It has been a demanding and disappointing year.

In February 2002, we outlined plans to simplify our Group’s structure by creating two core divisions, Production Management and Energy Management, secure its financial position and rebuild underlying performance. It was a difficult task, but one to which our management was committed and in which we achieved real progress.

In the end, this has not been enough. Tougher trading conditions than we anticipated were compounded by continuing weak financial markets. Despite completing our disposal programme ahead of target, and achieving significant performance improvements, it became clear that we could not afford to develop both core divisions and reduce our liabilities to an acceptable level. Further actions had to be taken for the good of Invensys and its investors.


15 April announcement
This was the background to our announcement on 15 April, that we had made the decision to move from two core divisions to focus our efforts on the Production Management and Rail Systems businesses.

All other businesses were moved into an enlarged Development Division and the process begun at once to divest all or part of our interest in these businesses. In addition to Baan, the businesses impacted are the largely product-based Appliance Controls, Climate Controls, Metering Systems and Powerware from the Energy Management Division, APV Baker from Production Management and Lambda, Teccor and Hansen Transmissions. For the year ended 31 March 2003, the expanded Development Division would have had combined revenues of £2.6 billion. IMServ and certain data management technologies that were formerly within Energy Management have been incorporated into
Production Management.

Successful completion of the disposal programme over the next 18 to 24 months should result in a smaller, more agile and focused Group, with higher growth potential and above all greater financial stability.

Performance
In the year to 31 March 2003, sales of the continuing operations, Production Management, Energy Management and Development divisions, were down 8% to £4,258 million or 4% at constant exchange rates. Operating profit was down 20% to £250 million, which meant that the operating margin for the continuing operations fell almost one percentage point to 5.9%.