Results for Half Year Ended 30 September 2008

RESULTS FOR HALF YEAR ENDED 30 SEPTEMBER 2008
A strong foundation provides opportunities to capture more value

Highlights

• Strengthened financial position (£178 million of net cash and a new five year £400 million banking facility) and core customer relationships provide opportunities to capture more value
• Reported orders rose 16% (8% at CER) to £1,156 million (H1 2007/08: £995 million) driven by strong performances by Process Systems (up 10% at CER) and Rail Group (up 44% at CER)
• Reported operating profit⁵ rose 12% (4% at CER) to £120 million (H1 2007/08: £107 million)
• Underlying basic earnings per share² rose 37% to 9.2 pence (H1 2007/08: 6.7 pence)
• Free cash flow was £177 million (H1 2007/08: £11 million), with operating cash flow⁵ of £135 million (H1 2007/08: £83 million) and operating cash conversion of 113% (H1 2007/08: 78%)
• Two new technology growth companies acquired for £50 million
• New valuation of UK pension scheme substantially agreed with Trustee resulting in no material change to annual funding plan

Ulf Henriksson, Chief Executive of Invensys plc, commented:

“I am pleased with our first half performance and we are now in a strong financial position as the world faces uncertain times. I believe that we are well prepared and have demonstrated that we have the agility to manage risk and capture value from the opportunities that will arise.

“Our Industrial Automation businesses, Process Systems and Eurotherm, will continue to improve their competitive positions by offering the innovative solutions that our customers will need to improve the productivity of their operations. Rail Group is continuing to grow in its core markets and has a large pipeline of export order prospects. In Controls, we will continue to manage the effect of the market downturn by aligning our business to our core customers and investing in delivery, productivity and products for mid to high end homes.

“Overall, we have a strong foundation to pursue opportunities and will succeed by applying our technologies to help our customers improve their value through increased efficiency and asset utilisation.  In this changing world, customers are seeking new ways to succeed.”

Contact:
Invensys plc               Steve Devany                              tel: +44 (0) 20 7821 3758
                                    Annabel Michie                           tel: +44 (0) 20 7821 2121                       
Financial Dynamics   Andrew Lorenz

                                     Richard Mountain                        tel: +44 (0) 20 7269 7121

Chief Executive’s Statement
I am pleased with the first half performance. Our strategy to help our customers unlock their potential has been endorsed by a 16% reported order growth. We have a strong financial foundation and capacity to capture more value – an 11% operating margin business, £178 million net cash, a new £400 million banking facility and no material change to our annual pension funding requirements.

Our geographic and industrial diversification gives us the opportunity to leverage our investments where growth exists and manage for cash and value where markets are declining. Together with our proven agility and preparedness to manage risk, I believe we have a strong foundation from which we can capture more value.

In our Industrial Automation businesses, Process Systems and Eurotherm, we expect a shift from capital expenditure that increases capacity towards investment to improve productivity.  Therefore we are continuing to make the necessary investments to transform the businesses to sell more valued added solutions that improve the efficiency of our customers’ existing operations. We have increased our investment in sales and marketing in Process Systems by around £15 million during the first half to capture more opportunities; the benefits of this increased investment is already reflected in improved order intake and a large pipeline of opportunities.  At the same time we are aligning our capabilities to growth markets. For example, we do not have any significant exposure to high cost upstream oil exploration such as deep sea drilling or oil sands but are well placed to assist customers in achieving more productivity in the downstream refining sector.  Geographically we see good growth in regions like the Americas and the Middle East but following recent evidence of a slowdown in the European market, we are now realigning our capacity in that market and increasing it in emerging markets.  This together with costs associated with improving our delivery capabilities will lead to an additional restructuring charge in the second half of the year of around £20 million; we expect this restructuring to provide a compelling financial return.

Rail Group had an excellent first half year with strong order growth and operating margin and we expect that spending on rail infrastructure in our core markets will remain robust. We have already had success in export markets so far this year and we believe that levels of demand across the world should increase, enabling us to continue to grow the business in the short to medium term.

Controls performed well with good cash generation in the first half in particularly difficult markets, helped by the actions that we have taken during the past two years to improve the operational effectiveness of the business, aligning it to our core customers needs and investing in products for mid to high end homes. We are continuing to complete the restructuring projects started in previous years and are prepared to take further action if required.

We believe that our businesses remain robust and well placed in their respective markets to deal with the future uncertain economic climate.  In Industrial Automation, we have good businesses positioned to meet the changing needs of our customers for productivity and optimisation. In Controls, recent events have reduced our expectations of industry shipments for the remainder of the year and we believe that its second half performance should now be in line with that achieved in the first half. Rail Group is demonstrating export success in addition to its strong position in its core markets. Overall, we expect the Group to make further progress in the second half compared with the first half of the year.

Notes

• Except where stated, percentage changes in performance are stated at constant exchange rates (CER).
• Underlying earnings per share is calculated on profit from continuing operations before exceptional finance costs, foreign exchange gains and losses and the PPP settlement credit.
• Total Group comprises continuing and discontinued operations.
• Continuing operations are Process Systems, Eurotherm, Rail Group and Controls.  Discontinued operations comprise APV, Reversing Valves, Safety and Burco businesses in 2007/08 and comparatives have been restated accordingly.
• All references to operating profit (OPBIT) and operating margin in this announcement are before exceptional items and all references to operating cash flow are before restructuring spend.
• Return on operating capital is calculated as OPBIT divided by capital employed excluding goodwill, net pension deficit, non-operating provisions and net tax liabilities.

Conference call
Ulf Henriksson, CEO, and Steve Hare, CFO, will be hosting a presentation and conference call for analysts and fund managers at 9.00 a.m. GMT this morning:

Venue:             JPMorgan Cazenove
20 Moorgate
London
EC2R 6DA

Dial-in details (please note that the passcode is required).

UK and international:      +44 (0)20 7806 1953
US:                                1 718 354 1385
Passcode:                       4556482           

The presentation will be audio webcast live with slides, which can be accessed at:

http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=79275&eventID=2003320

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.