RNSArticle

RNS Number : 8818G

Invensys PLC

19 May 2011

Invensys plc

19 May 2011

RESULTS FOR THE YEAR ENDED 31 MARCH 2011¹

Financial highlights - continuing operations

· Order intake was £2,452 million (2010: £2,473 million), down 1% (down 3% at CER²)

· Revenue was £2,486 million (2010: £2,243 million), up 11% (up 9% at CER)

· Operating profit³ rose 6% (up 5% at CER) to £262 million (2010: £248 million)

· Underlying earnings per share rose 48% to 19.8p (2010: 13.4p)

· Operating cash flow was £213 million (2010: £265 million) and free cash flow was £83 million (2010: £100 million)

· Recommended final dividend of 2.5p per share (2010: 2.0p per share); total dividends for the year of 4.0p per share (2010: 3.0p per share)

· Continued strong financial position with net cash of £348 million

Business highlights

· Strong order intake in Invensys Operations Management and Invensys Controls offset by fewer large orders in Invensys Rail

· Major contract awards during the year for control and safety systems at four nuclear reactors in China

· Good revenue growth across the Group driven by large greenfield contracts in Invensys Operations Management and new market contracts at Invensys Rail

· Provisional outcome of triennial review of UK Main Pension Scheme shows no change in deficit funding contribution schedule

Wayne Edmunds, Chief Executive of Invensys, commented:

"I am delighted to be leading Invensys in the next stage of its development. Having worked closely with our businesses over the past two years as Chief Financial Officer, it is clear to me that we have three strong divisions each with management strength in depth and the ability to create significant growth and value. We are a global company operating in end markets which each have strong growth prospects. Our overall strategy remains unchanged but we will have an increased focus upon execution."

"We have produced another good performance for the year and, looking forward on a constant currency basis, we expect 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

Notes

1. The financial information for the year ended 31 March 2011 is audited and has been prepared under the Group's accounting policies for the year ended 31 March 2011. The Group's accounting policies for the year ended 31 March 2011 are those contained in the 2010 Annual Report and Accounts except for certain changes set out in Note 1 to the Group Financial Statements, "Basis of preparation".

2. Unless otherwise stated, % change is measured at constant exchange rates (CER) as a percentage of the 2010 adjusted base and is calculated based upon underlying amounts in £'000s.

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

Conference call

Wayne Edmunds, Chief Executive, and David Thomas, Acting Chief Financial Officer, will be hosting a presentation and conference call for analysts and fund managers at 9.00am BST 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 7806 1966

US: +1 718 247 0887

France: 0800 942 824

Germany: 0800 673 8353

Italy: 800 979 137

Spain: 900 974 419

Confirmation Code: 1271042

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 Preliminary 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.

Chief Executive's Statement - Wayne Edmunds

Having worked closely with our businesses over the past two years as Chief Financial Officer, it is clear to me that we have three strong divisions, each with management strength in depth and the ability to create significant growth and value. We are a global company operating in end markets which each have strong growth prospects.

We need to create a common theme for execution across the Group. Execution means having a discipline for linking people, strategy and operations to create sustainable value. To that end, we have decided to move away from an integrated operating model, with centralised functions and matrix management, towards a holding company model where divisional management has greater control and responsibility for their operations.

We will be concentrating upon a number of important areas:

· Continuing to win further greenfield projects in emerging markets to enlarge our installed base and provide opportunities for additional sales. We have demonstrated that our technology is well-suited for large, complex solutions and our unique ability to team with global partners offers our customers distinctive value.

· Building a larger footprint in regions and industries with higher growth expectations such as Asia and the nuclear power generating industry.

· Continuing to invest in the development of our key technology platforms to our competitive advantage in key areas.

· Using our strong balance sheet to add new capabilities to our portfolio or additional market presence in strategically important regions or sectors.

· Having reached provisional agreement on the triennial review with the trustees of our UK Main Pension Scheme that there is no change to the deficit funding contribution schedule either in terms of duration or amount of payments, we will continue to keep our legacy pension issues under review.

Performance

For the year ended 31 March All data relates to continuing operations (other than free cash flow)	2011	2010
	2011	2010	% change at CER¹	% total change
Orders (£m)	2,452	2,473	(3%)	(1%)
Order book (£m)	2,204	2,307	(2%)	(4%)
Revenue (£m)	2,486	2,243	9%	11%
Operating profit² (£m)	262	248	5%	6%
Operating margin² (%)	10.5%	11.1%
Operating cash flow (£m)	213	265	(21%)	(20%)
Cash conversion (%)	81%	107%
Earnings per share - underlying³ (p)	19.8p	13.4p		48%
Earnings per share - basic (p)	22.4p	18.5p		21%
Free cash flow (£m)	83	100		(17%)
Return on operating capital⁴ (%)	49.9%	48.6%

1% change is measured as the change at CER as a percentage of the 2010 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 Calculated by reference to continuing operations before the exceptional post-retirement benefits past service credit, pension curtailment gains and PPP settlement credit.

4 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.

Overall, the Group produced another good performance with revenue and operating profit up 9% and 5% respectively at CER and underlying earnings per share up 48% to 19.8 pence per share (2010: 13.4 pence per share).

Invensys Operations Management had a strong order intake driven by a recovery in industrial capital expenditure in developed markets and the winning of further contracts to supply our control and safety systems for four additional Chinese nuclear reactors. Revenue growth was also strong mainly due to the ramp-up of activity on many of the large greenfield projects that we have won over the past two years. Operating margins returned to double-digits for the year and our cash conversion was in line with our targets.

Invensys Rail reported a lower than expected order intake which reflects the uneven nature of order intake in the industry and in particular the unexpected delay in the award of some larger contracts. However, the strength of its order book helped it to increase revenue by 9% at CER. Operating margins for the year reflected some provisions for additional costs on three mass transit contracts in the first half partially offset by the benefit of risk register releases on contract completions in the second half. Cash conversion was adversely affected by the phasing of receipts from some customers.

Invensys Controls improved both revenue and operating profit despite some weaker than expected markets in the second half of the year, particularly for US appliances. It is clearly benefitting from the significant restructuring that has been implemented in recent years and it continues to reduce its cost base to ensure that this will drive profit growth as revenue recovers.

Our strategy

Our overall strategy remains unchanged but we will have an increased focus upon execution. I like to describe our strategy in simple terms as being based upon using our distinctive technologies and delivery capabilities to build global market share and increase shareholder value.

Across our businesses we have a number of core attributes that should enable us to grow faster than the competition:

· Distinctive technologies including software and advanced applications.

· Strong delivery skills, in particular for large systems integration projects, which can be applied globally.

· A large installed base and exceptional customer relationships.

· Proven ability to be effective at business development, teaming and partnering, the combination of which enables us to take advantage of our market position.

· A strong balance sheet.

Our core markets remain robust

Each of our divisions is operating in industry verticals which have strong growth prospects:

· At Invensys Operations Management, our core markets of oil, gas and power have long-term structural growth due to the need for greenfield capacity in the developing world, especially India and China, and the potential for optimisation and efficiency of plant operations, particularly at brownfield sites in the developed world.

· At Invensys Rail, the global rail infrastructure market has long-term structural growth due to industrialisation and urbanisation in the developing world together with capacity needs and pressure to reduce carbon footprints in the developed world.

· At Invensys Controls, our coremarkets of appliance, commercial and wholesale should grow due to the expected recovery in Europe and North America and consumer aspirations in the developing world.

In particular, Chinaand India will be important markets for each of our divisions and we will be using our combined knowledge and experience from operating in these countries to improve our capabilities and to capture growth opportunities.

Mid-term growth catalysts

As part of linking our strategy to our execution capabilities, each of our divisions has identified mid-term growth catalysts on which they intend to focus:

· At Invensys Operations Management, the focus will continue to be on responding to the significant number of large contracts in emerging markets including nuclear power. Advanced Applications market demand also remains strong.

· At Invensys Rail, the global order pipeline for large complex rail schemes remains robust.

· At Invensys Controls, the opportunity to expand the commercial and wholesale businesses will allow growth and margin expansion.

· Each of the divisions has identified suitable bolt-on acquisitions to supplement their organic growth.

· We continue to invest in research and development to ensure we are at the technological forefront of each of our industries.

Outlook

Invensys Operations Management continues to see improved demand across all regions with increased industrial capital expenditure in North America and Europe and further building of new capacity elsewhere, especially in the oil and gas and power sectors in the Middle East and Asia.

The global rail infrastructure market remains strong with several large projects, both greenfield and brownfield, currently being bid for by Invensys Rail across the world. Revenue growth will be supported by the large order book and margins are expected to remain in line with FY 2010/11's reported outcome reflecting ongoing bidding and development costs and further investment in developing a presence in emerging markets; in the medium term, we expect margins to be in the range of 15-17%.

Invensys Controls' major appliance customers are expecting modest growth in our major markets in North America and Europe and we expect to outperform the market due to new product introductions and market share increases. We will also be putting a greater focus upon higher-margin sectors such as wholesale and commercial.

On a constant currency basis, we expect a year of further progress.

Business Review

Corporate

The Board

On 24 March 2011, the Board announced that Ulf Henriksson had stepped down as Chief Executive and a director and that Wayne Edmunds, who had been Chief Financial Officer since 2009, had been appointed Chief Executive. David Thomas was appointed Acting Chief Financial Officer and a permanent appointment will be made in due course after consideration of internal and external candidates.

Deena Mattar has today been appointed to the Board as an additional non-executive director. She was formerly Group Finance Director of Kier Group plc. Deena joined Kier Group in 1998 as Finance Director of Kier National, having previously held senior positions at KPMG, and was appointed to the board as Group Finance Director in 2001. She is a chartered accountant and will join the Audit Committee.

Pensions

We have reached provisional agreement with the Trustees of our UK Main Pension Scheme regarding the latest triennial review which has the effective date of 31 March 2011. This provisional agreement has produced a funding deficit of around £230 million, compared with £285 million at 31 March 2008, despite slightly more conservative assumptions. More importantly, there will be no change to the previous deficit funding contribution schedule that was agreed with the Trustees three years ago, which requires us to pay £39 million per annum (increasing by inflation) to 2017.

Dividendand dividend policy

The Board has recommended a final dividend of 2.5 pence per share, which brings the total dividends payable in respect of the year ended 31 March 2011 to 4.0 pence per share, an increase of one third over the payments of 3.0 pence per share in respect of last year. Subject to approval by shareholders at the Annual General Meeting on 28 July 2011, the final dividend will be paid on 5 August 2011 to shareholders on the register at 24 June 2011. We have decided to introduce a dividend reinvestment plan (DRIP) beginning with this final dividend, which will enable shareholders to reinvest their dividends directly into Invensys shares. Details of the DRIP are contained in separate documentation to be mailed to shareholders.

The Board's dividend policy seeks to balance the income needs of shareholders with the needs of the Group to retain the resources and flexibility to enhance further our growth prospects. Accordingly we remain committed to our progressive dividend policy with future dividend growth reflecting more closely the long-term sustainable trend in underlying earnings per share and free cash flow.

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 are divided into three areas: control and safety systems (60% of revenue), advanced applications (20% of revenue) and equipment (20% of revenue). Our Enterprise Control System (ECS) offering is spread across all three product categories.

Year ended 31 March	2011	2010	% change at CER	% total change
Orders (£m)	1,340	1,096	19%	22%
Order book (£m)	1,124	972	21%	16%
Revenue (£m)	1,147	1,000	12%	15%
Operating profit (£m)	123	92	31%	34%
Operating margin (%)	10.7%	9.2%
Operating cash flow (£m)	110	147	(27%)	(25%)
Operating cash conversion (%)	89%	160%
Employees at year end (numbers)	8,897	8,176		9%

Revenue by sector

Year ended 31 March	2011	2010
Oil and gas	27%	27%
General industries	24%	27%
Utilities and power	16%	13%
Discrete manufacturing	10%	11%
Petrochemicals	10%	8%
Other	13%	14%

Revenue by destination

Year ended 31 March	2011	2010
UK	5%	6%
Rest of Europe	20%	23%
North America	30%	31%
South America	7%	6%
Asia Pacific	24%	21%
Africa/Middle East	14%	13%

Markets

After two difficult years during which industrial capital expenditure showed significant declines due to the recession, some markets have shown a good recovery during the year helping to drive a strong improvement in divisional performance.

In North America, the market rebounded with increased demand in particular from the oil and gas sector for services and maintenance, measurement and instrumentation equipment and brownfield upgrades of control and safety systems. Our markets in South America and the Middle East were strong driven by large greenfield projects in the oil and gas sector; we have not been significantly affected by the current unrest in parts of the Middle East.

The Asia Pacific region remained strong as countries, in particular India and China, continue to expand their power generation capacity to meet the demands arising from economic growth and urbanisation. The large programme of new nuclear power station construction in China, where we have captured a significant market share during the past two years in supplying control and safety systems, has not been affected by the events at the Fukushima nuclear plants in Japan; we continue to monitor closely the effect of these events upon the expansion and station upgrade work in the nuclear sector in China and elsewhere.

Our European markets have not yet shown the level of recovery seen elsewhere though we do expect some improvement in the current year.

Developments

We continue to be recognised by our customers for our advanced applications technologies and our ability to execute the largest and most complex projects in our industry.

Advanced applications including our Enterprise Control System (ECS)

· We successfully implemented an InFusion™ ECS for ExxonMobil Lubricants & Specialties Company. Installed at ExxonMobil's lubricants plant in Beaumont, Texas, the InFusion ECS will help manage the operating facility, controlling major processes and integrating the existing SAP enterprise resource planning, batch process and final packaging and shipping systems.

· We signed a five-year contract to deliver a comprehensive refinery-wide optimisation solution for Thai Oil Public Company Limited, one of Asia Pacific's leading refining and petrochemical companies. Under the terms of the agreement, we will implement our SimSci-Esscor ROMeo® optimisation software to improve the real-time performance of Thai Oil's refinery operations.

Projects featuring control and safety systems

· During the year, we signed two project-based agreements with China Nuclear Power Engineering Co. LTD (CNPE) to provide safety and distributed control systems (DCS) and solutions for four nuclear reactors: units 3 and 4 at Fujian Fuqing Nuclear Power Plant, two 1,000MW nuclear power units under construction in Fujian province in southeast China; and two reactors at the Changjiang nuclear power plant under construction on Hainan Island.

· Invensys Operations Management signed a US$12.4 million contract to upgrade and modernise a DCS for Malaysia Liquefied Natural Gas Sdn. Bhd. (MLNG). The major upgrade will provide a continuously current DCS and sustain the productivity and safety of MLNG's liquefied natural gas operations in Bintulu, Sarawak, Malaysia.

· We entered into a contract with Bluewater (Glas Dowr) NV, a company specialising in the design, development, lease and operation of tanker-based production and storage systems. Invensys Operations Management will update the legacy DCS and safety systems aboard the Glas Dowr floating production, storage and offloading (FPSO) unit, which will be operating approximately 170 kilometres south of the Timor-Leste coast in the Timor Sea. We will supply our Foxboro® I/A Series® distributed control and Triconex® critical control solutions, as well as fire and gas detection systems, instrumentation, smoke detection systems, cabinets and consoles.

In April 2010, we announced the acquisition of Skelta Software, a privately held software company headquartered in Bangalore, India. Skelta provides business process management and advanced workflow software solutions.

Performance

Invensys Operations Management produced a strong performance driven by a recovery in capital expenditure, including the North American oil and gas sector, and the ramp-up of work on recently won large greenfield projects in emerging markets.

Order intake was £1,340 million (2010: £1,096 million), up 19% at CER with the improvement in industrial capital expenditure driving Eurotherm and measurement and instrumentation equipment and also services and maintenance upgrades. In addition, we continued to win nuclear projects in China and received orders for the control and safety systems for four more nuclear reactors. The order book at 31 March 2011 was at record levels at £1,124 million (2010: £972 million) with around 60% represented by emerging markets (2010: 47%). The order pipeline to 31 March 2014 was £3.9 billion.

Revenue for the year grew strongly and was up 12% at CER at £1,147 million (2010: £1,000 million) reflecting the benefit of the shorter-cycle equipment orders and the initial revenues flowing from the recent large greenfield orders; revenue from these large orders of over £10 million amounted to 16% of the division's revenue in the year (2010: 3%). The focus upon advanced applications and the maintenance annuity revenues during the year also drove performance with both revenue streams showing strong double-digit growth and contributing to margin expansion.

As a result of the increased revenue and control of overheads, operating profit was up 31% at CER to £123 million (2010: £92 million) and operating margin was 10.7% (2010: 9.2%). Post restructuring charges, operating profits were up 84% at CER at £123 million (2010: £66 million), reflecting the completion of the integration of the businesses to form the division.

Operating cash flow was £110 million (2010: £147 million) resulting in cash conversion of 89% (2010: 160%), in line with our medium-term target for the division.

Invensys Rail

Invensys Rail is a multinational technology leader, providing state-of-the-art software-based signalling, communication and control systems that enable the safe and efficient 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.

Year ended 31 March	2011	2010	% change at CER	% total change
Orders (£m)	558	817	(32%)	(32%)
Order book (£m)	1,021	1,257	(18%)	(19%)
Revenue (£m)	772	700	9%	10%
Operating profit (£m)	129	141	(8%)	(9%)
Operating margin (%)	16.7%	20.1%
Operating cash flow (£m)	71	98	(26%)	(28%)
Operating cash conversion (%)	55%	70%
Employees at year end (numbers)	4,009	3,857		4%

Revenue by sector

Year ended 31 March	2011	2010
Mainline engineering and contracting	47%	51%
Mass transit engineering and contracting	31%	29%
Products	22%	20%

Revenue by destination

Year ended 31 March	2011	2010
UK	25%	31%
Rest of Europe	29%	36%
North America	19%	16%
South America	9%	2%
Asia Pacific	18%	15%
Africa/Middle East	0%	0%

Markets

Across the world, the market for rail signalling and control systems remained strong during the year, with a number of drivers across both the developed and developing worlds including industrialisation, urbanisation, increasing capacity needs, and the recognition of rail as an environmentally sustainable and efficient means of transport and a means to reduce carbon footprints.

In the UK, the government announced its plans for continued investment in mainline and London Underground upgrades, as well as committing to finance the Crossrail project in London and giving a longer-term commitment to high-speed rail. On mainline, we won a number of large contract awards from Network Rail during the year. On the London Underground, we have continued to successfully deliver the signalling upgrades on the Sub-Surface Lines, allowing new rolling stock to enter passenger service, and on the Victoria Line. When the upgrade to the Victoria Line is completed in 2012, it will have delivered significantly improved line capacity and reduced journey times. While we were disappointed not to be selected by London Underground as preferred bidder for the Sub-Surface Railway resignalling project, we continue to focus upon international opportunities.

In Spain, we saw an expected slowdown in orders as the government implemented austerity measures. However, the market remains satisfactory with investment in metro and light railway declining but with Spain remaining committed to finishing its world leading high-speed line network. In Australia, the market remains robust in spite of the natural disasters that the country has experienced in recent months.

The North American market remains strong with rail traffic continuing to grow and an increase in US railroad activity expected in 2011. In the short to medium term, we continue to see significant potential opportunities from the introduction of positive train control (PTC) systems. Whilst we also continue to see significant opportunities from proposed North American high-speed lines, we do not expect this to impact revenue in the medium term.

Outside our traditional core markets, we are seeing increasing demand in many countries, particularly South America, the Middle East and Asia, including India and China. During the year we entered into agreements with a division of CSR, the leading Chinese manufacturer of rolling stock and we expect to see this relationship produce significant revenue over the next few years. In India, we are starting to see the benefits from prior years' investment and have begun winning an encouraging level of new business.

We expect the rail control market to continue to grow with demand driven by a satisfactory investment in our core markets and significant investment in new markets in both mainline, including high-speed lines, and mass transit.

Developments

James Drummond will be stepping down as Chief Executive of Invensys Rail and leaving the Group at the end of June 2011. Kevin Riddett, who has been Chief Operating Officer of the division since November 2010 and was formerly President of its US operations, will take over as its Chief Executive.

Our strategy of increasing the proportion of our revenue outside our traditional core markets continues and revenue from new markets rose to 22% in 2011 from 10% in 2010.

Our leading technologies and excellent commissioning record are reflected in our continued success in gaining new and replacement signalling contracts in both our core and new markets. The table below shows our order intake during the year for orders in excess of £10 million.

Contract Wins	Country
Porto Alegre Metro extension	Brazil
Abbot Point Expansion Project (Queensland's Newlands Coal System)	Australia
Madrid to Valencia high-speed line maintenance	Spain
Maintenance of Madrid Metro on board equipment	Spain
Orense to Santiago high-speed line	Spain
Utrera to Jerez high-speed line	Spain
Modular Signalling, Shrewsbury to Crewe (Network Rail)	UK
Salisbury to Exeter (Network Rail)	UK
Thameslink upgrade (Network Rail)	UK

Performance

Order intake during the period was £558 million (2010: £817 million), down 32% at CER due primarily to the increasing effects of the uneven intake of large orders in the industry. However, the order book at 31 March 2011 remains robust at £1,021 million, with around 44% represented by contracts outside our traditional core markets. In addition, the pipeline of order prospects for the next three years remains large at £8.6 billion.

Revenue was up 9% at CER at £772 million (2010: £700 million) with growth of around 150% in new markets offset, as expected, by a small decline in revenue in our traditional core markets.

Operating profit fell to £129 million (2010: £141 million), a decrease of 8% at CER, and operating margins, although lower than the prior year which benefitted from favourable contract commissioning in Spain, remained healthy at 16.7% (2010: 20.1%). Operating margin for the year reflected some provisions for additional costs on three mass transit contracts in the first half partially offset by the benefit of contract completions in the second half.

Operating cash flow was £71 million (2010: £98 million), and cash conversion was 55% (2010: 70%) as a result of some delays in progress payments in Spain and South America.

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.

Year ended 31 March	2011	2010	% change at CER	% total change
Orders (£m)	554	560	(3%)	(1%)
Order book (£m)	59	78	(21%)	(24%)
Revenue (£m)	567	543	2%	4%
Operating profit (£m)	56	53	3%	6%
Operating margin (%)	9.9%	9.8%
Operating cash flow (£m)	74	63	14%	17%
Operating cash conversion (%)	132%	119%
Employees at year end (numbers)	7,404	7,782		(5%)

Revenue by sector

Year ended 31 March	2011	2010
Appliance	60%	64%
Wholesale	22%	22%
Commercial	18%	14%

Revenue by destination

Year ended 31 March	2011	2010
UK	9%	9%
Rest of Europe	26%	27%
North America	45%	44%
South America	12%	12%
Asia Pacific	7%	7%
Africa/Middle East	1%	1%

Markets

For the past four years, Invensys Controls has been successful in managing its business despite significant reductions in production volumes in the global appliance and other markets. During the year, we have not seen the major declines of recent years; indeed we have seen some stabilisation in demand overall, although demand patterns remain unpredictable across several segments and geographies.

The North American appliance and wholesale markets showed significant improvement in the first half of the year but this was followed by a decline in the second half as a fall in consumer confidence was exacerbated by some customers reducing inventory in their supply chains. However, the North American commercial market remained robust throughout the year. In Europe, the appliance market was broadly flat but we saw some good improvements in the commercial and wholesale segments. South America was down slightly mainly due to the ending of tax incentives in Brazil. Asia Pacific was also broadly flat.

Developments

The division's focus upon applying its value-engineered solutions to help its customers produce the most advanced, efficient and consumer-friendly appliances and products has been reinforced by the creation of a global engineering team. This team is working to create common global platforms for certain product lines, capturing the best technology from each of its regions. For example, the Hydra Water Valve for the global residential washing machine market has been launched and has been well received by several customers. Other product lines, such as refrigerator controls and electric range controls, are now being developed as global platforms. In another segment, we have launched a series of environmentally-optimised electronic controllers and monitoring system for the refrigerated cabinets that are used extensively by supermarkets. New products accounted for 10% of revenue in the period.

As well as capturing the benefits of the restructuring activities that have taken place over the past three years, the division has been working with suppliers to alleviate some component shortages, some arising as a consequence of the recent earthquake in Japan, and actively managing raw material supply costs, particularly for metals and plastics.

The division recently opened a new research and development centre and Asia Pacific regional head office in Shanghai. This new centre will help drive our value-engineering strategy and will support regional customer design centres.

During the year, we disposed of a small European business that produced pumps for coffee-making machines for a consideration of £5 million. The business produced annual revenue and operating profit of around £15 million and £1 million respectively.

Performance

Invensys Controls produced a resilient performance against a backdrop of weaker than expected consumer markets in the second half of the year. Order intake was down 3% at CER at £554 million (2010: £560 million) resulting from a higher order book at the start of the year in what is mainly a short-cycle business. Revenue was up 2% at CER at £567 million (2010: £543 million) reflecting a strong start to the year, a good performance in commercial and wholesale, and the benefit of a high level of new product introductions. This was primarily offset by a weaker than expected second half of the year, particularly evident in North America as customers adjusted their demand as a result of a slowdown in consumer demand in the appliance segment in the second half.

Operating profit was £56 million (2010: £53 million), up 3% at CER with the effect of increased revenue and savings from restructuring being partially offset by raw material price inflation. Operating margin was 9.9% (2010: 9.8%).

Again this year, Invensys Controls produced strong operating cash flow of £74 million (2010: £63 million) as a result of tight management of working capital. This results in a further improvement in cash conversion for the year to 132% (2010: 119%).

Additional Financial Information

Orders and order book

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

Year ended 31 March	2010	Exchange	2010	Change at	2011
	orders	movement	CER	CER	orders	%
	£m	£m	£m	£m	£m	change
Invensys Operations Management	1,096	33	1,129	211	1,340	19%
Invensys Rail	817	6	823	(265)	558	(32%)
Invensys Controls	560	12	572	(18)	554	(3%)
Continuing operations	2,473	51	2,524	(72)	2,452	(3%)

The order book for continuing operations was £2,204 million at 31 March 2011 (2010: £2,307 million). This decrease is due to the uneven intake of large orders at Invensys Rail, partially offset by the significant orders won by Invensys Operations Management.

Revenue

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

Year ended 31 March	2010	Exchange	2010	Change at	2011
	revenue	movement	CER	CER	revenue	%
	£m	£m	£m	£m	£m	change
Invensys Operations Management	1,000	26	1,026	121	1,147	12%
Invensys Rail	700	5	705	67	772	9%
Invensys Controls	543	12	555	12	567	2%
Continuing operations	2,243	43	2,286	200	2,486	9%

The revenue increases were mainly driven by large greenfield contracts in Invensys Operations Management and the conversion to revenue of a strong opening order book at Invensys Rail.

Operating profit

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

Year ended 31 March	2010	Exchange	2010	Change at	2011
	OPBIT	movement	CER	CER	OPBIT	%
	£m	£m	£m	£m	£m	change
Invensys Operations Management	92	2	94	29	123	31%
Invensys Rail	141	(1)	140	(11)	129	(8%)
Invensys Controls	53	1	54	2	56	3%
Corporate	(38)	-	(38)	(8)	(46)	21%
Continuing operations	248	2	250	12	262	5%

The operating profit increase at Invensys Operations Management and Invensys Controls is mainly due to increased volume, close control of overheads and the benefits of restructuring projects.

The results in Invensys Rail were adversely impacted by provisions on three mass transit projects in the first half, but margins recovered in the latter part of the year reflecting favourable mix and the closure of contracts.

Operating cash flow and cash conversion

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

Year ended 31 March	Operating cash flow		Cash conversion
	2011	2010	2011	2010
	£m	£m	%	%
Invensys Operations Management	110	147	89%	160%
Invensys Rail	71	98	55%	70%
Invensys Controls	74	63	132%	119%
Corporate	(42)	(43)	-	-
Continuing operations	213	265	81%	107%

Invensys Controls continued to sustain an excellent cash conversion whereas in the other divisions cash receipts were impacted by the profile of milestones on major projects. In Invensys Rail there were some delays in progress payments in Spain and South America.

Exceptional items

The exceptional charge for the year totalled £21 million (2010: £25 million). This included restructuring costs of £21 million, £10 million of asset impairments (intangible assets £6 million and property, plant and equipment £4 million), offset by a £10 million credit of other operating exceptionals. These credits comprise a £20 million past service credit arising as a result of amendments made to the benefits payable under the terms of the US Healthcare Plan and a net £10 million of costs to settle a legal case.

Restructuring costs comprise the integration of the North American and European Invensys Controls businesses, the global Human Resources Service Delivery project, and other rationalisation projects across the Group.

The comparative period included restructuring costs of £43 million, £10 million of asset impairments (predominantly property, plant and equipment) and a £5 million loss on the sale of property, plant and equipment, offset by £33 million of other operating exceptionals which comprised £3 million of surplus property costs and a gain arising from the curtailment of the US defined benefit pension plans of £36 million.

Net finance costs

Net finance costs decreased to £5 million in the year (2010: £7 million) reflecting improved liquidity management.

Taxation

The tax charge for continuing operations was £37 million (2010: £26 million), which comprises a current year income tax charge of £44 million (2010: £39 million), offset by prior year credits of £6 million (2010: £14 million) and a deferred tax credit of £1 million (2010: £1 million charge). The Group 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 £7 million (2010: £2 million) relates to a net £7 million (2010: £3 million) of further provisions in respect of prior year disposals, offset by £nil tax (2010: £1 million credit).

Net profit

Net profit increased to £178 million (2010: £151 million), due to an increase in operating profit of £14 million and a decrease in the IAS 19 finance charge of £23 million, partially offset by an increase in the tax charge for the year of £11 million.

Earnings per share

Basic EPS from continuing operations were 22.4 pence per share (2010: 18.5 pence per share). Underlying EPS, which excludes the £20 million exceptional past service credit on the US Healthcare Plan were 19.8 pence per share (2010: 13.4 pence per share).

Free cash flow

Free cash flow for the year was £83 million (2010: £100 million). The reduced free cash flow was mainly driven by lower operating cash flow partially offset by lower restructuring and taxation payments.

Financial position at year end

Capital structure

The Group's capital structure is as follows:

As at 31 March	Note reference in Group Financial Statements	2011	2010
	Note reference in Group Financial Statements	£m	£m
Capital employed		201	57
Cash and cash equivalents	20	349	364
Borrowings	21	(1)	(1)
Net cash		348	363
Total capital (equals total equity)		549	420
Comprising:
- Equity holders of parent		514	340
- Non-controlling interests		35	80
		549	420

Capital is managed under the Group's treasury policy. The policy sets out a strategy for the long-term funding of the Group, with the objective of ensuring the Group has access to appropriate sources of funding to support its businesses, as and when required. The current capital structure supports this approach. The Group is currently debt free, but has credit facilities in place that provide liquidity for the Group until July 2013. The facilities are available for utilisation as loans or bank guarantees. As at 31 March 2011 £254 million was drawn for the provision of bank guarantees (2010: £240 million). In addition, the Group has £219 million (2010: £245 million) of guarantees issued under local uncommitted facilities.

The Group's cash balances supported by the availability of credit facilities allow access to adequate capital resources.

Further explanation of the way in which the Group manages its capital resources is set out in the Financial Policies on page 22 and in Note 22 to the Group Financial Statements.

Total equity

Total equity increased by £129 million, with net profit of £178 million and an IAS 19 actuarial gain of £30 million, partially offset by the £41 million interim distribution made to the non-controlling shareholders of Baan Company NV (in liquidation) (Baan), dividends paid of £28 million and foreign exchange translation losses of £20 million.

Non-controlling interests

The balance of non-controlling interests was £35 million (2010: £80 million), the majority of the opening balance related to the interests of the minority in Baan to whom there was an interim distribution in the year of £41 million.

Net cash

Net cash was £348 million (2010: £363 million) with a slightly lower free cash flow, an increase in dividends paid and the amounts paid for the interim distribution to the non-controlling shareholders of Baan.

Capital employed

Capital employed increased by £144 million to £201 million in the year, mainly attributable to the decrease in the IAS 19 pension liability in the year of £114 million. Capital employed includes operating capital of £390 million (2010: £366 million), generating a return of 49.9% (2010: 48.6%).

Pension liabilities and funding

The IAS 19 pensions liability at 31 March 2011 is £467 million (2010: £581 million), a reduction of £114 million driven by employer contributions of £80 million and an actuarial gain of £30 million. The latter includes an actuarial gain of £88 million arising from the change in pension indexation from RPI to CPI following the change in rules announced by the UK Government.

The provisional agreement reached with the trustees of the UK Main Pension Scheme has produced a funding deficit of around £230 million, compared with £285 million at 31 March 2008, despite slightly more conservative assumptions. More importantly, there will be no change to the previous deficit funding contribution schedule that was agreed with the trustees three years ago, which requires us to pay £39 million per annum (increasing by inflation) to 2017.

There will be an increase in the funding of the US plans to meet the Employee Retirement Income Security Act (ERISA) requirements.

Dividend

The Board is recommending a final dividend of 2.5 pence per share (2010: 2.0 pence per share), resulting in total dividends for the year of 4.0 pence per share (2010: 3.0 pence per share).

Invensys plc

Consolidated income statement

For the year ended 31 March 2011

		2011	2010
	Notes	£m	£m
Continuing operations
Revenue	2	2,486	2,243
Operating expenses before exceptional items		(2,224)	(1,995)

Operating profit before exceptional items	2	262	248
Exceptional items	4	(21)	(25)

Operating profit	3	241	223
Foreign exchange on financial items	5	-	-
Finance costs		(9)	(10)
Finance income		4	3
Other finance charges - IAS 19		(14)	(37)

Profit before taxation	2	222	179
Taxation - UK		-	3
Taxation - overseas		(37)	(29)

Profit after taxation - continuing operations		185	153
Loss after taxation - discontinued operations	6	(7)	(2)
Profit for the year		178	151

Attributable to:
Profit after taxation - continuing operations
Equity holders of the parent		181	149
Non-controlling interests		4	4
		185	153
Loss after taxation - discontinued operations
Equity holders of the parent		(7)	(2)

Profit for the year
Equity holders of the parent		174	147
Non-controlling interests		4	4
		178	151
Earnings/(loss) per share
Continuing operations
Earnings per share (basic)	7	22.4 p	18.5 p
Earnings per share (diluted)	7	22.2 p	18.4 p

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

Total Group
Earnings per share (basic)	7	21.5 p	18.3 p
Earnings per share (diluted)	7	21.3 p	18.1 p

Invensys plc

Consolidated statement of comprehensive income

For the year ended 31 March 2011

		2011	2010
	Notes	£m	£m


Profit for the year		178	151

Other comprehensive income
Cash flow hedges:
(Losses)/gains taken to equity		(2)	1
Transferred to income statement for the year - cost of sales		-	(3)
Exchange differences on translation of foreign operations		(20)	(7)
Actuarial gain/(loss) recognised on defined benefit pension schemes	9	30	(389)
Movement in irrecoverable element of potential future pension surplus	9	-	56
Taxation on components of other comprehensive income		13	-

Other comprehensive income/(loss) for the year, net of tax		21	(342)
Total comprehensive income/(loss) for the year		199	(191)

Attributable to:
Equity holders of the parent		198	(195)
Non-controlling interests		1	4
		199	(191)

Invensys plc

Consolidated balance sheet

As at 31 March 2011

		31 March	31 March
		2011	2010
	Notes	£m	£m
ASSETS
Non-current assets
Property, plant and equipment		237	274
Intangible assets - goodwill		291	301
Intangible assets - other		160	133
Deferred income tax assets		46	27
Trade and other receivables		22	26
Other financial assets		-	1
		756	762
Current assets
Inventories		155	157
Amounts due from contract customers		233	180
Trade and other receivables		526	510
Cash and cash equivalents	12	349	364
Income tax receivable		8	8
Derivative financial instruments		2	3
		1,273	1,222
Assets held for sale	10	11	6
TOTAL ASSETS		2,040	1,990

LIABILITIES
Non-current liabilities
Borrowings	12	-	(1)
Provisions		(88)	(100)
Income tax payable		(31)	(33)
Deferred income tax liabilities		(18)	(12)
Amounts due to contract customers		(11)	(40)
Trade and other payables		(10)	(10)
Pension liabilities	9	(467)	(581)
		(625)	(777)
Current liabilities
Trade and other payables		(546)	(529)
Amounts due to contract customers		(203)	(158)
Borrowings	12	(1)	-
Derivative financial instruments		(4)	(9)
Income tax payable		(27)	(18)
Provisions		(85)	(79)
		(866)	(793)
TOTAL LIABILITIES		(1,491)	(1,570)
NET ASSETS		549	420

EQUITY
Capital and reserves
Equity share capital		81	81
Treasury shares		(2)	(2)
Other reserves		2,527	2,546
Retained earnings		(2,092)	(2,285)
Equity holders of the parent		514	340
Non-controlling interests		35	80
TOTAL EQUITY		549	420

Invensys plc

Consolidated statement of changes in equity

For the year ended 31 March 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 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


Balance at 1 April 2009	80	(1)	348	1,582	495	(4)	134	2,555	(2,081)	553	87	640
Profit for the year	-	-	-	-	-	-	-	-	147	147	4	151
Other comprehensive loss for the year	-	-	-	-	-	(2)	(7)	(9)	(333)	(342)	-	(342)
Total comprehensive (loss)/income for the year	-	-	-	-	-	(2)	(7)	(9)	(186)	(195)	4	(191)
Share-based payment	-	-	-	-	-	-	-	-	9	9	-	9
Purchase of own shares by Employee Share Trust	-	(8)	-	-	-	-	-	-	-	(8)	-	(8)
Distribution of own shares under share-based payment arrangements	-	7	-	-	-	-	-	-	(7)	-	-	-
Dividends paid to equity shareholders	-	-	-	-	-	-	-	-	(20)	(20)	-	(20)
Dividends paid to non-controlling interests	-	-	-	-	-	-	-	-	-	-	(2)	(2)
Purchase of non-controlling interests²	-	-	-	-	-	-	-	-	-	-	(9)	(9)
Issue of share capital	1	-	-	-	-	-	-	-	-	1	-	1
Balance at 31 March 2010	81	(2)	348	1,582	495	(6)	127	2,546	(2,285)	340	80	420

¹Includes £41 million interim distribution made to the non-controlling shareholders of Baan.

²Relates to the purchase of 3.67 million shares from the non-controlling shareholders of Baan

Invensys plc

Consolidated cash flow statement

For the year ended 31 March 2011

		2011	2010
	Notes	£m	£m
Operating activities

Operating profit:
Continuing operations	3	241	223
Depreciation of property, plant and equipment		41	43
Amortisation of intangible assets - other		26	22
Provision for impairment charged to operating profit	4	10	10
Loss on sale of assets and operations		-	5
Sale of property, plant and equipment		2	1
Non-cash charge for share-based payment		8	9
(Increase)/decrease in inventories		(5)	5
(Increase)/decrease in receivables		(49)	6
Decrease in net amounts due to contract customers		(40)	(9)
Increase in payables and provisions		55	1
Difference between pension contributions paid and amounts recognised in operating profit		(82)	(100)
Cash generated from operations		207	216

Income taxes paid		(30)	(41)
Interest paid		(6)	(9)
Net cash flows from operating activities		171	166

Investing activities

Interest received		5	4
Purchase of property, plant and equipment		(32)	(34)
Expenditure on intangible assets - other		(61)	(36)
Sale of trade investments		1	-
Purchase/disposal of non-controlling interests		(43)	(9)
Purchase of subsidiaries		(6)	-
Net cash flow arising on disposal		(4)	(12)
Cash invested in financial assets		-	13
Cash payments on swap contracts		(9)	-

Cash flows from investing activities		(149)	(74)

Financing activities

Purchase of Invensys plc shares		(4)	(8)
Transfers of treasury bonds to cash equivalents		-	8
Repayment of short-term borrowings		-	(8)
Dividends paid to equity holders of the parent		(28)	(19)
Dividends paid to non-controlling interests		(3)	(2)

Cash flows from financing activities		(35)	(29)

Net (decrease)/increase in cash and cash equivalents		(13)	63
Cash and cash equivalents at beginning of year		364	296
Net foreign exchange difference		(2)	5
Cash and cash equivalents at end of year		349	364

Invensys plc

Notes

1 Basis of preparation

The Financial information presented in this preliminary announcement has been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority, International Financial Reporting Standards (IFRS) and International Financial Reporting Interpretation Committee (IFRIC) interpretations, as adopted by the European Union (EU) and in accordance with the provisions of the Companies Act 2006. The accounting policies applied do not differ significantly from those used for the financial statements for the year ended 31 March 2010 except for the adoption of IFRS 3, Business Combinations (revised) and the change made to IFRS 8, Operating Segments, by the Annual Improvements issued in April 2009.

IFRS 3 (revised) applies to business combinations completed on or after 1 April 2010, and so has been applied to the acquisition of Skelta Software Private Limited (Skelta) (see Note 8). The revised standard continues to require the purchase method of accounting (now referred to as the acquisition method) to be applied to business combinations but introduces some changes to the accounting treatment, including the recognition of acquisition-related costs as expenses in the periods in which the costs are incurred and the services are received rather than as part of the cost of the acquisition. The revised standard also contains new guidance on how to determine what constitutes consideration transferred for the acquiree. Among other things, this helps to clarify whether contingent payments to selling shareholders are contingent consideration in the business combination or are separate transactions, the distinction depending on the nature of the particular arrangements in place. In the case of Skelta, the amounts treated in accordance with this guidance as separate transactions rather than contingent consideration are disclosed in Note 8. The accounting for business combinations that occurred before 1 April 2010 was not required to be restated, so there is no effect on the Group's reported income or net assets on adoption.

Among changes to several IFRSs, the Improvements to IFRS adopted for the first time this year has clarified that IFRS 8, requires the separate disclosure of total segment assets only if such an amount is regularly provided to the divisional chief executives. As a result, with effect from 31 March 2011, Invensys will present a single measure of segment net assets/(liabilities) for its operating segments (see Note 2), rather than separate measures of segment assets and segment liabilities, as this disclosure better reflects the measure of segment assets and liabilities used in practice. The comparative disclosure for the year ended 31 March 2010 has been disclosed accordingly.

Going concern

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 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. There have been no changes to the composition of these operating segments during the year. Descriptions of the products and services provided by these divisions are set out in Note 1 of the 2011 Annual Report and Accounts. Operations presented as discontinued are explained in Note 6 of this preliminary announcement.

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.

Segment net assets/(liabilities) are determined based on the net operating assets/(liabilities) monitored by the divisional chief executives on a segment basis. At 31 March 2010 the totals of segment assets and liabilities were disclosed separately, but "Improvements to IFRS" (April 2009), which has been adopted for the year ended 31 March 2011, has clarified that IFRS 8, Operating Segments, requires the separate disclosure of total segment assets only if such an amount is regularly provided to the divisional chief executives. As a result it is considered that the disclosure of segment net assets/(liabilities) is more appropriate as it better reflects the measure of segment assets and liabilities used in practice. The comparative disclosure for the year ended 31 March 2010 has been re-presented accordingly.

2 Operating segment information (continued)

	2011	2011	2011	2010	2010	2010
	£m	£m	£m	£m	£m	£m
		Inter-			Inter-
	Total	company	External	Total	company	External
	revenue	revenue¹	revenue	revenue	revenue¹	revenue
Segment revenues
Division
Invensys Operations Management	1,156	9	1,147	1,009	9	1,000
Invensys Rail	772	-	772	700	-	700
Invensys Controls	567	-	567	544	1	543
Eliminations	(9)	(9)	-	(10)	(10)	-
Total Group	2,486	-	2,486	2,243	-	2,243



		Operating profit/(loss)	Operating profit/(loss)		Operating profit/(loss)	Operating profit/(loss)
		before exceptional items	after exceptional items		before exceptional items	after exceptional items
Segment profit
Division
Invensys Operations Management		123	123		92	63
Invensys Rail		129	118		141	136
Invensys Controls		56	35		53	40
Total segment		308	276		286	239
Corporate		(46)	(35)		(38)	(16)
Total Group		262	241		248	223

Reconciliation to profit before taxation:
Finance costs			(9)			(10)
Finance income			4			3
Other finance charges - IAS 19			(14)			(37)
Profit before taxation - continuing operations			222			179



Geographical analysis by destination			External revenue			External revenue
United Kingdom			299			320
Other countries:
Rest of Europe			604			630
United States			623			563
North America - other			123			102
South America			213			134
Asia Pacific			453			356
Africa and Middle East			171			138
			2,187			1,923
Total revenue			2,486			2,243


Segment net assets/(liabilities)			Net assets/ (liabilities)			Net assets/ (liabilities)
Division
Invensys Operations Management			216			203
Invensys Rail			121			68
Invensys Controls			169			215
Total segment net assets			506			486
Corporate			(107)			(120)
			399			366

Reconciliation to total net assets/(liabilities):
Intangible assets - goodwill			291			301
Cash and cash equivalents			349			364
Pension liabilities			(467)			(581)
Other (borrowings, current and deferred income tax assets/(liabilities))			(23)			(30)
Total net assets			549			420

¹Inter-company revenue is invoiced at market prices.

3 Operating profit
		2011	2010
	Note	£m	£m

Revenue		2,486	2,243
Cost of sales		(1,649)	(1,459)
Gross profit		837	784
Distribution costs		(14)	(13)
Administrative costs		(466)	(427)
Research and development costs		(95)	(96)
Operating profit before exceptional items		262	248
Exceptional items	4	(21)	(25)
Operating profit		241	223

4 Exceptional items

		2011	2010
		£m	£m

Restructuring costs		(21)	(43)
Other operating exceptional items:
	Past service credit on post-retirement benefits¹	20	-
	Curtailment gains on pension benefits²	1	36
	Other operating exceptional items³	(11)	(3)
Total other operating exceptional items		10	33
Impairment: property, plant and equipment		(4)	(8)
Impairment: intangible assets - other		(6)	(2)
Loss on sale of assets and operations		-	(5)
Exceptional items		(21)	(25)

Restructuring costs by division:
Invensys Operations Management		-	(26)
Invensys Rail		(5)	(5)
Invensys Controls		(8)	(5)
Corporate		(8)	(7)
		(21)	(43)

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

² 2010: the gain arose from the closure of the defined benefit portion of the Invensys US pension plans. Refer to Note 9.

³2011: includes net £10 million of costs to settle a legal case.

5 Foreign exchange on financial items

Foreign exchange on financial items is £nil (2010: £nil). This includes £1 million gains (2010: £1 million losses) of foreign exchange relating to derivatives used in the management of the Group's cash, offset by £1 million losses (2010: £1 million gains) of foreign exchange on corresponding cash balances and intra-Group loans which do not form part of the lenders' net investments in foreign operations.

6 Discontinued operations

No operations have been discontinued in the year to 31 March 2011 or 31 March 2010. In the year ended 31 March 2011, net £7 million (2010: £3 million) of additional costs were incurred in respect of prior year disposals against which there was £nil tax (2010: £1 million credit).

7 Earnings/(loss) per share

			2011	2010
	Earnings/(loss) per share (pence)

	Continuing operations
	Basic		22.4 p	18.5 p
	Diluted		22.2 p	18.4 p

	Before exceptional post-retirement benefits past service credit, pensions curtailment gains and PPP settlement credit
	Basic		19.8 p	13.4 p
	Diluted		19.6 p	13.3 p

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

	Total Group
	Basic		21.5 p	18.3 p
	Diluted		21.3 p	18.1 p

	Weighted average number of shares (million)
	Basic		808	805
	Effect of dilution - share awards		8	6
	Diluted		816	811

	Earnings (£m)
	Continuing Operations
	Basic		181	149

	Before exceptional post-retirement benefits past service credit, pensions curtailment gains and PPP settlement credit
		Operating profit	241	223
		Exceptional past service credit	(20)	-
		Exceptional curtailment gains	(1)	(36)
		Finance costs	(9)	(10)
		Finance income	4	3
		Other finance charges - IAS 19	(14)	(37)
Operating profit less net finance costs			201	143
		Taxation on operating profit less net finance costs*	(37)	(31)
		Non-controlling interests	(4)	(4)
			160	108

	Discontinued operations
	Basic		(7)	(2)
	Total Group
	Basic		174	147

* Includes £nil (2010: £5 million) for the reversal of the exceptional tax charge that arose from the recognition of the PPP settlement credit.

The basic earnings/(loss) per share for the year has been calculated using 808 million shares (2010: 805 million), being the weighted average number of shares in issue during the year, excluding those held as Treasury shares which are treated as cancelled, 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 options which are considered to be anti-dilutive.

8 Analysis of business combinations and business disposals

In the year ended 31 March 2011, the Group acquired Skelta and disposed of a small European business in Invensys Controls. Details of this business combination and disposal are shown below. There were no acquisitions or disposals in the year ended 31 March 2010.

Business Combinations

On 21 April 2010, Invensys acquired 100% of the share capital of Skelta Software Private Limited (Skelta), a privately held software company headquartered in Bangalore, India, for cash consideration of £6.4 million. Skelta provides business process management (BPM) and advanced workflow software solutions. The acquisition has been accounted for using the acquisition method of accounting and the Group Financial Statements include the results of Skelta from its date of acquisition to 31 March 2011.

The fair value of the identifiable assets and liabilities of Skelta at the date of acquisition was:

		Fair value recognised on acquisition
		£m
Property, plant and equipment		0.2
Intangible assets - other*		2.9
Trade and other receivables		1.3
Cash and cash equivalents		0.6
Total assets		5.0

Trade and other payables		(0.1)
Amounts due to contract customers		(0.4)
Current tax payable and deferred income tax liability		(1.1)
Total liabilities		(1.6)

Total identifiable net assets at fair value		3.4
Goodwill arising on acquisition		3.0
Total purchase consideration transferred		6.4

Total purchase consideration transferred comprises:
Cash payment		6.4
		6.4
Analysis of cash flows on acquisition:
Cash paid (included in cash flows from investing activities)		(6.4)
Net cash acquired with the subsidiary (included in cash flows from investing activities)		0.6
Transaction costs of the acquisition (included in cash flows from operating activities)		(0.3)
Net cash outflow		(6.1)

* The intangible assets acquired relate to capitalised development costs

Trade and other receivables includes trade receivables of £0.7 million. The gross contractual amount of trade receivables is £1.2 million. £0.5 million of the trade receivables have been impaired, £0.2 million has been collected and it is expected that £0.5 million of the remaining contractual amount can be collected.

The goodwill shown above is attributed to the expected synergies and other benefits arising from combining the assets and activities of Skelta with those of the Group. Costs relating to the acquisition of Skelta of £0.3 million have been expensed in the year ended 31 March 2011 and are included in exceptional items in the income statement.

Under the terms of the acquisition agreement, costs of up to £2.0 million will become payable to the former owners of Skelta dependent on the achievement of certain agreed performance targets subsequent to the acquisition of Skelta by the Group. From its acquisition date of 21 April 2010, Skelta has contributed a profit of £0.1 million to the net profit before tax of the Group and revenue of £2.2 million.

Business Disposals

On 31 December 2010, the Group disposed of a small European business in Invensys Controls for cash consideration of £5 million. The net assets sold comprised property plant and equipment of £4 million, working capital of £1 million and pension liabilities of £1 million. The gain on disposal of £1 million is included within exceptional items in the income statement. The assets and liability had not been treated as held for sale and prior to their disposal were included in the Invensys Controls operating segment.

9 Pensions and post-retirement benefits

Changes in the present value of the defined benefit obligation for the year ended 31 March 2011 were as follows:


	Funded schemes			Unfunded schemes		Total	Total
	Invensys	Invensys
	Pension Scheme (UK)	Pension Plan (US)	Other	US Healthcare	Other	2011	2010
	£m	£m	£m	£m	£m	£m	£m

Opening present value of defined benefit obligation	(4,056)	(982)	(283)	(29)	(120)	(5,470)	(4,848)
Current service cost	(10)	-	(7)	-	(2)	(19)	(18)
Past service credit	-	-	-	20	-	20	-
Contributions by employees	(1)	-	-	-	-	(1)	(1)
Benefit payments	227	60	12	2	8	309	303
Interest on plan liabilities	(217)	(55)	(15)	(1)	(5)	(293)	(300)
Net liabilities transferred on disposal	-	-	-	-	1	1	-
Actuarial (losses)/gains	(61)	(42)	18	(2)	2	(85)	(678)
Transfers (from)/to other schemes¹	-	(9)	9	-	-	-	-
Settlements	-	-	-	-	-	-	4
Curtailments	-	-	1	-	-	1	36
Exchange adjustments	-	69	3	1	3	76	32
Closing present value of defined benefit obligation	(4,118)	(959)	(262)	(9)	(113)	(5,461)	(5,470)

Changes in the fair value of plan assets for the year ended 31 March 2011 were as follows:

	Funded schemes			Total	Total
	Invensys	Invensys
	Pension Scheme (UK)	Pension Plan (US)	Other	2011	2010
	£m	£m	£m	£m	£m

Opening fair value of plan assets	3,902	820	197	4,919	4,627
Expected return on plan assets	216	51	12	279	263
Contributions by employer	47	13	10	70	68
Contributions by employees	1	-	-	1	1
Benefit payments	(227)	(60)	(12)	(299)	(292)
Actuarial gains	49	60	6	115	288
Transfers to/(from) other schemes¹	-	9	(9)	-	-
Exchange adjustments	-	(59)	(2)	(61)	(36)
Closing fair value of plan assets	3,988	834	202	(5,024)	4,919

¹ During the year, the assets and liabilities of the Retirement Plan for the Bargaining Employees of Safetran were transferred to a new section of the Invensys Pension Plan (US).

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 31 March 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 £30 million (2010: £30 million).


	2011	2010
	£m	£m

Deficit in the scheme	(130)	(154)
Future minimum funding requirements	215	239
Potential future pension surplus	85	85
Irrecoverable element of potential future pension surplus	(30)	(30)
Recoverable element of potential future pension surplus	55	55

Movement in irrecoverable element of potential future pension surplus	-	56

Reconciliation of assets and liabilities recognised in the balance sheet as at 31 March 2011:

	Funded schemes			Unfunded schemes		Total	Total
	Invensys	Invensys
	Pension Scheme (UK)	Pension Plan (US)	Other	US Healthcare	Other	2011	2010
	£m	£m	£m	£m	£m	£m	£m

Present value of defined benefit obligation	(4,118)	(959)	(262)	(9)	(113)	(5,461)	(5,470)
Fair value of plan assets	3,988	834	202	-	-	5,024	4,919
Deficit in the plan	(130)	(125)	(60)	(9)	(113)	(437)	(551)
Irrecoverable element of potential future pension surplus	(30)	-	-	-	-	(30)	(30)
Net liability	(160)	(125)	(60)	(9)	(113)	(467)	(581)

Changes in key assumptions

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

The discount rate applied is 5.30% (2010: 5.50%). The inflation assumption has been assessed at 3.70%* (2010: 3.70%). With regards to mortality tables, PA92 has been projected by year of birth with medium cohort projections 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 year ended 31 March 2010.

In 2010, the UK Government changed the inflation measure used to determine the minimum pension increases to be applied to the statutory index-linked features of retirement benefits from the Retail Prices Index (RPI) to the Consumer Prices Index (CPI). In general, annual CPI increases have been lower than annual RPI increases and therefore the change has reduced the overall liabilities of the scheme. The UK Accounting Standards Board has published guidance on how to account for this situation for companies that report under UK GAAP. Urgent Issues Task Force (UITF) Abstract 48, Accounting implications of the replacement of the retail prices index with the consumer prices index for retirement benefits, sets out how to apply the requirements of the UK standard FRS 17, Retirement Benefits, to the change from using RPI to using CPI. The Group considers that this guidance is relevant and useful when determining how to account for this change under its IFRS accounting policies, as the requirements of FRS 17 are substantially the same as the equivalent requirements of IAS 19, Employee Benefits. As the scheme was not obligated to increase pensions in line with RPI, the change to using CPI is considered to be a change in the inflation assumption, and gives rise to an actuarial gain in accordance with IAS 19. In the main, the change to CPI affects only deferred pensions and has limited impact on pensions already in payment. The impact of the change is highlighted in Note 25(iv) of the 2011 Annual Report and Accounts.

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

The discount rate applied is 5.65% (2010: 5.95%). The inflation assumption is no longer applicable (2010: 2.50%).

Deficit funding contribution schedule for the Invensys Pension Scheme (UK)

The deficit funding contribution schedule for the UK Main Pension Scheme is subject to revision after the next triennial valuation which will have a reference date of 31 March 2011.

* The inflation rate for the UK schemes is based on RPI. An additional inflation rate assumption for CPI is now required for the Invensys Pension Scheme (UK) (2.95%) and for one Other funded scheme (2.95%) 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.

10 Assets held for sale

At 31 March 2011 and 31 March 2010, assets held for sale relate to surplus freehold properties that are vacant, no longer 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

		2011	2010
		£m	£m
Net cash flows from operating activities		171	166
Capital expenditure included within investing activities		(93)	(70)
Interest paid		6	9
Taxation paid (operating)		30	41
Restructuring		25	46
Legacy items:
	Pension contributions	62	60
	Other legacy payments	12	13
		74	73
Operating cash flow		213	265
Restructuring		(25)	(46)
Net finance costs paid		(1)	(5)
Taxation paid (operating)		(30)	(41)
Legacy items		(74)	(73)
Free cash flow		83	100

Operating cash flow attributable to:
Continuing operations		213	265
		213	265

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

12 Net cash

	2011	2010
	£m	£m
Cash and cash equivalents	349	364
Borrowings:
Non-current	-	(1)
Current	(1)	-
Net cash	348	363

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 31 March 2011 restricted cash and cash equivalents held in such territories totalled £58 million (2010: £68 million).

Cash and cash equivalents include £31 million (2010: £37 million) of collateral held in the ordinary course of business to provide security for local bonding facilities.

12 Net cash (continued)

As at 31 March 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 utilisation as loans, letters of credit or bank guarantees. The available facility at 31 March 2011 and 31 March 2010 was £400 million of which £254 million was drawn at 31 March 2011 for the provision of bonds and guarantees (2010: £240 million).

As at 31 March 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 31 March 2011 was £25 million of which £nil was drawn at 31 March 2011.

In addition, at 31 March 2011, the Group has bonds and guarantees totalling £219 million (2010: £245 million) issued under uncommitted facilities. Of these, £31 million (2010: £37 million) are supported by cash collateral and a further £17 million (2010: £20 million) are supported by guarantees issued under the Group's committed syndicated loan facility.

13 Contingent liabilities

Group companies have given performance guarantees to certain subsidiaries (and certain former subsidiaries prior to disposal) in the normal course of business. Counter-indemnities have been received from purchasers in the case of guarantees given in favour of former subsidiaries. At the balance sheet date, the directors are not aware of any circumstances that may give rise to a liability to the Group under these performance guarantees.

No member of the Group is engaged in nor (so far as the directors are aware) has pending, or is threatened by, or has against it any legal or arbitration proceedings which may have a significant effect on the financial position of the Group, other than those already disclosed.

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 directors since the year end are also detailed on pages 38 and 39 of the 2011 Annual Report and Accounts. The remuneration of the directors who served during the year consisted of short-term and other benefits for the year of £4 million (2010: £4 million), termination benefits of £1 million (2010: £nil) and share based payments of £1 million (2010: £2 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 2010, 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, the following loans were 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 2008/09, Invensys Systems Inc. advanced £546,000 on 14 April 2009 to Mr Henriksson, being an amount equal to the expected refunds due from HMRC.

This refund was paid by HMRC on 28 June 2010 and Mr Henriksson subsequently repaid the loan within 5 days as required by the loan agreement.

A further loan of £312,691 was advanced to Mr Henriksson on 29 June 2010 in respect of the double taxation suffered in respect of US employment duties in 2009/10. 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.

15 Dividends paid and proposed

	2011	2010
	£m	£m
Paid during the year
Equity dividends on ordinary shares:
Interim dividend for the year ended 31 March 2011: 1.5p (2010: 1.0p)	12	8
Final dividend for the year ended 31 March 2010: 2.0p (2009: 1.5p)	16	12
	28	20
Proposed for approval by shareholders at the AGM
Equity dividends on ordinary shares:
Final dividend for the year ended 31 March 2011: 2.5p (2010: 2.0p)	20	16
	20	16

The interim dividend for the year ending 31 March 2011 was declared by the Board on 3 November 2010 and paid on 10 December 2010.

The final dividend for the year ended 31 March 2010 was approved by shareholders on 28 July 2010 and paid on 6 August 2010.

Subject to approval by shareholders at the AGM on 28 July 2011, the proposed dividend for the year ended 31 March 2011 will be paid on 5 August 2011 to shareholders on the register at 24 June 2011, and will be accounted for as an appropriation of retained earnings in the year ending 31 March 2012.

The Invensys Employee Share Trust has waived its right to the final dividend for the year ended 31 March 2011 payable on the 716,763 shares that it owns (2010: 230,380 shares). The Trust also waived its right to the interim dividend for the year ended 31 March 2011 payable on the 749,884 shares that it owned.

16 Exchange rates

	2011	2010
	average	average

US$ to £1	1.55	1.59
Euro to £1	1.17	1.13


	2011	2010
	closing	closing

US$ to £1	1.61	1.50
Euro to £1	1.14	1.11

17 Financial information

This preliminary announcement ('statement') was approved by a duly appointed and authorised committee of the Board of Directors on 18 May 2011. The financial information contained in this statement does not comprise the statutory accounts of the Group, as defined in section 434 of the Companies Act 2006, for the years ended 31 March 2011 or 31 March 2010. Statutory accounts of the Group for the year ended 31 March 2010 have been delivered to the registrar of companies, and those for the year ended 31 March 2011 will be delivered in due course. The auditors, Ernst & Young LLP, have reported on both the accounts for the years ended 31 March 2011 and 31 March 2010; their reports were (i) unqualified, (ii) did not include references to any matters to which the auditors draw attention by way of emphasis without qualifying their reports and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

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