|Share Price: 408.30||Bid: 406.60||Ask: 408.70||Change: -2.00 (-0.49%)|
11 June 2012
Annual Financial Report
Invensys plc (the "Company") has posted its 2012 Annual Report and Accounts (the "2012 Annual Report and Accounts") and Notice of the 2012 Annual General Meeting of the Company (the "2012 AGM Notice") to shareholders.
The 2012 Annual Report and Accounts, which were approved by the Board of Directors on 16 May 2012, constitute the Annual Financial Report for the purposes of DTR 4.1.
The Annual General Meeting is to be held at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE on Friday, 13 July 2012 at 11.00 a.m.
In compliance with LR 9.6.1, the Company has submitted to the National Storage Mechanism the following documents, which will be available for inspection at: www.Hemscott.com/nsm.do
· 2012 Annual Report and Accounts;
· Chairman's Letter and 2012 AGM Notice; and
· Forms of Proxy for Ordinary Shareholders in relation to the Annual General Meeting.
The 2012 Annual Report and Accounts and 2012 AGM Notice are also available on the Company's website at www.invensys.com.
In compliance with DTR 6.3.5, the following information is extracted from the 2012 Annual Report and Accounts and should be read in conjunction with the Company's Results Announcement issued on 17 May 2012, both of which can be found at www.invensys.com Together, these constitute the material required by DTR 6.3.5 to be communicated to the media in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the 2012 Annual Report and Accounts in full and page numbers and cross-references in the extracted information below refer to page numbers and cross-references in the 2012 Annual Report and Accounts.
The following information is extracted from pages 6 and 7 of the 2012 Annual Report and Accounts.
During the past year, Invensys has made significant progress in a number of areas which will stand us in good stead for the future. As our Chief Executive Wayne Edmunds explains in his statement on pages 8 to 9, our divisions have each improved their market position and we have reinforced the Group's financial stability with new £600 million five-year banking facilities and, as part of its triennial review, no change to the funding plan of the Invensys Pension Scheme (UK).
Wayne Edmunds has settled in well to his new role and his actions in strengthening the management team around him underlines the Board's confidence in the executive team.
Whilst the additional costs on a small number of contracts have adversely affected our overall performance these should not detract from the significant progress made in positioning our businesses for the future. I am particularly pleased that Invensys Rail has significantly grown its order book and that Invensys Operations Management has seen excellent underlying order growth across each of its lines of business. Invensys Controls continues to perform well against the background of very difficult market conditions in its appliance segment. Also each business is ensuring that it continues to meet market needs by investing in refreshing and updating many of our core technology platforms.
Dividend and dividend policy
The Board has recommended a final dividend of 2.75 pence per share, which brings the total dividends payable in respect of the year ended 31 March 2012 to 4.4 pence per share (2011: 4.0 pence per share), an increase of 10%. Subject to approval by shareholders at the Annual General Meeting on 13 July 2012, the final dividend will be paid on 3 August 2012 to shareholders on the register at 22 June 2012. A dividend reinvestment plan (DRIP)
is available for this final dividend, which will enable shareholders to reinvest their dividends directly into Invensys shares.
The Board's dividend policy seeks to balance the income needs of shareholders with the needs of the Group to retain the resources and flexibility to enhance further our growth prospects. In particular, the Board has taken into account the investment required in working capital, particularly on large projects, and in research and development, the opportunities to make bolt-on acquisitions to increase our technology base and market presence, and the need to retain flexibility should an opportunity arise to reduce our pension liabilities.
Accordingly we remain committed to our progressive dividend policy with future dividend growth reflecting more closely the long-term sustainable trend in underlying earnings per share and free cash flow.
On 19 May 2011, Deena Mattar was appointed to the Board as a non-executive director. She is a chartered accountant and was formerly Group Finance Director of Kier Group plc. Deena has joined the Audit Committee.
On 28 July 2011, David Thomas was appointed to the Board as Chief Financial Officer. He had been Acting Chief Financial Officer of the Group since 24 March 2011. David joined Invensys in 2002 as Group Controller, having previously been a senior partner in Ernst & Young LLP specialising in long-term industrial contracting businesses and has held a number of senior roles at Invensys including CFO and CEO roles within the divisions. He is a member of the Auditing Practices Board.
On 29 November 2011, Victoria Hull was appointed to the Board as an executive director. She is the Group's Chief Legal Officer with responsibility for the management of legal, compliance and commercial risk across the Group. She joined Invensys in 2001, since when she has been an integral member of the Group's senior management team.
The Board recognises the importance and benefits of diversity and will continue to take this into account in our recruitment process whilst ensuring that candidates are selected on merit and ensuring there is an appropriate range and balance of skills, experience and background on the Board.
Invensys Operations Management markets remain buoyant and we expect our software and equipment lines of business to continue to perform well. Our systems business will benefit from its strong order book but growth in its operating margins will be moderated by the effects of the lower margin greenfield projects.
Invensys Rail had a very successful year in winning major projects in its core and new markets and these orders will increasingly benefit revenue in the year as we begin to mobilise our project teams. Operating margins are expected to remain within our medium-term target range but are expected to be around 15% for next year because we intend to take a more conservative view of profit recognition in the early stages of some of the large contracts in new markets.
Invensys Controls' major appliance customers are expecting a year of more stable demand, particularly in North
America and Europe, and we expect continued success in commercial and wholesale.
Overall we are looking forward to a year of improving performances across our businesses.
Sir Nigel Rudd
Chief Executive's Statement
The following information is extracted from pages 8 to 9 of the 2012 Annual Report and Accounts.
During the year, we made good progress with some significant achievements that position us well for the future. In particular, we reorganised into lines of business within the divisions to increase focus on our industry-leading technologies and we are investing in enhancing many of our core technology platforms. We also grew the Invensys Rail order book significantly and agreed the triennial review of the Invensys Pension Scheme (UK) with no change to the funding plan.
During the year, we made some significant achievements positioning us well for the future:
· Invensys Rail grew its order book significantly with major contract wins in both core and new markets.
· Invensys Operations Management achieved strong order momentum across each line of business without the benefit of any new large greenfield contract awards during the year.
· Invensys Controls did well in coping with much weaker than expected trading conditions in the appliance market in North America and Europe.
· We refocused our divisions on their lines of business to bring additional emphasis upon our leading brands and technologies.
· We have strengthened our management teams with several new appointments across the divisions.
· We are making significant investments in enhancing a number of our core technology platforms across the divisions.
· We agreed the 31 March 2011 triennial review with the Trustees of the Invensys Pension Scheme (UK) which resulted in no change to the funding plan.
· We refinanced and increased our banking facilities to ensure we have the funding capacity to underpin our financial position and support our future growth.
However it is disappointing that our profitability was reduced by £60 million of additional costs arising from our nuclear projects in China within Invensys Operations Management and a handful of contracts within Invensys Rail's Asia Pacific region. Since the announcement in January 2012, we have responded by strengthening our procedures and management teams in a number of areas.
We have three strong businesses with leading positions in industries with structural growth drivers and it is our clear focus to ensure that we capture the opportunities available to us to build shareholder value.
The world is changing at great speed with rapidly developing economies (RDEs) likely to overtake the developed world in terms of share of global GDP over the next decade or so. Although the core of our overall strategy remains unchanged, we need to ensure that we continue to extend our success in RDEs as they become our largest customer base.
Our core attributes support our strategy
Across our businesses we have a number of core attributes that position us well as the global economy develops, with the result that we should grow faster than the competition:
· We have distinctive technologies including software and western standard safety systems which are attractive to RDE customers. We are also adapting a number of our offerings to meet many RDE needs for scalable and adaptable products with features tailored to their markets, whilst maintaining effectiveness and safety.
· We have a large installed base with exceptional customer relationships across both the developed world and RDEs.
· As we have responded to the project issues in the year, we have strengthened our global delivery skills, in particular for large systems integration projects.
· We have proven our ability to be effective at business development, teaming and partnering to provide comprehensive market access, as evidenced in particular by our major contract wins in Invensys Rail.
· We have a strong balance sheet which provides us with flexibility in managing and financing our businesses and paying dividends to shareholders.
Our core markets remain robust
Each of our divisions is operating in industry verticals which have strong growth prospects:
· At Invensys Operations Management, our core markets of oil, gas and power have long-term structural growth prospects due to the need for greenfield capacity in the developing world, especially India and China, and the potential for optimisation and efficiency of plant operations, particularly at brownfield sites in the developed world.
· At Invensys Rail, the global rail infrastructure market also has long-term structural growth prospects due to industrialisation and urbanisation in the developing world together with capacity needs and pressure to reduce carbon footprints in the developed world.
· At Invensys Controls, our core markets of appliance, commercial and wholesale are expected to grow due to a recovery in Europe and North America and consumer aspirations in the developing world.
In particular, RDEs including China and India are increasingly important markets for each of our divisions and we will be using our combined knowledge and experience from operating in these countries to improve our capabilities and to capture growth opportunities.
Although many of the Group's businesses performed strongly with order growth in Invensys Operations Management and Invensys Rail providing visibility into next year, additional costs on a small number of contracts resulted in a reduction in profits compared to last year.
Invensys Operations Management had another year of strong order intake across each line of business despite the absence of any large greenfield project awards in the year. The underlying rate of order increase was 11% at CER with orders in systems up 7%, software up a record 20% and equipment up 11%. Revenue growth was also strong mainly due to the ramp-up of activity on many of the recently won large greenfield projects. However operating profit and margins were affected by the previously announced £40 million additional costs on our nuclear projects in China.
Invensys Rail reported a near record order intake with the award of several large contracts in new markets. Revenue was broadly flat with good growth in the UK and North America offset by an anticipated reduction in Spain and delays in mobilisation on some of the large new market contracts. Despite the previously announced £20 million additional costs, operating margin was 15.0%.
Invensys Controls had to cope with an appliance market that was much weaker than had been expected at the start of the year, resulting in a decline in revenue and profit. However its wholesale and commercial lines of business held up much better to offset some of the declines in appliance.
At the corporate centre, we have eliminated several previously group-wide functions and returned some responsibilities to the divisions, which has resulted in central costs being reduced by 17% at CER to £38 million (2011: £46 million).
Directors' responsibility statement
The following information is extracted from page 78 of the 2012 Annual Report and Accounts.
We confirm that to the best of our knowledge:
a) the Financial Statements for the year ended 31 March 2012, prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation as a whole; and
b) the Business Review includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation as a whole, together with a description of the principal risks and uncertainties that they face.
By order of the Board
Chief Financial Officer
16 May 2012
Risks and Uncertainties
The following description of Risks and Uncertainties is extracted from pages 40 to 42 of the 2012 Annual Report and Accounts.
Failure to maintain a competitive and technologically advanced product range could reduce margins and revenue growth
Invensys operates in highly competitive markets and the Group's products and services are characterised by continually evolving industry standards and rapidly changing technology, driven by the demands of the Group's customers. As illustrations of this, Invensys Rail continues to invest in the development of the European Rail Traffic Management System (ERTMS) and Communication Based Train Control (CBTC) 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.
Failure to keep pace with technological changes and system or application requirements in the industrial sectors may result in loss of market share and lower margins. Furthermore, delays to development programmes may adversely impact the delivery of major projects.
The Group invests in research and development to create new technologies and products to sustain or improve its competitive position. However, all new technologies and products involve business risk in terms of possible abortive expenditure including asset impairments, reputational risk and customer claims. The Group reviews its portfolio of technologies as part of the strategic planning process. In addition, the divisions control individual development programmes through a regular review process.
The timing and frequency of substantial contract awards are uneven
The revenue of Invensys Rail depends on a small number of large railway operators, both in our traditional core markets in the UK, Iberia, North America and Australia and in new markets. New contract awards are often associated with major transport infrastructure upgrades, and as a result are by nature large and infrequent.
Invensys Operations Management is associated with the supply of technology, software and consulting to the oil and gas, chemical and nuclear industries. Capital expenditure requirements from customers in these industries are often highly cyclical and linked to the international supply, demand and pricing of hydrocarbons. Also the timing of new contract awards in the nuclear industry may be impacted if certain nuclear programmes are subject to delay or cancellation.
The timing of contract awards is uncertain and delays in awards may result in volatility in the order book and our operating performance. Major projects may also impact the business mix because a substantial element of the contract may be supplied by third parties. In addition, the opportunity to develop control and safety systems for the nuclear industry may lead to an increased dependence on a small number of major customers for Invensys Operations Management.
The Group monitors its order pipeline, sales activity, sales cover in its order book, expected margins and the impact of potential delays on the expected results to allow appropriate mitigating actions to be considered.
Undertaking large, long-term projects exposes the Group to risk of loss
A significant amount of the Group's business involves long-term projects that can take many months or even years to complete. These projects may be subject to delays and cost overruns due to delays in 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's failure to anticipate technical and development problems, estimate costs accurately, control delivery or receive timely payments may reduce the profitability of such a contract, impact cash collection or result in a loss.
The Group has an established process with clear delegated authorities for the approval of major contracts, which includes a review system for the approval of bids submitted to customers. Contracts with a large monetary value or non-standard contractual terms require Board approval. During the year certain contract execution issues were identified in Invensys Rail's Asia Pacific operations and our nuclear projects in China within Invensys Operations Management. This has prompted an in-depth internal review with the result that systems have been further improved and additional risk metrics have been established to monitor the execution of such major projects. These are subject to regular reporting to the Board.
The Group may be subject to financial loss and/or damage to its reputation as a result of product liability claims
Errors and defects in the Group's products, systems or applications, which may be used in safety-critical applications, could cause injury to persons or damage to property and equipment or be the subject of product recalls.
These occurrences could result in claims, loss of revenue, warranty costs, costs and damages associated with product recalls, litigation, delays in market acceptance or harm to the Group's reputation for safety and quality.
Each division has an established quality control function and, if an event occurs, there are processes to investigate and manage the occurrence.
The Group may be exposed to liability through the actions of consortium partners, cosource partners or its supply chain
The business activities of the Group are often conducted with consortia, with joint and several liability between consortium partners, and/or with cosource partners whose day-to-day management actions are outside of the control of the Group. A significant element of the Group's risk profile is the delivery performance of its supply chain. These partnerships exist across our businesses. For example, Invensys Rail often undertakes contracts with consortium partners in traditional core markets and in new or developing markets.
Given the nature of the Group's business mix, a quality or other failure in the supply chain could present a risk to safety and delivery which might have a material adverse effect on the Group's business, financial performance and/or reputation. There is also a risk that regulatory non-compliance of partners could have a material adverse effect on the Group's reputation.
Assessment, mitigation and management of these risks are addressed by the divisions in conjunction with our legal and risk departments. In-depth due diligence on partners is undertaken where considered appropriate, and cross-indemnities entered into to mitigate liability.
The Group may be exposed to additional liabilities with respect to its UK and US pension plans
The Group has a large level of gross liabilities in respect of its major pension plans relative to its market capitalisation.
With respect to both of the Group's major pension plans for its UK and US operations, any decline in the equity market, improvements in life expectancy, changes in expected morbidity rates, long periods of low inflation or deflation or future decreases in interest rates could increase the funding deficit and require additional funding contributions in excess of those currently expected.
The Invensys Pension Scheme (UK) has a high proportion of pensioners relative to its active workforce which provides a level of certainty with respect to the valuation of the plan's liabilities. In addition, its investment policy has been established to address the need to match the scheme assets and liabilities as far as is realistically possible. The current Invensys Pension Scheme (UK) deficit funding contribution schedule was agreed on the basis of a valuation undertaken at 31 March 2011, and anticipates deficit recovery contributions being made on a six-monthly basis until March 2017. In addition, the Invensys Pension Plan (US)
was recently de-risked by reducing the number of deferred participants. The Group regularly monitors the performance of the principal UK and US plans.
The Group is subject to ongoing litigation and environmental liabilities
As a consequence of the past disposal of a significant number of businesses, the Group has, 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.
All of these liabilities are subject to a number of uncertainties, assumptions and contingencies, and there can be no assurance that the liabilities will not be substantially higher or become payable sooner than anticipated, or that the provisions in the Group's accounts in respect of any such liabilities will be sufficient.
The Group continually monitors the remaining liabilities and has established performance indicators to support regular reporting to the Board. The indicators include cash spend, provisions, insurance recoveries and estimated exposures. The Group regularly reviews the related provisions and aims in negotiations to limit the risk of future liabilities or disputes.
Directors' loan and pension commutation
The following description of Director's loan is extracted from Note 33 on page 146 of the 2012 Annual Report and Accounts.
During the year ended 31 March 2011, a loan was made to Mr Henriksson while he was a director of the Company in view of the double taxation suffered in relation to his US employment duties in 2009/10. Mr Henriksson left the Company on 24 March 2011. Invensys Systems Inc. advanced £312,691 on 29 June 2010 to Mr Henriksson, being an amount equal to the expected refunds due from HMRC. As at 31 March 2012 this loan remains outstanding, is free of any interest, and will be repayable within five business days from the date of HMRC making the expected refund to Mr Henriksson. Mr Henriksson's repayment obligations are not affected by the termination of his employment with the company.
No further loan has been advanced to any director during the year ended 31 March 2012.
Related Party Disclosures
The following description of related party transactions is extracted from Note 34 on page 147 of the 2012 Annual Report and Accounts. A condensed version of this note was published in the Results Announcement as Note 14.
Details of transactions that have been entered into with related parties for the years ended 31 March 2012 and 31 March 2011 are as follows:
(i) Remuneration of key management personnel
Key management comprises the directors. Remuneration is as follows:
Short-term employee benefits
Short-term employee benefits comprise salary and benefits earned during the year and bonuses awarded for the year.
Full details of individual directors' remuneration are given in the Remuneration Report.
(ii) Other related party transactions
There are no other related party transactions that have a material effect on the financial position or performance of the Group in the year (2011: none) other than the director's loan disclosed in Note 33.
Invensys plc Steve Devany tel: +44 (0) 20 3 155 1301
|14-Jun-13 16:43||RNS||Return of Cash - Update||Company Announcement - General|
|14-Jun-13 13:30||RNS||Additional Listing - Replacement||Company Announcement - General|
|14-Jun-13 12:27||RNS||Additional Listing||Company Announcement - General|
|12-Jun-13 18:01||RNS||Annual Financial Report||Results and Trading Reports|
|12-Jun-13 07:00||RNS||Results of Return of Cash Election||Company Announcement - General|
|11-Jun-13 16:51||RNS||Result of Meeting||Results and Trading Reports|
|10-Jun-13 13:53||RNS||Result of Meeting||Results and Trading Reports|
|05-Jun-13 07:00||RNS||Capital Markets Day||Company Announcement - General|
|03-Jun-13 17:05||RNS||Holding(s) in Company||Holding(s) in Company|
|03-Jun-13 16:03||RNS||Total Voting Rights||Holding(s) in Company|
|21-May-13 07:00||RNS||Return of Cash||Company Announcement - General|
|16-May-13 07:00||RNS||Final Results||Results and Trading Reports|
|02-May-13 10:20||RNS||Completion of the disposal of Invensys Rail||Mergers, Acquisitions and Disposals|
|02-May-13 09:41||RNS||Total Voting Rights||Holding(s) in Company|
|26-Apr-13 14:58||RNS||Holding(s) in Company||Holding(s) in Company|
|24-Apr-13 11:42||RNS||Holding(s) in Company||Holding(s) in Company|
|23-Apr-13 15:00||RNS||Holding(s) in Company||Holding(s) in Company|
|18-Apr-13 15:46||RNS||Further update on the disposal of Invensys Rail||Company Announcement - General|
|11-Apr-13 13:08||RNS||Holding(s) in Company||Holding(s) in Company|
|02-Apr-13 14:28||RNS||Director/PDMR Shareholding||Directors' Dealings|
|02-Apr-13 14:26||RNS||Total Voting Rights||Holding(s) in Company|
|01-Mar-13 13:28||RNS||Total Voting Rights||Holding(s) in Company|
|28-Feb-13 11:05||RNS||Director/PDMR Shareholding||Directors' Dealings|
|21-Feb-13 09:46||RNS||Holding(s) in Company||Holding(s) in Company|
|04-Feb-13 15:05||RNS||Blocklisting Interim Review||Company Announcement - General|
|04-Feb-13 15:05||RNS||Blocklisting Interim Review||Company Announcement - General|
|04-Feb-13 15:02||RNS||Blocklisting Interim Review||Company Announcement - General|
|01-Feb-13 14:33||RNS||Total Voting Rights||Holding(s) in Company|
|24-Jan-13 07:00||RNS||Interim Management Statement||Results and Trading Reports|
|04-Jan-13 16:20||RNS||Director/PDMR Shareholding||Directors' Dealings|