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Invensys PLC (ISYS)

  Print      Mail a friend       Annual reports

Thursday 11 November, 2004

Invensys PLC

Q2 Results

Invensys PLC
11 November 2004


Invensys plc
2004/05 Second Quarter Results

For the three months to 30 September 2004

Key financial points

• Q2 trading in line with expectations
-       Sales for retained (1) businesses at £643 million (Q2 03/04: £733
        million)
-       Operating profit (2) of retained businesses at £47 million (Q2 03/04:
        £74 million)
-       Operating margin (2) of retained businesses 7.3% after corporate costs
        (Q2 03/04: 10.1%)
-       Corporate costs reduced to £12 million (Q2 03/04: £16 million)
-       Gross debt reduced by £118 million and legacy liabilities, including
        pension deficits, reduced by £12 million since 30 June 2004

• H1 trading in line with expectations
-       Sales for retained (1) businesses at £1,254 million
-       Operating profit (2) of retained businesses at £63 million
-       Operating cash inflow from operations at £50 million before payment of
        legacy liabilities (H1 03/04: inflow £15 million)

Chief Executive of Invensys, Rick Haythornthwaite, said:

"We have delivered results in line with expectations, both for the second
quarter and overall for the half.

"We now have a real sense of operational momentum and most of our leading
indicators are on track. Orders in key areas are rising, led by a 49% increase
in major accounts at Process Systems during the second quarter.

"All of this reflects the benefits of our greater financial stability. And, with
the arrival of Ulf Henriksson as Chief Operating Officer, we are able to
accelerate our programmes for margin improvement and cash generation in each
business, as well as investing in core capabilities for future growth.

"Our expectations for an improving year-on-year trend in the second half remain
unchanged."

Contact:
Invensys plc             Victoria Scarth / Mike Davies tel: +44 (0) 20 7821 3755
Maitland   Angus Maitland / Emma Burdett / Fiona Piper tel: +44 (0) 20 7379 5151

Financial Summary                    Q2 04/05   Q2 03/04   H1 04/05   H1 03/04
                                           £m         £m         £m         £m
Sales

- Retained businesses                     643        733      1,254      1,386
- Continuing (3) operations               715        801      1,396      1,516
- Discontinued (4) operations               3        252        111        528
- Total Group                             718      1,053      1,507      2,044

0perating profit/(loss)(2)

- Retained businesses                      47         74         63         91
- Continuing operations                    49         73         66         81
- Discontinued operations                   -         15         (3)        22
- Total Group                              49         88         63        103

Operating exceptional items              (119)      (101)      (133)      (132)
                                         
Goodwill    
        
- Goodwill amortisation                    (7)       (13)       (16)       (31)
- Goodwill impairment                       -          -        (27)         -

Disposals (5)

- Profit on sale/closure                    7         79        175         72
- Goodwill on disposal/closure            (15)      (131)      (462)      (159)

Net interest payable                      (33)       (18)       (69)       (39)

FRS 17 finance charges                     (4)        (6)        (8)       (12)

Loss for financial period                (116)       (50)      (477)      (149)

(Loss)/earnings per share

- Basic                                  (2.1)p     (1.5)p     (8.4)p     (4.3)p
- Total Group before
exceptional items,                        0.4p       1.3p      (0.2)p      0.8p
goodwill amortisation and goodwill
impairment

Notes:
1         Retained businesses are Process Systems, Eurotherm, APV, Rail Systems,
          Climate Controls and Appliance Controls
2         All references to operating profit and operating margin in this
          announcement are stated before exceptional items, goodwill amortisation and
          goodwill impairment
3         Continuing operations refers to retained businesses and businesses for
          sale (principally Lambda and Baker)
4         Discontinued operations comprise Powerware, Hansen, Marcam and APV
          Baker Goldsboro in H1 04/05 and additionally Metering Systems, Baan & Teccor 
          in FY 03/04
5         Closures and disposals of businesses and sale of fixed assets

A presentation and webcast of the Group's second quarter results will take place
at 9.00am today at Haberdashers' Hall, 18 West Smithfield, London EC1A 9HQ. The
announcement, webcast presentation and an interview with CEO Rick
Haythornthwaite and COO Ulf Henriksson are available on www.invensys.com and the
latter can also be viewed on www.cantos.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.

Q2 results overview

Overall, Group sales for Q2 04/05 were £718 million, down 32% compared with Q2
last year. This was due mainly to disposals of businesses and a negative
currency translation impact of £66 million driven by weakness in both the US
dollar and the euro. Group operating profit was £49 million, compared with £88
million last year, reflecting the impact of disposals, a weaker year-on-year
performance at APV, costs associated with programmes to improve performance and
capabilities, and lower volumes in Climate Controls. In addition, profits at
Process Systems are beginning to move toward a more even quarterly weighting
than during the first half of last year.

Sales for the retained businesses were £643 million (Q2 03/04: £733 million),
down 6% at constant exchange rates (CER). Operating profit was £47 million (Q2
03/04: £74 million), including a negative currency translation adjustment of £4
million, resulting in a Q2 operating margin of 7.3%.

Operating cash flow for the Group (before the payment of legacy liabilities) was
an inflow of £58 million, representing a 118% cash conversion on operating
profit. Free cash flow from operations (before the payment of legacy
liabilities) was an inflow of £6 million.

Total free cash flow for the Group including legacy items was an outflow of £48
million, following payments of £54 million related to legacy liabilities. These
were paid out of cash raised in the refinancing, causing net debt to increase to
£776 million at 30 September 2004. Gross debt fell by £118 million during Q2.

H1 results overview

Group sales for the six months to 30 September 2004 were £1,507 million,
compared with £2,044 million in the same period last year. Group operating
profit was £63 million, compared with £103 million. Group operating margin for
the six months was 4.2%. The fall in sales and profits was largely due to the
same effects as those affecting the second quarter.

Sales for the retained businesses were £1,254 million, compared with £1,386
million last year, down 3% at CER. Operating profit for the retained businesses
was £63 million, compared with £91 million last year. Operating margin for the
retained businesses was 5.0%.

Operating cash flow before legacy payments was £50 million and total free cash
flow including legacy items for the six months was an outflow of £127 million,
largely due to payments of legacy liabilities (H1 03/04: £153 million outflow).

No interim dividend will be paid (H1 03/04: nil).

Operational review

Process Systems          Q2 04/05       Q2 03/04       H1 04/05       H1 03/04

Sales (£m)                  180            206            349            375
Operating profit (£m)        14             22             17             14
Operating margin (%)        7.8%          10.7%           4.9%           3.7%

Second quarter sales at Process Systems, excluding IMServ, were down 3% at CER
and up 7% compared with Q1 this year. The decline in year-on-year sales is
mainly due to the winding down of a large long-term contract in North America.
Excluding IMServ, H1 sales were up 4% compared to last year, driven by higher
sales in EMEA and strong sales to the hydrocarbons and power sectors,
particularly in Asia Pacific and the Middle East. The sales mix improved
significantly due to the re-invigoration of the product business, while the new
solutions business continued to build strength over the first two quarters of
this financial year.

Sales at IMServ were down 26% during the quarter and 25% during the half, at
CER, reflecting the disposal of the Fieldtech operations during the prior year.

An operating profit for the second quarter of £14 million and an operating
margin of 7.8% resulted in an operating profit for the first half of £17 million
and an operating margin of 4.9%, compared with 3.7% in H1 last year, with
notable improvement in Asia Pacific.

Orders for the period (excluding IMServ) were up 4% for the quarter and up 9%
for the first half at CER. Buoyant conditions in Asia Pacific, North America and
Europe, together with increasing demand for solutions, offset weaker markets in
South America. Orders from our largest key accounts rose by 30% at CER during
the first half and by 49% during Q2. The increased competitiveness of Process
Systems was also demonstrated by a strong performance in China, the Middle East
and Russia. Major orders in the second quarter included a contract to supply
process control and safety solutions to Ras Laffan LNG II Train 5 and a contract
to automate the 1200 MW Zhang Jiagang Shazhou power plant in China.

Historically, the performance of Process Systems has displayed a stronger bias
toward the second half of the year and, in particular, towards the final
quarter. Although management is working toward a process of more regular
quarterly balance going forward, this pattern is likely to continue to some
extent during the current year. This is because benefits associated with the
70-week performance improvement programme are expected to become more pronounced
- and costs associated with the programme start to fall - in the fourth quarter.

Eurotherm                Q2 04/05       Q2 03/04       H1 04/05       H1 03/04

Sales (£m)                   32             31             60             60
Operating profit (£m)         4              4              7              8
Operating margin (%)       12.5%          12.9%          11.7%          13.3%

Eurotherm sales in Q2 of £32 million were 10% higher at CER compared with last
year and 14% higher than in Q1, due to good conversion of the strong order
backlog built up during the first quarter. An increase in North American demand,
together with continued strong growth in Asia Pacific, drove the overall rise in
sales.

Operating profit at £4 million was up 6% at CER despite a slight reduction in
operating margin to 12.5%. This was due mainly to continued strong growth in the
lower-margin Asia Pacific region. Initiatives are now underway to increase the
level of sourcing from the Asia Pacific region in order to mitigate the
transactional currency impact on gross margins from the high proportion of Yuan
and US dollar sales.

Orders for the second quarter increased by 7% at CER as Eurotherm's main
markets, including the US, continued to experience an upturn. In addition,
targeted initiatives into growth sectors, such as steel and glass, are beginning
to result in higher orders from key customers.

Eurotherm's performance typically displays little seasonal variation throughout
the year.

APV                            Q2 04/05     Q2 03/04     H1 04/05     H1 03/04

Sales (£m)                         92          104           174          193
Operating profit/(loss) (£m)        1           12            (6)          17
Operating margin (%)              1.1%        11.5%        (3.4)%        8.8%

APV's Q2 sales at £92 million were 6% lower at CER, primarily reflecting the
previous weaker project order flow in EMEA, although this was partially offset
by stronger sales in the Americas and a slight increase in Asia Pacific.

APV is already starting to deliver on its 50-week performance improvement
programme initiated in August, with Q2 operating profit showing an early
turnaround to a profit of £1 million from the Q1 loss of £7 million, the latter
including a £4 million adjustment related to prior periods. 

Improvements have also been achieved by reducing management layers, removing the 
overhead of a regional organisation and tightly controlling discretionary costs. 
The mix of the business has been changed by transferring a significant number of 
sales people to focus on product and aftermarket sales, which is already driving
volume and margin increases.

Orders for Q2 were up 18% at CER, as strong growth in Mexico and Asia Pacific,
particularly Australasia, was partially offset by a weaker intake of project
orders in EMEA and North America.

Present trends in the business and the 50-week performance improvement programme
indicate that increased profitability should continue through the second half,
particularly in Q4.

Rail Systems            Q2 04/05       Q2 03/04       H1 04/05       H1 03/04

Sales (£m)                  103            115            207            232
Operating profit (£m)        13             18             26             32
Operating margin (%)       12.6%          15.7%          12.6%          13.8%

Rail Systems' Q2 sales at £103 million, while level with Q1, were 6% lower at
CER compared to Q2 last year. This was mainly due to the loss of a large North
American logistics contract, delays in the passage of the US Transportation Bill
and lower UK sales resulting from continued order delays at Network Rail. Sales
in Spain grew strongly, up 54% compared with Q2 last year.

Operating profit of £13 million, a decrease of £4 million at CER compared to Q2
last year, nonetheless reflected a margin of 12.6%, in line with Q1. The
benefits of margin improvements on certain contracts and a better sales mix
offset volume decreases and higher costs for bonding, insurance and UK pensions.

Q2 orders were 23% higher at CER compared with last year, mainly due to a £10
million contract in China for the Tianjin Metro Line 1.

The longer-term prospects for this business remain positive. Management actions
to mitigate the effect of weaker demand in the short-term have contributed to a
robust first half performance and provide a good basis for the second half. We
also expect the Network Rail situation to ease gradually over the coming months.

Climate Controls          Q2 04/05       Q2 03/04       H1 04/05       H1 03/04

Sales (£m)                  145            179            286            338
Operating profit (£m)        14             21             21             33
Operating margin (%)        9.7%          11.7%           7.3%           9.8%

Climate Controls' sales in Q2 of £145 million were 12% lower at CER compared to
Q2 last year, primarily due to the continued exit from low margin contracting in
building management and the loss of specific contracts - both in the US.
Although some retail business has been regained during that period, this will
impact progressively through the second half. These weaker sales in the Americas
offset stronger sales in Europe. The quarantine and subsequent recall of a large
number of gas valves at the end of the quarter also caused a hiatus in
production and sales of the affected product ranges. Although activity has now
been resumed, sales in North America will continue to be impacted as output is
supplied to replace recalled units.

Q2 operating profit was £14 million, a decrease of £5 million at CER due to
lower sales volumes and pricing pressure on reversing valves in Japan. Operating
margin fell to 9.7% in the second quarter.

Orders for Q2 were 9% lower at CER, driven by the impact of exited business,
high channel inventories in North America and the weaker commercial building
sector in Europe. Market conditions for the product businesses remain positive
in Europe and Asia. During the quarter, the Ranco business commenced shipments
to North America of reversing valves manufactured in its new Chinese factory and
this restructuring is now nearly complete.

The business historically experiences a seasonal bias towards the second and
final quarters of the year.

Appliance Controls        Q2 04/05       Q2 03/04       H1 04/05       H1 03/04

Sales (£m)                   91             98            178            188
Operating profit (£m)        13             13             24             24
Operating margin (%)       14.3%          13.3%          13.5%          12.8%

Q2 sales at Appliance Controls of £91 million were 1% higher at CER compared to
Q2 last year. As expected, solid growth in South America and Europe offset
slightly softer demand in North America.

Operating profit at £13 million remained stable and the operating margin
improved to 14.3% (Q2 03/04: 13.3%) as volume increases more than offset
increases in raw materials prices and increased insurance costs.

Overall, orders fell 5% at CER relative to the strong second quarter last year.
However, Appliance Controls was awarded sizeable contracts for new platforms in
laundry for a Turkish OEM and in cooking for a large worldwide OEM, as well as
gaining new business from customers in the emerging economies, such as China and
Korea.

Conditions in Appliance Controls' core markets remain mixed, with muted consumer
confidence in North America contrasted by continuing strong growth in Europe and
South America. This pattern is expected to continue into Q3.

As a business that has a relatively short supply chain, Appliance Controls is
more likely to be affected by customer order patterns than by quarterly
patterns.

Invensys Controls

Since the quarter end, Climate Controls and Appliance Controls have been brought
together under the leadership of John Duerden. Management believes that this
will enable the businesses to use their scale and complementary strengths in
markets where they have a strong overlap in products, technologies and channels.
The newly combined business, known as Invensys Controls, will be able to more
effectively deploy sales and operating resources in their markets, leverage
their buying power and reduce overheads by removing duplication between the
businesses.

Businesses for sale             Q2 04/05     Q2 03/04     H1 04/05     H1 03/04

Sales (£m)                          72           68          142          130
Operating profit/(loss) (£m)         2           (1)           3          (10)
Operating margin (%)               2.8%        (1.5)%        2.1%        (7.7)%

Trading operations principally relate to Lambda and Baker.

Combined Q2 sales were higher at CER and the businesses achieved an operating
profit of £2 million for the quarter, compared with a combined loss of £1
million last year.

Lambda sales were higher at CER compared to Q2 last year, primarily due to the
recovery in technology markets, particularly in Asia, new programmable products
introduced for high power, and the benefits of the restructuring activity
initiated last year.

Baker's sales were higher at CER compared to Q2 last year, primarily due to
major projects announced in both UK and Spain.

Corporate costs

Corporate costs during the quarter were £12 million, down from £16 million last
year and 14% lower than in the first quarter (Q1 04/05: £14 million). This level
of costs is planned to reduce further toward the end of the current year.

Financial summary

Q2 sales for the retained businesses were £643 million (Q2 03/04: £733 million),
down 6% at CER. Group sales at £718 million (Q2 03/04: £1,053 million) were down
32%.

Operating profit for the retained businesses decreased from £74 million to £47
million. Group operating profit fell 44% to £49 million (Q2 03/04: £88 million).

H1 sales for the retained businesses at £1,254 million (H1 03/04: £1,386
million) were 10% lower than last year and Group sales of £1,507 million (H1 03/
04: £2,044 million) were 26% lower.

The Group has recorded a loss this quarter of £116 million compared with a loss
of £50 million in Q2 03/04, reflecting a significant fixed asset impairment and
the product recall at Climate Controls. The loss for the half year of £477
million compares to a loss of £149 million in the prior year and was mainly
caused by the write-off of goodwill on disposal of operations and goodwill
impairment.

Basic loss per share for the quarter was 2.1p (Q2 03/04: loss 1.5p). Earnings
per share before exceptional items, goodwill amortisation and goodwill
impairment were 0.4p (Q2 03/04: 1.3p).

Goodwill amortisation and goodwill impairment

Goodwill amortisation fell to £7 million for the quarter and to £16 million for
the half (Q2 03/04: £13 million; H1 03/04: £31 million) mainly reflecting the
disposal of Powerware.

The goodwill impairment charge of £27 million (H1 03/04: nil) relates to the
Meterpoint business within IMServ.

Operating exceptional items

Operating exceptional items in this quarter comprise four elements: costs for
the Group's restructuring programmes, transition costs, fixed asset impairments
and product recall costs. Restructuring costs for the quarter were £18 million
(Q2 03/04: £15 million) and include £10 million of costs connected with Climate
Controls moving production facilities for its Ranco business from North America
to China and £2 million relating to Lambda Power's closure of Low Power in North
America. A level of 2% of sales is expected for the full year. Transition costs
of £8 million (Q2 03/04: £68 million) include £5 million of personnel costs and
£3 million of costs for professional fees. Fixed asset impairments of £63
million (Q2 03/04: £18 million) relate predominantly to the Climate Controls
business. The £30 million of product recall costs (Q2 03/04: nil) that have been
provided related to two ranges of valve products within the Climate Controls
business, as announced in our October trading update.

Operating exceptional items in the half year totalled £133 million (Q2 03/04:
£132 million).

Corporate exceptional items

The key component of corporate exceptional items continued to be the loss on
disposal of operations of £7 million (Q2 03/04: £51 million). This arose
principally from the business asset disposal of APV Baker Goldsboro in the US.

For the half year, the corporate exceptional charge was £287 million (H1 03/04:
£87 million) which included gross consideration of £401 million from the sales
of Powerware, Hansen and Marcam during Q1. The charge also includes a write-off
of associated goodwill of £462 million, of which £333 million had previously
been eliminated against reserves on acquisition.

Net interest expense and taxation

The Q2 interest charge was £33 million, giving an interest charge for the half
year of £69 million (H1 03/04: £39 million). The Q1 interest charge included a
£5 million write-off of fees on the early termination of the Term Loan A
facility that was not repeated in Q2. Overall the rise in interest charge
compared to the prior year reflects the increased cost of borrowing under
facilities agreed as part of the refinancing agreement.

The Q2 tax charge was £8 million compared to a prior year tax credit of £52
million, which included a credit in respect of prior years' tax of £64 million.
The tax charge for the quarter is based on an allocation of the estimated tax 
charge for the full year.  No tax relief has been attributed to restructuring 
and corporate exceptionals.

The half year tax charge was £13 million (H1 03/04: £49 million tax credit).

Cash flow

Free cash inflow in the second quarter was £6 million before payment of legacy
liabilities, with an encouraging working capital inflow of £23 million. Net
capital expenditure reduced to £12 million (Q2 03/04: £45 million), mostly as a
result of the disposal of Hansen, where there had been a major investment in new
facilities.

During the quarter, payments made in respect of legacy liabilities from funds
raised in the refinancing totalled £54 million. These included £28 million in
respect of environmental and litigation settlements and £25 million of pension
contributions.

Indebtedness and financing

Net debt increased at 30 September to £776 million (30 June 2004: £713 million).
While cash and short-term deposits reduced by £181 million, gross debt fell by
£118 million, mostly due to the successful completion of a tender for the
repurchase of 71/8% Notes maturing January 2007. This resulted in the
cancellation of Notes amounting to £84 million.

Pensions and other legacy liabilities

The Group's pension service cost charge to operating profit for Q2 was £12
million (Q2 03/04: £11 million) and other finance charges were £4 million (Q2 03
/04: £6 million). Settlement and curtailment credits were £6 million (Q2 03/04:
nil) relating to the disposals of Powerware (£5 million) and APV Baker Goldsboro
(£1 million). Actuarial assessments of pension assets and liabilities have been
updated as at 30 September 2004, resulting in an actuarial loss of £47 million
for the half year (H1 03/04: gain of £89 million). This is mainly due to the
return on assets in the main UK and US schemes being less than the interest cost
on liabilities in the first half, which in turn was primarily due to the
performance of non-UK equities in the period. Contributions of £37 million were
made in the quarter (Q2 03/04: £36 million), of which £22 million were paid to
the UK main scheme. Overall the pension liability has increased by £18 million
to £600 million since Q1 but reduced by £6 million since 31 March 2004.

Other legacy liabilities reduced by £30 million in the quarter resulting, in an
overall reduction of £54 million during the half. This included £17 million of
planned spend against transition costs and a number of smaller settlements.
Additionally, certain liabilities were divested with the disposal of businesses
in the first quarter.

Outlook

Results for the Group - during both the first and second quarters - have
remained in line with expectations and with plans drawn up at the time of the
refinancing in early 2004. Against a backdrop of increased financial stability,
and modest economic recovery, the management teams of the businesses are gaining
a sense of real operational momentum. Given the initiatives underway to improve
operational performance and strengthen core processes and capabilities, it is
expected that profits and cash in the second half will remain weighted towards
the fourth quarter.

At this point and with continuing recovery in certain segments and geographies,
the Group's overall expectations for an improving year-on-year trend in the
second half remain unchanged.

                                      END

Notes to Editors:

About Invensys

Invensys is a global automation, controls and process solutions Group. Our
products, services, expertise and ongoing support enable intelligent systems to
monitor and control processes in many different environments. The businesses
within Invensys help customers in a variety of industries - including
hydrocarbons, chemicals, oil and gas, power and utilities, rail, construction,
environmental control, white goods, telecommunications, paper, food and
beverage, dairy, pharmaceuticals and personal care - to perform with greater
efficiency, safety and cost-effectiveness.

Process Systems provides products, services and solutions for the automation and
optimisation of plant operation in the process industries, such as hydrocarbons
(oil and gas), chemicals, power and utilities and metals and mining. Process
Systems technologies, including industry-leading brands such as Foxboro,
Triconex, SimSci-Esscor and Wonderware, help to make plants function more
efficiently and safely.

Process Systems occupies a top-three position in the DCS (Distributed Control
System), safety, simulation and HMI (Human-Machine Interface - the software that
represents plant information in a comprehensible form) markets; its products are
installed in over 50,000 plants across the world.

Eurotherm is a leading global supplier of control, data and measurement
solutions and services to industrial and process customers. Eurotherm helps many
industries, including plastics, pharmaceuticals, food and beverage and
glassmaking, to measure and control variables such as pressure and temperature
and record vital data. Eurotherm's product range includes distributed process
automation systems and machine control incorporating single and multi-loop
control, operator displays, data management and graphic recorders.

APV's knowledge and expertise in the food, beverage, personal care,
pharmaceutical and chemical industries has made it a leading supplier of process
equipment, turnkey plant solutions and value-increasing services. With nearly
1,000 engineers and 700 sales personnel across 48 countries, APV delivers return
on investment across the world and throughout plant life cycles.

Rail Systems is a multinational leader in the design, manufacture, supply,
installation, commissioning and maintenance of safety-related rail signalling
and control systems, as well as a complete range of rail signalling products.
Working directly for rail authorities or with partners or contractors who
provide other elements of a complete solution, Rail Systems businesses have
established market-leading positions in the US, UK and Spain.

Climate Controls is a leading provider of the components, systems and services
used across the world to make commercial and residential buildings safer, more
comfortable and more efficient. With industry-recognised names such as Ranco,
Eberle, Robertshaw and Firex, Climate Controls has significant presence in the
heating, ventilation, air conditioning, commercial refrigeration and residential
building alarms markets.

Appliance Controls provides electronic and electro-mechanical systems and
components to appliance and related industries. These include motor controls,
thermostats and design software for refrigerators and freezers, washing machines
and dishwashers, water coolers and a wide variety of other appliances used in
homes and businesses. With the broadest product offering worldwide, and a
history of more than 100 years of innovation, Appliance Controls helps customers
to meet consumer demand for reliable, stylish and energy-efficient appliances.

Invensys also currently owns two businesses, Lambda and Baker, which are
identified for sale.

Lambda is a leading producer of standard and modified power supplies for the
industrial automation, test and measurement and telecommunications markets.
Baker provides equipment, services and complete process solutions to the bakery,
biscuit, confectionery and snack industries.

The Invensys Group is listed on the London Stock Exchange. With over 35,000
employees operating in 60 countries, Invensys helps customers to improve their
performance and profitability, building value for end users and shareholders
alike.

Invensys plc
Second quarter announcement 2004/05

Consolidated 
profit and 
loss 
account
(unaudited)

                      Quarter ended    Quarter ended   Half year ended  Half year ended
                       30 September     30 September      30 September     30 September
                               2004             2003              2004             2003
              Notes              £m               £m                £m               £m
                          ----------       ---------         ---------        ---------

Turnover
                           
Continuing
operations                      715             801            1,396             1,516
Discontinued
operations                        3             252              111               528
                           ----------       ---------        ---------       ---------

                  1             718           1,053            1,507             2,044
Operating
profit before
exceptional
items,
goodwill
amortisation               
and goodwill
impairment

Continuing
operations                       49              73              66              81
Discontinued
operations                        -              15              (3)             22
                           ----------       ---------       ---------       ---------

                  1              49              88              63             103

Operating
exceptional
items             3            (119)           (101)           (133)           (132)
                           ----------       ---------       ---------       ---------

Operating
loss
before                          (70)            (13)            (70)            (29)
goodwill
amortisation
and goodwill
impairment

Goodwill
amortisation                     (7)            (13)            (16)            (31)
Goodwill
impairment                        -               -             (27)              -
                           ----------       ---------       ---------       ---------

Total
operating         2             (77)            (26)           (113)            (60)
loss


                           ----------       ---------       ---------       ---------
Continuing
operations        2             (77)            (33)           (108)            (56)
Discontinued
operations        2               -               7              (5)             (4)
                           ----------       ---------       ---------       ---------

Total
operating         2             (77)            (26)           (113)            (60)
loss

Corporate
exceptional
items
Costs of
closure                           -               -               -             (31)
Loss on sale
of fixed
assets                           (1)             (1)             (1)             (2)
Loss on
disposal of
operations        4              (7)            (51)           (286)            (54)
                           ----------       ---------       ---------       ---------

Loss on
ordinary
activities
before
interest                        (85)            (78)           (400)           (147)
and
taxation
Net interest
payable and
similar
charges                         (33)            (18)            (69)            (39)
Other finance
charges - FRS 17                 (4)             (6)             (8)            (12)
                           ----------       ---------       ---------       ---------

Loss on
ordinary
activities
before
taxation                       (122)           (102)           (477)           (198)
Taxation on
loss on
ordinary
activities        5              (8)             52             (13)             49
                           ----------       ---------       ---------       ---------

Loss on
ordinary
activities
after                          (130)            (50)           (490)           (149)
taxation
Minority
interests -
equity                           14               -              13               -
                           ----------       ---------       ---------       ---------

                       
Retained loss
for the                        (116)            (50)           (477)           (149)
period                     ----------       ---------       ---------       ---------

Loss per
share
(basic and        6            (2.1)           (1.5)           (8.4)           (4.3)
diluted)
(Loss)/
earnings
per share         6             0.4             1.3            (0.2)            0.8
(total Group
before
exceptional
items,
goodwill
amortisation
and goodwill
impairment)

Average
exchange
rates for the
period
US$ to £1                      1.80            1.61            1.81            1.62
Euro to £1                     1.48            1.44            1.49            1.43
Yen to £1                    199.16          186.76          197.97          190.10

The results for the period have been translated into sterling at the appropriate
average exchange rates.

Consolidated balance sheet
(unaudited)

                                        30 September   30 September    31 March
                                                2004           2003        2004
                                Notes             £m             £m          £m
                                            ----------      ---------  ---------

Fixed assets
Intangible assets - goodwill                     309            578        478
Tangible assets                                  459            816        660
Investments in associated
undertakings                                       1              4          1
Other investments                                 16             20         16
                                            ----------      ---------  ---------

                                                 785          1,418      1,155
                                            ----------      ---------  ---------
Current assets
Stocks                                           309            475        376
Debtors: amounts falling due
within one year                                  945            945      1,043
Debtors: amounts falling due
after                                             39             99         38
more than one year
Investments                                       18             23         20
Cash and short-term deposits        7            794            396        566
                                            ----------      ---------  ---------

                                               2,105          1,938      2,043
                                            ----------      ---------  ---------
Creditors: amounts falling due
within one year
Short-term borrowings                            (34)          (572)       (58)
Other creditors                                 (957)        (1,174)    (1,065)
                                            ----------      ---------  ---------

                                                (991)        (1,746)    (1,123)
                                            ----------      ---------  ---------

Net current assets                             1,114            192        920
                                            ----------      ---------  ---------

Total assets less current
liabilities                                    1,899          1,610      2,075
                                            ----------      ---------  ---------

Creditors: amounts falling due
after more than one year
Long-term borrowings                          (1,536)        (1,433)    (1,494)
Other creditors                                  (39)           (26)       (23)
                                            ----------      ---------  ---------

                                              (1,575)        (1,459)    (1,517)
                                            ----------      ---------  ---------

Provisions for liabilities and
charges                                         (251)          (320)      (256)
                                            ----------      ---------  ---------

Net assets/(liabilities)
excluding                                         73           (169)       302
pension liability                           ----------      ---------  ---------

Pension liability                               (600)          (770)      (606)
                                            ----------      ---------  ---------

                                    1           (527)          (939)      (304)
                                            ----------      ---------  ---------

Capital and reserves
Called up share capital                          897            875        897
Share premium account                            440             15        440
Capital redemption reserve                        83             83         83
Capital reserve                                2,826          2,126      2,509
Profit and loss account                       (4,921)        (4,225)    (4,398)
                                            ----------      ---------  ---------

Shareholders' deficit - equity                  (675)        (1,126)      (469)
Minority interests - including
non-equity                                       148            187        165
                                            ----------      ---------  ---------

                                                (527)          (939)      (304)
                                            ----------      ---------  ---------

Period end exchange rates
US$ to £1                                       1.81           1.66       1.84
Euro to £1                                      1.46           1.43       1.50
Yen to £1                                     199.44         185.60     191.20

The balence sheet has been translated into sterling at appropriate period and 
exchange rates                                         
                                                                  

Consolidated cash flow
statement (unaudited)

                                 Quarter ended   Quarter ended   Half year ended Half year ended
                                  30 September    30 September      30 September    30 September
                                          2004            2003              2004            2003
                         Notes              £m              £m                £m              £m
                                       ---------       ---------       ---------       ---------

Net cash
(outflow)/inflow
from
operating
activities                   7              14             163             (36)             (8)
Returns on
investments
and servicing
of finance                   7             (47)            (24)            (56)            (47)
Taxation                     7              (6)            (45)            (19)            (50)
Capital
expenditure
and financial
investment                   7             (12)            (45)            (28)            (59)
Acquisitions
and disposals                7              (6)             99             371              74
                                       ---------       ---------       ---------       ---------

Cash
inflow/(outflow)
before use
of liquid
resources and
financing                                  (57)            148             232             (90)
Management of
liquid
resources                    7             134             (28)             31             (48)
Financing

(Decrease)/increase
in debt                      7            (108)           (118)             (5)            136
                                       ---------       ---------       ---------       ---------

Increase/(decrease
in cash
in period                                  (31)              2             258              (2)
                                       ---------       ---------       ---------       ---------

Reconciliation of net
cash flow to movement in
net debt (unaudited)

                                 Quarter ended   Quarter ended   Half year ended Half year ended
                                  30 September    30 September      30 September    30 September
                                          2004            2003              2004            2003
                         Notes              £m              £m                £m              £m
                                       ---------       ---------       ---------       ---------

Increase/(decrease)
in cash
in period                                  (31)              2             258              (2)
Cash
outflow/(inflow)
from
decrease/
(increase)                                 108             118               5            (136)
in debt
                                       ---------       ---------       ---------       ---------
Cash
(inflow)/outflow
from
(decrease)
/increase in
liquid
resources                                 (134)             28             (31)             48
                                       ---------       ---------       ---------       ---------

Change in net
debt resulting
from cash
flows                        7             (57)            148             232             (90)



Transfer of
facility costs
from
prepayments                                  2               -               2               -
Amortisation
of facility
fees within
debt                                        (3)              -              (3)
Exchange
movements                    7              (5)            (11)            (21)             37
                                       ---------       ---------       ---------       ---------

Movement in
net debt in
period                                     (63)            137             210             (53)
Net debt at
beginning of
period                       7            (713)         (1,746)           (986)         (1,556)
                                       ---------       ---------       ---------       ---------

Net debt at
end of period                7            (776)         (1,609)           (776)         (1,609)
                                       ---------       ---------       ---------       ---------

Consolidated statement
of total recognised
gains and losses
(unaudited)
                                 Quarter ended   Quarter ended   Half year ended Half year ended
                                  30 September    30 September      30 September    30 September
                                          2004            2003              2004            2003
                                            £m              £m                £m              £m
                                       ---------       ---------       ---------       ---------

Loss for the
period                                    (116)            (50)           (477)           (149)
Currency
translation
differences on
foreign                                      4             (13)            (17)             14
currency net
investments, net of
tax
Actuarial
(loss)/gain
recognised on
pension                                    (47)             89             (47)             89
schemes


Total
recognised
(losses)/gains
in the the                                (159)             26            (541)            (46)
period
Prior year
adjustment -
FRS 17                                                       -                            (984)
Prior year
adjustment -
FRS 5                                                        -                             (23)
                                                       ---------       ---------       ---------

Total
recognised
(losses)/gains
relating to
the period                                                  26                          (1,053)
                                                       ---------       ---------       ---------

Reconciliation of 
movements in 
consolidated 
shareholders' deficit
           (unaudited)
                                 Quarter ended   Quarter ended   Half year ended Half year ended
                                  30 September    30 September      30 September    30 September
                                          2004            2003              2004            2003
                                            £m              £m                £m              £m
                                       ---------       ---------       ---------       ---------

Loss for the
period                                    (116)            (50)           (477)           (149)
Currency
translation
differences on
foreign                                      4             (13)            (17)             14
currency net
investments, net of
tax
Unvested,
restricted
shares (UITF 17)                             1               -               2               -
Actuarial
(loss)/gain
recognised on
pension                                    (47)             89             (47)             89
schemes
Goodwill
written back
on disposals
and                                         15               2             333              30
closures
                                       ---------       ---------       ---------       ---------

Net
(increase)/
decrease in
shareholders'                             (143)             28            (206)            (16)
deficit for the period                 ---------       ---------       ---------       ---------

Opening
shareholders'
deficit
(previously                               (532)         (1,154)           (469)           (103)
reported)
Prior year
adjustment -
FRS 17                                       -               -               -            (984)
Prior year
adjustment -
FRS 5                                        -               -               -             (23)
Opening
shareholders'
deficit
(restated)                                (532)         (1,154)           (469)         (1,110)
                                       ---------       ---------       ---------       ---------

Closing
shareholders'
deficit                                   (675)         (1,126)           (675)         (1,126)
                                       ---------       ---------       ---------       ---------

Notes (unaudited)

1 Segmental analysis                                         Operating      Operating
                               Turnover       Turnover        profit *       profit *
                             Q2 2004/05     Q2 2003/04      Q2 2004/05     Q2 2003/04
                                     £m             £m              £m             £m
                              -----------    -----------    ------------    -----------

Business
Process Systems                     180            206              14             22
Eurotherm                            32             31               4              4
APV                                  92            104               1             12
Rail Systems                        103            115              13             18
Climate Controls                    145            179              14             21
Appliance Controls                   91             98              13             13
Businesses for sale                  72             68               2             (1)
Corporate costs                       -              -             (12)           (16)
                              -----------    -----------    ------------    -----------

Continuing operations               715            801              49             73

Discontinued operations               3            252               -             15
                              -----------    -----------    ------------    -----------

                                    718          1,053              49             88
                              -----------    -----------    ------------    -----------

Geographical analysis by
origin
United Kingdom                      103            112               8             15
Rest of Europe                      183            198              13             18
North America                       273            342              26             43
South America                        19             14               4              2
Asia Pacific                        116            121               9             10
Africa and Middle East               21             14               1              1
Corporate costs                       -              -             (12)           (16)
                              -----------    -----------    ------------    -----------

Continuing operations               715            801              49             73

Discontinued operations               3            252               -             15
                              -----------    -----------    ------------    -----------

                                    718          1,053              49             88
                              -----------    -----------    ------------    -----------

Geographical analysis of turnover by
destination
United Kingdom                       99            104
Rest of Europe                      180            195
North America                       255            331
South America                        22             17
Asia Pacific                        120            131
Africa and Middle East               39             23
                              -----------    -----------

Continuing operations               715            801

Discontinued operations               3            252
                              -----------    -----------

                                    718          1,053
                              -----------    -----------

                                                             Operating      Operating
                               Turnover       Turnover        profit *       profit *
                             H1 2004/05     H1 2003/04      H1 2004/05     H1 2003/04
                                     £m             £m              £m             £m
                              -----------    -----------    ------------    -----------

Business
Process Systems                     349            375              17             14
Eurotherm                            60             60               7              8
APV                                 174            193              (6)            17
Rail Systems                        207            232              26             32
Climate Controls                    286            338              21             33
Appliance Controls                  178            188              24             24
Businesses for sale                 142            130               3            (10)
Corporate costs                       -              -             (26)           (37)
                              -----------    -----------    ------------    -----------

Continuing operations             1,396          1,516              66             81

Discontinued operations             111            528              (3)            22
                              -----------    -----------    ------------    -----------

                                  1,507          2,044              63            103
                              -----------    -----------    ------------    -----------

Geographical analysis by
origin
United Kingdom                      215            213              12             23
Rest of Europe                      366            374              21             29
North America                       522            650              40             56
South America                        34             28               5              2
Asia Pacific                        224            225              13              7
Africa and Middle East               35             26               1              1
Corporate costs                       -              -             (26)           (37)
                              -----------    -----------    ------------    -----------

Continuing operations             1,396          1,516              66             81

Discontinued operations             111            528              (3)            22
                              -----------    -----------    ------------    -----------

                                  1,507          2,044              63            103
                              -----------    -----------    ------------    -----------

Geographical analysis of turnover by
destination
United Kingdom                      196            198
Rest of Europe                      366            374
North America                       504            627
South America                        40             32
Asia Pacific                        231            243
Africa and Middle East               59             42
                              -----------    -----------

Continuing operations             1,396          1,516

Discontinued operations             111            528
                              -----------    -----------

                                  1,507          2,044
                              -----------    -----------

* Before exceptional items, goodwill amortisation and goodwill impairment.

                                     Net                Net                Net
                               operating          operating          operating
                                  assets             assets             assets
                              H1 2004/05         H1 2003/04         FY 2003/04
                                      £m                 £m                 £m
                                  --------           --------           --------

Business
Process Systems                      346                372                354
Eurotherm                            133                150                134
APV                                   99                 88                 87
Rail Systems                          41                 56                 46
Climate Controls                     193                342                296
Appliance Controls                   188                198                173
Businesses for sale                  205                204                219
Corporate costs                     (189)              (192)              (158)
                                  --------           --------           --------

Continuing operations              1,016              1,218              1,151

Discontinued operations                -                469                324
                                  --------           --------           --------

                                   1,016              1,687              1,475
                                  --------           --------           --------

Borrowings                        (1,570)            (2,005)            (1,552)
Cash and short-term deposits         794                396                566
Deferred tax                           5                (56)                (6)
Taxation                            (172)              (191)              (181)
Pension liability                   (600)              (770)              (606)
                                  --------           --------           --------

Net liabilities per consolidated
balance sheet                       (527)              (939)              (304)
                                  --------           --------           --------

                                          Net             Net             Net
                                    operating       operating       operating
                                       assets          assets          assets
                                   H1 2004/05      H1 2003/04      H1 2003/04
                                           £m              £m              £m

Geographical analysis by origin

United Kingdom                            221             247             247
Rest of Europe                            300             230             273
North America                             377             520             419
South America                              26              26              20
Asia Pacific                              266             372             336
Africa and Middle East                     15              15              14
Corporate costs                          (189)           (192)           (158)
                                      ---------       ---------       ---------

Continuing operations                   1,016           1,218           1,151

Discontinued operations                     -             469             324
                                      ---------       ---------       ---------

                                        1,016           1,687           1,475

Borrowings                              1,570)         (2,005)         (1,552)
Cash and short-term deposits              794             396             566
Deferred tax                                5             (56)             (6)
Taxation                                 (172)           (191)           (181)
Pension liability                        (600)           (770)           (606)
                                       --------       ---------        --------

Net liabilities per consolidated
balance sheet                            (527)           (939)           (304)
                                       --------       ---------        --------

2 Total operating loss

               Continuing   Continuing   Discontinued   Discontinued     Total     Total
               operations   operations     operations     operations        Q2        Q2
               Q2 2004/05   Q2 2003/04     Q2 2004/05     Q2 2003/04   2004/05   2003/04
                       £m           £m             £m             £m        £m        £m

Turnover              715          801              3            252       718     1,053
Cost of              (521)        (575)            (2)          (189)     (523)     (764)
sales              --------     --------       --------       --------  --------  --------

Gross profit          194          226              1             63       195       289
Distribution
costs                  (4)          (5)             -             (1)       (4)       (6)
Administrative
costs                (141)        (148)            (1)           (47)     (142)     (195)
                   --------     --------       --------       --------  --------  --------

Operating
profit*                49           73              -             15        49        88
Operating
exceptional
items                (119)         (99)             -             (2)     (119)     (101)
Goodwill
amortisation           (7)          (7)             -             (6)       (7)      (13)
                   --------     --------       --------       --------  --------  --------

Total
operating loss        (77)         (33)             -              7       (77)      (26)
                   --------     --------       --------       --------  --------  --------

The total restructuring costs of £18 million (Q2 2003/04: £15 million) together
with transition costs of £8 million (Q2 2003/04: £68 million), product recall
costs of £30 million (Q2 2003/04: £nil), goodwill amortisation of £7 million (Q2
2003/04: £13 million) and fixed asset impairment of £63 million (Q2 2003/04: £18
million) are classified as administrative costs, which therefore total £268
million (Q2 2003/04: £309 million).

               Continuing   Continuing   Discontinued   Discontinued     Total     Total
               operations   operations     operations     operations
                       H1           H1             H1             H1        H1        H1
                  2004/05      2003/04        2004/05        2003/04   2004/05   2003/04
                       £m           £m             £m             £m        £m        £m

Turnover            1,396        1,516            111            528     1,507     2,044
Cost of            (1,036)      (1,115)           (91)          (394)   (1,127)   (1,509)
sales              --------     --------       --------       --------  --------  --------

Gross profit          360          401             20            134       380       535
Distribution
costs                  (9)         (11)            (1)            (3)      (10)      (14)
Administrative
costs                (285)        (309)           (22)          (109)     (307)     (418)
                   --------     --------       --------       --------  --------  --------

Operating
profit/(loss)*         66           81             (3)            22        63       103
Operating
exceptional
items                (133)        (122)             -            (10)     (133)     (132)
Goodwill
amortisation          (14)         (15)            (2)           (16)      (16)      (31)
Goodwill
impairment            (27)           -              -              -       (27)        -
                   --------     --------       --------       --------  --------  --------

Total
operating loss       (108)         (56)            (5)            (4)     (113)      (60)
                   --------     --------       --------       --------  --------  --------

* Before exceptional items, goodwill amortisation and goodwill impairment

3 Operating exceptional items

                                    Quarter        Quarter      Half year      Half year
                                      ended          ended          ended          ended
                               30 September   30 September   30 September   30 September
                                       2004           2003           2004           2003
                                         £m             £m             £m             £m
                                   ----------     ----------     ----------     ----------

Restructuring
costs                                   (18)           (15)           (28)           (46)
Transition costs*                        (8)           (68)           (12)           (68)

Fixed asset
impairment                              (63)           (18)           (63)           (18)
Product recall
costs*                                  (30)             -            (30)             -
                                   ----------     ----------     ----------     ----------

                                       (119)           101)          (133)          (132)
                                   ----------     ----------     ----------     ----------

Restructuring costs by
business

Process Systems                          (1)            (4)            (2)            (7)
Eurotherm                                 -             (1)             -             (1)
APV                                      (3)            (1)            (5)            (3)
Rail Systems                              -              -              -              -
Climate Controls                         (9)            (3)           (14)            (6)
Appliance Controls                        -              -              -             (3)
Businesses for
sale                                     (3)            (2)            (5)           (11)
Corporate costs                          (2)            (2)            (2)            (5)
                                   ----------     ----------     ----------     ----------

Continuing
operations                              (18)           (13)           (28)           (36)

Discontinued
operations                                -             (2)             -            (10)
                                   ----------     ----------     ----------     ----------

                                        (18)           (15)           (28)           (46)
                                   ----------     ----------     ----------     ----------
Fixed asset impairment by
business



Climate Controls                       (60)             -            (60)            -

Businesses for
sale                                    (1)             -             (1)            -
Corporate costs                         (2)           (18)            (2)          (18)
                                  ----------     ----------     ----------    ----------

Continuing
operations                             (63)           (18)           (63)          (18)

Discontinued operations                  -              -              -             -
                                  ----------     ----------     ----------    ----------

                                       (63)           (18)           (63)          (18)
                                  ----------     ----------     ----------    ----------

*Transition costs relate wholly to the corporate sector. Product recall costs
are attributable wholly to the Climate Controls business.

4 Loss on disposal of operations

The Group's loss on disposal of operations comprises the following:

                       Quarter        Quarter      Half year      Half year
                         ended          ended          ended          ended
                  30 September   30 September   30 September   30 September
                          2004           2003           2004           2003
                            £m             £m             £m             £m
                      ----------     ----------      ---------      ---------

Profit on assets
divested                     2             80            168             77
Charge of
associated
goodwill                   (15)          (131)          (462)          (131)
Settlements and
curtailments
credit                       6              -              8              -
                      ----------     ----------      ---------      ---------

                            (7)           (51)          (286)           (54)
                      ----------     ----------      ---------      ---------

5 Taxation on loss on ordinary activities

                       Quarter        Quarter      Half year      Half year
                         ended          ended          ended          ended
                  30 September   30 September   30 September   30 September
                          2004           2003           2004           2003
                            £m             £m             £m             £m
                      ----------     ----------     ----------     ----------

Taxation on
ordinary
activities                  (8)           (15)           (13)           (20)
Adjustments in
respect of prior
years                        -             64              -             64
Deferred tax                 -              3              -              5
                      ----------     ----------     ----------     ----------
                      ----------     ----------     ----------     ----------

                            (8)            52            (13)            49
                      ----------     ----------     ----------     ----------

6 (Loss)/earnings per share

                          Quarter        Quarter      Half year      Half year
                            ended          ended          ended          ended
                     30 September   30 September   30 September   30 September
                             2004           2003           2004           2003

(Loss)/earnings per
share (pence)
Basic                        (2.1)p         (1.5)p         (8.4)p         (4.3)p
Total Group*                  0.4p           1.3p          (0.2)p          0.8p
Diluted                      (2.1)p         (1.5)p         (8.4)p         (4.3)p
                         ----------     ----------      ---------      ---------

Average number of
shares (million)
Basic                       5,687          3,500          5,687          3,500
                         ----------     ----------      ---------      ---------

(Loss)/earnings (£m)

Basic                        (116)           (50)          (477)          (149)

Total Group
Operating profit*              49             88             63            103
Net interest
payable                       (33)           (18)           (69)           (39)
Other finance
charges - FRS 17               (4)            (6)            (8)           (12)
                         ----------     ----------      ---------      ---------

Operating profit
less finance costs             12             64            (14)            52
Tax on operating
profit less
finance costs                  (8)           (20)           (13)           (25)
Minority interests             14              -             13              -
                         ----------     ----------      ---------      ---------

                               18             44            (14)            27
                         ----------     ----------      ---------      ---------

* Before exceptional items, goodwill amortisation and goodwill impairment.

The basic loss per share for the quarter has been calculated using 5,687 million
shares (Q2 2003/04: 3,500 million), being the weighted average number of shares
in issue during the quarter and the loss after taxation and minority interests
of £116 million (Q2 2003/04: £50 million).

(Loss)/earnings per share is also calculated by reference to earnings for the
total Group, before exceptional items, goodwill amortisation and goodwill
impairment with an underlying tax charge of £8 million (Q2 2003/04: £20
million), since the directors consider that this gives a useful additional
indication of underlying performance.

The diluted loss per share has been calculated in accordance with Financial
Reporting Standard No 14: Earnings per share (FRS 14) without reference to
adjustments in respect of certain share options which are considered to be
anti-dilutive.

7 Cash flow statement

                          Quarter        Quarter      Half year      Half year
                            ended          ended          ended          ended
                     30 September   30 September   30 September   30 September
                             2004           2003           2004           2003
                               £m             £m             £m             £m
                         ----------     ----------     ----------     ----------
Reconciliation of
operating loss
before interest and
tax
to net cash outflow
from operating
activities

Total operating
loss                          (77)           (26)          (113)           (60)
Depreciation
charge                         17             30             39             61
Provision for
impairment charged
to operating
profit                         63              -             90              -
Amortisation of
goodwill                        7             13             16             31
Cash costs of
closures                        -              1              -             (2)
Increase in stocks             (3)            (1)           (18)           (13)
(Increase)/decrease
in debtors                    (19)           102            (12)            53
Increase/(decrease)
in creditors and
provisions                     51             69             15            (58)
Movement in
pensions                      (25)           (25)           (53)            20)
                         ----------     ----------     ----------     ----------

Net cash
(outflow)/inflow
from operating
activities                     14            163            (36)            (8)
                         ----------     ----------     ----------     ----------

Analysis of cash
flows for headings
netted in the cash
flow statement

Returns on
investments and
servicing of
finance
Interest received               5              5              8             10
Interest paid                 (51)           (28)           (63)           (56)

Dividends paid to
minority interests             (1)            (1)            (1)            (1)
                         ----------     ----------     ----------     ----------

Net cash outflow
for returns on
investments and
servicing of
finance                       (47)           (24)           (56)           (47)
                         ----------     ----------     ----------     ----------

Taxation
UK corporation tax
(paid)/received                (1)             1             (1)             -
Overseas tax paid              (5)           (46)           (18)           (50)
                         ----------     ----------     ----------     ----------

Net cash outflow
for tax paid                   (6)           (45)           (19)           (50)
                         ----------     ----------     ----------     ----------

Capital expenditure
and financial
investment
Purchase of
tangible fixed
assets                        (12)           (48)           (28)           (65)
Sale of tangible
fixed assets                    -              1              -              2
Sale of trade
investments                     -              2              -              4
                         ----------     ----------     ----------     ----------

Net cash outflow
for capital
expenditure and
financial
investment                    (12)           (45)           (28)           (59)
                         ----------     ----------     ----------     ----------

Acquisitions and
disposals
Purchase of
subsidiary
undertakings                   (1)            (1)            (1)            (1)
Sale of subsidiary
undertakings*                  (5)           105            390             80
Net cash disposed
of on sale of
subsidiary
undertakings                    -             (4)           (18)            (4)

Purchase of
minority interests              -             (1)             -             (1)
                         ----------     ----------     ----------     ----------

Net cash
inflow/(outflow)
for acquisitions
and disposals                  (6)            99            371             74
                         ----------     ----------     ----------     ----------

Management of liquid
resources
Short-term
deposits
withdrawn/(made)              134            (28)            31            (48)
                         ----------     ----------     ----------     ----------

Net cash
inflow/(outflow)
from management of
liquid resources              134            (28)            31            (48)
                         ----------     ----------     ----------     ----------

Financing
                       
Debt due within one
year
Increase in
short-term
borrowings                      -             55              -            128
Repayment of
short-term
borrowings                    (23)          (127)           (21)          (189)
Debt due beyond one
year
Increase in
long-term
borrowings                      6              -            107            242
Repayment of
long-term
borrowings                    (90)           (45)           (90)           (44)
Capital element of
finance lease
repayments                     (1)            (1)            (1)            (1)
                         ----------     ----------     ----------     ----------

                             (108)          (118)             5)           136
                         ----------     ----------     ----------     ----------

Net cash
(outflow)/inflow
from financing               (108)          (118)            (5)           136
                         ----------     ----------     ----------     ----------

* In the three months ended 30 September 2004, the net disposal proceeds
received comprised cash proceeds of £2 million less £7 million of other directly
related cash costs, including advisor and professional fees.

Analysis of changes to net debt
Second quarter

                     At 1 July       Cash        Other   Exchange   At 30 September
                          2004       flow   movements*   movement            2004
                           £m         £m           £m         £m               £m

Cash at bank and in
hand                      717        (51)           -          3             669
Overdrafts                (21)        20            -          -              (1)

                                     (31)

Debt due within one
year                      (55)        23            -         (1)            (33)
Debt due after one
year                   (1,609)        84           (1)        (8)         (1,534)
Finance leases             (3)         1            -          -              (2)

                                     108
Short-term deposits       258       (134)           -          1             125
                     ---------- ----------   ---------- ----------     -----------

            Total        (713)       (57)          (1)        (5)           (776)
                     ---------- ----------   ---------- ----------     -----------

Cash at bank and in
hand                      717                                                669
Short-term deposits       258                                                125
                     ----------                                        -----------

Cash and short-term
deposits                  975                                                794
                     ----------                                        -----------

*Other movements comprise a £2 million transfer of facility fees from
prepayments in respect of the Group's refinancing, less £3 million amortisation
of facility fees within debt.

Half year
                    At 1 April       Cash       Other   Exchange   At 30 September
                          2004       flow   movements   movement            2004
                            £m         £m          £m         £m              £m

Cash at bank and in
hand                       409        255           -          5             669
Overdrafts                  (4)         3           -          -              (1)

                                      258

Debt due within one
year                       (53)        21           -         (1)            (33)
Debt due after one
year                    (1,492)       (17)         (1)       (24)         (1,534)
Finance leases              (3)         1           -          -              (2)

                                        5
Short-term deposits        157        (31)          -         (1)            125
                      ---------- ----------  ---------- ----------      ----------

            Total         (986)       232          (1)       (21)           (776)
                      ---------- ----------  ---------- ----------      ----------

Cash at bank and in
hand                       409                                               669
Short-term deposits        157                                               125
                      ----------                                        ----------

Cash and short-term
deposits                   566                                               794
                      ----------                                        ----------


8 Financial statements

This unaudited results statement was approved by a duly appointed and authorised
committee of the Board of directors on 10 November 2004. This statement does not
comprise the statutory accounts of the Group, as defined in section 240 of the
Companies Act 1985.

The financial information for the half year and quarter ended 30 September 2004
has been prepared on the same basis of accounting as for the year ended 31 March
2004. The financial information is unaudited. The statutory accounts of Invensys
plc for the year ended 31 March 2004 have been delivered to the Registrar of
Companies. The auditors, Ernst & Young LLP, reported on those accounts and their
report was unqualified and did not contain a statement under section 237(2) or
(3) of the Companies Act 1985.

The financial information for the half year ended 30 September 2004 included
within this unaudited results statement has been extracted from the Group's
interim report for the half year ended 30 September 2004.




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