Operating results
Invensys’ operating results include the performance of continuing and discontinued operations. Continuing operations encompass the three main divisions in existence during the year ended 31 March 2003: Production Management, Energy Management and Development. Discontinued operations are those businesses that were sold during the year including Rexnord, Flow Control, Sensor Systems, Fasco Motors and Drive Systems.

Sales from continuing operations were £4,258 million (2002 £4,623 million) down 8% in absolute terms and reflecting a decline of 4% at constant exchange rates (CER). Total Group sales for the year were £5,018 million (2002 £6,972 million) reflecting the disposal of businesses during the year.

Operating profit for continuing operations was £250 million (2002 £312 million) in line with our trading update in April. Total Group operating profit was £330 million overall (2002 £549 million). Total Group operating margin was 6.6% (2002 7.9%), while operating margin for continuing operations was 5.9% (2002 6.7%), primarily due to the under-performance in a minority of businesses.

These results include a £203 million negative currency translation impact on continuing operations’ sales and £11 million on operating profit due to substantial movement in US dollar to sterling exchange rates over the year.

Production Management
Production Management sales were £1,449 million (2002 £1,584 million). Sales were 9% lower than the prior year (5% CER). Sales in Europe were significantly affected by the decline in the software market served by Baan. Sales in North America were 5% lower (CER), reflecting the continued lower spending by organisations served by the industrial automation businesses, while South America, Asia Pacific and the Middle East and Africa all grew. Operating profit was £28 million (2002 £33 million) and operating margin was 1.9% (2002 2.1%). Sales for the year excluding Baan were 6% lower at £1,261 million (2002 £1,342 million).

Excluding Baan, Production Management achieved strong underlying improvements with a rise in operating profits from £28 million to £53 million and in operating margin from 2.1% to 4.2%. This underlying performance improvement was the result of aggressive management actions to control contracts, project management and supply chain costs.

While costs were tightly controlled, the Division continued to invest in new technologies. ArchestrA, the future platform for all Invensys technology, was launched commercially and customer feedback has been positive. Foxboro A2, an ArchestrAbased, smaller scale complement to the I/A series, and Digital Coriolis, our awardwinning flow meter and transmitter, were also successfully introduced to the market.

Process Systems manufactures process automation systems, advanced process control solutions, safety and critical control technologies and software focusing on the management and control of information flow, in addition to providing project management and services to the process automation industry.

Process Systems achieved a significant increase in operating profit from £8 million to £21 million, despite a slight decline in sales to £713 million (2002 £768 million). Increases in plant intelligence software sales, including growth associated with Triconex, were offset by lower process systems sales in Europe, Middle East and Asia. Operating margin increased from 1.0% to 2.9%, after including significant investments in technologies including ArchestrA, through improved portfolio management and project execution and the positive impact of performance initiatives.

APV provides process equipment, project management and services to food, beverage and pharmaceutical producers in North America and Europe, Middle East and Asia.

APV saw sales reduced from £303 million last year to £291 million. Lower sales in certain markets were more than offset by operational improvements and a closer integration between the Products, Solutions & Services businesses, contributing to an operating profit of £11 million compared to a £1 million loss last year. Operating margin was 3.8%.


Eurotherm manufactures control and measurement instrumentation for a wide range of industrial and process markets.

Eurotherm successfully maintained operating profits at £17 million (2002 £20 million) as sales dipped from £127 million to £119 million in difficult trading conditions impacted by overcapacity in the semiconductor, steel and plastic processing industries. Operating margin fell to 14.3% (2002 15.7%).

Baan is a provider of enterprise application software and related services.

Sales for Baan reduced to £188 million (2002 £242 million). Significant cost and headcount reductions were not able to offset a decline in high margin licence sales, resulting in an operating loss of £25 million, compared with an operating profit of £5 million last year.

Baan’s performance had a significant impact on the performance of Production Management as a whole, reducing operating margin from 4.2% to 1.9%.

APV Baker is a leading manufacturer of process equipment specifically for the dry food industry.

APV Baker maintained sales at £78 million (2002 £77 million) with contract wins in the US bakery industry. Operating profit remained at £2 million and operating margin at 2.6%.

M&I manufactures measurement tools and instrumentation primarily for the process industries.

M&I experienced a steady decline in markets resulting in a decline in sales to £60 million (2002 £67 million). Despite this, the positive impact of prior year restructuring and cost containment programmes resulted in an operating profit of £2 million compared to an operating loss of £1 million the previous year.