Third Quarter Results
Posted 08 February 2007
Invensys PLC
08 February 2007
INVENSYS PLC
2006/07 THIRD QUARTER RESULTS
FOR THE THREE MONTHS ENDED 31 DECEMBER 2006
Operational improvements demonstrate continued progress
Q3 Highlights
? Orders from continuing operations (1) were £630 million (Q3 2005/06: £658
million), unchanged at constant exchange rates (CER)
? Revenue from continuing operations was £637 million (Q3 2005/06: £611
million), up 10% at CER
? Operating profit (2) from continuing operations was £56 million (Q3 2005/
06: £46 million), up 29% at CER
? Operating margin (2) for continuing operations was 8.8% (Q3 2005/06: 7.5%)
? Net profit was £42 million (Q3 2005/06: £3 million loss)
? Basic earnings per share from continuing operations were 4.0 pence
(Q3 2005/06: 0.8 pence loss per share)
? Operating cash inflow from continuing operations excluding legacy items was
£56 million (Q3 2005/06: £64 million)
? Free cash inflow excluding legacy items was £43 million (Q3 2005/06:
£47 million)
? Net debt at 31 December 2006 was £249 million (30 September 2006: £291
million)
Ulf Henriksson, Chief Executive Officer of Invensys plc, commented:
"I am pleased that we have made further overall progress in the
third quarter which has enabled us to report another good set of
results.
"Process Systems produced another strong performance. Rail Systems showed good
revenue growth although order intake was impacted by the phasing of Network Rail
project bookings in the UK. Controls produced another satisfactory result
despite the weakness in those businesses supplying the US new residential
construction market and I am encouraged that APV produced a profit for a fourth
consecutive quarter.
"Financing charges were significantly reduced due to the benefits of the 2006
Refinancing (3), resulting in a net profit in the quarter of £42 million
compared with a small loss in the third quarter last year. Operating cash flow,
although lower than last year, was strong at £56 million representing 100%
conversion.
"With the improved performance in the period and continued progress in achieving
a balance of results between quarters, the Board remains confident of a
satisfactory outturn for the financial year as a whole."
Contact
Invensys plc Steve Devany tel: +44 (0) 20 7821 3758
Peter Niklewicz tel: +44 (0) 20 7821 2121
Maitland Emma Burdett/Suzanne Bartch tel: +44 (0) 20 7379 5151
Notes
1. Continuing operations are Controls, Process Systems, Rail Systems, APV and
Eurotherm. Discontinued operations in 2006/07 comprise Invensys Building
Systems operations in the US and Asia Pacific (IBS) and, in addition, ABS
EMEA, Lambda and Baker in 2005/06.
2. All references to operating profit (OPBIT) and operating margin in this
announcement are before exceptional items.
3. Definitions used in the Prospectus dated 25 May 2006 shall have the same
meanings when used in this announcement, unless the context requires
otherwise.
Conference call
1. Ulf Henriksson, CEO, and Steve Hare, CFO, will be hosting a conference call
for analysts and fund managers at 8.00 am London time this morning:
UK: +44 (0)20 7138 0808
US: +1 718 354 1158
No passcode is required
The conference call will be audio webcast live with slides, which can be
accessed by following the link at the following address:
http://www.invensys.com/isys/
A recording will be available at this address shortly after the completion of
the call.
2. This announcement and the presentation materials for the conference call are
also available at http://www.invensys.com/isys/
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.
Overview of results
Operating Operating
Orders received Revenue profit/(loss) Operating margin cash flow (1)
Quarter £m £m £m % £m
Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3
2006/07 2005/06 2006/07 2005/06 2006/07 2005/06 2006/07 2005/06 2006/07 2005/06
Controls 166 198 179 200 15 15 8.4% 7.5% 25 18
Process Systems 218 200 200 183 28 22 14.0% 12.0% 14 17
Rail Systems 112 133 131 103 18 18 13.7% 17.5% 27 29
APV 106 99 100 96 2 (4) 2.0% (4.2)% 1 3
Eurotherm 28 28 27 29 2 3 7.4% 10.3% 2 2
Corporate - - - - (9) (8) - - (13) (5)
Continuing operations 630 658 637 611 56 46 8.8% 7.5% 56 64
(1) Excluding legacy items. Operating cash flow from discontinued operations was
£nil (Q3 2005/06: £3 million inflow).
Operating Operating
Orders received Revenue profit/(loss) Operating margin cash flow (1)
9 months £m £m £m % £m
9M 9M 9M 9M 9M 9M 9M 9M 9M 9M
2006/07 2005/06 2006/07 2005/06 2006/07 2005/06 2006/07 2005/06 2006/07 2005/06
Controls 550 592 551 583 43 45 7.8% 7.7% 23 37
Process Systems 628 565 563 522 71 51 12.6% 9.8% 39 27
Rail Systems 397 373 379 302 57 41 15.0% 13.6% 115 66
APV 339 323 295 281 10 (2) 3.4% (0.7)% (5) -
Eurotherm 83 87 80 87 8 10 10.0% 11.5% 9 8
Corporate - - - - (27) (25) - - (37) (23)
Continuing operations 1,997 1,940 1,868 1,775 162 120 8.7% 6.8% 144 115
(1) Excluding legacy items. Operating cash flow from discontinued operations was
an inflow of £3 million (9M 2005/06: £18 million).
Orders
Orders received in the quarter for continuing operations were unchanged at CER
at £630 million (Q3 2005/06: £658 million). Orders at Process Systems were up
15% at CER. Controls' reported orders were down 11% at CER but were down 6%
after adjusting for the previously announced loss of the EDF contract at IMServ
and the disposal of small contracting businesses. Rail Systems' order intake was
impacted by the phasing of Network Rail project bookings. A summary of orders
and movements at CER by business is set out below:
For the quarter ended
31 December Q3 Q3 Q3
2005/06 2005/06 Change at 2006/07 Change
Orders Exchange at CER CER Orders at CER (1)
£m £m £m £m £m %
Controls 198 (10) 188 (22) 166 (11)%
Process Systems 200 (10) 190 28 218 15%
Rail Systems 133 (4) 129 (17) 112 (13)%
APV 99 (6) 93 13 106 14%
Eurotherm 28 (1) 27 1 28 1%
Continuing operations 658 (31) 627 3 630 -%
(1) % Change is calculated based on underlying amounts in £'000s.
The order book for continuing operations was £2,038 million at 31 December 2006
compared to £2,073 million at 30 September 2006, representing no change at CER.
Revenue
Revenue in the quarter was £637 million (Q3 2005/06: £611 million), an increase
of 10% at CER. The Group has operations around the world and as a result has a
significant exposure to movements in foreign exchange rates and in particular to
the US dollar and euro. The translation effect of foreign exchange rates during
the quarter was a decrease in revenue of £31 million or 5%. A summary of revenue
and movements at CER by business is set out below:
For the quarter ended
31 December Q3 Q3 Q3
2005/06 2005/06 Change at 2006/07 Change
Revenue Exchange at CER CER Revenue at CER (1)
£m £m £m £m £m %
Controls 200 (11) 189 (10) 179 (6)%
Process Systems 183 (10) 173 27 200 16%
Rail Systems 103 (4) 99 32 131 33%
APV 96 (5) 91 9 100 9%
Eurotherm 29 (1) 28 (1) 27 (5)%
Continuing operations 611 (31) 580 57 637 10%
(1) % Change is calculated based on underlying amounts in £'000s.
Operating profit and margin
Operating profit before exceptional items was £56 million in the quarter (Q3
2005/06: £46 million), which represents an increase of 29% at CER. The
translation effect of foreign exchange rates during the quarter was a decrease
in operating profit before exceptional items of £1 million. Operating margin was
8.8% (Q3 2005/06: 7.5%); the lower margin in Q3 at Rail Systems was due to
normal differences in business mix. A summary of operating profit and movements
at CER by business is set out below:
For the quarter ended
31 December Q3 Q3 Q3
2005/06 2005/06 Change at 2006/07 Change
OPBIT Exchange at CER CER OPBIT at CER (1)
£m £m £m £m £m %
Controls 15 - 15 - 15 -%
Process Systems 22 (1) 21 7 28 38%
Rail Systems 18 - 18 - 18 6%
APV (4) - (4) 6 2 n/a
Eurotherm 3 - 3 (1) 2 (25)%
Corporate (8) - (8) (1) (9) (24)%
Continuing operations 46 (1) 45 11 56 29%
(1) % Change is calculated based on underlying amounts in £'000s.
Exceptional items
Exceptional items for continuing operations in the quarter were a net nil (Q3
2005/06: £12 million charge). This included restructuring costs of £1 million
(Q3 2005/06: £9 million) and a gain on the sale of other financial assets of £1
million (Q3 2005/06: £nil). The prior year also included a £1 million charge to
property, plant and equipment impairment and a £2 million loss on sale of
operations.
Foreign exchange gains and losses
Foreign exchange gains in the quarter of £12 million (Q3 2005/06: £5 million
loss) relate to exchange differences arising on the translation of unhedged
foreign currency monetary items used in the financing of the Group and its
subsidiaries. These are principally attributable to exchange differences on the
Group's non-sterling denominated currency borrowings held in companies whose
functional currency is sterling. Of the exchange gains, £8 million arose on US
dollar borrowings and £4 million arose on euro borrowings.
The Group's hedging policy is determined by reference to the currency of the
underlying cash generation, ensuring, as far as possible, an economic hedge.
This results in an unhedged position under IAS 21.
Finance costs
Net finance costs in the quarter decreased to £12 million (Q3 2005/06: £30
million) reflecting the benefits of the 2006 Refinancing. In addition,
exceptional finance costs of £12 million arose on the partial redemption of the
principal amount of $180 million of High Yield Notes in November 2006,
comprising a £9 million premium paid on redemption and a £3 million write-off of
capitalised facility fees.
Taxation
The taxation charge for the quarter was £7 million (Q3 2005/06: £1 million)
based on an allocation of the estimated taxation charge for the full year.
Profit from discontinued operations
The profit from discontinued operations in the quarter comprises a taxation
credit of £9 million following the resolution of certain taxation issues in
Brazil and the US.
Net profit
The net profit for the quarter was £42 million (Q3 2005/06: £3 million loss),
after charging £12 million relating to the November 2006 High Yield Notes
redemption and after crediting a foreign exchange gain of £12 million.
Basic earnings per share
Basic earnings per share from continuing operations in the quarter were 4.0
pence (Q3 2005/06: 0.8 pence loss per share), calculated using the weighted
average number of shares in issue during the quarter of 796 million shares (Q3
2005/06: 609 million shares) and the profit after taxation and minority
interests for continuing operations of £32 million (Q3 2005/06: £5 million
loss).
Cash flow
Operating cash flow from continuing operations excluding legacy items in the
quarter was an inflow of £56 million (Q3 2005/06: £64 million), representing
cash conversion of 100% (Q3 2005/06: 139%). Free cash flow excluding legacy
items was an inflow of £43 million (Q3 2005/06: £47 million), after payment of
cash costs of £9 million relating to the partial redemption of High Yield
Notes in November 2006. Net debt at 31 December 2006 was £249 million (30
September 2006: £291 million).
Outlook
With the improved performance in the period and continued progress in achieving
a balance of results between quarters, the Board remains confident of a
satisfactory outturn for the financial year as a whole.
Controls
For the quarter ended 31 December 2006 Q3 2006/07 Q3 2005/06 % change % total
at CER change
Orders received (£m) 166 198 (11)% (16)%
Revenue (£m) 179 200 (6)% (11)%
Operating profit (£m) 15 15 -% -%
Operating margin (%) 8.4% 7.5% - -
Operating cashflow (£m) 25 18 41% 39%
Employees at period end (numbers) 13,085 13,903 - (6)%
For the 9 months ended 31 December 2006 9M 9M % change % total
2006/07 2005/06 at CER change
Orders received (£m) 550 592 (5)% (7)%
Revenue (£m) 551 583 (4)% (5)%
Operating profit (£m) 43 45 (3)% (4)%
Operating margin (%) 7.8% 7.7% - -
Operating cashflow (£m) 23 37 (36)% (38)%
Developments
During the quarter, Controls continued to improve operational efficiency in
terms of delivery performance and product quality. The North American businesses
supplying smoke and carbon monoxide alarms and thermostats continue to be
impacted by the slowdown in the US new residential construction market. Markets
outside North America remained generally favourable. New product launches are
being well received by customers. Further selective price increases were
implemented across many product groups during the period and additional pricing
actions are planned in the final quarter.
Performance
In the quarter, reported orders of £166 million (Q3 2005/06: £198 million) were
down 11% at CER but were down 6% after adjusting for the previously announced
loss of the EDF contract at IMServ and the disposal of small contracting
businesses; this shortfall arose in North America due mainly to the slowdown in
the new residential construction market. Reported revenue of £179 million (Q3
2005/06: £200 million) was down 6% at CER but was up 1% after the above
adjustments, reflecting the benefit of price rises and new product launches
offset by the reduced revenue in the businesses supplying the US new residential
construction market.
Operating margin rose to 8.4% from 7.5% in the prior year mainly due to the
success of the continuing restructuring programme and the disposal of low margin
contracting businesses. Operating profit was £15 million in line with the
corresponding quarter last year. Operating cash inflow of £25 million (Q3 2005/
06: £18 million) was up by 41% at CER with a significant reduction in working
capital driven by improved receivables and reductions in inventory.
In the nine months, orders were down 5% at CER at £550 million (9M 2005/06: £592
million) but were up 3% after adjusting for the above contract loss and
disposals. Revenue was 4% lower at CER at £551 million (9M 2005/06: £583
million) but was up 4% after these adjustments. Operating profit fell to £43
million (9M 2005/06: £45 million), a decrease of 3% at CER but an improvement of
13% after the above adjustments. Operating margin improved slightly to 7.8% (9M
2005/06: 7.7%). Operating cash inflow was £23 million (9M 2005/06: £37 million)
which was similar to last year after adjusting for the above contract loss and
disposals.
Process Systems
For the quarter ended 31 December 2006 Q3 2006/07 Q3 2005/06 % change % total
at CER change
Orders received (£m) 218 200 15% 9%
Revenue (£m) 200 183 16% 9%
Operating profit (£m) 28 22 38% 27%
Operating margin (%) 14.0% 12.0% - -
Operating cashflow (£m) 14 17 (19)% (18)%
Employees at period end (numbers) 7,081 6,723 - 5%
For the 9 months ended 31 December 2006 9M 9M % change % total
2006/07 2005/06 at CER change
Orders received (£m) 628 565 13% 11%
Revenue (£m) 563 522 10% 8%
Operating profit (£m) 71 51 43% 39%
Operating margin (%) 12.6% 9.8% - -
Operating cashflow (£m) 39 27 47% 44%
Developments
Process Systems had another good quarter reflecting the continuing strong end
markets, particularly oil and gas and power generation, and the benefits of its
recent investment in technology and sales and marketing. Regional market growth
continues in Asia, and the Middle East has seen a recent increase in projected
capital spending driven by the continued high oil price. Orders from the seven
global key accounts were up 9% in the quarter and 24% in the nine months.
InFusionTM, the recently launched enterprise control system that enables the
integration of all plant floor systems with an enterprise's business information
systems, continues to attract considerable interest from customers and gained
several significant contract wins in the quarter from, for example, Bechtel in
the US, AGIP KCO in Kazakhstan, Ratnagiri Gas and Power in India and the Tuketo
Power Plant in China.
At the December North American customer conference attended by nearly 600
customer participants, product enhancements were launched to the TriconexTM
safety system and the AvantisTM asset management system.
In January 2007, Paulett Eberhart joined the group as CEO and President of
Invensys Process Systems. Paulett was previously with EDS, the global technology
services company, which she joined in 1978. She held a number of senior roles
within EDS, latterly as President of its largest operating unit, the Americas,
which had revenues in excess of $8 billion.
Performance
Orders for the quarter rose 15% at CER to £218 million (Q3 2005/06: £200
million) with particularly strong growth in Asia Pacific where orders grew by
45% at CER driven primarily by China, ASEAN and South Korea.
Revenue increased by 16% at CER to £200 million (Q3 2005/06: £183 million) with
strong growth seen in all regions driven primarily by strong backlog conversion.
Revenue in Asia Pacific was up 42% at CER due to the execution of several major
projects in ASEAN and South Korea. North America was up 12% at CER attributable
to both project backlog conversion and an increase in Foxboro DCS (distributed
controls systems) upgrade orders within its customer service business.
Operating profit rose 38% at CER to £28 million (Q3 2005/06: £22 million). The
operating margin improved significantly to 14.0% (Q3 2005/06: 12.0%). The
increase in operating margin was driven by two primary factors, namely
incremental margin realised on higher factory shipments within the products
businesses and higher volumes and margin improvements in both the Asia Pacific
and EMEA regions. An operating cash inflow of £14 million was generated (Q3 2005
/06:£17 million). The reduction in cash conversion is mainly due to the timing
of receipts on a number of long term contracts.
For the nine months, orders rose to £628 million (9M 2005/06: £565 million), up
13% at CER, with strong growth seen in all regions. In particular, Asia Pacific
orders grew by 37% at CER driven primarily by the Reliance expansion project in
Jamnagar, India, as well as growth in ASEAN on several large projects. Revenue
for the nine months of £563 million (9M 2005/06: £522 million) increased by 10%
at CER driven by Asia Pacific. Operating profit rose to £71 million (9M 2005/06:
£51 million), a 43% increase at CER. The operating margin improved significantly
to 12.6% (9M 2005/06: 9.8%). An operating cash inflow of £39 million was
generated (9M 2005/06: £27 million), primarily attributable to the higher
operating profit.
Rail Systems
For the quarter ended 31 December 2006 Q3 2006/07 Q3 2005/06 % change % total
at CER change
Orders received (£m) 112 133 (13)% (16)%
Revenue (£m) 131 103 33% 27%
Operating profit (£m) 18 18 6% -%
Operating margin (%) 13.7% 17.5% - -
Operating cashflow (£m) 27 29 (6)% (7)%
Employees at period end (numbers) 3,074 2,828 - 9%
For the 9 months ended 31 December 2006 9M 9M % change % total
2006/07 2005/06 at CER change
Orders received (£m) 397 373 7% 6%
Revenue (£m) 379 302 27% 25%
Operating profit (£m) 57 41 40% 39%
Operating margin (%) 15.0% 13.6% - -
Operating cashflow (£m) 115 66 73% 74%
Developments
Rail Systems had a satisfactory quarter with good revenue growth. Markets have
remained generally favourable although its US business has not yet seen the
expected increase in orders for rail crossings following the signing of the
Transportation Bill due to customers continuing to focus investment into
capacity enhancements.
Performance
Orders for the quarter fell to £112 million (Q3 2005/06: £133 million), down 13%
at CER. UK orders were impacted by delays in finalising contracts with Network
Rail but all other businesses recorded increased orders compared with the
corresponding period last year.
Revenue of £131 million (Q3 2005/06: £103 million) was 33% higher at CER,
primarily due to improved levels of activity in the UK. Revenue also increased
in Spain and Australia reflecting the recent improvement in orders.
Operating profit was £18 million (Q3 2005/06: £18 million), translating into an
increase of 6% at CER reflecting the improvement in revenue offset by a normal
change in business mix. Operating margin was 13.7% (Q3 2005/06: 17.5%) bringing
year to date margins to 15.0%. Cash generation remained strong with an operating
cash inflow of £27 million (Q3 2005/06: £29 million), with conversion of
operating profit to operating cash in excess of 100% in both periods.
Orders for the nine months rose to £397 million (9M 2005/06: £373 million), up
7% at CER, driven by strong orders in Spain and Australia. The nine month
book-to-bill was 105% despite delayed contract awards in the UK. Revenue of £379
million (9M 2005/06: £302 million) was 27% higher at CER with all businesses
showing revenue growth, in particular from mainline and transit activities in
the UK and Spain.
In the nine months, operating profit rose to £57 million (9M 2005/06: £41
million), an increase of 40% at CER reflecting the significant increase in
revenue. The operating margin improved to 15.0% (9M 2005/06: 13.6%) benefiting
from higher revenue and an improved sales mix. An operating cash inflow of £115
million was generated (9M 2005/06: £66 million). Cash flow remains strong with
the year on year improvement driven by improved operating profit, strong
receipts on long term contracts and effective management of inventories and
receivables.
APV
For the quarter ended 31 December 2006 Q3 2006/07 Q3 2005/06 % change % total
at CER change
Orders received (£m) 106 99 14% 7%
Revenue (£m) 100 96 9% 4%
Operating profit/(loss) (£m) 2 (4) n/a n/a
Operating margin (%) 2.0% (4.2)% - -
Operating cashflow (£m) 1 3 (33)% (67)%
Employees at period end (numbers) 2,895 2,705 - 7%
For the 9 months ended 31 December 2006 9M 9M % change % total
2006/07 2005/06 at CER change
Orders received (£m) 339 323 7% 5%
Revenue (£m) 295 281 7% 5%
Operating profit/(loss) (£m) 10 (2) n/a n/a
Operating margin (%) 3.4% (0.7)% - -
Operating cashflow (£m) (5) - n/a n/a
Developments
APV had another satisfactory quarter as it benefited from continued efforts to
improve performance. Product, spares and services (PSS) revenue continues to
grow as a proportion of its total business and the project business is now
achieving a consistent improvement in performance. During the quarter, an
additional production facility was opened in Poland.
The pricing and shortage of certain raw materials continues to constrain APV. In
particular, the shortage of titanium has slowed what otherwise would have been a
strong growth in orders for industrial plate heat exchangers. Discussions with
suppliers have been progressing with additional supplies secured, enabling APV
to accept new customer orders in the quarter. Further investment has been made
in a new plate component that will open up a new sector of the industrial market
for APV as well as providing more efficient usage of titanium.
Performance
Orders for the quarter rose to £106 million (Q3 2005/06: £99 million), up 14% at
CER, driven by large project wins in North America and Europe; this has been
partially offset by lower PSS orders driven by the titanium shortage. Revenue of
£100 million (Q3 2005/06: £96 million) was 9% higher at CER, primarily due to
good growth in PSS revenue in both industrial and non-industrial sectors and
project revenue growth in Europe, North America and China.
Operating profit rose to £2 million (Q3 2005/06: £4 million loss). This was
driven by the growth in PSS revenue, improvement in executed project margins and
strong factory pull through. The operating margin improved to 2.0% (Q3 2005/06:
(4.2)%) predominantly due to better project execution. An operating cash inflow
of £1 million was generated, compared to £3 million in Q3 2005/06.
In the nine months, orders rose to £339 million (9M 2005/06: £323 million), up
7% at CER and revenue was also 7% higher at CER at £295 million (9M 2005/06:
£281 million). Operating profit rose to £10 million (9M 2005/06: £2 million
loss) and the operating margin improved to 3.4% (9M 2005/06: (0.7)%). An
operating cash outflow of £5 million was generated, compared to breakeven last
year.
Eurotherm
For the quarter ended 31 December 2006 Q3 2006/07 Q3 2005/06 % change % total
at CER change
Orders received (£m) 28 28 1% -%
Revenue (£m) 27 29 (5)% (7)%
Operating profit (£m) 2 3 (25)% (33)%
Operating margin (%) 7.4% 10.3% - -
Operating cashflow (£m) 2 2 6% -%
Employees at period end (numbers) 1,122 1,140 - (2)%
For the 9 months ended 31 December 2006 9M 9M % change % total
2006/07 2005/06 at CER change
Orders received (£m) 83 87 (4)% (5)%
Revenue (£m) 80 87 (7)% (8)%
Operating profit (£m) 8 10 (18)% (20)%
Operating margin (%) 10.0% 11.5% - -
Operating cashflow (£m) 9 8 9% 13%
Developments
Eurotherm continues to reshape its business model aimed at capturing market
growth and reducing its cost base. In the quarter, the first shipments of
product from its new Polish facility were made with further transfers of product
ranges scheduled to follow over the coming months. Negotiations are also taking
place with suppliers regarding transferring part of current manufacturing into
the supply chain.
Performance
Orders for the quarter were unchanged at £28 million (Q3 2005/06: £28 million)
but rose 9% at CER after taking into account the loss of the motor drives
distribution agreement in Q3 2005/06. Revenue of £27 million (Q3 2005/06: £29
million) was 5% lower at CER, primarily due to the decline in motor drives
revenue compared to the prior year.
Operating profit fell to £2 million (Q3 2005/06: £3 million). The operating
margin fell to 7.4% (Q3 2005/06: 10.3%). Both declines were predominantly caused
by the lost overall contribution caused by the reduced motor drives revenue. An
operating cash inflow of £2 million was generated in the quarter, which was in
line with the cash inflow of £2 million in Q3 2005/06.
Orders for the nine months fell to £83 million (9M 2005/06: £87 million), down
4% at CER but rose by 5% at CER taking into account the loss of the motor drives
distribution agreement. Revenue of £80 million (9M 2005/06: £87 million) was 7%
lower at CER, primarily due to a £9 million reduction in motor drives revenue.
Operating profit fell to £8 million (9M 2005/06: £10 million), a decrease of 18%
at CER and operating margin fell to 10.0% (9M 2005/06: 11.5%). An operating cash
inflow of £9 million was generated, compared to £8 million in the same period
last year.
Consolidated income statement (unaudited)
For the quarter ended 31 December 2006
Quarter ended Quarter ended 9 mths ended 9 mths ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
Notes £m £m £m £m
----------- ----------- ----------- -----------
Continuing operations
Revenue 1 637 611 1,868 1,775
Operating expenses before
exceptional items (581) (565) (1,706) (1,655)
----------- ----------- ----------- -----------
Operating profit before
exceptional items 1 56 46 162 120
Exceptional items 3 - (12) (15) (34)
----------- ----------- ----------- -----------
Operating profit 2 56 34 147 86
Foreign exchange gains/(losses) 4 12 (5) 39 (26)
Exceptional finance costs (12) - (67) -
Finance costs (14) (37) (68) (115)
Finance income 2 7 13 21
Other finance charges - IAS 19 (4) (2) (8) (5)
----------- ----------- ----------- -----------
Profit/(loss) before taxation 40 (3) 56 (39)
Taxation - overseas (7) (1) (16) (12)
----------- ----------- ----------- -----------
Profit/(loss)from continuing
operations 33 (4) 40 (51)
Profit from discontinued
operations 5 9 1 133 61
----------- ----------- ----------- -----------
Net profit/(loss)for the period 42 (3) 173 10
----------- ----------- ----------- -----------
Attributable to:
Equity holders of the parent 41 (4) 172 7
Minority interests 1 1 1 3
----------- ----------- ----------- -----------
42 (3) 173 10
----------- ----------- ----------- -----------
Earnings/(loss) per share
Continuing operations
Earnings/(loss) per share (basic) 7 4.0 p (0.8)p 5.5 P (8.4)p
Earnings/(loss) per share (diluted) 7 3.9 p (0.8)p 5.3 p (8.3)p
Discontinued operations
Earnings per share (basic) 7 1.2 p 0.1 p 18.6 p 9.5 p
Earnings per share (diluted) 7 1.1 p 0.2 p 18.2 p 9.4 p
Consolidated balance sheet (unaudited)
As at 31 December 2006
31 December 31 December 31 March
2006 2005 2006
Notes £m £m £m
----------- ----------- -----------
ASSETS
Non-current assets
Property, plant and equipment 312 377 348
Intangible assets - goodwill 206 230 222
Intangible assets - other 82 82 81
Deferred income tax assets 8 10 8
Amounts due from contract customers 7 5 7
Other receivables 37 32 34
Other financial assets 16 12 18
Pension asset 5 - 42
----------- ----------- -----------
673 748 760
----------- ----------- -----------
Current assets
Inventories 224 238 212
Amounts due from contract customers 197 145 161
Trade and other receivables 592 608 583
Cash and cash equivalents 222 614 450
Current income tax receivable 2 - 4
Derivative financial instruments 4 6 4
----------- ----------- -----------
1,241 1,611 1,414
Assets held for sale 8 4 23 54
----------- ----------- -----------
TOTAL ASSETS 1,918 2,382 2,228
----------- ----------- -----------
LIABILITIES
Non-current liabilities
Borrowings (469) (1,281) (1,191)
Provisions (69) (85) (98)
Deferred income tax liabilities (12) (20) (17)
Amounts due to contract customers (38) (24) (26)
Other payables (18) (19) (13)
Pension liability (581) (610) (531)
----------- ----------- -----------
(1,187) (2,039) (1,876)
----------- ----------- -----------
Current liabilities
Trade and other payables (575) (587) (600)
Amounts due to contract customers (234) (147) (148)
Borrowings (2) (6) (11)
Derivative financial instruments (1) (2) (2)
Current income tax payable (48) (66) (62)
Provisions (90) (106) (97)
----------- ----------- -----------
(950) (914) (920)
Liabilities held for sale 8 - (19) (25)
----------- ----------- -----------
TOTAL LIABILITIES (2,137) (2,972) (2,821)
----------- ----------- -----------
NET LIABILITIES (219) (590) (593)
----------- ----------- -----------
EQUITY
Equity attributable to equity
holders of the parent
Equity share capital 80 57 57
Other reserves 4,156 3,876 3,881
Retained earnings (4,516) (4,588) (4,597)
----------- ----------- -----------
Equity holders of the parent (280) (655) (659)
Minority interests 61 65 66
----------- ----------- -----------
TOTAL EQUITY 9 (219) (590) (593)
----------- ----------- -----------
Consolidated cash flow statement (unaudited)
For the quarter ended 31 December 2006
Quarter ended Quarter ended 9 mths ended 9 mths ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
Notes £m £m £m £m
----------- ----------- ----------- -----------
Operating activities
Operating profit:
Continuing operations 2 56 34 147 86
Discontinued operations 5 - 1 4 16
Depreciation of property,
plant and equipment 13 14 39 42
Amortisation of intangible
assets - other 3 4 10 11
Provision for impairment
charged to operating profit - 1 - 7
(Gain)/loss on sale of assets
and operations 3 (1) 2 (4) 6
Sale of property, plant and
equipment - - 4 1
Sale of subsidiaries - 3 6 2
Non-cash charge for share-based
payment 4 2 7 4
(Increase)/decrease in inventories (4) 1 (31) (19)
(Increase)/decrease in receivables (51) 1 (57) (15)
Increase in net amounts due to
contract customers 19 21 64 63
Increase/(decrease) in payables
and provisions 29 (1) (14) (55)
Movement in pensions 3 (4) 7 (30)
----------- ----------- ----------- -----------
Cash generated from operations 71 79 182 119
Income taxes paid (10) (7) (18) (18)
Interest paid (1) (21) (70) (86)
Exceptional finance costs (9) - (38) -
----------- ----------- ----------- -----------
Cash flows from operating
activities 51 51 56 15
----------- ----------- ----------- -----------
Investing activities
Interest received 1 6 14 19
Purchase of property, plant
and equipment (11) (11) (35) (31)
Expenditure on intangible
assets - other (3) (5) (14) (18)
Purchase of subsidiaries - - - (1)
Sale of financial assets 3 - 3 -
Sale of subsidiaries (4) (3) 146 211
Net cash disposed of on sale of
subsidiaries - (2) (2) (23)
Purchase of minority interests (1) - (1) -
Dividends paid to minority
interests (1) (1) (2) (4)
----------- ----------- ----------- -----------
Cash flows from investing
activities (16) (16) 109 153
----------- ----------- ----------- -----------
Financing activities
Issue of ordinary share capital - - 342 -
Share issue expenses - - (19) -
Facility fees capitalised - - (19) -
Increase in long-term borrowings - - 155 22
Repayment of short-term borrowings - - - (24)
Repayment of long-term borrowings (94) (99) (831) (211)
Capital element of finance lease
repayments - - (1) (3)
----------- ----------- ----------- -----------
Cash flows from financing activities (94) (99) (373) (216)
----------- ----------- ----------- -----------
Net decrease in cash and cash
equivalents (59) (64) (208) (48)
Cash and cash equivalents at
beginning of period 287 673 450 638
Net foreign exchange difference (6) 5 (20) 24
----------- ----------- ----------- -----------
Cash and cash equivalents at end
of period 222 614 222 614
----------- ----------- ----------- -----------
Consolidated statement of recognised income and expense (unaudited)
For the quarter ended 31 December 2006
Quarter ended Quarter ended 9 mths ended 9 mths ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
£m £m £m £m
----------- ----------- ----------- -----------
Gains on revaluation of available-for-sale
investments:
Transferred to income statement for
the period (1) - (1) -
Gains on cash flow hedges:
Gains taken to equity 1 - 1 2
Transferred to income statement for
the period (1) - (3) (2)
Exchange differences on translation of
foreign operations (11) (1) (27) 3
Foreign exchange gains transferred on
disposal of operations - - (1) (1)
Actuarial loss recognised on defined
benefit pension schemes - - (96) (64)
----------- ----------- ----------- -----------
Net expense recognised directly in
equity (12) (1) (127) (62)
Net profit/(loss)for the period 42 (3) 173 10
----------- ----------- ----------- -----------
Total recognised income/(expense)
for the period 30 (4) 46 (52)
----------- ----------- ----------- -----------
Attributable to:
Equity holders of the parent 30 (6) 49 (58)
Minority interests - 2 (3) 6
----------- ----------- ----------- -----------
30 (4) 46 (52)
----------- ----------- ----------- -----------
Notes (unaudited)
1 Segmental analysis
Quarter ended Quarter ended Quarter ended Quarter ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
Operating Operating
Revenue Revenue profit/(loss)* profit/(loss)*
£m £m £m £m
----------- ----------- ----------- -----------
Business
Controls 179 200 15 15
Process Systems 200 183 28 22
Rail Systems 131 103 18 18
APV 100 96 2 (4)
Eurotherm 27 29 2 3
Corporate - - (9) (8)
----------- ----------- ----------- -----------
Continuing operations 637 611 56 46
----------- ----------- ----------- -----------
Geographical analysis by origin
United Kingdom 103 77 10 7
Rest of Europe 182 179 19 23
North America 219 236 23 16
South America 28 28 4 4
Asia Pacific 82 75 7 4
Africa and Middle East 23 16 2 -
Corporate - - (9) (8)
----------- ----------- ----------- -----------
Continuing operations 637 611 56 46
----------- ----------- ----------- -----------
Geographical analysis of revenue by destination
United Kingdom 92 71
Rest of Europe 194 179
North America 197 223
South America 30 31
Asia Pacific 91 81
Africa and Middle East 33 26
----------- -----------
Continuing operations 637 611
----------- -----------
Geographical analysis of discontinued operations by origin
United Kingdom - 7 - -
Rest of Europe - - - -
North America - 19 - 2
South America - - - -
Asia Pacific - 1 - -
Africa and Middle East - - - -
----------- ----------- ----------- -----------
Discontinued operations - 27 - 2
----------- ----------- ----------- -----------
* Before exceptional items.
1 Segmental analysis continued
9 mths ended 9 mths ended 9 mths ended 9 mths ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
Operating Operating
Revenue Revenue profit/(loss)* profit/(loss)*
£m £m £m £m
----------- ----------- ----------- -----------
Business
Controls 551 583 43 45
Process Systems 563 522 71 51
Rail Systems 379 302 57 41
APV 295 281 10 (2)
Eurotherm 80 87 8 10
Corporate - - (27) (25)
----------- ----------- ----------- -----------
Continuing operations 1,868 1,775 162 120
----------- ----------- ----------- -----------
Geographical analysis by origin
United Kingdom 266 222 30 20
Rest of Europe 526 507 45 46
North America 686 698 76 56
South America 80 75 7 9
Asia Pacific 252 226 26 12
Africa and Middle East 58 47 5 2
Corporate - - (27) (25)
----------- ----------- ----------- -----------
Continuing operations 1,868 1,775 162 120
----------- ----------- ----------- -----------
Geographical analysis of revenue by destination
United Kingdom 244 206
Rest of Europe 535 510
North America 637 660
South America 86 83
Asia Pacific 274 245
Africa and Middle East 92 71
----------- -----------
Continuing operations 1,868 1,775
----------- -----------
Geographical analysis of discontinued operations by origin
United Kingdom - 43 - (1)
Rest of Europe - 28 - 3
North America 22 73 4 8
South America - - - -
Asia Pacific 2 73 - 7
Africa and Middle East - 4 - -
----------- ----------- ----------- -----------
Discontinued operations 24 221 4 17
----------- ----------- ----------- -----------
* Before exceptional items.
2 Operating profit
Quarter ended Quarter ended 9 mths ended 9 mths ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
£m £m £m £m
----------- ----------- ----------- -----------
Revenue 637 611 1,868 1,775
Cost of sales (462) (441) (1,357) (1,299)
----------- ----------- ----------- -----------
Gross profit 175 170 511 476
Distribution costs (3) (5) (9) (13)
Administrative costs before
exceptional items (116) (119) (340) (343)
----------- ----------- ----------- -----------
Operating profit before
exceptional items 56 46 162 120
Exceptional items (note 3) - (12) (15) (34)
----------- ----------- ----------- -----------
Operating profit 56 34 147 86
----------- ----------- ----------- -----------
Segmental analysis of operating profit:
Business
Controls 16 14 47 36
Process Systems 28 18 70 41
Rail Systems 18 18 57 41
APV 1 (11) 9 (14)
Eurotherm 2 3 8 10
Corporate (9) (8) (44) (28)
----------- ----------- ----------- -----------
Operating profit 56 34 147 86
----------- ----------- ----------- -----------
3 Exceptional items
Quarter ended Quarter ended 9 mths ended 9 mths ended
31 December 31 December 31 December 31 December
2006 2005 2006 2005
£m £m £m £m
----------- ----------- ----------- -----------
Restructuring costs (1) (9) (7) (21)
Impairment: property, plant and
equipment - (1) - (7)
Other exceptional items - - (12) -
Gain/(loss) on sale of assets
and operations 1 (2) 4 (6)
----------- ----------- --