2007/08 First Quarter Results
Posted 02 August 2007
Invensys PLC
02 August 2007
NEWS RELEASE
2 August 2007
2007/08 FIRST QUARTER RESULTS
FOR THE THREE MONTHS ENDED 30 JUNE 2007
Highlights
? Revenue from continuing operations1 was up 9% at constant exchange
rates (CER) at £621 million (Q1 2006/07: £598 million)
? Operating profit2 from continuing operations was up 28% at CER at
£55 million (Q1 2006/07: £45 million)
? Operating margin2 of continuing operations increased to 8.9% (Q1
2006/07: 7.5%)
? Basic earnings per share from continuing operations were 3.4 pence
(Q1 2006/07: 6.4 pence loss per share)
? Operating cash flow from continuing operations was down 48% at CER
at £17 million (Q1 2006/07: £34 million)
? Net profit was £28 million (Q1 2006/07: £34 million loss - after
charging costs of £55 million relating to the 2006 Refinancing)
? Free cash flow was £9 million (Q1 2006/07: £22 million)
? Net debt was £167 million (31 March 2007: £166 million)
Ulf Henriksson, Chief Executive Officer of Invensys plc, commented:
"I am pleased to report another solid performance in the first quarter, with
operating profit from continuing operations of £55 million and operating margin
improving to 8.9%. Our long term contracting businesses, Process Systems, Rail
Group and APV, continued to make progress overall. Controls produced another
satisfactory quarterly result in an uncertain market and Eurotherm's
restructuring programme continues. We are now positioning the Group for further
growth by increasing investment in sales and marketing and research and
development, in particular within Process Systems and Rail Group.
"Following this solid first quarter performance, the Board remains confident
that the Group will make further progress in the current financial year."
Contact:
Invensys plc Steve Devany tel: +44 (0) 20 7821 3758
Kate Elliott tel: +44 (0) 20 7821 2121
Financial Dynamics Andrew Lorenz
Richard Mountain tel: +44 (0) 20 7269 7121
Notes
1. Continuing operations are Process Systems, Eurotherm, APV, Rail Group and
Controls. Discontinued operations comprise Invensys Building Systems in the
US and Asia Pacific (IBS) in 2006/07.
2. All references to operating profit (OPBIT) and operating margin in this
announcement are before exceptional items.
Conference call
1. Ulf Henriksson, CEO, and Steve Hare, CFO, will be hosting a conference call
for analysts and fund managers at 8.00 a.m. this morning:
UK: +44 (0) 20 7138 0820
US: +1 718 354 1361
No passcode is required
2. The presentation will be audio webcast live with slides, which can be
accessed by following the link at the following address:
http://www.invensys.com
A recording will be available at this address shortly after the completion of
the call.
3. This announcement and the presentation materials for the conference call
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.
OVERVIEW OF RESULTS
For the quarter Operating Operating Operating cash
ended 30 June Revenue profit/(loss) margin flow Orders received
£m £m % £m £m
Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
2007/08 2006/07 2007/08 2006/07 2007/08 2006/07 2007/08 2006/07 2007/08 2006/07
Process Systems 174 173 20 20 11.5% 11.6% (14) 2 207 205
Eurotherm 27 26 2 3 7.4% 11.5% - 4 28 28
APV 101 96 3 3 3.0% 3.1% (20) 1 97 128
Rail Group 147 121 22 17 15.0% 14.0% 41 40 134 179
Controls 172 182 17 11 9.9% 6.0% 12 (3) 172 192
Corporate - - (9) (9) - - (2) (10) - -
Continuing operations 621 598 55 45 8.9% 7.5% 17 34 638 732
Summary of results
During the quarter ended 30 June 2007, revenue from continuing operations was up
9% at CER at £621 million (Q1 2006/07: £598 million). Operating profit before
exceptional items was £55 million (Q1 2006/07: £45 million), up 28% at CER and
operating margin was 8.9% (Q1 2006/07: 7.5%). Operating cash flow for
continuing operations in the quarter ended 30 June 2007 was £17 million (Q1 2006
/07: £34 million). Orders from continuing operations were down 9% at CER at £638
million (Q1 2006/07: £732 million), mainly due to the uneven nature of large
order bookings within Rail Group and APV.
Outlook
Following this solid first quarter performance, the Board remains confident that
the Group will make further progress in the current financial year.
BUSINESS REVIEW
Revenue
Revenue in the quarter ended 30 June 2007 was £621 million (Q1 2006/07: £598
million), an increase of 9% at CER. The global breadth of the Group means it 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 on
the quarter was a decrease in revenue of £27 million or 5%. A summary of
revenue and movements at CER by business is set out below:
For the quarter ended 30 June Q1 2006/07 Q1 2006/07 Change at Q1 2007/08
Revenue Exchange at CER CER Revenue Change1
£m £m £m £m £m %
Process Systems 173 (10) 163 11 174 7%
Eurotherm 26 (1) 25 2 27 8%
APV 96 (4) 92 9 101 9%
Rail Group 121 (4) 117 30 147 25%
Controls 182 (8) 174 (2) 172 (1%)
Continuing operations 598 (27) 571 50 621 9%
1 % change is measured as the change at CER as a percentage of the Q1
2006/07 adjusted base and is calculated based on underlying amounts in £'000s.
Operating profit and margin
Operating profit before exceptional items was £55 million in the quarter ended
30 June 2007 (Q1 2006/07: £45 million), which represents an increase of 28% at
CER. The translation effect of foreign exchange rates on the quarter was a
decrease in operating profit of £2 million or 4%. Improved performances were
reported by Controls, Rail Group and Process Systems, while APV and Eurotherm
showed small declines. Operating margin increased to 8.9% (Q1 2006/07: 7.5%).
A summary of operating profit and movements at CER by business is set out below:
For the quarter ended 30 June Q1 2006/07 Q1 2006/07 Change at Q1 2007/08
OPBIT Exchange at CER CER OPBIT Change1
£m £m £m £m £m %
Process Systems 20 (1) 19 1 20 5%
Eurotherm 3 - 3 (1) 2 (10%)
APV 3 - 3 - 3 (10%)
Rail Group 17 - 17 5 22 28%
Controls 11 (1) 10 7 17 60%
Corporate (9) - (9) - (9) (3%)
Continuing operations 45 (2) 43 12 55 28%
1 % change is measured as the change at CER as a percentage of the
Q1 2006/07 adjusted base and is calculated based on underlying amounts
in £'000s.
Orders
Orders received in the quarter ended 30 June 2007 were £638 million, a decrease
of 9% at CER (Q1 2006/07: £732 million). A summary of orders and movements at
CER by business is set out below:
For the quarter ended 30 June Q1 2006/07 Q1 2006/07 Change at Q1 2007/08
Orders Exchange at CER CER Orders Change1
£m £m £m £m £m %
Process Systems 205 (11) 194 13 207 7%
Eurotherm 28 (1) 27 1 28 4%
APV 128 (4) 124 (27) 97 (21)%
Rail Group 179 (3) 176 (42) 134 (24)%
Controls 192 (9) 183 (11) 172 (7)%
Continuing operations 732 (28) 704 (66) 638 (9)%
1 % change is measured as the change at CER as a percentage of the
Q1 2006/07 adjusted base and is calculated based on underlying amounts
in £'000s.
Order growth at Process Systems reflects good market conditions particularly in
the Middle East and Asia Pacific. The reduction in orders at Rail Group was due
to some short-term delays in contract signings and at APV there were some
particularly large project orders booked in Q1 2006/07. The fall in orders in
Controls was caused mainly by the disposal of some small contracting businesses.
The order book for continuing operations rose from £2,052 million at 31 March
2007 to £2,059 million at 30 June 2007. Increases in the Process Systems order
book were largely offset by reductions at Rail Group and APV.
Exceptional items
Exceptional items in the quarter ended 30 June 2007 totalled £8 million (Q1 2006
/07: £15 million). In the current quarter, this related to restructuring costs
totalling £7 million (Q1 2006/07: £2 million) and a charge of £1 million to
property, plant and equipment impairment (Q1 2006/07: £nil), both mainly
relating to the European Controls business.
The comparative quarter also included a £15 million charge relating to the
augmentation of members' benefits in the Invensys Australian Superannuation
Fund, partially offset by a gain on the sale of assets of £2 million.
Foreign exchange gains
Foreign exchange gains in the quarter ended 30 June 2007 of £4 million (Q1 2006/
07: £20 million) 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, £3 million arose on US
dollar borrowings and £2 million arose on euro borrowings, offset by a £1
million loss on other currencies.
These foreign currency borrowings are held as an economic hedge by reference to
the Group's underlying cash generation by currency. However, they are not
accounted for as net investment hedges under IAS 39 and consequently exchange
differences arising on these borrowings are recorded in the income statement.
Net finance costs and cover
Net finance costs decreased by £17 million to £11 million (Q1 2006/07: £28
million) owing to the 2006 Refinancing and lower net debt. The reduction in net
finance costs together with improved operating profit led to an increase in net
finance costs cover from 1.6 times to 5.0 times.
Profit before tax
Profit before tax for the quarter ended 30 June 2007 was £36 million (Q1 2006/
07: £36 million loss after charging £55 million relating to the 2006 Refinancing
and the £15 million exceptional charge relating to the Invensys Australian
Superannuation Fund and after crediting a foreign exchange gain of £20 million).
The key influences were increased operating profit, lower exceptional items
and reduced finance costs.
Taxation
The tax charge for the quarter ended 30 June 2007 was £8 million (Q1 2006/07: £2
million), based on an allocation of the estimated tax charge for the full year.
The comparative quarter charge of £2 million included a deferred tax credit of
£5 million arising from the exceptional charge relating to the Invensys
Australian Superannuation Fund.
Net profit
Net profit for the quarter ended 30 June 2007 was £28 million (Q1 2006/07: £34
million loss).
Earnings per share
Basic earnings per share for continuing operations were 3.4 pence per share (Q1
2006/07: 6.4 pence loss per share).
Cash flow
Operating cash flow from continuing operations in the quarter was £17 million
(Q1 2006/07: £34 million). This reduction was principally driven by increases in
working capital at Process Systems, reflecting some delays in customer
collections associated with an upgrade of its business information system, and
at APV, due to higher supplier payments and lower project orders resulting in
reduced advanced payments. These effects resulted in an operating cash
conversion for the quarter of 31% (Q1 2006/07: 76%).
Free cash flow for the quarter was £9 million (Q1 2006/07: £22 million) with the
£17 million reduction in operating cash flow partly offset by a £9 million
decrease in net finance costs. In addition, the comparative quarter included a
receipt of £15 million in respect of the Invensys Australian Superannuation Fund
and a payment of £13 million of exceptional 2006 Refinancing costs.
Net debt at 30 June 2007 was £167 million, an increase during the quarter of £1
million.
Process Systems
For the quarter ended 30 June Q1 2007/08 Q1 2006/07 % Change at % Total
CER change
Revenue (£m) 174 173 7% 1%
Operating profit (£m) 20 20 5% -
Operating margin (%) 11.5% 11.6%
Operating cash flow (£m) (14) 2 n/a n/a
Orders (£m) 207 205 7% 1%
Employees at period end (numbers) 7,346 6,694 10%
Developments
Process Systems' markets remained strong with regional demand in emerging
markets such as Asia Pacific and the Middle East in particular continuing to
drive growth in the key oil and gas sector.
The US $24 million acquisition of Cimnet, Inc., a Manufacturing Execution System
(MES) software company based in Pennsylvania, was completed on 1 July 2007 and
is now being fully integrated into our Wonderware business. Cimnet's MES
technology is being combined with our open industry standard based ArchestrA(R)
technology, to ensure rapid deployment and ease of use by the large installed
base of over 100,000 plants around the world. The merged MES technologies
resulting from this acquisition will become part of many of our integrated
offerings, including InFusionTM, the world's first Enterprise Control System.
During the quarter we introduced our new wireless-enabled enterprise solutions
and expanded implementation and support capabilities. These wireless-enabled
applications are in various stages of implementation at customer plants around
the world including a large chemical complex on the US Gulf Coast, petroleum
refineries in the US and Europe, and several US power plants.
We also gained further recognition during the quarter: a SimSci-Esscor training
simulator was recognised as "Best In Class" in Dow Corning's prestigious Global
Supply Chain Excellence Programme; we were recognised by RasGas as one of its
three key vendors contributing to the successful completion of the Phase 1
Expansion Project in Qatar; and for the fourth consecutive year Wonderware was
awarded Frost and Sullivan's Company of the Year Award for innovative software
solutions.
During the quarter, we implemented a new global SAP-based business information
system which caused some short-term delays in shipments, invoicing and cash
collections.
Performance
Revenue during the quarter was £174 million (Q1 2006/07: £173 million) an
increase of 7% at CER. Moderate growth was seen across North America and EMEA,
and significant growth in Asia Pacific, up 28% at CER, due to high revenues from
ASEAN countries, India and Korea.
Operating profit was £20 million (Q1 2006/07: £20 million). The effect of
higher revenue was offset by the planned investments in sales and marketing and
research and development which are reflected in the increase in employee numbers
during the quarter. The operating margin was 11.5% (Q1 2006/07: 11.6%).
An operating cash outflow of £14 million was generated during the quarter (Q1
2006/07: £2 million inflow), reflecting in part the delays in customer
collections associated with the transition to our new SAP systems.
Order growth remained solid with orders for the quarter increasing to £207
million (Q1 2006/07: £205 million), up 7% at CER. Asia Pacific orders increased
by 14% at CER driven primarily by gains in Malaysia and China. North America
orders increased by 15% at CER due to gains in customer service and projects but
South America orders declined by 34% at CER as a result of a large Petroleos de
Venezuela SA order booked in the comparative quarter.
Outlook
We continue to believe that our major markets will remain robust for the
foreseeable future, especially in our core industries of petrochemicals/
refining, upstream oil and gas, power and pharmaceuticals/specialty chemicals.
Although we are seeing some delays in major projects due to engineering resource
constraints, we do not currently anticipate any significant impact during this
financial year.
In addition, the services side of the industrial automation market continues to
be an area of fast growth due to the engineering constraints and the efficiency
requirements necessary for our customers to maintain a competitive edge. We
also believe that our InFusion platform, industry solutions and key service
offerings are well placed to benefit from the growth in this arena.
Eurotherm
For the quarter ended 30 June Q1 2007/08 Q1 2006/07 % Change at % Total
CER change
Revenue (£m) 27 26 8% 4%
Operating profit (£m) 2 3 (10%) (33)%
Operating margin (%) 7.4% 11.5%
Operating cash flow (£m) - 4 (89%) (100%)
Orders (£m) 28 28 4% -
Employees at period end (numbers) 1,147 1,115 3%
Developments
Eurotherm continues to execute its restructuring programme in order to capture
the expected growth in certain market and geographic sectors, and to address
issues within our manufacturing cost base. The migration of manufacturing from
Western Europe both into the supply chain and to a new facility in Poland is
progressing on its revised schedule.
Performance
Revenue was £27 million (Q1 2006/07: £26 million), 8% higher at CER, primarily
due to an increase in solutions revenue and growth from the core controllers
business.
Operating profit was £2 million (Q1 2006/07: £3 million), a decrease of 10% at
CER. This decrease arose mainly due to reduced gross margins caused by the
strategic change in sales mix from products to solutions and the adverse
transactional effect of a weaker US dollar. Operating margin was 7.4% (Q1 2006/
07: 11.5%).
Operating cash flow was neutral (Q1 2006/07: £4 million inflow), due mainly to
lower customer collections and investments in inventory associated with the
transfer of manufacturing to Poland and to the supply chain.
Orders for the quarter were £28 million (Q1 2006/07: £28 million), up 4% at CER.
Outlook
We expect to see continued growth in our three main vertical markets of glass,
life science and heat treatment. We should see increasing benefits from our
manufacturing restructuring programme, which continues on its revised schedule
for completion by 31 March 2008.
APV
For the quarter ended 30 June Q1 2007/08 Q1 2006/07 % Change at % Total
CER change
Revenue (£m) 101 96 9% 5%
Operating profit (£m) 3 3 (10%) -
Operating margin (%) 3.0% 3.1%
Operating cash flow (£m) (20) 1 n/a n/a
Orders (£m) 97 128 (21%) (24)%
Employees at period end (numbers) 3,044 2,846 7%
Developments
Following the substantial progress made in stabilising performance, we are now
investing to drive consistent global processes through the implementation of a
single global SAP platform. Sales processes are also being improved through the
implementation of tools which will drive back-office efficiency and enhanced
customer responsiveness.
Titanium supply, which has been difficult for some time, is now showing signs of
improvement and we have recently entered into a new titanium supply contract,
which together with product development programmes, have opened up good order
potential for industrial heat exchangers.
Performance
Revenue was £101 million during the quarter (Q1 2006/07: £96 million), 9% higher
at CER, primarily due to stronger project revenue in North America and Asia
Pacific, and higher product, spares and services (PSS) revenue in Europe.
Operating profit remained at £3 million for the quarter (Q1 2006/07: £3 million)
which equated to a 10% fall at CER. The benefits of higher revenue were offset
by raw material price rises and investment in the new Polish manufacturing
facility, as well as investment in the sales and marketing effort. Operating
margin was 3.0% (Q1 2006/07: 3.1%).
An operating cash outflow of £20 million was generated (Q1 2006/07: £1 million
inflow). The outflow was driven by large supplier payments following the high Q4
2006/07 activity levels and lower project orders resulting in reduced advanced
payments.
Orders for the quarter fell to £97 million (Q1 2006/07: £128 million), down 21%
at CER, reflecting a reduction in project orders from an unusually high level in
the comparative quarter, partially offset by an increase in PSS orders.
Outlook
The key trends of plant consolidation, product traceability and plant
productivity in the dairy industry are providing good opportunities for our
automation, plant modifications and product sales. Food and beverage in general
also shows good potential for further penetration in existing and emerging
markets. Also the improvement in titanium supply enables us to recommence our
sales efforts for industrial heat exchangers across several market sectors.
Rail Group
For the quarter ended 30 June Q1 2007/08 Q1 2006/07 % Change at % Total
CER change
Revenue (£m) 147 121 25% 21%
Operating profit (£m) 22 17 28% 29%
Operating margin (%) 15.0% 14.0%
Operating cash flow (£m) 41 40 5% 3%
Orders (£m) 134 179 (24%) (25)%
Employees at period end (numbers) 3,372 2,941 15%
Developments
Rail Group's core markets of the UK, Iberia and US remain stable and we continue
to see a strong pipeline of major opportunities in export markets. As a result,
we are investing in sales and marketing to ensure that we have the capacity to
manage the contract bidding process and in research and development to maintain
a leading position in rail signalling technology. This is reflected in the
increase in employee numbers during the quarter.
Despite the financial difficulties experienced by Metronet, we have seen a
strong level of sales activity in the quarter on our PPP contracts for the
Victoria Line and the Sub-Surface Lines. We are contracted to Bombardier to
provide the signalling and control upgrade on these lines, with Bombardier
supplying new rolling stock, and work is continuing unaffected.
Performance
Revenue of £147 million (Q1 2006/07: £121 million) was 25% higher at CER,
reflecting a strong increase in activity in the UK, Spain and Australia.
Revenue remained flat in North America where the focus of investment continues
to be on capacity enhancement, while demand for rail crossings has yet to show
any significant upturn.
Operating profit rose to £22 million (Q1 2006/07: £17 million), an increase of
28% at CER reflecting the substantial increase in activity and operating margin
improved to 15.0% (Q1 2006/07: 14.0%).
An operating cash flow of £41 million was generated (Q1 2006/07: £40 million)
driven by increased operating profit and strong cash flow from long term
contracts.
Orders in the quarter were £134 million (Q1 2006/07: £179 million), down 24% at
CER. Order intake for the Rail Group is by its nature uneven as, for example,
the comparative quarter included the £41 million Taiwan mass transit export
order and this quarter excluded a further large Network Rail order which has now
been booked in the second quarter. Major contracts booked during this quarter
include the Network Rail Glasgow Central contract, as mentioned at the full year
results, and the Barcelona Metro Line 5 contract worth £8 million.
Outlook
Orders and revenue in the UK, Spain and Australia are expected to continue at
recent strong levels but North America is likely to remain flat during the rest
of the year. We are exploring a growing number of opportunities beyond our core
markets with the greatest prospect for revenue growth lying in these export
markets. We continue to improve our prospects in these new markets through
focussed marketing and investment in engineering resources and product
development.
Controls
For the quarter ended 30 June Q1 2007/08 Q1 2006/07 % Change at % Total
CER change
Revenue (£m) 172 182 (1%) (5)%
Operating profit (£m) 17 11 60% 55%
Operating margin (%) 9.9% 6.0%
Operating cash flow (£m) 12 (3) n/a n/a
Orders (£m) 172 192 (7%) (10)%
Employees at period end (numbers) 12,395 13,911 (11%)
Developments
Despite difficult market conditions Controls reported another satisfactory
performance for the quarter and continued to benefit from the actions initiated
during last year.
The weak US new residential construction market, which represents approximately
10% of Controls' revenue, remains challenging and no near-term improvement in
that portion of the market is anticipated. Despite these material costs being
significantly higher than the comparative quarter, actions on price and improved
operating execution have mitigated some of the impact on performance. Our
product quality and on-time delivery have improved significantly during the last
15 months and these improvements have helped our pricing actions. They have
also allowed us to increase our focus on improving plant productivity and we are
seeing improvements in throughput resulting in reduced scrap, rework and
expedited freight costs.
During the quarter, we announced our intention to close the manufacturing
operations at our plant in Thyez, France. The decision to execute this
restructuring was partially as a result of a product phase out by customers.
This closure and the previously announced closure of our Lomazzo operation in
Italy are in line with our intention only to restructure the high cost
manufacturing base within our European Appliance business where there is a
compelling economic case to do so.
We have continued to improve upon our product development processes. During the
quarter we completed the roll out of a common product development process across
our businesses and during the quarter we introduced 34 new products representing
either new offerings or updated replacements for existing products.
Performance
Revenue in the quarter was £172 million (Q1 2006/07: £182 million), a 3%
increase at CER after adjusting for the effect of the disposal of some small
contracting businesses during last year, with price increases largely offsetting
volume declines.
Operating profit rose to £17 million (Q1 2006/07: £11 million), an increase of
60% at CER. Price increases, plant productivity improvements and restructuring
benefits contributed to the much improved profit levels and increased the
operating margin to 9.9% (Q1 2006/07: 6.0%).
Our operating improvements and commercial negotiations with both suppliers and
customers continued to yield working capital improvements. This was a key
driver in the operating cash inflow of £12 million for the quarter (Q1 2006/07:
£3 million outflow).
Orders for the quarter were £172 million (Q1 2006/07: £192 million), down 2% at
CER after adjusting for the effect of the disposal of the small contracting
businesses during last year. This decrease was caused by the weak US new
residential construction market and some market share losses in low margin
business as a result of our pricing initiatives.
Outlook
The outlook for our markets remains uncertain and, in particular, the US new
residential construction market shows little sign of recovery. In addition, raw
material price inflation is likely to continue and our performance will depend
upon our ability to recover these increased costs through further pricing
actions.
Improvements in our quality and delivery issues should continue to allow us to
refocus our resources on improving plant productivity and lowering our cost base
by consolidating our manufacturing footprint and streamlining our general
overhead structure on an opportunistic and economic basis.
Invensys plc
Consolidated income statement (unaudited)
For the quarter ended 30 June 2007
Quarter ended Quarter ended
30 June 30 June
2007 2006
Notes £m £m
Continuing operations
Revenue 1 621 598
Operating expenses before exceptional items (566) (553)
Operating profit before exceptional items 1 55 45
Exceptional items 3 (8) (15)
Operating profit 2 47 30
Foreign exchange gains 4 4 20
Exceptional finance costs - (55)
Finance costs (15) (35)
Finance income 4 7
Other finance charges - IAS 19 (4) (3)
Profit/(loss) before taxation 36 (36)
Taxation - overseas (8) (2)
Profit/(loss) from continuing operations 28 (38)
Profit from discontinued operations 5 - 4
Profit/(loss) for the period 28 (34)
Attributable to:
Equity holders of the parent 27 (35)
Minority interests 1 1
28 (34)
Earnings/(loss) per share
Continuing operations
Earnings/(loss) per share (basic) 7 3.4p -6.4p
Earnings/(loss) per share (diluted) 7 3.3p -6.3p
Discontinued operations
Earnings per share (basic) 7 - 0.7p
Earnings per share (diluted) 7 - 0.7p
Invensys plc
Consolidated balance sheet (unaudited)
As at 30 June 2007
30 June 30 June 31 March
2007 2006 2007
Notes £m £m £m
ASSETS
Non-current assets
Property, plant and equipment 305 329 314
Intangible assets - goodwill 205 216 206
Intangible assets - other 90 81 90
Deferred income tax assets 17 8 17
Amounts due from contract customers 10 7 8
Other receivables 41 39 39
Other financial assets 7 17 7
Pension asset 1 11 3
676 708 684
Current assets
Inventories 237 226 229
Amounts due from contract customers 152 169 196
Trade and other receivables 613 564 565
Cash and cash equivalents 301 441 307
Income tax receivable 2 4 2
Derivative financial instruments 2 5 2
1,307 1,409 1,301
Assets held for sale 8 3 49 3
TOTAL ASSETS 1,986 2,166 1,988
LIABILITIES
Non-current liabilities
Borrowings (467) (432) (472)
Provisions (91) (89) (93)
Income tax payable (21) (22) (22)
Deferred income tax liabilities (16) (12) (16)
Amounts due to contract customers (34) (30) (37)
Other payables (16) (14) (16)
Pension liability (526) (523) (525)
(1,171) (1,122) (1,181)
Current liabilities
Trade and other payables (606) (631) (615)
Amounts due to contract customers (223) (166) (223)
Borrowings (1) (734) (1)
Derivative financial instruments (1) (2) (1)
Income tax payable (37) (41) (34)
Provisions (70) (91) (73)
(938) (1,665) (947)
Liabilities held for sale 8 - (19) -
TOTAL LIABILITIES (2,109) (2,806) (2,128)
NET LIABILITIES (123) (640) (140)
Capital and reserves
Equity share capital 80 57 80
Other reserves 4,159 3,870 4,158
Retained earnings (4,421) (4,631) (4,438)
Equity holders of the parent (182) (704) (200)
Minority interests 59 64 60
TOTAL EQUITY 9 (123) (640) (140)
Invensys plc
Consolidated cash flow statement (unaudited)
For the quarter ended 30 June 2007
Quarter ended Quarter ended
30 June 30 June
2007 2006
Notes £m £m
Operating activities
Operating profit:
Continuing operations 2 47 30
Discontinued operations 5 - 4
Depreciation of property, plant and equipment 13 13
Amortisation of intangible assets - other 4 3
Provision for impairment/write down of assets charged to
operating profit 1 -
Gain on sale of assets and operations 3 - (2)
Sale of property, plant and equipment - 3
Non-cash charge for share-based payment 3 1
Increase in inventories (10) (22)
Increase in receivables (12) (4)
(Decrease)/increase in net amounts due to contract customers (7) 17
Decrease in payables and provisions (13) (9)
Difference between pension contributions paid and amounts
recognised in operating profit 2 32
Cash generated from operations 28 66
Income taxes paid (6) (5)
Interest paid (4) (30)
Net cash flows from operating activities 18 31
Investing activities
Interest received 3 7
Purchase of property, plant and equipment (7) (11)
Expenditure on intangible assets - other (5) (5)
Sale of subsidiaries (1) (6)
Net cash disposed of on sale of subsidiaries - (2)
Dividends paid to minority interests (1) -
Cash flows from investing activities (11) (17)
Financing activities
Issue of ordinary share capital - 3
Share issue expenses - (1)
Purchase of Invensys plc shares by Employee Share Trust (9) -
Purchase of shares on vested share awards (4) -
Repayment of short-term borrowings - (4)
Repayment of long-term borrowings - (2)
Capital element of finance lease repayments - (1)
Cash flows from financing activities (13) (5)
Net (decrease)/increase in cash and cash equivalents
(6) 9
Cash and cash equivalents at beginning of period 307 450
Net foreign exchange difference - (18)
Cash and cash equivalents at end of period 301 441
Invensys plc
Consolidated statement of recognised income and expense (unaudited)
For the quarter ended 30 June 2007
Quarter ended Quarter ended
30 June 30 June
2007 2006
£m £m
Income and expense recognised directly in equity
Exchange differences on translation of foreign operations - (13)
Net expense recognised directly in equity - (13)
Profit/(loss) for the period 28 (34)
Total recognised income/(expense) for the period 28 (47)
Attributable to:
Equity holders of the parent 27 (46)
Minority interests 1 (1)
28 (47)
Invensys plc
Notes (unaudited)
1 Segmental analysis
Quarter ended Quarter ended Quarter ended Quarter ended
30 June 30 June 30 June 30 June
2007 2006 2007 2006
Operating Operating
Revenue Revenue profit/(loss) * profit/(loss) *
£m £m £m £m
Business
Process Systems 174 173 20 20
Eurotherm 27 26 2 3
APV 101 96 3 3
Rail Group 147 121 22 17
Controls 172 182 17 11
Corporate - - (9) (9)
Continuing operations 621 598 55 45
Geographical analysis by origin
United Kingdom 93 78 10 9
Rest of Europe 181 168 16 11
North America 218 231 26 24
South America 25 24 3 2
Asia Pacific 90 79 8 7
Africa and Middle East 14 18 1 1
Corporate - - (9) (9)
Continuing operations 621 598 55 45
Geographical analysis of revenue by destination
United Kingdom 87 72
Rest of Europe 180 167
North America 203 216
South America 27 26
Asia Pacific 95 87
Africa and Middle East 29 30
Continuing operations 621 598
Geographical analysis of discontinued operations by origin
North America - 17 - 4
Asia Pacific - 1 - -
Discontinued operations - 18 - 4
* Before exceptional items.
Invensys plc
Notes (unaudited)
2 Operating profit
Quarter ended Quarter ended
30 June 30 June
2007 2006
£m £m
Revenue 621 598
Cost of sales (452) (439)
Gross profit 169 159
Distribution costs (3) (3)
Administrative costs (111) (111)
Operating profit before exceptional items 55 45
Exceptional items (note 3) (8) (15)
Operating profit 47 30
Segmental analysis of operating profit:
Business
Process Systems 20 19
Eurotherm 2 3
APV 1 4
Rail Group 22 17
Controls 11 11
Corporate (9) (24)
Operating profit 47 30
3 Exceptional items
Quarter ended Quarter ended
30 June 30 June
2007 2006
£m £m
Restructuring costs (7) (2)
Impairment: property, plant and equipment (1) -
Gain on sale of assets and operations - 2
Other exceptional items - (15)
Exceptional items (8) (15)
Restructuring costs by business:
Process Systems - (1)
APV (2) (1)
Controls (5) -
(7) (2)
Invensys plc
Notes (unaudited)
4 Foreign exchange gains
Foreign exchange gains in the quarter of £4 million (Q1 2006/07: £20 million)
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 in the year, £3 million arose on net external US dollar
borrowings and £2 million on net external euro borrowings, offset by £1 million
losses on other currencies.
These foreign currency borrowings are held as an economic hedge by reference to
the Group's underlying cash generation by currency. However, they are not
accounted for as net investment hedges under IAS 39 and consequently exchange
differences arising on these borrowings are recorded in the income statement.
5 Profit from discontinued operations
Quarter ended Quarter ended
30 June 30 June
2007 2006
£m £m
Profit from discontinued operations comprises the following:
Revenue - 18
Operating expenses before exceptional items - (14)
Profit from discontinued operations - 4
6 Reconciliation of cash flows
Quarter ended Quarter ended
30 June 30 June
2007 2006
£m £m
Net cash flows from operating activities 18 31
Capital expenditure included within investing activities (12) (16)
Interest paid 4 30
Taxation paid (operating) 6 5
Legacy items:
Pension contributions (2) (17)
Other legacy payments 3 3
1 (14)
Operating cash flow 17 36
Net finance costs (1) (23)
Taxation paid (6) (5)
Legacy items (1) 14
Free cash flow 9 22
Operating cash flow attributable to:
Continuing operations 17 34
Discontinued operations - 2
17 36
The directors consider that the best measure of the Group's cash performance is free cash flow, as
calculated above.
Invensys plc
Notes (unaudited)
7 Earnings/(loss) per share
Quarter ended Quarter ended
30 June 30 June
Earnings/(loss) per share (pence) 2007 2006
Continuing operations
Basic 3.4 p (6.4)p
Diluted 3.3 p (6.3)p
Before exceptional finance costs and foreign exchange gains (basic) 2.9 p (0.7)p
Before exceptional items, exceptional finance costs and foreign 3.9 p 1.0 p
exchange gains (basic)
Discontinued operations
Basic - 0.7 p
Diluted - 0.7 p
Total Group
Basic 3.4 p (5.7)p
Diluted 3.3 p (5.6)p
Weighted average number of shares (million)*
Basic 796 609
Effect of dilution - share options 15 13
Diluted 811 622
Earnings/(loss) (£m)
Continuing operations
Basic 27 (39)
Before exceptional finance costs and foreign exchange gains
Operating profit 47 30
Finance costs (15) (35)
Finance income 4 7
Other finance charges - IAS 19 (4) (3)
Operating profit/(loss) less net finance costs 32 (1)
Taxation on operating profit less net finance costs (8) (2)
Minority interests (1) (1)
23 (4)
Before exceptional items, exceptional finance costs and foreign
exchange gains
Operating profit before exceptional items 55 45
Finance costs (15) (35)
Finance income 4 7
Other finance charges - IAS 19 (4) (3)
Operating profit less net finance costs 40 14
Taxation on operating profit less net finance costs (8) (7)
Minority interests (1) (1)
31 6
Discontinued operations
Basic - 4
Total Group
Basic 27 (35)
The basic earnings/(loss) per share for the year has been calculated using 796
million shares (Q1 2006/07: 609 million), being the weighted average number of
shares in issue during the year and the profit/(loss) after taxation and
minority interests for continuing operations, discontinued operations and total
Group as shown above.
Two additional earnings per share calculations have been included since the
directors consider that they both give useful additional indications of
underlying performance. These are:
Earnings before exceptional finance costs and foreign exchange gains with
an underlying tax charge of £8 million (Q1 2006/07: £2 million).
Earnings before exceptional items, exceptional finance costs and foreign
exchange gains with an underlying tax charge of £8 million (Q1 2006/07:
£7 million).
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 options which are considered to be anti-dilutive.
*Comparative figures for the weighted average number of shares have been
restated after adjusting for the bonus element of the 2 for 5 Rights Issue and
the share consolidation of one 10 pence share for every ten 1 pence shares in
July 2006. The adjustment factor for the Rights Issue is 1.070588 calculated
using 19.75 pence per share, being the closing price on 6 July 2006.
Invensys plc
Notes (unaudited)
8 Assets and liabilities held for sale
Assets and liabilities held for sale as at 30 June 2007 consist of the Group's
surplus freehold property portfolio. Assets and liabilities held for sale as at
30 June 2006 consist of the Group's surplus freehold property portfolio and the
assets and liabilities of IBS (Invensys Building Systems business in the US and
Asia Pacific).
9 Reconciliation of movements in equity
Quarter Quarter
ended ended
30 June 30 June
2007 2006
£m £m
Opening equity (140) (593)
Total recognised income/(expense) for the period 28 (47)
Share-based payment (10) 1
Dividends paid to minority interests (1) (1)
At end of period (123) (640)
Attributable to:
Equity holders of the parent (182) (704)
Minority interests 59 64
(123) (640)
10 Basis of preparation
The Group prepares its annual financial statements on the basis of International
Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and
in accordance with the provisions of the Companies Act 1985. The financial
information presented in this quarterly report has been prepared in accordance
with the accounting policies expected to be used in preparing the annual
financial statements for the year ending 31 March 2008, which do not differ
significantly from those used for the most recent annual financial statements.
11 Financial information
This quarterly report was approved by a duly appointed and authorised committee
of the Board of directors on 1 August 2007. This statement does not comprise
the statutory accounts of the Group, as defined in section 240 of the Companies
Act 1985. The financial information for the quarter ended 30 June 2007 is
unaudited. The financial information for the balance sheet as at 31 March 2007
has been extracted from statutory accounts on which an unqualified audit report
has been issued.
The statutory accounts of Invensys plc for the year ended 31 March 2007 have
been delivered to the Registrar of Companies. The auditors, Ernst & Young LLP,
reported on those accounts in accordance with section 235 of the Companies Act
1985 and their report was unqualified and did not contain a statement under
section 237(2) or (3) of the Companies Act 1985.
Invensys plc
Notes (unaudited)
12 Events after the balance sheet date
Acquisition of Cimnet, inc.
On