 was approved by shareholders on 28 July 2011 and paid on 5 August 2011.

The interim dividend for the year ending 31 March 2012 was declared by the Board on 2 November 2011 and will be paid to shareholders on 9 December 2011. This dividend will be accounted for as an appropriation of retained earnings in the second half of the financial year and is payable to all shareholders on the register of Members at the close of business on 11 November 2011.

The Invensys Employee Share Trust has waived its right to the interim dividends payable on the shares that it owns (240,350 at 30 September 2011). FY 10/11: The Trust also waived its rights to the final dividend payable on the 716,763 shares that it owned and the interim dividend payable on the 749,884 shares that it owned.

16 Exchange rates

	Half year ended 30 September 2011		Half year ended 30 September 2010		Year ended 31 March 2011
		Average		Average		Average

US$ to £1		1.62		1.52		1.55
Euro to £1		1.14		1.18		1.17

		As at 30 September 2011		As at 30 September 2010		As at 31 March 2011
		Closing		Closing		Closing

US$ to £1		1.56		1.58		1.61
Euro to £1		1.15		1.16		1.14

17 Financial information

This half yearly financial report was approved by a duly appointed and authorised committee of the Board of Directors on 2 November 2011. This statement does not comprise the statutory accounts of the Group, as defined in section 434 of the Companies Act 2006. The financial information for the half year ended 30 September 2011 is unaudited. The financial information for the balance sheet as at 31 March 2011 has been extracted from the statutory accounts published in the Annual Report and Accounts 2011.

The statutory accounts of Invensys plc for the year ended 31 March 2011 have been reported on by the Group's auditors, Ernst & Young LLP, and delivered to the Registrar of Companies. The report of the auditors was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Invensys plc

Notes (unaudited)

GOING CONCERN

A full description of the Group's business activities, financial position, cash flows, liquidity position and borrowing facilities together with the factors likely to affect its future development, performance and position are set out in the Business Review, Financial Review and Notes to the financial statements included in the Annual Report and Accounts for the year ended 31 March 2011, which is available from the Group's website, www.invensys.com. The Annual Report and Accounts also includes an explanation of the principal risks and uncertainties facing the Group, along with mitigating actions. This half yearly report provides updated information on the business activities for the six months to 30 September 2011, the financial position, cash flow and liquidity position at 30 September 2011, and the principal risks and uncertainties facing the Group for the remaining six months of the current financial year.

The Group remains generally in a sound financial position with net cash, £425 million of banking facilities in place until 2013, and well-established relationships with key customers and suppliers.

The directors have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Consolidated Financial Statements.

DIRECTORS' RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

a) The condensed set of financial statements for the six months to 30 September 2011 have been prepared in accordance with IAS 34, as adopted by the EU;

b) This half yearly financial report includes a fair review of the information required by DTR 4.2.7R (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of principal risks and uncertainties for the remaining six months of the financial year); and

c) This half yearly financial report includes a fair review of the information required by DTR 4.2.8R (being the disclosure of related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or the performance of the Group during that period, and any changes in the related party transactions described in the last Annual Report and Accounts for the year ended 31 March 2011 that could have a material effect on the financial position or performance of the Group within the first six months of the financial year).

By order of the Board

Wayne Edmunds David Thomas

Chief Executive Chief Financial Officer

2 November 2011

The directors of Invensys plc as at 31 March 2011 are listed on pages 38 and 39 of the 2011 Annual Report and Accounts. The changes to the Board of non-executive directors since the year end are also detailed on page 38 and 39 of the 2011 Annual Report and Accounts. Subsequent to the publication of the 2011 Annual Report and Accounts, David Thomas was appointed Chief Financial Officer on 28 July 2011.

This half yearly financial report contains certain statements that are forward-looking. These statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Forward-looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and liquidity, and the development of the industries in which the Group operates, may differ materially from those made in or suggested by these statements and a number of factors could cause the results and developments to differ materially from those expressed or implied by these forward-looking statements.

INDEPENDENT REVIEW REPORT TO INVENSYS PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2011 which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes 1 to 17. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Ernst & Young LLP

London

2 November 2011

This information is provided by RNS

The company news service from the London Stock Exchange

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Half Yearly Report