Invensys 2004/05 Second Quarter Results for the Three Months to September 30, 2004

 

LONDON, Nov 11, 2004 
Invensys:
 
    Key financial points
 
    --  Q2 trading in line with expectations
 
    --  Sales for retained(1) businesses at GBP 643 million (Q2 03/04:
        GBP 733 million)
 
    --  Operating profit(2) of retained businesses at GBP 47 million
        (Q2 03/04: GBP 74 million)
 
    --  Operating margin(2) of retained businesses 7.3% after
        corporate costs (Q2 03/04: 10.1%)
 
    --  Corporate costs reduced to GBP 12 million (Q2 03/04: GBP 16
        million)
 
    --  Gross debt reduced by GBP 118 million and legacy liabilities,
        including pension deficits, reduced by GBP 12 million since
        June 30, 2004
 
    --  H1 trading in line with expectations
 
    --  Sales for retained(1) businesses at GBP 1,254 million
 
    --  Operating profit(2) of retained businesses at GBP 63 million
 
    --  Operating cash inflow from operations at GBP 50 million before
        payment of legacy liabilities (H1 03/04: inflow GBP 15
        million)
 
    Chief Executive of Invensys, Rick Haythornthwaite, said:
 

"We have delivered results in line with expectations, both for the second quarter and overall for the half.

"We now have a real sense of operational momentum and most of our leading indicators are on track. Orders in key areas are rising, led by a 49% increase in major accounts at Process Systems during the second quarter.

"All of this reflects the benefits of our greater financial stability. And, with the arrival of Ulf Henriksson as Chief Operating Officer, we are able to accelerate our programmes for margin improvement and cash generation in each business, as well as investing in core capabilities for future growth.

"Our expectations for an improving year-on-year trend in the second half remain unchanged."

Financial Summary                           Q2     Q2     H1     H1
                                           04/05  03/04  04/05  03/04
                                           GBP m  GBP m  GBP m  GBP m
----------------------------------------------------------------------
Sales
-    Retained businesses                     643    733  1,254  1,386
-    Continuing(3) operations                715    801  1,396  1,516
-    Discontinued(4) operations                3    252    111    528
-    Total Group                             718  1,053  1,507  2,044
----------------------------------------------------------------------
Operating profit/(loss)(2)
-    Retained businesses                      47     74     63     91
-    Continuing operations                    49     73     66     81
-    Discontinued operations                   -     15     (3)    22
-    Total Group                              49     88     63    103
----------------------------------------------------------------------
Operating exceptional items                 (119)  (101)  (133)  (132)
----------------------------------------------------------------------
Goodwill
       --  Goodwill amortisation              (7)   (13)   (16)   (31)
       --  Goodwill impairment                 -      -    (27)     -
----------------------------------------------------------------------
Disposals(5)
-    Profit on sale/closure                    7     79    175     72
-    Goodwill on disposal/closure            (15)  (131)  (462)  (159)
----------------------------------------------------------------------
Net interest payable                         (33)   (18)   (69)   (39)
----------------------------------------------------------------------
FRS 17 finance charges                        (4)    (6)    (8)   (12)
----------------------------------------------------------------------
Loss for financial period                   (116)   (50)  (477)  (149)
----------------------------------------------------------------------
(Loss)/earnings per share
-    Basic                                (2.1)p (1.5)p (8.4)p (4.3)p
-   Total Group before exceptional items,
goodwill amortisation and goodwill
 impairment                                 0.4p   1.3p (0.2)p   0.8p
----------------------------------------------------------------------
 
 

Notes:

1 Retained businesses are Process Systems, Eurotherm, APV, Rail Systems, Climate Controls and Appliance Controls

2 All references to operating profit and operating margin in this announcement are stated before exceptional items, goodwill amortisation and goodwill impairment

3 Continuing operations refers to retained businesses and businesses for sale (principally Lambda and Baker)

4 Discontinued operations comprise Powerware, Hansen, Marcam and APV Baker Goldsboro in H1 04/05 and additionally Metering Systems, Baan & Teccor in FY 03/04

5 Closures and disposals of businesses and sale of fixed assets

A presentation and webcast of the Group's second quarter results took place at 9.00am (UK) today at Haberdashers' Hall, 18 West Smithfield, London EC1A 9HQ. The announcement, webcast presentation and an interview with CEO Rick Haythornthwaite and COO Ulf Henriksson are available on www.invensys.com and the latter can also be viewed on www.cantos.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.

Q2 results overview

Overall, Group sales for Q2 04/05 were GBP 718 million, down 32% compared with Q2 last year. This was due mainly to disposals of businesses and a negative currency translation impact of GBP 66 million driven by weakness in both the US dollar and the euro. Group operating profit was GBP 49 million, compared with GBP 88 million last year, reflecting the impact of disposals, a weaker year-on-year performance at APV, costs associated with programmes to improve performance and capabilities, and lower volumes in Climate Controls. In addition, profits at Process Systems are beginning to move toward a more even quarterly weighting than during the first half of last year.

Sales for the retained businesses were GBP 643 million (Q2 03/04: GBP 733 million), down 6% at constant exchange rates (CER). Operating profit was GBP 47 million (Q2 03/04: GBP 74 million), including a negative currency translation adjustment of GBP 4 million, resulting in a Q2 operating margin of 7.3%.

Operating cash flow for the Group (before the payment of legacy liabilities) was an inflow of GBP 58 million, representing a 118% cash conversion on operating profit. Free cash flow from operations (before the payment of legacy liabilities) was an inflow of GBP 6 million.

Total free cash flow for the Group including legacy items was an outflow of GBP 48 million, following payments of GBP 54 million related to legacy liabilities. These were paid out of cash raised in the refinancing, causing net debt to increase to GBP 776 million at September 30, 2004. Gross debt fell by GBP 118 million during Q2.

H1 results overview

Group sales for the six months to September 30, 2004 were GBP 1,507 million, compared with GBP 2,044 million in the same period last year. Group operating profit was GBP 63 million, compared with GBP 103 million. Group operating margin for the six months was 4.2%. The fall in sales and profits was largely due to the same effects as those affecting the second quarter.

Sales for the retained businesses were GBP 1,254 million, compared with GBP 1,386 million last year, down 3% at CER. Operating profit for the retained businesses was GBP 63 million, compared with GBP 91 million last year. Operating margin for the retained businesses was 5.0%.

Operating cash flow before legacy payments was GBP 50 million and total free cash flow including legacy items for the six months was an outflow of GBP 127 million, largely due to payments of legacy liabilities (H1 03/04: GBP 153 million outflow).

    No interim dividend will be paid (H1 03/04: nil).
 
    Operational review
 
Process Systems                             Q2     Q2     H1     H1
                                            04/05  03/04  04/05  03/04
------------------------------------------------- ------ ------ ------
Sales (GBP m)                                180    206    349    375
Operating profit (GBP m)                      14     22     17     14
Operating margin (%)                         7.8%  10.7%   4.9%   3.7%
------------------------------------------------- ------ ------ ------
 

Second quarter sales at Process Systems, excluding IMServ, were down 3% at CER and up 7% compared with Q1 this year. The decline in year-on-year sales is mainly due to the winding down of a large long-term contract in North America. Excluding IMServ, H1 sales were up 4% compared to last year, driven by higher sales in EMEA and strong sales to the hydrocarbons and power sectors, particularly in Asia Pacific and the Middle East. The sales mix improved significantly due to the re-invigoration of the product business, while the new solutions business continued to build strength over the first two quarters of this financial year.

Sales at IMServ were down 26% during the quarter and 25% during the half, at CER, reflecting the disposal of the Fieldtech operations during the prior year.

An operating profit for the second quarter of GBP 14 million and an operating margin of 7.8% resulted in an operating profit for the first half of GBP 17 million and an operating margin of 4.9%, compared with 3.7% in H1 last year, with notable improvement in Asia Pacific.

Orders for the period (excluding IMServ) were up 4% for the quarter and up 9% for the first half at CER. Buoyant conditions in Asia Pacific, North America and Europe, together with increasing demand for solutions, offset weaker markets in South America. Orders from our largest key accounts rose by 30% at CER during the first half and by 49% during Q2. The increased competitiveness of Process Systems was also demonstrated by a strong performance in China, the Middle East and Russia. Major orders in the second quarter included a contract to supply process control and safety solutions to Ras Laffan LNG II Train 5 and a contract to automate the 1200 MW Zhang Jiagang Shazhou power plant in China.

Historically, the performance of Process Systems has displayed a stronger bias toward the second half of the year and, in particular, towards the final quarter. Although management is working toward a process of more regular quarterly balance going forward, this pattern is likely to continue to some extent during the current year. This is because benefits associated with the 70-week performance improvement programme are expected to become more pronounced - and costs associated with the programme start to fall - in the fourth quarter.

Eurotherm                                   Q2     Q2     H1     H1
                                            04/05  03/04  04/05  03/04
------------------------------------------------- ------ ------ ------
Sales (GBP m)                                 32     31     60     60
Operating profit (GBP m)                       4      4      7      8
Operating margin (%)                        12.5%  12.9%  11.7%  13.3%
------------------------------------------------- ------ ------ ------
 

Eurotherm sales in Q2 of GBP 32 million were 10% higher at CER compared with last year and 14% higher than in Q1, due to good conversion of the strong order backlog built up during the first quarter. An increase in North American demand, together with continued strong growth in Asia Pacific, drove the overall rise in sales.

Operating profit at GBP 4 million was up 6% at CER despite a slight reduction in operating margin to 12.5%. This was due mainly to continued strong growth in the lower-margin Asia Pacific region. Initiatives are now underway to increase the level of sourcing from the Asia Pacific region in order to mitigate the transactional currency impact on gross margins from the high proportion of Yuan and US dollar sales.

Orders for the second quarter increased by 7% at CER as Eurotherm's main markets, including the US, continued to experience an upturn. In addition, targeted initiatives into growth sectors, such as steel and glass, are beginning to result in higher orders from key customers.

Eurotherm's performance typically displays little seasonal variation throughout the year.

APV                                         Q2     Q2     H1     H1
                                            04/05  03/04  04/05  03/04
------------------------------------------------- ------ ------ ------
Sales (GBP m)                                 92    104    174    193
Operating profit/(loss) (GBP m)                1     12     (6)    17
Operating margin (%)                         1.1%  11.5% (3.4)%   8.8%
------------------------------------------------- ------ ------ ------
 

APV's Q2 sales at GBP 92 million were 6% lower at CER, primarily reflecting the previous weaker project order flow in EMEA, although this was partially offset by stronger sales in the Americas and a slight increase in Asia Pacific.

APV is already starting to deliver on its 50-week performance improvement programme initiated in August, with Q2 operating profit showing an early turnaround to a profit of GBP 1 million from the Q1 loss of GBP 7 million, the latter including a GBP 4 million adjustment related to prior periods. Improvements have also been achieved by reducing management layers, removing the overhead of a regional organisation and tightly controlling discretionary costs. The mix of the business has been changed by transferring a significant number of sales people to focus on product and aftermarket sales, which is already driving volume and margin increases.

Orders for Q2 were up 18% at CER, as strong growth in Mexico and Asia Pacific, particularly Australasia, was partially offset by a weaker intake of project orders in EMEA and North America.

Present trends in the business and the 50-week performance improvement programme indicate that increased profitability should continue through the second half, particularly in Q4.

Rail Systems                                Q2     Q2     H1     H1
                                            04/05  03/04  04/05  03/04
------------------------------------------------- ------ ------ ------
Sales (GBP m)                                103    115    207    232
Operating profit (GBP m)                      13     18     26     32
Operating margin (%)                        12.6%  15.7%  12.6%  13.8%
------------------------------------------------- ------ ------ ------
 

Rail Systems' Q2 sales at GBP 103 million, while level with Q1, were 6% lower at CER compared to Q2 last year. This was mainly due to the loss of a large North American logistics contract, delays in the passage of the US Transportation Bill and lower UK sales resulting from continued order delays at Network Rail. Sales in Spain grew strongly, up 54% compared with Q2 last year.

Operating profit of GBP 13 million, a decrease of GBP 4 million at CER compared to Q2 last year, nonetheless reflected a margin of 12.6%, in line with Q1. The benefits of margin improvements on certain contracts and a better sales mix offset volume decreases and higher costs for bonding, insurance and UK pensions.

Q2 orders were 23% higher at CER compared with last year, mainly due to a GBP 10 million contract in China for the Tianjin Metro Line 1.

The longer-term prospects for this business remain positive. Management actions to mitigate the effect of weaker demand in the short-term have contributed to a robust first half performance and provide a good basis for the second half. We also expect the Network Rail situation to ease gradually over the coming months.

Climate Controls                            Q2     Q2     H1     H1
                                            04/05  03/04  04/05  03/04
------------------------------------------------- ------ ------ ------
Sales (GBP m)                                145    179    286    338
Operating profit (GBP m)                      14     21     21     33
Operating margin (%)                         9.7%  11.7%   7.3%   9.8%
------------------------------------------------- ------ ------ ------
 

Climate Controls' sales in Q2 of GBP 145 million were 12% lower at CER compared to Q2 last year, primarily due to the continued exit from low margin contracting in building management and the loss of specific contracts - both in the US. Although some retail business has been regained during that period, this will impact progressively through the second half. These weaker sales in the Americas offset stronger sales in Europe. The quarantine and subsequent recall of a large number of gas valves at the end of the quarter also caused a hiatus in production and sales of the affected product ranges. Although activity has now been resumed, sales in North America will continue to be impacted as output is supplied to replace recalled units.

Q2 operating profit was GBP 14 million, a decrease of GBP 5 million at CER due to lower sales volumes and pricing pressure on reversing valves in Japan. Operating margin fell to 9.7% in the second quarter.

Orders for Q2 were 9% lower at CER, driven by the impact of exited business, high channel inventories in North America and the weaker commercial building sector in Europe. Market conditions for the product businesses remain positive in Europe and Asia. During the quarter, the Ranco business commenced shipments to North America of reversing valves manufactured in its new Chinese factory and this restructuring is now nearly complete.

The business historically experiences a seasonal bias towards the second and final quarters of the year.

Appliance Controls                          Q2     Q2     H1     H1
                                            04/05  03/04  04/05  03/04
------------------------------------------------- ------ ------ ------
Sales (GBP m)                                 91     98    178    188
Operating profit (GBP m)                      13     13     24     24
Operating margin (%)                        14.3%  13.3%  13.5%  12.8%
------------------------------------------------- ------ ------ ------
 

Q2 sales at Appliance Controls of GBP 91 million were 1% higher at CER compared to Q2 last year. As expected, solid growth in South America and Europe offset slightly softer demand in North America.

Operating profit at GBP 13 million remained stable and the operating margin improved to 14.3% (Q2 03/04: 13.3%) as volume increases more than offset increases in raw materials prices and increased insurance costs.

Overall, orders fell 5% at CER relative to the strong second quarter last year. However, Appliance Controls was awarded sizeable contracts for new platforms in laundry for a Turkish OEM and in cooking for a large worldwide OEM, as well as gaining new business from customers in the emerging economies, such as China and Korea.

Conditions in Appliance Controls' core markets remain mixed, with muted consumer confidence in North America contrasted by continuing strong growth in Europe and South America. This pattern is expected to continue into Q3.

As a business that has a relatively short supply chain, Appliance Controls is more likely to be affected by customer order patterns than by quarterly patterns.

Invensys Controls

Since the quarter end, Climate Controls and Appliance Controls have been brought together under the leadership of John Duerden. Management believes that this will enable the businesses to use their scale and complementary strengths in markets where they have a strong overlap in products, technologies and channels. The newly combined business, known as Invensys Controls, will be able to more effectively deploy sales and operating resources in their markets, leverage their buying power and reduce overheads by removing duplication between the businesses.

Businesses for sale                        Q2     Q2     H1     H1
                                            04/05  03/04  04/05  03/04
------------------------------------------------- ------ ------ ------
Sales (GBP m)                                 72     68    142    130
Operating profit/(loss) (GBP m)                2     (1)     3    (10)
Operating margin (%)                         2.8% (1.5)%   2.1% (7.7)%
------------------------------------------------- ------ ------ ------
 
 

Trading operations principally relate to Lambda and Baker.

Combined Q2 sales were higher at CER and the businesses achieved an operating profit of GBP 2 million for the quarter, compared with a combined loss of GBP 1 million last year.

Lambda sales were higher at CER compared to Q2 last year, primarily due to the recovery in technology markets, particularly in Asia, new programmable products introduced for high power, and the benefits of the restructuring activity initiated last year.

Baker's sales were higher at CER compared to Q2 last year, primarily due to major projects announced in both UK and Spain.

Corporate costs

Corporate costs during the quarter were GBP 12 million, down from GBP 16 million last year and 14% lower than in the first quarter (Q1 04/05: GBP 14 million). This level of costs is planned to reduce further toward the end of the current year.

Financial summary

Q2 sales for the retained businesses were GBP 643 million (Q2 03/04: GBP 733 million), down 6% at CER. Group sales at GBP 718 million (Q2 03/04: GBP 1,053 million) were down 32%.

Operating profit for the retained businesses decreased from GBP 74 million to GBP 47 million. Group operating profit fell 44% to GBP 49 million (Q2 03/04: GBP 88 million).

H1 sales for the retained businesses at GBP 1,254 million (H1 03/04: GBP 1,386 million) were 10% lower than last year and Group sales of GBP 1,507 million (H1 03/04: GBP 2,044 million) were 26% lower.

The Group has recorded a loss this quarter of GBP 116 million compared with a loss of GBP 50 million in Q2 03/04, reflecting a significant fixed asset impairment and the product recall at Climate Controls. The loss for the half year of GBP 477 million compares to a loss of GBP 149 million in the prior year and was mainly caused by the write-off of goodwill on disposal of operations and goodwill impairment.

Basic loss per share for the quarter was 2.1p (Q2 03/04: loss 1.5p). Earnings per share before exceptional items, goodwill amortisation and goodwill impairment were 0.4p (Q2 03/04: 1.3p).

Goodwill amortisation and goodwill impairment

Goodwill amortisation fell to GBP 7 million for the quarter and to GBP 16 million for the half (Q2 03/04: GBP 13 million; H1 03/04: GBP 31 million) mainly reflecting the disposal of Powerware.

The goodwill impairment charge of GBP 27 million (H1 03/04: nil) relates to the Meterpoint business within IMServ.

Operating exceptional items

Operating exceptional items in this quarter comprise four elements: costs for the Group's restructuring programmes, transition costs, fixed asset impairments and product recall costs. Restructuring costs for the quarter were GBP 18 million (Q2 03/04: GBP 15 million) and include GBP 10 million of costs connected with Climate Controls moving production facilities for its Ranco business from North America to China and GBP 2 million relating to Lambda Power's closure of Low Power in North America. A level of 2% of sales is expected for the full year. Transition costs of GBP 8 million (Q2 03/04: GBP 68 million) include GBP 5 million of personnel costs and GBP 3 million of costs for professional fees. Fixed asset impairments of GBP 63 million (Q2 03/04: GBP 18 million) relate predominantly to the Climate Controls business. The GBP 30 million of product recall costs (Q2 03/04: nil) that have been provided related to two ranges of valve products within the Climate Controls business, as announced in our October trading update.

Operating exceptional items in the half year totalled GBP 133 million (Q2 03/04: GBP 132 million).

Corporate exceptional items

The key component of corporate exceptional items continued to be the loss on disposal of operations of GBP 7 million (Q2 03/04: GBP 51 million). This arose principally from the business asset disposal of APV Baker Goldsboro in the US.

For the half year, the corporate exceptional charge was GBP 287 million (H1 03/04: GBP 87 million) which included gross consideration of GBP 401 million from the sales of Powerware, Hansen and Marcam during Q1. The charge also includes a write-off of associated goodwill of GBP 462 million, of which GBP 333 million had previously been eliminated against reserves on acquisition.

Net interest expense and taxation

The Q2 interest charge was GBP 33 million, giving an interest charge for the half year of GBP 69 million (H1 03/04: GBP 39 million). The Q1 interest charge included a GBP 5 million write-off of fees on the early termination of the Term Loan A facility that was not repeated in Q2. Overall the rise in interest charge compared to the prior year reflects the increased cost of borrowing under facilities agreed as part of the refinancing agreement.

The Q2 tax charge was GBP 8 million compared to a prior year tax credit of GBP 52 million, which included a credit in respect of prior years' tax of GBP 64 million. The tax charge for the quarter is based on an allocation of the estimated tax charge for the full year. No tax relief has been attributed to restructuring and corporate exceptionals.

The half year tax charge was GBP 13 million (H1 03/04: GBP 49 million tax credit).

Cash flow

Free cash inflow in the second quarter was GBP 6 million before payment of legacy liabilities, with an encouraging working capital inflow of GBP 23 million. Net capital expenditure reduced to GBP 12 million (Q2 03/04: GBP 45 million), mostly as a result of the disposal of Hansen, where there had been a major investment in new facilities.

During the quarter, payments made in respect of legacy liabilities from funds raised in the refinancing totalled GBP 54 million. These included GBP 28 million in respect of environmental and litigation settlements and GBP 25 million of pension contributions.

Indebtedness and financing

Net debt increased at September 30 to GBP 776 million (June 30, 2004: GBP 713 million). While cash and short-term deposits reduced by GBP 181 million, gross debt fell by GBP 118 million, mostly due to the successful completion of a tender for the repurchase of 71/8% Notes maturing January 2007. This resulted in the cancellation of Notes amounting to GBP 84 million.

Pensions and other legacy liabilities

The Group's pension service cost charge to operating profit for Q2 was GBP 12 million (Q2 03/04: GBP 11 million) and other finance charges were GBP 4 million (Q2 03/04: GBP 6 million). Settlement and curtailment credits were GBP 6 million (Q2 03/04: nil) relating to the disposals of Powerware (GBP 5 million) and APV Baker Goldsboro (GBP 1 million). Actuarial assessments of pension assets and liabilities have been updated as at September 30, 2004, resulting in an actuarial loss of GBP 47 million for the half year (H1 03/04: gain of GBP 89 million). This is mainly due to the return on assets in the main UK and US schemes being less than the interest cost on liabilities in the first half, which in turn was primarily due to the performance of non-UK equities in the period. Contributions of GBP 37 million were made in the quarter (Q2 03/04: GBP 36 million), of which GBP 22 million were paid to the UK main scheme. Overall the pension liability has increased by GBP 18 million to GBP 600 million since Q1 but reduced by GBP 6 million since March 31, 2004.

Other legacy liabilities reduced by GBP 30 million in the quarter resulting, in an overall reduction of GBP 54 million during the half. This included GBP 17 million of planned spend against transition costs and a number of smaller settlements. Additionally, certain liabilities were divested with the disposal of businesses in the first quarter.

Outlook

Results for the Group - during both the first and second quarters - have remained in line with expectations and with plans drawn up at the time of the refinancing in early 2004. Against a backdrop of increased financial stability, and modest economic recovery, the management teams of the businesses are gaining a sense of real operational momentum. Given the initiatives underway to improve operational performance and strengthen core processes and capabilities, it is expected that profits and cash in the second half will remain weighted towards the fourth quarter.

At this point and with continuing recovery in certain segments and geographies, the Group's overall expectations for an improving year-on-year trend in the second half remain unchanged.

    Notes to Editors:
 
    About Invensys
 

Invensys is a global automation, controls and process solutions Group. Our products, services, expertise and ongoing support enable intelligent systems to monitor and control processes in many different environments. The businesses within Invensys help customers in a variety of industries - including hydrocarbons, chemicals, oil and gas, power and utilities, rail, construction, environmental control, white goods, telecommunications, paper, food and beverage, dairy, pharmaceuticals and personal care - to perform with greater efficiency, safety and cost-effectiveness.

Process Systems provides products, services and solutions for the automation and optimisation of plant operation in the process industries, such as hydrocarbons (oil and gas), chemicals, power and utilities and metals and mining. Process Systems technologies, including industry-leading brands such as Foxboro, Triconex, SimSci-Esscor and Wonderware, help to make plants function more efficiently and safely.

Process Systems occupies a top-three position in the DCS (Distributed Control System), safety, simulation and HMI (Human-Machine Interface - the software that represents plant information in a comprehensible form) markets; its products are installed in over 50,000 plants across the world.

Eurotherm is a leading global supplier of control, data and measurement solutions and services to industrial and process customers. Eurotherm helps many industries, including plastics, pharmaceuticals, food and beverage and glassmaking, to measure and control variables such as pressure and temperature and record vital data. Eurotherm's product range includes distributed process automation systems and machine control incorporating single and multi-loop control, operator displays, data management and graphic recorders.

APV's knowledge and expertise in the food, beverage, personal care, pharmaceutical and chemical industries has made it a leading supplier of process equipment, turnkey plant solutions and value-increasing services. With nearly 1,000 engineers and 700 sales personnel across 48 countries, APV delivers return on investment across the world and throughout plant life cycles.

Rail Systems is a multinational leader in the design, manufacture, supply, installation, commissioning and maintenance of safety-related rail signalling and control systems, as well as a complete range of rail signalling products. Working directly for rail authorities or with partners or contractors who provide other elements of a complete solution, Rail Systems businesses have established market-leading positions in the US, UK and Spain.

Climate Controls is a leading provider of the components, systems and services used across the world to make commercial and residential buildings safer, more comfortable and more efficient. With industry-recognised names such as Ranco, Eberle, Robertshaw and Firex, Climate Controls has significant presence in the heating, ventilation, air conditioning, commercial refrigeration and residential building alarms markets.

Appliance Controls provides electronic and electro-mechanical systems and components to appliance and related industries. These include motor controls, thermostats and design software for refrigerators and freezers, washing machines and dishwashers, water coolers and a wide variety of other appliances used in homes and businesses. With the broadest product offering worldwide, and a history of more than 100 years of innovation, Appliance Controls helps customers to meet consumer demand for reliable, stylish and energy-efficient appliances.

Invensys also currently owns two businesses, Lambda and Baker, which are identified for sale.

Lambda is a leading producer of standard and modified power supplies for the industrial automation, test and measurement and telecommunications markets.

Baker provides equipment, services and complete process solutions to the bakery, biscuit, confectionery and snack industries.

The Invensys Group is listed on the London Stock Exchange. With over 35,000 employees operating in 60 countries, Invensys helps customers to improve their performance and profitability, building value for end users and shareholders alike.

                              Invensys plc
                              Second quarter
                               announcement
                               2004/05
 
                              Consolidated
                               profit and
                               loss account
                               (unaudited)
 
      Half year ended         Half year ended       Quarter   Quarter
                                                       ended     ended
         30 September            30 September            30        30
                                                   September September
              2004     2003                          2004      2003
              GBP m    GBP m                 Notes   GBP m     GBP m
 
                              Turnover
 
                              Continuing
             1,396    1,516    operations             715       801
                              Discontinued
               111      528    operations               3       252
 
             1,507    2,044                    1      718     1,053
                              Operating
                               profit before
                               exceptional
                               items,
                              goodwill
                               amortisation
                               and goodwill
                               impairment
 
                              Continuing
                66       81    operations              49        73
                              Discontinued
                (3)      22    operations               -        15
 
                63      103                    1       49        88
 
                              Operating
                               exceptional
              (133)    (132)   items           3     (119)     (101)
 
                              Operating loss
                               before
                               goodwill
                               amortisation
                               and goodwill
               (70)     (29)   impairment             (70)      (13)
 
                              Goodwill
               (16)     (31)   amortisation            (7)      (13)
                              Goodwill
               (27)       -    impairment               -         -
 
                              Total operating
              (113)     (60)   loss            2      (77)      (26)
 
 
 
                              Continuing
              (108)     (56)   operations      2      (77)      (33)
                              Discontinued
                (5)      (4)   operations      2        -         7
 
                              Total operating
              (113)     (60)   loss            2      (77)      (26)
 
                              Corporate
                               exceptional
                               items
                              Costs of
                 -      (31)   closure                  -         -
                              Loss on sale of
                (1)      (2)   fixed assets            (1)       (1)
                              Loss on
                               disposal of
              (286)     (54)   operations      4       (7)      (51)
 
                              Loss on
                               ordinary
                               activities
                               before
                               interest and
              (400)    (147)   taxation               (85)      (78)
                              Net interest
                               payable and
                               similar
               (69)     (39)   charges                (33)      (18)
                              Other finance
                               charges - FRS
                (8)     (12)   17                      (4)       (6)
 
                              Loss on
                               ordinary
                               activities
                               before
              (477)    (198)   taxation              (122)     (102)
                              Taxation on
                               loss on
                               ordinary
               (13)      49    activities      5       (8)       52
 
                              Loss on
                               ordinary
                               activities
              (490)    (149)   after taxation        (130)      (50)
                              Minority
                               interests -
                13        -    equity                  14         -
 
                              Retained loss
              (477)    (149)   for the period        (116)      (50)
----------------------------                      ------------------
 
                               Loss per share
                               (basic and
            (8.4) p    (4.3) p   diluted)        6   (2.1)p   (1.5)p
                               (Loss)/earnings
                               per share
                               (total Group
                               before
                               exceptional
                               items,
                               goodwill
                               amortisation
                               and goodwill
            (0.2) p     0.8 p  impairment)       6    0.4 p     1.3 p
 
 
                              Average
                               exchange rates
                               for the period
              1.81     1.62   US$ to GBP 1           1.80      1.61
              1.49     1.43   Euro to GBP 1          1.48      1.44
            197.97   190.10   Yen to GBP 1         199.16    186.76
 

The results for the period have been translated into sterling at the appropriate average exchange rates.

            Invensys plc
            Second quarter announcement
             2004/05
 
            Consolidated balance sheet
             (unaudited)
 
   31 March                                             30         30
                                                  September  September
      2004                                            2004       2003
      GBP m                                Notes      GBP m      GBP m
 
            Fixed assets
       478  Intangible assets - goodwill               309        578
       660  Tangible assets                            459        816
            Investments in associated
         1   undertakings                                1          4
        16  Other investments                           16         20
 
     1,155                                             785      1,418
 
            Current assets
       376  Stocks                                     309        475
            Debtors: amounts falling due
     1,043   within one year                           945        945
            Debtors: amounts falling due
        38   after more than one year                   39         99
        20  Investments                                 18         23
       566  Cash and short-term deposits      7        794        396
 
     2,043                                           2,105      1,938
            Creditors: amounts falling due
             within one year
       (58) Short-term borrowings                      (34)      (572)
    (1,065) Other creditors                           (957)    (1,174)
 
    (1,123)                                           (991)    (1,746)
 
       920  Net current assets                       1,114        192
 
            Total assets less current
     2,075   liabilities                             1,899      1,610
 
            Creditors: amounts falling due
             after more than one year
    (1,494) Long-term borrowings                    (1,536)    (1,433)
       (23) Other creditors                            (39)       (26)
 
    (1,517)                                         (1,575)    (1,459)
 
            Provisions for liabilities and
      (256)  charges                                  (251)      (320)
 
            Net assets/(liabilities)
       302   excluding pension liability                73       (169)
 
      (606) Pension liability                         (600)      (770)
 
      (304)                                   1       (527)      (939)
-----------                                      ---------------------
 
            Capital and reserves
       897  Called up share capital                    897        875
       440  Share premium account                      440         15
        83  Capital redemption reserve                  83         83
     2,509  Capital reserve                          2,826      2,126
    (4,398) Profit and loss account                 (4,921)    (4,225)
 
      (469) Shareholders' deficit - equity            (675)    (1,126)
            Minority interests - including
       165   non-equity                                148        187
 
      (304)                                           (527)      (939)
-----------                                      ---------------------
 
 
 
            Period end exchange rates
      1.84  US$ to GBP 1                              1.81       1.66
      1.50  Euro to GBP 1                             1.46       1.43
    191.20  Yen to GBP 1                            199.44     185.60
 

The balance sheet has been translated into sterling at appropriate period end exchange rates.

                        Invensys plc
                        Second quarter
                         announcement
                         2004/05
 
                        Consolidated cash
                         flow statement
                         (unaudited)
 
  Half year  Half year                             Quarter    Quarter
       ended      ended                               ended      ended
30 September        30                                  30         30
              September                           September  September
       2004       2003                                2004       2003
       GBP m      GBP m                     Notes     GBP m      GBP m
 
                        Net cash
                         (outflow)/inflow
                         from operating
        (36)        (8)  activities            7        14        163
                        Returns on
                         investments and
                         servicing of
        (56)       (47)  finance               7       (47)       (24)
        (19)       (50) Taxation               7        (6)       (45)
                        Capital expenditure
                         and financial
        (28)       (59)  investment            7       (12)       (45)
                        Acquisitions and
        371         74   disposals             7        (6)        99
 
                        Cash
                         inflow/(outflow)
                         before use of
                         liquid resources
        232        (90)  and financing                 (57)       148
                        Management of liquid
         31        (48)  resources             7       134        (28)
                        Financing
                        (Decrease)/increase
         (5)       136   in debt               7      (108)      (118)
 
                        Increase/(decrease)
        258         (2)  in cash in period             (31)         2
-----------------------                          ---------------------
 
 
 
                        Reconciliation of
                         net cash flow to
                         movement in net
                         debt (unaudited)
 
  Half year  Half year                             Quarter    Quarter
       ended      ended                               ended      ended
30 September        30                                  30         30
              September                           September  September
       2004       2003                                2004       2003
       GBP m      GBP m                     Notes     GBP m      GBP m
 
                        Increase/(decrease)
        258         (2)  in cash in period             (31)         2
                        Cash
                         outflow/(inflow)
                         from
                         decrease/(increase)
          5       (136)  in debt                       108        118
                        Cash
                         (inflow)/outflow
                         from
                         (decrease)/increase
        (31)        48   in liquid resources          (134)        28
 
                        Change in net debt
                         resulting from cash
        232        (90)  flows                 7       (57)       148
                        Transfer of facility
                         costs from
          2          -   prepayments                     2          -
                        Amortisation of
                         facility fees
         (3)             within debt                    (3)         -
        (21)        37  Exchange movements     7        (5)       (11)
 
                        Movement in net debt
        210        (53)  in period                     (63)       137
                        Net debt at
       (986)    (1,556)  beginning of period   7      (713)    (1,746)
 
                        Net debt at end of
       (776)    (1,609)  period                7      (776)    (1,609)
-----------------------                          ---------------------
 
 
 
                        Consolidated
                         statement of total
                         recognised gains
                         and losses
                         (unaudited)
 
  Half year  Half year                             Quarter    Quarter
       ended      ended                               ended      ended
30 September        30                                  30         30
              September                           September  September
       2004       2003                                2004       2003
       GBP m      GBP m                               GBP m      GBP m
 
       (477)      (149) Loss for the period           (116)       (50)
                        Currency translation
                         differences on
                         foreign currency
                         net investments,
        (17)        14   net of tax                      4        (13)
                        Actuarial
                         (loss)/gain
                         recognised on
        (47)        89   pension schemes               (47)        89
 
 
                        Total recognised
                         (losses)/gains in
       (541)       (46)  the the period               (159)        26
------------                                     ----------
                        Prior year
                  (984)  adjustment - FRS 17                        -
                        Prior year
                   (23)  adjustment - FRS 5                         -
 
 
                        Total recognised
                         (losses)/gains
                         relating to the
                (1,053)  period                                    26
             ----------                                     ----------
 
 
 
 
                        Reconciliation of
                         movements in
                         consolidated
                         shareholders'
                         deficit (unaudited)
 
  Half year  Half year                             Quarter    Quarter
       ended      ended                               ended      ended
30 September        30                                  30         30
              September                           September  September
       2004       2003                                2004       2003
       GBP m      GBP m                               GBP m      GBP m
 
       (477)      (149) Loss for the period           (116)       (50)
                        Currency translation
                         differences on
                         foreign currency
                         net investments,
        (17)        14   net of tax                      4        (13)
                        Unvested, restricted
          2          -   shares (UITF 17)                1          -
                        Actuarial
                         (loss)/gain
                         recognised on
        (47)        89   pension schemes               (47)        89
                        Goodwill written
                         back on disposals
        333         30   and closures                   15          2
 
                        Net
                         (increase)/decrease
                         in shareholders'
                         deficit for the
       (206)       (16)  period                       (143)        28
 
                        Opening
                         shareholders'
                         deficit (previously
       (469)      (103)  reported)                    (532)    (1,154)
                        Prior year
          -       (984)  adjustment - FRS 17             -          -
                        Prior year
          -        (23)  adjustment - FRS 5              -          -
 
                        Opening
                         shareholders'
       (469)    (1,110)  deficit (restated)           (532)    (1,154)
 
                        Closing
                         shareholders'
       (675)    (1,126)  deficit                      (675)    (1,126)
-----------------------                          ---------------------
 
Invensys plc
Second quarter announcement
 2004/05
 
Notes (unaudited)
 
1 Segmental analysis
 
                                               Operating   Operating
                         Turnover   Turnover     profit      profit
                                                     (a)         (a)
                         H1 2004/05 H1 2003/04  H1 2004/05 H1 2003/04
                            GBP m      GBP m       GBP m       GBP m
 
Business
Process Systems              349        375          17          14
Eurotherm                     60         60           7           8
APV                          174        193          (6)         17
Rail Systems                 207        232          26          32
Climate Controls             286        338          21          33
Appliance Controls           178        188          24          24
Businesses for sale          142        130           3         (10)
Corporate costs                -          -         (26)        (37)
 
Continuing operations      1,396      1,516          66          81
 
Discontinued operations      111        528          (3)         22
 
                           1,507      2,044          63         103
                         ---------- ---------- ----------- ---------
 
 
Geographical analysis by
 origin
United Kingdom               215        213          12          23
Rest of Europe               366        374          21          29
North America                522        650          40          56
South America                 34         28           5           2
Asia Pacific                 224        225          13           7
Africa and Middle East        35         26           1           1
Corporate costs                -          -         (26)        (37)
 
Continuing operations      1,396      1,516          66          81
 
Discontinued operations      111        528          (3)         22
 
                           1,507      2,044          63         103
                         ---------- --------   ----------- ---------
 
 
Geographical analysis of turnover
 by destination
United Kingdom               196        198
Rest of Europe               366        374
North America                504        627
South America                 40         32
Asia Pacific                 231        243
Africa and Middle East        59         42
 
Continuing operations      1,396      1,516
 
Discontinued operations      111        528
 
                           1,507      2,044
                         ---------- --------
 
 
                                                 Operating   Operating
                              Turnover  Turnover    profit      profit
                                                       (a)         (a)
                                    Q2        Q2        Q2          Q2
                               2004/05   2003/04   2004/05     2003/04
                                GBP m      GBP m     GBP m       GBP m
 
 
Business
Process Systems                   180        206       14           22
Eurotherm                          32         31        4            4
APV                                92        104        1           12
Rail Systems                      103        115       13           18
Climate Controls                  145        179       14           21
Appliance Controls                 91         98       13           13
Businesses for sale                72         68        2          (1)
Corporate costs                     -          -      (12)        (16)
 
Continuing operations             715        801       49           73
 
Discontinued operations             3        252        -           15
 
                                  718      1,053       49           88
                                  -------- ------   --------- --------
 
 
Geographical analysis by
 origin
United Kingdom                    103        112        8           15
Rest of Europe                    183        198       13           18
North America                     273        342       26           43
South America                      19         14        4            2
Asia Pacific                      116        121        9           10
Africa and Middle East             21         14        1            1
Corporate costs                     -          -      (12)        (16)
 
Continuing operations             715        801       49           73
 
Discontinued operations             3        252        -           15
 
                                  718      1,053       49           88
                                  -------- ------   --------- --------
 
 
Geographical analysis of turnover
 by destination
United Kingdom                     99        104
Rest of Europe                    180        195
North America                     255        331
South America                      22         17
Asia Pacific                      120        131
Africa and Middle East             39         23
 
Continuing operations             715        801
 
Discontinued operations             3        252
 
                                  718      1,053
                                  -------- ------
 

(a) Before exceptional items, goodwill amortisation and goodwill impairment.

Invensys plc
Second quarter announcement 2004/05
 
Notes (unaudited)
 
1 Segmental analysis
 (continued)
                            Net       Net       Net
                      operating operating operating
                         assets    assets    assets
                            H1        H1        FY
                        2004/05   2003/04   2003/04
                          GBP m     GBP m     GBP m
 
Business
Process Systems            346       372       354
Eurotherm                  133       150       134
APV                         99        88        87
Rail Systems                41        56        46
Climate Controls           193       342       296
Appliance Controls         188       198       173
Businesses for sale        205       204       219
Corporate costs           (189)     (192)     (158)
 
Continuing operations    1,016     1,218     1,151
 
Discontinued
 operations                  -       469       324
 
                         1,016     1,687     1,475
                      -----------------------------
 
Borrowings
Cash and short-term
 deposits
Deferred tax
Taxation
Pension liability
 
Net liabilities per
 consolidated balance sheet
 
                           Net      Net        Net
                       operatingoperatingoperating
                        assets   assets     assets
                             H1       H1       FY
                         2004/05  2003/04  2003/04
                         GBP m    GBP m      GBP m
 
Geographical analysis by
 origin
 
United Kingdom            221      247        247
Rest of Europe            300      230        273
North America             377      520        419
South America              26       26         20
Asia
 Pacific                  266      372        336
Africa and
 Middle East               15       15         14
Corporate
 costs                   (189)    (192)      (158)
 
Continuing
 operations             1,016    1,218      1,151
 
Discontinued
 operations                 -      469        324
 
                        1,016    1,687      1,475
 
Borrowings             (1,570)  (2,005)    (1,552)
Cash and short-term
 deposits                 794      396        566
Deferred
 tax                        5      (56)        (6)
Taxation                 (172)    (191)      (181)
Pension
 liability               (600)    (770)      (606)
 
Net liabilities per
 consolidated balance
 sheet                   (527)    (939)      (304)
                       ---------------------------
 
2 Total operating
 loss
 
                        Continuing Continuing Discontinued
                        operations operations   operations
                        Q2 2004/05 Q2 2003/04   Q2 2004/05
                           GBP m      GBP m      GBP m
 
Turnover                    715        801          3
Cost of sales              (521)      (575)        (2)
 
Gross profit                194        226          1
Distribution
 costs                       (4)        (5)         -
Administrative
 costs                     (141)      (148)        (1)
 
Operating
 profit(a)                   49         73          -
Operating
 exceptional
 items                     (119)       (99)         -
Goodwill
 amortisation                (7)        (7)         -
 
 
Total operating
 loss                       (77)       (33)         -
                        ---------- --------   ------------
 
 
                                       Discontinued    Total    Total
                                         operations
                                         Q2 2003/04       Q2       Q2
                                                     2004/05  2003/04
                                              GBP m    GBP m    GBP m
 
Turnover                                       252      718     1,053
Cost of sales                                 (189)    (523)     (764)
 
Gross profit                                    63      195       289
Distribution costs                              (1)      (4)       (6)
Administrative costs                           (47)    (142)     (195)
 
Operating profit(a)                             15       49        88
Operating exceptional items                     (2)    (119)     (101)
Goodwill amortisation                           (6)      (7)      (13)
 
 
Total operating loss                             7      (77)      (26)
                                  --- -------------  -------- --------
 
    The total restructuring costs of GBP 18 million (Q2 2003/04: GBP
15 million) together with transition costs of GBP 8 million (Q2
2003/04: GBP 68 million), product recall costs of GBP 30 million (Q2
2003/04: GBP nil), goodwill amortisation of GBP 7 million (Q2 2003/04:
GBP 13 million) and fixed asset impairment of GBP 63 million (Q2
2003/04: GBP 18 million) are classified as administrative costs, which
therefore total GBP 268 million (Q2 2003/04: GBP 309 million).
 
                        Continuing Continuing Discontinued
                        operations operations   operations
                             H1         H1         H1
                         2004/05    2003/04    2004/05
                           GBP m      GBP m      GBP m
 
Turnover                  1,396      1,516        111
Cost of sales            (1,036)    (1,115)       (91)
 
Gross profit                360        401         20
Distribution
 costs                       (9)       (11)        (1)
Administrative
 costs                     (285)      (309)       (22)
 
Operating
 profit/(loss)(a)            66         81         (3)
Operating
 exceptional
 items                     (133)      (122)         -
Goodwill
 amortisation               (14)       (15)        (2)
Goodwill
 impairment                 (27)         -          -
 
 
Total operating
 loss                      (108)       (56)        (5)
                        ---------- --------   ------------
 
                                         Discontinued   Total    Total
                                                   operations
                                          H1 2003/04      H1       H1
                                                      2004/05  2003/04
                                               GBP m    GBP m    GBP m
 
Turnover                                        528    1,507    2,044
Cost of sales                                  (394)  (1,127)  (1,509)
 
Gross profit                                    134      380      535
Distribution costs                               (3)     (10)     (14)
Administrative costs                           (109)    (307)    (418)
 
Operating profit/(loss)(a)                       22       63      103
Operating exceptional items                     (10)    (133)    (132)
Goodwill amortisation                           (16)     (16)     (31)
Goodwill impairment                               -      (27)       -
 
 
Total operating loss                             (4)    (113)     (60)
                                   --- ------------- -----------------
 

(a) Before exceptional items, goodwill amortisation and goodwill impairment.

                               Invensys plc
                               Second quarter
                                announcement
                                2004/05
 
                               Notes
                                (unaudited)
 
                               3 Operating
                                exceptional
                                items
     Half year ended Half year                      Quarter   Quarter
                          ended                        ended     ended
        30 September        30                           30        30
                      September                    September September
              2004       2003                         2004       2003
              GBP m      GBP m                        GBP m      GBP m
 
                               Restructuring
               (28)       (46)  costs                  (18)       (15)
                               Transition
               (12)       (68)  costs(a)                (8)       (68)
                               Fixed asset
               (63)       (18)  impairment             (63)       (18)
                               Product
                                recall
               (30)         -   costs(a)               (30)         -
 
              (133)      (132)                        (119)      (101)
-------------------- ---------                    --------------------
 
                               Restructuring
                                costs by
                                business
 
                               Process
                (2)        (7)  Systems                 (1)        (4)
                 -         (1) Eurotherm                 -         (1)
                (5)        (3) APV                      (3)        (1)
                 -          -  Rail Systems              -          -
                               Climate
               (14)        (6)  Controls                (9)        (3)
                               Appliance
                 -         (3)  Controls                 -          -
                               Businesses
                (5)       (11)  for sale                (3)        (2)
                               Corporate
                (2)        (5)  costs                   (2)        (2)
 
                               Continuing
               (28)       (36)  operations             (18)       (13)
 
                               Discontinued
                 -        (10)  operations               -         (2)
 
               (28)       (46)                         (18)       (15)
-------------------- ---------                    --------------------
 
                               Fixed asset
                                impairment by
                                business
 
                               Climate
               (60)         -   Controls               (60)         -
                               Businesses
                (1)         -   for sale                (1)         -
                               Corporate
                (2)       (18)  costs                   (2)       (18)
 
                               Continuing
               (63)       (18)  operations             (63)       (18)
 
                               Discontinued
                 -          -   operations               -          -
 
               (63)       (18)                         (63)       (18)
-------------------- ---------                    --------------------
 
 
                             (a)Transition costs relate wholly to the
                                corporate sector.  Product recall
                                costs are attributable wholly to the
                                Climate Controls business.
 
 
                               4 Loss on
                                disposal of
                                operations
 
                               The Group's loss
                                on disposal of
                                operations
                                comprises the
                                following:
 
     Half year ended         Half year ended        Quarter   Quarter
                                                       ended     ended
        30 September        30                           30        30
                      September                    September September
              2004       2003                         2004       2003
              GBP m      GBP m                        GBP m      GBP m
 
                               Profit on
                                assets
               168         77   divested                 2         80
                               Charge of
                                associated
              (462)      (131)  goodwill               (15)      (131)
                               Settlements
                                and
                                curtailments
                 8          -   credit                   6          -
 
              (286)       (54)                          (7)       (51)
-------------------- ---------                    --------------------
 
 
 
 
                               5 Taxation on
                                loss on
                                ordinary
                                activities
     Half year ended Half year                      Quarter   Quarter
                          ended                        ended     ended
        30 September        30                           30        30
                      September                    September September
              2004       2003                         2004       2003
              GBP m      GBP m                        GBP m      GBP m
 
                               Taxation on
                                ordinary
               (13)       (20)  activities              (8)       (15)
                               Adjustments in
                                respect of
                 -         64   prior years              -         64
                 -          5  Deferred tax              -          3
 
               (13)        49                           (8)        52
-------------------- ---------                    --------------------
 
                      Invensys plc
                      Second quarter
                       announcement 2004/05
 
                      Notes
                       (unaudited)
 
                      6 (Loss)/earnings per
                       share
 
  Half year           Half year ended               Quarter   Quarter
       ended                                           ended     ended
30 September       30                                    30        30
             September                             September September
      2004      2003                                 2004      2003
 
                      (Loss)/earnings
                       per share
                       (pence)
      (8.4)p    (4.3)p               Basic           (2.1) p   (1.5) p
                                     Total                           p
      (0.2)p     0.8 p                Group(a)        0.4  p    1.3
      (8.4)p    (4.3)p               Diluted         (2.1) p   (1.5) p
 
                      Average number
                       of shares
                       (million)
     5,687     3,500                 Basic          5,687     3,500
 
 
                      (Loss)/earnings
                       (GBP m)
      (477)     (149)                Basic           (116)      (50)
 
                                     Total
                                      Group
                                     Operating
        63       103                  profit(a)        49        88
                                     Net
                                      interest
       (69)      (39)                 payable         (33)      (18)
                                     Other
                                      finance
                                      charges -
        (8)      (12)                 FRS 17           (4)       (6)
 
                                     Operating
                                      profit
                                      less
                                      finance
       (14)       52                  costs            12        64
                                     Tax on
                                      operating
                                      profit less
                                      finance
       (13)      (25)                 costs            (8)      (20)
                                     Minority
        13         -                  interests        14         -
 
       (14)       27                                   18        44
----------- ---------                             --------  --------
 

(a) Before exceptional items, goodwill amortisation and goodwill impairment.

The basic loss per share for the quarter has been calculated using 5,687 million shares (Q2 2003/04: 3,500 million), being the weighted average number of shares in issue during the quarter and the loss after taxation and minority interests of GBP 116 million (Q2 2003/04: GBP 50 million).

(Loss)/earnings per share is also calculated by reference to earnings for the total Group, before exceptional items, goodwill amortisation and goodwill impairment with an underlying tax charge of GBP 8 million (Q2 2003/04: GBP 20 million), since the directors consider that this gives a useful additional indication of underlying performance.

The diluted loss per share has been calculated in accordance with Financial Reporting Standard No 14: Earnings per share (FRS 14) without reference to adjustments in respect of certain share options which are considered to be anti-dilutive.

                              Invensys plc
                              Second quarter
                               announcement
                               2004/05
 
                              Notes (unaudited)
 
                              7 Cash flow
                               statement
 
    Half year ended               Half year ended   Quarter   Quarter
                                                       ended     ended
      30 September        30                            30         30
                    September                     September  September
             2004       2003                          2004       2003
             GBP m      GBP m                         GBP m      GBP m
 
                              Reconciliation of
                               operating loss
                               before interest
                               and tax
                              to net cash outflow
                               from operating
                               activities
 
                              Total operating
             (113)       (60)  loss                    (77)       (26)
               39         61  Depreciation charge       17         30
                              Provision for
                               impairment charged
                               to operating
               90          -   profit                   63          -
                              Amortisation of
               16         31   goodwill                  7         13
                              Cash costs of
                -         (2)  closures                  -          1
              (18)       (13) Increase in stocks        (3)        (1)
                              (Increase)/decrease
              (12)        53   in debtors              (19)       102
                              Increase/(decrease)
                               in creditors and
               15        (58)  provisions               51         69
                              Movement in
              (53)       (20)  pensions                (25)       (25)
 
                              Net cash
                               (outflow)/inflow
                               from operating
              (36)        (8)  activities               14        163
-----------------------------                    ---------------------
 
                              Analysis of cash
                               flows for headings
                               netted in the cash
                               flow statement
 
                              Returns on
                               investments and
                               servicing of
                               finance
                8         10  Interest received          5          5
              (63)       (56) Interest paid            (51)       (28)
                              Dividends paid to
               (1)        (1)  minority interests       (1)        (1)
 
                              Net cash outflow
                               for returns on
                               investments and
                               servicing of
              (56)       (47)  finance                 (47)       (24)
-----------------------------                    ---------------------
 
                              Taxation
                              UK corporation tax
               (1)         -   (paid)/received          (1)         1
              (18)       (50) Overseas tax paid         (5)       (46)
 
                              Net cash outflow
              (19)       (50)  for tax paid             (6)       (45)
-----------------------------                    ---------------------
 
                              Capital expenditure
                               and financial
                               investment
                              Purchase of
                               tangible fixed
              (28)       (65)  assets                  (12)       (48)
                              Sale of tangible
                -          2   fixed assets              -          1
                              Sale of trade
                -          4   investments               -          2
 
                              Net cash outflow
                               for capital
                               expenditure and
                               financial
              (28)       (59)  investment              (12)       (45)
-----------------------------                    ---------------------
 
                              Acquisitions and
                               disposals
                              Purchase of
                               subsidiary
               (1)        (1)  undertakings             (1)        (1)
                              Sale of subsidiary
              390         80   undertakings(a)          (5)       105
                              Net cash disposed
                               of on sale of
                               subsidiary
              (18)        (4)  undertakings              -         (4)
                              Purchase of
                -         (1)  minority interests        -         (1)
 
                              Net cash
                               inflow/(outflow)
                               for acquisitions
              371         74   and disposals            (6)        99
-----------------------------                    ---------------------
 
                              Management of
                               liquid resources
                              Short-term deposits
               31        (48)  withdrawn/(made)        134        (28)
 
                              Net cash
                               inflow/(outflow)
                               from management of
               31        (48)  liquid resources        134        (28)
-----------------------------                    ---------------------
 
                              Financing
                              Debt due within one
                               year
                              Increase in short-
                -        128   term borrowings           -         55
                              Repayment of short-
              (21)      (189)  term borrowings         (23)      (127)
                              Debt due beyond one
                               year
                              Increase in long-
              107        242   term borrowings           6          -
                              Repayment of long-
              (90)       (44)  term borrowings         (90)       (45)
                              Capital element of
                               finance lease
               (1)        (1)  repayments               (1)        (1)
 
               (5)       136                          (108)      (118)
-----------------------------                    ---------------------
 
                              Net cash
                               (outflow)/inflow
               (5)       136   from financing         (108)      (118)
-----------------------------                    ---------------------
 

(a) In the three months ended 30 September 2004, the net disposal proceeds received comprised cash proceeds of GBP 2 million less GBP 7 million of other directly related cash costs, including advisor and professional fees.

Invensys plc
Second quarter
 announcement 2004/05
 
Notes (unaudited)
 
7 Cash flow statement
 (continued)
 
Analysis of changes to
 net debt
 
Second quarter
                             At                                     At
                         1 July  Cash        Other Exchange        30
                                                             September
                          2004   flow movements(a) movement      2004
                          GBP m GBP m        GBP m    GBP m      GBP m
 
 
Cash at bank and in hand   717   (51)           -        3        669
Overdrafts                 (21)   20            -        -         (1)
 
                                 (31)
 
 
Debt due within one year   (55)   23            -       (1)       (33)
Debt due after one year (1,609)   84           (1)      (8)    (1,534)
Finance leases              (3)    1            -        -         (2)
 
                                 108
Short-term deposits        258  (134)           -        1        125
 
Total                     (713)  (57)          (1)      (5)      (776)
                        ------------- ------------ -------------------
 
Cash at bank and in hand   717                                    669
Short-term deposits        258                                    125
 
Cash and short-term
 deposits                  975                                    794
                        -------                             ----------
 

(a) Other movements comprise a GBP 2 million transfer of facility fees from prepayments in respect of the Group's refinancing, less GBP 3 million amortisation of facility fees within debt.

Half year
                                 At                                 At
                            1 April Cash     Other Exchange         30
                                                             September
                              2004  flow movements movement       2004
                              GBP m GBP m      GBP m    GBP m    GBP m
 
 
 
Cash at bank and in hand       409  255         -        5        669
Overdrafts                      (4)   3         -        -         (1)
 
                                    258
 
 
Debt due within one year       (53)  21         -       (1)       (33)
Debt due after one year     (1,492) (17)       (1)     (24)    (1,534)
Finance leases                  (3)   1         -        -         (2)
 
                                      5
Short-term deposits            157  (31)        -       (1)       125
 
Total                         (986) 232        (1)     (21)      (776)
                            ------------ --------- -------------------
 
Cash at bank and in hand       409                                669
Short-term deposits            157                                125
 
Cash and short-term deposits   566                                794
                            -------                         ----------
 
 

8 Financial statements

This unaudited results statement was approved by a duly appointed and authorised committee of the Board of directors on 10 November 2004. This statement does not comprise the statutory accounts of the Group, as defined in section 240 of the Companies Act 1985.

The financial information for the half year and quarter ended 30 September 2004 has been prepared on the same basis of accounting as for the year ended 31 March 2004. The financial information is unaudited. The statutory accounts of Invensys plc for the year ended 31 March 2004 have been delivered to the Registrar of Companies. The auditors, Ernst & Young LLP, reported on those accounts and their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

www.invensys.com

SOURCE: Invensys plc

Invensys plc
Victoria Scarth / Mike Davies
tel: +44 (0) 20 7821 3755
or
Taylor Rafferty
Brian Rafferty
tel: +1 212 889-4350