RNSArticle

Invensys plc

13 June 2011

Invensys plc

Annual Financial Report

Invensys plc (the "Company") has today posted its 2011 Annual Report and Accounts (the "2011 Annual Report and Accounts") and notice of the 2011 Annual General Meeting of the Company (the "2011 AGM Notice") to shareholders.

The 2011 Annual Report and Accounts, which were approved by the Board of Directors on 18 May 2011, constitute the Annual Financial Report for the purposes of DTR 4.1.

The Annual General Meeting is to be held at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE on Thursday, 28 July 2011 at 11.00 a.m.

In compliance with LR 9.6.1, the Company has submitted to the National Storage Mechanism the following documents, which will be available for inspection at: www.Hemscott.com/nsm.do

· 2011 Annual Report and Accounts;

· Chairman's Explanatory letter and 2011 AGM Notice; and

· Form of Proxy for Ordinary Shareholders in relation to the Annual General Meeting.

The 2011 Annual Report and Accounts and 2011 AGM Notice are also available on the Company's website at www.invensys.com.

In compliance with DTR 6.3.5, the following information is extracted from the 2011 Annual Report and Accounts and should be read in conjunction with the Company's Results Announcement issued on 19 May 2011, both of which can be found at www.invensys.com. Together, these constitute the material required by DTR 6.3.5 to be communicated to the media in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the 2011 Annual Report and Accounts in full and page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the 2011 Annual Report and Accounts.

Chairman's Statement

The following information is extracted from pages 12 and 13 of the 2011 Annual Report and Accounts.

Dear shareholder

I am pleased to report that Invensys produced another improvement in performance during the year ended 31 March 2011. We increased revenue by 9% at CER to £2,486 million and operating profit before exceptional items by 5% at CER to £262 million. Invensys Operations Managementproduced record results, clearly benefiting from its success in winning large greenfieldprojects in emerging markets, executing on its advanced applications strategy, and a strong recovery in industrial capital expenditure in developed countries. Theglobal rail infrastructure markets remained strong; however, Invensys Rail experienced a small decline in profitability due to costoverruns on three mass transit contracts and its order intake was affected by the timing of the award of large contracts. Invensys Controls produced a performancebroadly in line with last year despite revenue being held back by weaker than expected consumer markets, particularly in North America.

At Invensys, we have three world class divisions and a management team to match. Our task for the future is to take our strong market positions, our excellent technology, our committed people and our financial strength, and create an even better future for Invensys and its shareholders. As our new Chief Executive, Wayne Edmunds, elaborates upon in his statement on page 14, we have the businesses and plans to achieve this; it is now all about execution.

Dividend and 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 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.

The Board

On 24 March 2011, the Board announced that Ulf Henriksson had stepped down as Chief Executive and as a director and that Wayne Edmunds, who had been Chief Financial Officer since 2009, had been appointed Chief Executive. David Thomas, who has held senior financial roles within the Group since 2002, was appointed Acting Chief Financial Officer and a permanent appointment will be made in due course after consideration of internal and external candidates. With effect from 19 May 2011, Deena Mattar has 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.

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.

Sir Nigel Rudd

Chairman

Chief Executive's Statement

The following information is extracted from pages 14 to 16 of the 2011 Annual Report and Accounts.

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. 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 highlights

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 benefiting 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.

• A 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 core markets 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, China and 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.

Corporate Social Responsibility (CSR)

I intend to reinforce our commitment to supporting the principles of economic success, environmental stewardship, diversity and social responsibility. We have programmes in place across the Group to ensure that we act as a responsible global citizen and these are supported by our Code of Conduct which defines how each of us acts in our business life.

Our CSR report, which starts on page 28, contains a summary of our achievements and these are explained in more detail in our third Sustainability Report, which will be available for download from our website. I am especially pleased by the very low incidence of injuries to our employees; their health and safety remains the highest priority. During the year, there were a number of incidents of natural disasters and civil unrest around the world and our teams ensured that all Invensys people and their families who were affected were helped where needed.

Invensys people

I have inherited a very talented and committed group of professionals who drive our business on a day-to-day basis. We also have the strength in depth that will provide us with the flexibility and capability to deal effectively with inevitable challenges that will arise going forward. All of our people have contributed to our resilience through the worst recession in generations and together they have created the strong divisions and corporate centre that will drive future growth. I would like to pay tribute to each of them for their efforts and thank them for helping to make Invensys what it is today. I look forward to working with them to create an even better Invensys.

Wayne Edmunds

Chief Executive

Directors' responsibility statement

The following information is extracted from Page 64 of the 2011 Annual Report and Accounts

We confirm that to the best of our knowledge:

a) the Financial Statements for the year ended 31 March 2011, prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole; and

b) the Business Review includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board

Wayne Edmunds

Chief Executive

18 May 2011

Risks and Uncertainties

The following description of Risks and Uncertainties is extracted from pages 34 to 36 of the 2011 Annual Report and Accounts.

Failure to maintain a competitive and technologically advanced product range could reduce margins and revenue growth

Invensys operates in highly competitive markets and the Group's products and services are characterised by continually evolving industry standards and rapidly changing technology, driven by the demands of the Group's customers. As illustrations of this, Invensys Rail continues to invest in the development of the European Rail Traffic Management System (ERTMS) and Communication Based Train Control (CBTC) to evolve the capabilities to meet the needs of the "Railway of Tomorrow". Invensys Operations Management continues to invest in enhancements to its control and safety systems, advanced applications and Enterprise Control System to optimise plant performance for our global customers.

Impact

Failure to keep pace with technological changes and system or application requirements in the industrial sectors may result in loss of market share and lower margins. Furthermore, delays to development programmes may adversely impact the delivery of major projects.

Mitigation

The Group invests in research and development to develop new technologies and products to sustain or improve its competitive position. However, all new technologies and products involve business risk in terms of possible abortive expenditure including asset impairments, reputational risk and customer claims. The Group reviews its portfolio of technologies as part of the strategic planning process. In addition, the divisions control individual development programmes through a regular review process.

The timing and frequency of substantial contract awards are uneven

The revenue of Invensys Rail depends on a small number of large railway operators, both in our traditional core markets in the UK, Iberia, North America and Australia and in new markets. New contract awards are often associated with major transport infrastructure upgrades, and as a result are by nature large and infrequent. Invensys Operations Management is associated with the supply of technology, software and consulting to the oil and gas, chemical and nuclear industries. Capital expenditure requirements from customers in these industries are often highly cyclical and linked to the international supply, demand and pricing of hydrocarbons. Also the timing of new contract awards in the nuclear industry may be impacted if certain nuclear programmes are subject to delay or cancellation.

Impact

The timing of contract awards is uncertain and delays in awards may result in volatility in the order book and the results. Major projects may also impact the business mix because a substantial element of the contract may be supplied by third parties. In addition, the opportunity to develop control and safety systems for the nuclear industry may lead to an increased dependence on a small number of major customers for Invensys Operations Management.

Mitigation

The Group monitors sales activity, sales cover in its order book, expected margins and the impact of potential delays on the expected results to allow appropriate mitigating actions to be considered.

Undertaking large, long-term projects exposes the Group to risk of loss

A significant amount of the Group's business involves long-term projects that can take many months or even years to complete. These projects may be subject to delays and cost overruns due to delays in equipment deliveries, engineering problems, work stoppages, unanticipated cost increases, shortages of materials or skilled labour or other unforeseen problems inherent in the nature of such projects. An increasing number of projects have been secured in new markets including Asia, South America and the Middle East where the execution risks may be greater.

Impact

The Group's failure to anticipate technical problems, estimate costs accurately or control delivery may reduce the profitability of such a contract or result in a loss.

Mitigation

The Group has established a process with clear delegated authorities for the approval of major contracts, which includes a review system for the approval of bids submitted to customers. Contracts with a large monetary value or onerous contractual terms require Board approval. During the year certain execution issues were identified in an export contract for Invensys Rail. This has prompted an internal review with the result that systems have been improved and key risk metrics have been established to monitor the execution of all the major projects. These are subject to regular reporting to the Board.

The Group may be subject to liability as a result of product liability claims

Errors and defects in the Group's products, systems or applications, which may be used in safety-critical applications, could cause injury to persons or damage to property and equipment or be the subject of product recalls.

Impact

These occurrences could result in claims, loss of revenue, warranty costs, costs and damages associated with product recalls, litigation, delays in market acceptance or harm to the Group's reputation for safety and quality.

Mitigation

Each division has an established quality control function and, if an event occurs, there are processes to investigate and manage the occurrence.

The Group may be exposed to liability through the actions of consortium partners, cosource partners or its supply chain

The business activities of the Group are often conducted in conjunction with consortium, codevelopment or cosource partners whose day-to-day management actions are outside of the control of the Group. A significant element of the Group's risk profile is the delivery performance of its supply chain. These partnerships exist across our businesses. The Invensys Rail high-speed line contracts are often undertaken with consortium partners and the development of wireless solutions for all divisions often rely on local or global partnerships.

Impact

Given the nature of the Group's business mix, a quality or other failure in the supply chain could present a risk to safety and delivery which could have a material adverse effect on the Group's business, financial performance and/or reputation.

Mitigation

Assessment, mitigation and management of these risks are addressed by the divisions in conjunction with the Legal, Supply Chain and Risk functions.

The Group may be exposed to additional liabilities with respect to its UK and US pension plans

The UK Main Pension Scheme has a high proportion of pensioners relative to its active workforce.

Impact

With respect to both the Group pension plans for its UK and US operations, any decline in the equity market, improvements in life expectancy, changes in expected morbidity rates, long periods of low inflation or deflation or future decreases in interest rates could increase the funding deficit and require additional funding contributions in excess of those currently expected.

Mitigation

The investment policy has been established to address the need to match the scheme assets and liabilities as far as is realistically possible. The current UK Main Pension Scheme deficit funding contribution schedule was agreed on the basis of a valuation undertaken at 31 March 2008, and anticipates deficit recovery contributions being made on a six-monthly basis until March 2017. This UK deficit funding contribution schedule is likely to be unchanged following the valuation undertaken at 31 March 2011. There will be an increase in the funding of the US plans to meet the Employee Retirement Income Security Act (ERISA) requirements. In addition to regular financial reporting under IAS 19, the Group regularly monitors the performance of the principal UK and US plans.

The Group is subject to ongoing litigation and environmental liabilities

As a consequence of the past disposal of a significant number of businesses, the Group has certain liabilities in relation to environmental claims (including the cost associated with the remediation of contaminated sites no longer owned by the Group), disputed taxes, litigation (including personal injury claims arising from alleged exposure to asbestos and silica), indemnity claims and other disposal costs relating to the disposed businesses. These risks have receded over time as warranties and indemnities in relation to past disposals have expired, existing disputes have been settled and remediation work on contaminated sites has been completed. The Group also has environmental liabilities in relation to the remediation of vacant sites which it owns.

Impact

All of the aforementioned liabilities are subject to a number of uncertainties, assumptions and contingencies, and there can be no assurance that the liabilities will not be substantially higher or become payable sooner than anticipated, or that the provisions in the Group's accounts in respect of any such liabilities will be sufficient.

Mitigation

The Group continually monitors the remaining liabilities and has established key performance indicators to support monthly reporting to the Board. The indicators include cash spend, provisions, insurance recoveries and estimated exposures. The Group regularly reviews the related provisions and aims in negotiations to limit the risk of future liabilities or disputes.

Directors' loan and pension commutation

The following description of Directors' loan and pension commutation is extracted from Note 33 on page 133 of the 2011 Annual Report and Accounts.

Director's loan

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.

Year ended 31 March 2010

Mr Henriksson incurs both US and UK tax liabilities in respect of his employment duties undertaken in the US. Deloitte LLP has advised that the UK tax liabilities paid by Mr Henriksson in respect of such duties should be refunded to him by HM Revenue and Customs (HMRC). However, such refund was delayed pending a determination by the US and UK tax authorities of the relevant treaty provisions. In view of the double taxation suffered, 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 loan was free of any interest and was repayable within five business days from the date of HMRC making the refund to Mr Henriksson. The refund was paid by HMRC on 28 June 2010 and Mr Henriksson subsequently repaid the loan within five business days as required.

Year ended 31 March 2011

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 his US employment duties in 2009/10 pending the refund of the amount by HMRC. This loan was made on the same terms as the previous loan, and will be repayable within five business days from the date of HMRC making the refund to Mr Henriksson. Mr Henriksson's repayment obligations are not affected by the termination of his employment with the Company.

Director's pension commutation

Year ended 31 March 2010 Kathleen O'Donovan left Invensys as Chief Financial Officer on 31 December 2002. Part of her pension entitlement for service at Invensys was provided through an Unfunded Unapproved Retirement Benefit Scheme (UURBS). As permitted by her termination agreement, Ms O'Donovan requested a commutation of her UURBS during the year. The Remuneration Committee agreed to pay £2.1 million commutation on a fair value basis, resulting in a reduction in the accrued IAS 19 pension liability. The cash settlement was made in March 2010, in addition, the Company bore National Insurance costs of £268,800.

Related Party Disclosures

The following description of related party transactions is extracted from Note 34 on page 133 of the 2011 Annual Report and Accounts. A condensed version of this note was published in the Results Announcement as Note 14.

Details of transactions that have been entered into with related parties for the years ended 31 March 2011 and 31 March 2010 are as follows:

(i) Remuneration of key management personnel

Key management comprises the directors. Remuneration is as follows:

2011

£m

2010

£M

Short-term employee benefits

Post-employment benefits

Other long-term benefits

Termination benefits

Share-based payment

Short-term employee benefits comprise salary and benefits earned during the year and bonuses awarded for the year.

Post-employment benefits comprise the cost of pensions and post-retirement benefits.

Full details of individual directors' remuneration are given in the Remuneration Report.

(ii) Other related party transactions

There are no other related party transactions that have a material effect on the financial position or performance of the Group in the year (2010: none) other than the director's loan disclosed in Note 33.

Contact:

Invensys plc Steve Devany tel: +44 (0) 20 3 155 1301

Annabel Michie tel: +44 (0) 20 3 155 1303