Invensys PLC ISYS Half Yearly Report

  Invensys PLC (ISYS) - Half Yearly Report

RNS Number : 1691R
Invensys PLC
15 November 2012














Invensys plc



15 November 2012



RESULTS FOR HALF YEAR ENDED 30 SEPTEMBER 2012



Business highlights

· Overall the Group produced a good performance in an uncertain
macro-economic environment

· Invensys Operations Management continued to perform well in the first
half with improvements in revenue, operating profit and operating margin
driven by conversion of its large order book and strong growth in higher
margin Software revenue

· As expected, Invensys Rail had delays in mobilisation of some of the
large contracts awarded in H2 last year and in the letting of contracts under
the Network Rail framework agreements; material progress is expected in H2

· Invensys Controls experienced softening demand in Appliance; good
progress is expected in Commercial and Wholesale in H2

Financial performance - continuing operations

· Order intake was £1,044 million (H1 11/12: £1,086 million), down 2% at
CER^1 due mainly to the timing of orders at Invensys Operations Management and
Invensys Controls

· Revenue was £1,200 million (H1 11/12: £1,244 million), down 2% at CER,
with good growth in Invensys Operations Management more than offset by an
expected decline at Invensys Rail

· Operating profit^2 was £102 million (H1 11/12 £102 million), up 2% at
CER, with an expected weaker performance from Invensys Rail offset by Invensys
Operations Management

· Underlying earnings per share^3 increased by 10% to 7.6p (H1 11/12:
6.9p) mainly due to a reduction in restructuring costs

· Operating cash inflow was £27 million (H1 11/12: £11 million outflow)
with operating cash conversion of 26% mainly due to the investment in working
capital in our major projects ahead of payment milestones

· Net cash was £175 million (31 March 2012: £262 million) with the
reduction mainly due to working capital and pension payments

· The IAS 19 pension liability was £490 million (31 March 2012: £426
million), in part reflecting continued low interest rates

· Interim dividend increased by 6% to 1.75p per share (H1 11/12: 1.65p
per share)

Outlook

· Subject to any significant changes to the global macro-economic
environment, our good first half performance and strong order book supports
our view that we will improve our performance for the year as a whole



Contact:



Invensys plc Steve Devany tel: +44 (0)
20 3155 1301

 

FTI Consulting  Andrew Lorenz

 Richard Mountain tel: +44
(0) 20 7269 7291





Chief Executive's Statement



We have produced a good performance in the first six months of the year, a
period during which there have been increased levels of uncertainty in the
global macro-economic environment.



Invensys Operations Management continued to perform well with growth in
revenue and operating margins. This was achieved through its strong order
book and the diversity of its industry and geographic end markets. The
execution of the three China Nuclear contracts is progressing in accordance
with our revised plans.



As expected, Invensys Rail had a slow start to the year due to the timing of
orders from Network Rail and also the timing of mobilisation of some of our
large export contracts. We expect material progress in the second half of the
year.



Invensys Controls experienced less volatility in demand within its Appliance
business but was generally affected by the weaker economies in the US and
Europe.



Our financial position remains strong with net cash on the balance sheet of
£175 million despite having made some large investments in working capital to
support our major projects ahead of payment milestones; this working capital
position is expected to unwind as we enter the next financial year.



We have made two bolt-on acquisitions so far this year; PHW Inc., which
expands Invensys Rail's positive train control product range to include
onboard equipment, and Spiral Software, which strengthens our simulation and
optimisation offerings for refinery customers in Invensys Operations
Management.

Looking ahead, subject to any significant changes to the global macro-economic
environment, our good first half performance and strong order book supports
our view that we will improve our performance for the year as a whole.



Wayne Edmunds





Notes

1. Unless otherwise stated, % change is measured at constant exchange rates
(CER) as a percentage of the H1 11/12 adjusted base and is calculated based
upon underlying amounts in £'000s.



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



3. Underlying earnings per share is before exceptional post-retirement
benefits - settlement loss; and exceptional finance costs.







Presentation and conference call

Wayne Edmunds, CEO, and David Thomas, CFO, will be hosting a presentation and
conference call for analysts and investors at 9.00 a.m. London time this
morning:



Venue: City Presentation Centre
4 Chiswell Street
London
EC1Y 4UP





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



 UK: +44(0)20 7784 1036
 US: +1 646 254 3360
 France:   0805 631 580
 Germany:      0800 589 2673
 Italy: 800 089 737
 Spain:           800 600 526
 Confirmation Code:           6642955



The presentation will also be available via audio webcast both live and for
replay purposes. To access the audio webcast please go to
http://www.invensys.com and follow the Half Year Results link.



A recording will be available at this address shortly after the completion of
the call. This announcement and the presentation materials are also available
at http://www.invensys.com





Safe harbor

This announcement contains certain statements that are forward-looking. These
statements involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. Forward-looking
statements are not guarantees of future performance. The Group's actual
results of operations, financial condition and liquidity, and the development
of the industries in which the Group operates, may differ materially from
those made in or suggested by these statements and a number of factors could
cause the results and developments to differ materially from those expressed
or implied by these forward-looking statements.



Business Review

Performance highlights

Half year ended 30 September



All data relates to continuing                             % Total % Change at
operations (other than free cash flow) H1 12/13 H1 11/12  change      CER^1
Orders (£m)                               1,044    1,086   (4%)       (2%)
Order book^4 (£m) ^                       2,148    2,360   (9%)       (6%)
Revenue (£m)                              1,200    1,244   (4%)       (2%)
Operating profit^2 (£m)                     102      102      -         2%
Operating margin^2 (%)                     8.5%     8.2%
Operating cash flow - inflow/(outflow)
(£m)                                         27     (11)   nm^5       nm^5
Cash conversion (%)                         26%    (11%)
Free cash flow - outflow (£m)              (49)    (103)    52%
Earnings per share - basic (p)             7.6p     6.9p  10.2%
Earnings per share - underlying (p)        7.6p     6.9p  10.2%
Return on operating capital^3 (%)         33.5%    35.2%       

^

1. % change is measured as the change at CER as a percentage of the
H1 11/12 adjusted base and is calculated based on underlying amounts in
£'000s.

2. All references to operating profit and operating margin are
arrived at before exceptional items, unless otherwise stated.

3. Return on operating capital at CER is calculated as OPBIT divided
by capital employed excluding goodwill, net pension liabilities, non-operating
provisions and net taxation liabilities.

4. Comparative is as at 31 March 2012.

5. nm - not meaningful.





Dividend

The Board has declared an interim dividend of 1.75 pence per share (H1 11/12:
1.65 pence per share) payable on 21 December 2012 to shareholders on the
register on 23 November 2012. 



Outlook

We expect Invensys Operations Management to continue to perform well in the
second half underpinned by its large order book and significant exposure to
emerging markets, many of which are expected to be less affected by the
current uncertain macro-economic environment.



Invensys Rail is expected to see improved order intake during the rest of the
year, particularly from Network Rail, and revenue recovering as we begin
mobilisation of the recently won large export contracts.



Based upon customer comments, we expect Invensys Controls' major Appliance
markets in North America and Europe to continue to be more stable in the
secondhalf and we should see the traditional seasonal improvements in
Commercial and Wholesale, supported by several key new product launches in
Commercial.



Subject to any significant changes to the global macro-economic environment,
our good first half performance and strong order book supports our view that
we will improve our performance for the year as a whole.



Invensys Operations Management



Invensys Operations Management is a leading global technology, software and
consulting business that creates and applies advanced technologies to enable
the safe and efficient operation of industrial and commercial operations such
as oil refineries, fossil fuel and nuclear power plants, petrochemical works
and other manufacturing sites.



Our product offerings can be broadly divided into three areas: Systems,
formerly control and safety (61% of revenue), Software, formerly advanced
applications (18% of revenue) and Equipment (21% of revenue). Our enterprise
control offerings are delivered across all three product categories.





Half year ended 30 September  H1 12/13 H1 11/12 % Total change % Change at CER
Orders (£m)                        564      599           (6%)            (5%)
Order book^1 (£m)                  970    1,088          (11%)            (9%)
Revenue (£m)                       656      618             6%              7%
Operating profit (£m)               64       54            19%             18%
Operating margin (%)              9.8%     8.7%
Operating cash flow (£m)             1       13          (92%)           (90%)
Operating cash conversion (%)       2%      24%
Employees at period end
(numbers)                        9,767    9,309             5%



1. Comparative is as at 31 March 2012





Revenue by line of business

Half year ended 30 September H1 12/13 H1 11/12 % Total change % Change at CER
Systems                           398      377             6%              6%
Software                          120      103            17%             16%
Equipment                         138      138              -              3%



Revenue by sector

Half year ended 30 September

                            H1 12/13 H1 11/12
Oil and gas                       29%      28%
General industries                30%      26%
Utilities and power               15%      17%
Discrete manufacturing             7%       9%
Petrochemicals                     5%       6%
Other                             14%      14%



Revenue by destination

Half year ended 30 September

                            H1 12/13 H1 11/12
UK                                 5%       5%
Rest of Europe                    20%      21%
North America                     31%      28%
South America                      6%       7%
Asia Pacific                      25%      25%
Africa/Middle East                13%      14%





Markets

Invensys Operations Management continues to expect growth in the global
industrial automation market driven by continued investment in oil and gas
markets, as well as continued growth from servicing the installed base and
smaller projects. However it has experienced some softening in the systems
markets driven by macro-economic conditions in Europe and Asia and the timing
of larger greenfield projects awards.



While macro-economic conditions have been creating a slowing business
environment over the last few months, the heavy process markets continue to be
areas of investment, and there are no indications of a significant risk for
contraction of the automation or industrial software markets.



The main drivers of the automation and industrial software industries continue
to be the expectation of growing demand for energy in emerging markets. This
demand and the forecast for oil and gas prices continue to drive significant
investment throughout the world in the energy markets. In emerging markets,
the outlook for automation remains good based on growth in investment in
energy, particularly in the Middle East, Brazil, India, and China. In the
developed markets, ageing assets, new sources of energy, and our customers'
strong cash positions continue to drive service, upgrade and migration
business in Systems.



The software markets have remained solid despite the economic uncertainty with
good demand from customers for simulation software to enable them to optimise
the performance of their plants; this business is being enhanced through the
recent acquisition of Spiral Software which broadens its offerings in the
refinery market (see below).



The shorter-cycle equipment market continues to see better than expected
conditions helped by a large order backlog and continued demand from the heavy
process industries such as oil and gas. Although there has been some
softening in demand from emerging markets such as China, the level of customer
enquiries has risen in the recent months.



Developments

Since the period end, our simulation and optimisation offerings have been
expanded by the £38 million acquisition of Spiral Software, a privately held
company based in Cambridge, UK. Founded in 1998, Spiral Software provides
integrated solutions ranging from crude assay management to refinery supply
chain optimisation, enabling clients to make the best possible choices in
trading and refining crude oil. It provides the only integrated
refining-industry solution designed from the ground up, bringing together
feedstock data management, planning and scheduling. This means that our
offerings will now fully support and optimise the entire refining value chain,
from crude trading to supply-chain distribution, including lifecycle modeling
from design to start up to performance optimisation.



Work on the three contracts to supply control and safety systems to eight
nuclear reactors in China has continued in accordance with the revised project
plans put in place in January 2012 and we are now making some good progress in
project execution. Although we are having to invest heavily in working
capital to progress these contracts, with the consequent adverse effect on
operating cash flow, we expect to reach some key payment milestones in the
second half of the year which will improve the division's cash conversion. We
are continuing with our decision not to recognise any profits from the two
later contracts until we have greater certainty of the final outcome; this has
impacted operating margins in the division by around one percentage point.



Performance

Order intake in the first half was slightly down on the first half of last
year mainly due to some orders being delayed into H2 for larger greenfield
projects in the Systems business and softness in Equipment mainly due to
weaker than expected economies in Europe and North America. Order intake was
£564 million (H1 11/12: £599 million), down 5% at CER. The order book at 30
September 2012 was £970 million (31 March 2012: £1,088 million), a decrease
during the period of 9% at CER. The pipeline of order prospects through to 31
March 2016 remains strong at around £3.5 billion.



Revenue in the period was up 7% at CER to £656 million (H1 11/12: £618
million) with growth in each line of business driven by conversion of the
division's large order book. There was strong growth in Software (up 16% at
CER), helped by simulation and HMI across most regions, and Systems (up 6% at
CER), helped by the execution of the large greenfield projects awarded in
prior years.



Operating profit was up 18% at CER at £64 million (H1 11/12: £54 million) and
operating margin increased compared to the corresponding period last year to
9.8% (H1 11/12: 8.7%) despite the dilutive effect of revenue arising from the
China Nuclear projects which are currently being traded at zero margin.



Operating cash flow was £1 million (H1 11/12: £13 million) resulting in cash
conversion for the half year of 2% (H1 11/12: 24%). The low level of operating
cash conversion was due mainly to the need to invest in working capital in the
large greenfield projects such as China Nuclear ahead of the incidence of
payment milestones; this position is expected to improve significantly in the
second half of the year.





Invensys Rail



Invensys Rail is a multinational provider of state-of-the-art software-based
signalling, communication and control systems that enable the safe and
efficient operation of trains in mainline and mass transit networks across the
world. Our aim is to deliver higher capacity safely and reduced travel times.



Half year ended 30 September                                       % Change at
                                  H1 12/13 H1 11/12 % Total change         CER
Orders^1 (£m)                          264      250            6%         6%
Order book^2 (£m)                    1,118    1,202           (7%)        (4%)
Revenue (£m)                           323      382          (15%)       (14%)
Operating profit (£m)                   45       53          (15%)       (10%)
Operating margin (%)                 13.9%    13.9%                         
Operating cash inflow/(outflow)
(£m)                                    28      (1)           nm^3        nm^3
Operating cash conversion (%)          62%     (2%)                         
Employees at period end (numbers)    3,700    4,013           (8%)           



1. Orders and order book exclude framework agreements

2. Comparative is as at 31 March 2012

3. nm - not meaningful



Revenue by line of business

Half year ended 30 September

                            H1 12/13 H1 11/12
Engineering and contracting       63%      76%
Products                          37%      24%



Revenue by destination

Half year ended 30 September

                            H1 12/13 H1 11/12
UK                                27%      26%
Rest of Europe                    17%      19%
North America                     31%      21%
South America                      6%      12%
Asia Pacific                      18%      22%
Africa/Middle East                 1%        -



Markets

The market for rail signalling and train control remained strong in the first
half of the year particularly in South America, the Middle East and Asia.
Demand continues to be driven by industrialisation, urbanisation, increasing
capacity needs and the recognition of rail as an environmentally sustainable
and efficient means of transport.



The UK market is supported by government commitments to continue to fund
Network Rail and other rail infrastructure projects such as Crossrail and the
second High Speed Line linking London and Birmingham. However, following our
success in being awarded four of the nine regional framework agreements by
Network Rail, the letting of contracts under those agreements has been slow in
the first half but is expected to pick up significantly in the second half.



In the US, the market for grade crossings remains robust and we have made some
progress in penetrating the mass transit and mainline signalling markets. In
Spain there has been a significant reduction in activity levels due to
government austerity measures.



Outside our traditional core markets, there is a significant level of rail
infrastructure investment being made, as evidenced by our recent wins in Saudi
Arabia and Turkey.



Developments

During the first half, Invensys Rail North America acquired the privately-held
PHW Inc. for £12 million. Based in Pittsburgh, PHW is a leading manufacturer
of cab signalling systems and other safety electronic train control systems
for the North American mainline and mass transit industries. PHW's onboard
Positive Train Control (PTC) products enhance our existing range of trackside
PTC products, strengthening further our position in North America. PHW's
onboard system is used on the North East Corridor by Amtrak and associated
railroads as part of Amtrak's ACSES PTC system, which is the only PTC system
to be approved so far for operation by the Federal Railroad Administration
under the requirements of the Rail Safety Improvement Act of 2008. Since its
acquisition in May 2012, PHW has been awarded its largest ever order, a
sub-contract to install its PTC system onboard all the transit rail vehicles
of the Southeastern Pennsylvania Transportation Authority (SEPTA).



As part of its strategy to increase the level of equipment sales, our S60
level crossing barrier machine has received a Certificate of Acceptance from
Network Rail. The S60 machine is a lightweight electro-mechanical product
rather than a traditional hydraulic system, making it far simpler to operate
and maintain. Also, it uses less power than conventional systems so reducing
cable size and battery capacity. The Certificate of Acceptance covers the S60
barrier machine for use at all types of automatic half barrier and manually
controlled barrier level crossings, including those that incorporate CCTV and
object detection technology.

Since the period end, aconsortium comprising Invensys Rail and Siemens plc has
been awarded a £50 million contract by Crossrail Limited to deliver the
signalling and train control solution for the core Crossrail area and for the
integration with Network Rail infrastructure at its fringes. Crossrail will
provide 21 kilometres of new railway under the heart of London in twin-bore
tunnels. Up to 24 trains per hour will operate in the core central section
area during the peak, with 200 million passengers annually using the Crossrail
service. The consortium will deliver a Communications-Based Train Control
(CBTC) solution and integration with Network Rail's European Rail Traffic
Management System (ERTMS). This will enable Crossrail trains to travel on both
the new central section and the existing rail network.



The issues identified at a business within our Asia Pacific region, which gave
rise to a provision of £20 million last year, have now been resolved with no
changes needed to the level of the provision. The operation is now performing
well under a new management team.



Performance

Orders in the first six months were up 6% at CER at £264 million (H1 11/12:
£250 million) with a book-to-bill ratio below 1.0 mainly due to the delays in
Network Rail orders in the UK. Our order book at 30 September 2012 was £1,118
million (31 March 2012: £1,202 million).



Revenue in the period was down 14% at CER to £323 million (H1 11/12: £382
million) reflecting the timing of contract awards by Network Rail and the
significant reduction in revenue in Spain which have not yet been offset by
increased new market revenue due to the delays in mobilisation of the large
new contracts awarded last year, which will now make a significant
contribution to revenue in the second half. This was partially offset by
significant growth in Product sales due to success with US grade crossings.



Operating profit was down 10% at CER at £45 million (H1 11/12: £53 million)
and operating margin was 13.9% (H1 11/12: 13.9%). Operating cash inflow was
£28 million (H1 11/12: £1 million outflow) following the receipt of some
upfront payments on contracts awarded last year. Operating cash conversion
was 62% (H1 11/12: (2%)) and is expected to improve in the second half as we
await a large receipt from one of the division's major South American
customers.



Invensys Controls



Invensys Controls is a leading global engineering and technology provider that
designs, engineers and manufactures products, components, systems and services
used in appliances, heating, air conditioning/cooling and refrigeration
products across a wide range of industries in residential and commercial
markets.



Half year ended 30 September  H1 12/13 H1 11/12 % Total change % Change at CER
Orders (£m)                        216      237           (9%)            (5%)
Order book^1 (£m)                   60       70          (14%)           (11%)
Revenue (£m)                       221      244           (9%)            (6%)
Operating profit (£m)               11       14          (21%)           (23%)
Operating margin (%)              5.0%     5.7%
Operating cash flow (£m)            13        5           160%            170%
Operating cash conversion (%)     118%      36%
Employees at period end
(numbers)                        6,943    7,033           (1%)



1. Comparative is as at 31 March 2012



Revenue by line of business

Half year ended 30 September

                            H1 12/13 H1 11/12
Appliance                         59%      60%
Wholesale                         23%      22%
Commercial                        18%      18%



Revenue by destination

Half year ended 30 September

                            H1 12/13 H1 11/12
UK                                 9%       7%
Rest of Europe                    24%      27%
North America                     47%      44%
South America                     12%      13%
Asia Pacific                       7%       7%
Africa/Middle East                 1%       2%





Markets

Overall Invensys Controls markets remained weak in the first half of the
year. The Appliance market in North America demonstrated greater stability in
the first half compared to last year but the recent signs of improvements in
the US housing market are not yet translating into increased shipments of
appliances. As a result, the North American appliance manufacturers are now
expecting a small decline in total appliance shipments in the calendar year
2012.

The European Appliance market continues to suffer from the region's economic
problems with some of our customers limiting factory operations by as much as
one week per month to manage capacity and inventory. Growth in Asia has shown
signs of slowing with China production being affected by both reduced export
and domestic demand. In South America, the Brazilian government's economic
stimulus package and extended tax incentives should continue to help our
business during the remainder of the year.

The Wholesale markets in North America and Europe were also generally weak in
the first half and improvement in the second half will be dependent upon more
normal winter weather to drive increased heating and thermostat demand.

The Commercial markets held up well but our performance was affected in
particular by delays in orders for new products, which represent a significant
part of this business.



Developments

The continued weakness in the European Appliance market led to the decision
being made in the period to close the Belluno factory in Italy and move
manufacturing to other plants.



The investment in new product development continued with new products
representing 14% of the division's revenue in the first half compared with 13%
in FY 2011/12, despite some delays within Commercial.



Following its success with Thermo King in applying wireless and remote
monitoring technologies to refrigerated transportation, Invensys Controls has
been working with Verizon to create a new application for our Centeron^® tank
monitoring system. The new solution, which can be used across multiple
industries, including petroleum, agriculture and telecommunications, uses
radio and sensor technology to remotely track fuel levels in a company's
tanks, including the fuel tanks that power generators at many Verizon cell
sites across the US.Combined with data centres, advanced productivity
software and monitoring reports, the system helps prevent outages by ensuring
fuel levels remain at optimum levels.



Performance

Orders during the period were £216 million (H1 11/12: £237 million), down 5%
at CER reflecting continuing challenges faced by our end markets.



Revenue was £221 million (H1 11/12: £244 million), a 6% decrease at CER. Our
order book at 30 September 2012 was £60 million (31 March 2012: £70 million).



Although gross margin improved as a result of restructuring and continued
focus on cost reduction, operating profit was down 23% at CER to £11 million
(H1 11/12: £14 million) due to the reduced revenue.



Operating margin was 5.0% (H1 11/12: 5.7%). Despite the reduced operating
performance, operating cash flow was strong at £13 million (H1 11/12: £5
million) with cash conversion at 118% (H1 11/12: 36%).



Risks and uncertainties



As part of our  routine procedures, the principal  risks and uncertainties  of 
the  Group  are  kept  under   review.  In  particular  we  have   considered 
developments in the world's economic situation and financial markets upon both
the Group's financial position  and that of its  customers and suppliers.  We 
have concluded that the  principal risks and  uncertainties for the  remaining 
six months of the financial year remain as detailed on pages 37-44 of the 2012
Annual  Report   and   Accounts,  a   copy   of  which   is   available   from 
www.invensys.com. The principal risks are summarised below as required by DTR
4.27R of the Disclosure and Transparency Rules:



Risk                          Description
Failure   to    maintain    a Invensys operates in highly competitive  markets 
competitive               and and  the  Group's  products  and  services   are 
technologically      advanced characterised by  continually evolving  industry 
product  range  could  reduce standards  and   rapidly  changing   technology, 
margins and revenue growth    driven by the demands of the Group's  customers. 
                              As  illustrations   of   this,   Invensys   Rail 
                              continues to invest  in the  development of  the 
                              European Rail Traffic Management System  (ERTMS) 
                              and Communication  Based  Train  Control  (CBTC) 
                              which are becoming globally adopted standards of
                              signalling   and    train   control.    Invensys 
                              Operations Management  continues  to  invest  in 
                              enhancements to its  systems, advanced  software 
                              applications and enterprise control offerings to
                              optimise  plant  performance   for  our   global 
                              customers.

                              
The timing  and frequency  of The revenue of Invensys Rail depends on a  small 
substantial  contract  awards number of large railway  operators, both in  our 
are uneven                    traditional core  markets  in  the  UK,  Iberia, 
                              North America and Australia and in new  markets. 
                              New contract  awards are  often associated  with 
                              major transport infrastructure upgrades, and  as 
                              a result are by nature large and infrequent.

                              

                              Invensys  Operations  Management  is  associated 
                              with the  supply  of  technology,  software  and 
                              consulting to  the  oil and  gas,  chemical  and 
                              nuclear    industries.    Capital    expenditure 
                              requirements from customers in these  industries 
                              are often  highly  cyclical and  linked  to  the 
                              international  supply,  demand  and  pricing  of 
                              hydrocarbons. Also  the timing  of new  contract 
                              awards in the nuclear  industry may be  impacted 
                              if certain  nuclear  programmes are  subject  to 
                              delay or cancellation.

                              
Undertaking large,  long-term A significant  amount  of the  Group's  business 
projects exposes the Group to involves long-term projects  that can take  many 
risk of loss                  months or even years to complete. These projects
                              may be subject to  delays and cost overruns  due 
                              to delays in  technology development,  equipment 
                              deliveries,    engineering    problems,     work 
                              stoppages,   unanticipated    cost    increases, 
                              shortages of  materials  or  skilled  labour  or 
                              other unforeseen problems inherent in the nature
                              of such projects.

                              
The Group may  be subject  to Errors and  defects  in  the  Group's  products, 
financial loss and/or  damage systems or applications,  which may  be used  in 
to its reputation as a result safety-critical applications, could cause injury
of product liability claims   to persons or damage  to property and  equipment 
                              or be the subject of product recalls.

                              
The Group may  be exposed  to The business activities of  the Group are  often 
liability through the actions conducted with consortia, with joint and several
of    consortium    partners, liability between  consortium  partners,  and/or 
cosource  partners   or   its with   cosource   partners   whose    day-to-day 
supply chain                  management actions are outside of the control of
                              the Group. A significant element of the Group's
                              risk profile is the delivery performance of  its 
                              supply chain. These  partnerships exist  across 
                              our  businesses.  For  example,  Invensys  Rail 
                              often  undertakes   contracts  with   consortium 
                              partners in traditional core markets and in  new 
                              or developing markets.

                              
The Group may  be exposed  to The Group has a large level of gross liabilities
additional  liabilities  with in respect of its  major pension plans  relative 
respect  to  its  UK  and  US to its market capitalisation.
pension plans


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

                              



Additional Financial Information



Orders and order book

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



For the half year H1 2011/12                 H1                 H1         
ended 30                                                     2012/13
September             Orders    Exchange 2011/12 Change at           Change at
                             movement £m               CER Orders £m   CER^1 %
                          £m              at CER
                                                        £m
                                              £m
Invensys
Operations               599         (7)     592      (28)       564      (5%)
Management
Invensys Rail            250         (2)     248        16       264        6%
Invensys Controls        237         (9)     228      (12)       216      (5%)
Continuing             1,086        (18)   1,068      (24)     1,044      (2%)
operations



The order book for  continuing operations was £2,148  million at 30  September 
2012 (31 March 2012: £2,360 million). This includes 47% in emerging markets.



Revenue

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



For the half year   H1 2011/12                 H1       H1 2012/13         
ended 30 September
                       Revenue    Exchange 2011/12 Change  Revenue£m Change at
                               movement £m         at CER              CER^1 %
                            £m              at CER
                                                       £m
                                                £m
Invensys Operations        618         (7)     611     45        656        7%
Management
Invensys Rail              382         (8)     374   (51)        323     (14%)
Invensys Controls          244         (9)     235   (14)        221      (6%)
Continuing               1,244        (24)   1,220   (20)      1,200      (2%)
operations



Operating profit

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



For the half year  H1 2011/12                 H1                H1         
ended 30 September                                           2012/13
                        OPBIT    Exchange 2011/12 Change at          Change at
                              movement £m               CER OPBIT £m   CER^1 %
                           £m              at CER
                                                         £m
                                               £m
Invensys
Operations                 54           -      54        10       64       18%
Management
Invensys Rail              53         (3)      50       (5)       45     (10%)
Invensys Controls          14           -      14       (3)       11     (23%)
Corporate                (19)           -    (19)         1     (18)        2%
Continuing                102         (3)      99         3      102        2%
operations



1 % change is measured as the change at CER as a percentage of the H1
2011/12 adjusted base and

 is calculated based on underlying amounts in £'000s.



Operating cash flow and cash conversion

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



For the half year ended         Operating cash flow     Cash conversion
                               H1 2012/13 H1 2011/12 H1 2012/13 H1 2011/12
30 September
                                       £m         £m          %          %
Invensys Operations Management          1         13         2%        24%
Invensys Rail                          28        (1)        62%       (2%)
Invensys Controls                      13          5       118%        36%
Corporate                            (15)       (28)          -          -
Continuing operations                  27       (11)        26%      (11%)





Exceptional items

The exceptionals charge for  the period totalled £9  million (H1 2011/12:  £24 
million). This included restructuring costs of  £11 million and £1 million  of 
intangible asset impairments;  offset by a  £2 million profit  on the sale  of 
property and a £1 million credit on other operating exceptional items.



Restructuring costs included a plant shutdown in Invensys Controls.



The comparative  period included  restructuring costs  of £20  million and  £4 
million of other operating exceptional items.



Net finance costs

Net finance costs were £7 million in the period (H1 2011/12: £4 million), this
was driven by higher bonding costs.



Other finance charges - IAS 19

IAS 19 finance charges increased to £9 million (H1 2011/12: £1 million) mainly
as a result  of a  greater reduction  in the  expected return  on plan  assets 
compared to the interest  on pension liabilities  arising from lower  discount 
rates.



Taxation

The tax charge  for continuing  operations was  £14 million  (H1 2011/12:  £16 
million), which comprised a current year income tax charge of £18 million  (H1 
2011/12: £23 million), offset by prior year credits of £2 million (H1 2011/12:
£2 million) and a deferred tax credit of £2 million (H1 2011/12: £5  million). 
The Group is subject to several factors which affect the tax charge  including 
the levels  and  mix  of  profitability in  different  jurisdictions  and  the 
availability of tax losses. The effective tax rate for the Group was 18%  (H1 
2011/12: 22%).



Discontinued operations

There was £nil  profit from discontinued  operations (H1 2011/12:  loss of  £2 
million).



Net profit

Net profit for the period was £63 million (H1 2011/12: £55 million), due to  a 
decrease in exceptional items of £15 million, offset by an increase in the IAS
19 finance charge of £8 million.



Earnings per share

Basic EPS from continuing operations was 7.6 pence per share (H1 2011/12:  6.9 
pence per share). Underlying  EPS was also 7.6  pence per share (H1  2011/12: 
6.9 pence per share).





Free cash flow

Free cash flow  for the period  was a  £49 million outflow  (H1 2011/12:  £103 
million outflow). The  improvement in  free cash  flow was  driven by  better 
operating cash flow and lower legacy spend with reduced pension  contributions 
to the US Pension Plan under local regulations.



Financial position

Capital structure

The Group's capital structure is as follows:



                            30 September 30 September 31 March

                                    2012         2011     2012

                                      £m           £m       £m
Capital employed                     321          481      314
Cash and cash equivalents            176          194      263
Borrowings                           (1)          (2)      (1)
Net cash                             175          192      262
Total equity - funds                 496          673      576
Comprising:
- Equity holders of parent           475          652      556
- Non-controlling interests           21           21       20
                                     496          673      576



Total equity

Total equity  decreased by  £80  million, principally  driven  by the  IAS  19 
actuarial losses of £134 million and  the final dividend paid of £22  million, 
offset by the net profit of £63 million.



Non-controlling interests

The non-controlling  interests balance  was £21  million (31  March 2012:  £20 
million), the majority of  which relates to Ranco  Japan Limited, an  Invensys 
Controls business.



Net cash

Net cash was £175 million (31 March 2012: £262 million). The reduction in net
cash was  primarily due  to the  free cash  outflow of  £49 million,  dividend 
payments of £22 million and the acquisition  cost of £12 million for PHW  Inc, 
an Invensys Rail business.



Capital employed

Capital employed increased by £7 million to £321 million in the period, mainly
attributable to increased  working capital,  offset by  the increased  pension 
liabilities of £64  million. Capital employed  includes operating capital  of 
£514 million (31 March 2012: £440  million), generating a return of 33.3%  (30 
September 2011: 35.2%, 31 March 2012: 35.5%).



Pension liabilities and funding

The IAS 19 valuation of pension assets and liabilities as at 30 September 2012
resulted in  a net  pension liability  of £490  million (31  March 2012:  £426 
million). The overall increase of £64 million is driven by an actuarial  loss 
of £134 million offset by contributions of £45 million.



Dividend

The Board  has  declared an  interim  dividend of  1.75  pence per  share  (30 
September 2011: 1.65 pence per share).



Invensys plc

Consolidated income statement (unaudited)

For the half year ended 30 September 2012



                                    Half year ended Half year ended Year ended

                                       30 September    30 September   31 March

                                               2012            2011       2012
                                   Notes         £m              £m         £m
Continuing operations
Revenue                                2      1,200           1,244      2,539
Operating expenses before                   (1,098)         (1,142)    (2,330)
exceptional items
Operating profit before exceptional    2        102             102        209
items
Exceptional items                      3        (9)            (24)       (56)
Operating profit                       3         93              78        153
Finance costs                                   (7)             (5)       (13)
Finance income                                    -               1          3
Other finance charges - IAS 19                  (9)             (1)        (3)
Profit before taxation                 2         77              73        140
Taxation - UK                                     -               -        (4)
Taxation - overseas                            (14)            (16)       (31)
Profit after taxation - continuing               63              57        105
operations
Loss after taxation - discontinued     4          -             (2)        (6)
operations
Profit for the period                            63              55         99
Attributable to:
Profit after taxation - continuing
operations
- Equity holders of the parent               62              56        104
- Non-controlling interests                   1               1          1
                                                 63              57        105
Loss after taxation - discontinued
operations
- Equity holders of the parent                -             (2)        (6)
Profit for the period
- Equity holders of the parent               62              54         98
- Non-controlling interests                   1               1          1
                                                 63              55         99





Earnings/(loss) per share
Continuing operations
Earnings per share (basic)   5 7.6p    6.9p   12.8p
Earnings per share (diluted) 5 7.6p    6.9p   12.8p
Discontinued operations
Loss per share (basic)       5    -  (0.2)p  (0.7)p
Loss per share (diluted)     5    -  (0.3)p  (0.8)p
Total Group
Earnings per share (basic)   5 7.6p    6.7p   12.1p
Earnings per share (diluted) 5 7.6p    6.6p   12.0p















Invensys plc

Consolidated statement of comprehensive income (unaudited)

For the half year ended 30 September 2012



                                   Half year ended Half year ended  Year ended

                                      30 September    30 September    31 March

                                              2012            2011        2012
                                    Note        £m              £m          £m
Profit for the period                           63              55          99
Other comprehensive (loss)/income
Cash flow hedges:
Losses taken to equity                         (3)             (2)           -
Transferred to the income                        3               1           -
statement - cost of sales
Exchange differences on                       (23)               2        (12)
translation of foreign operations
Actuarial (loss)/gain recognised             (134)             147        (31)
on defined benefit pension schemes
Movement in irrecoverable element
of potential future pension            9        34            (51)         (4)
surplus
Taxation on components of other                (4)               7          21
comprehensive income
Other comprehensive (loss)/income            (127)             104        (26)
for the period, net of tax
Total comprehensive (loss)/income             (64)             159          73
for the period
Attributable to:
Equity holders of the parent                  (66)             156          71
Non-controlling interests                        2               3           2
                                              (64)             159          73









Invensys plc

Consolidated balance sheet (unaudited)

As at 30 September 2012



                              30 September               30 September 31 March

                                      2012                       2011     2012
                            Notes       £m                         £m       £m
ASSETS
Non-current assets
Property, plant and equipment          224                        235      227
Intangible assets - goodwill           285                        295      289
Intangible assets - other              174                        173      168
Deferred income tax assets              67                         53       70
Amounts due from contract               14                          -       11
customers
Trade and other receivables             26                         24       26
                                       790                        780      791
Current assets
Inventories                            156                        168      145
Amounts due from contract              331                        305      273
customers
Trade and other receivables            469                        506      500
Cash and cash equivalents       7      176                        194      263
Income tax receivable                    6                          7       10
Derivative financial                     2                          2        3
instruments
                                     1,140                      1,182    1,194
Assets held for sale            8        7                         10       10
TOTAL ASSETS                         1,937                      1,972    1,995
LIABILITIES
Non-current liabilities
Provisions                            (69)                       (76)     (74)
Income tax payable                    (15)                       (32)     (15)
Deferred income tax                   (15)                       (17)     (15)
liabilities
Amounts due to contract               (19)                        (8)     (23)
customers
Trade and other payables              (11)                        (9)     (10)
Pension liabilities             9    (490)                      (327)    (426)
                                     (619)                      (469)    (563)
Current liabilities
Trade and other payables             (525)                      (501)    (533)
Amounts due to contract              (199)                      (222)    (205)
customers
Borrowings                      7      (1)                        (2)      (1)
Derivative financial                   (3)                        (4)      (3)
instruments
Income tax payable                    (38)                       (27)     (49)
Provisions                            (56)                       (74)     (65)
                                     (822)                      (830)    (856)
TOTAL LIABILITIES                  (1,441)                    (1,299)  (1,419)
NET ASSETS                             496                        673      576
EQUITY
Capital and reserves
Equity share capital                    82                         81       81
Treasury shares                        (1)                        (1)      (1)
Other reserves                       2,493                      2,526    2,515
Retained earnings                  (2,099)                    (1,954)  (2,039)
Equity holders of the parent           475                        652      556
                                            The story has been
Non-controlling interests               21  truncated,
[TRUNCATED]