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2007/08 Third Quarter Results for the three months ended 31 December 2007

Posted 07 February 2008

2007/08 THIRD QUARTER RESULTS FOR THE THREE MONTHS ENDED 31 DECEMBER 2007

A quarter of good overall performance
Redemption of High Yield Bonds to improve efficiency of capital
structure

Highlights

Continuing operations1

  • Orders were up 6% at constant exchange rates (CER) at £540 million (Q3 2006/07: £508 million)
    with improvements at Process Systems and Rail Group reflecting the increased emphasis upon sales
    and marketing
  • Revenue was up 5% at CER at £545 million (Q3 2006/07: £521 million) with good performances at
    Process Systems, up 9%, and Rail Group, up 13%, partly offset by the anticipated reduction at
    Controls
  • Operating profit2 was up 26% at CER at £67 million (Q3 2006/07: £53 million) with strong
    performances at Process Systems and Rail Group together with maintained profitability at Controls
    Operating margin2 increased to 12.3% (Q3 2006/07: 10.2%) with each of our three major business
    groups reporting double digit margins
  • Operating cash flow was up 36% at CER at £72 million (Q3 2006/07: £54 million) due mainly to
    anticipated improvements at Process Systems
  • Earnings per share before exceptional finance costs and foreign exchange gains and losses were 4.2p (Q3 2006/07: 3.8p)

Total Group3

  • Free cash flow, after accelerated legacy pension payments of £28 million relating to the APV disposal, was £21 million (Q3 2006/07: £41 million), our fifth consecutive quarter of free cash inflow
  • Net cash was £55 million (30 September 2007: £187 million net debt) following the receipt of £275 million for the disposals of APV, Safety and Reversing Valve businesses and payments totalling £70 million out of the APV proceeds to the UK main pension scheme
  • Redemption of the remaining £343 million of High Yield Bonds on 17 March 2008 using existing cash resources will result in a significant reduction in future finance charges (see separate announcement)

Contact:

Invensys plc Steve Devany tel: +44 (0) 20 7821 3758
  Kate Elliott tel: +44 (0) 20 7821 2121
     
Financial Dynamics Andrew Lorenz  
  Richard Mountain tel: +44 (0) 20 7269 7121
     

 

Ulf Henriksson, Chief Executive Officer of Invensys plc, commented:


“I am pleased to report another good operational and financial performance in the quarter. Each of our three major business groups reported double digit margins and, as expected, we achieved a much improved operating cash conversion. We are continuing to invest in our businesses to enhance profitability as we work to become a high performing, sustainable and cohesive company.

“Process Systems’ order intake improved following its increased emphasis upon sales and marketing, with a double digit increase in North America. Rail Group produced a strong quarter and Controls maintained profitability despite the anticipated revenue decline.

“We completed the disposals of three lower margin businesses, APV, Safety and Reversing Valves which, together with our good cash performance in the quarter, placed the Group into a net cash position. We have therefore today called the remaining £343 million of High Yield Bonds, which will result in a significant reduction on our future finance charges. We are reviewing our other debt financing with a view to further optimising our capital structure. We have also started a project to put the Group into a position where the Board can, in future years and in suitable circumstances, recommend the payment of a dividend.

“Following the recent disposals, around 70% of our revenue comes from Process Systems and Rail Group. These businesses operate in markets such as global energy and infrastructure which are expected to continue to exhibit growth, despite some uncertainty about the future direction of the world’s economies. Revenue growth is supported by the large order books in these businesses which total £1.8 billion. The combination of these strong end markets and the actions we are taking to maintain profitability at Controls gives us confidence that we will make further progress in the final quarter of the financial year and they also provide a sound platform for growth next year.”


Notes

1. Continuing operations are Process Systems, Eurotherm, Rail Group and Controls. Discontinued operations comprise APV, Reversing Valves and Safety businesses in both periods and Invensys Building Systems in the US and Asia Pacific in 2006/07.
2. All references to operating profit (OPBIT) and operating margin in this announcement are before exceptional items.
3. Total Group comprises continuing and discontinued operations.

Conference call

1. Ulf Henriksson, CEO, and Steve Hare, CFO, will be hosting a conference call for analysts and fund
managers at 8.00 a.m. GMT this morning:

UK: +44 (0) 800-032-3808
US (Toll-free): +1-866-850-2201

No passcode is required.

2. The presentation will be audio webcast live with slides, which can be accessed by following the link
at the following address:

http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=79275&eventID=1746829

A recording will be available at this address shortly after the completion of the call.

3. This announcement and the presentation materials for the conference call are also available at:
http://www.invensys.com

Safe harbor

This announcement contains certain statements that are forward-looking. These statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future.

Forward-looking statements are not guarantees of future performance. The Group's actual results of operations, financial condition and liquidity, and the development of the industries in which the Group operates, may differ materially from those made in or suggested by these statements and a number of factors could cause the results and developments to differ materially from those expressed or implied by these forward-looking statements.