Sales:
£2,228 million (2001: £2,320 million)

Operating profit*:
£289 million (2001: £380 million)

Overview
Sales for our largest division were 4% down on last year, with the organic decline of 7% directly reflecting the order pattern. However, the year finished with renewed consumer confidence driving stronger sales of white goods in North America, with orders at Appliance Controls in the second half up 7% on the first half. Demand for climate controls and meters also showed stability in North America and Europe, but continuing softness in Japan.

Wherever markets declined sharply, there was a high drop-through effect on profits and margins. Equally, as throughput rose in the latter months at Appliance Controls, profits rose from increased production efficiencies in its plants. Cash generation for the division improved as a result of a concentrated focus which drove inventories down 18% creating a £50 million cash inflow, and cut overdue receivables by 9% in the second half.

Key developments
The growing need for our customers to reduce their energy bills pushed up sales by Energy Solutions in those vertical segments specifically targeted by that business. These include healthcare and pharmaceuticals, where we are able to provide data validation services to assist in Federal Drug Administration compliance.

IMServ metering sales rose 10% between the first half and the second half and the business won a five year service contract as central market operator of the UK's wholesale electricity market, NETA. In Building Systems we continue to win orders for our new SIGMA control system.

At the same time, performance was adversely affected by the continued weakness in the North American commercial building systems and services sector. Fasco Motors and Sensor Systems held up overall and are showing signs of recovery.

Investment has continued into the development of residential control systems. Costs are charged to operating profit, but no commercial revenue was booked for the year.

The Metering Systems business remained solid with good productivity. New products that answer consumer needs offer strong opportunities. For example, we will begin full production of our iCon meter in early 2003. This enables gas, water and electricity consumption to be managed remotely via the Internet.

With the exception of Sensor Systems and Fasco Motors, which are being marketed for disposal, all businesses in this division were transferred on 1 May 2002 to the Energy Management division.