Invensys Plc Ordinary 10p (ISYS)

Company overview

Automation, controls and process solutions company, Invensys, helps companies improve their performance and profitability by enabling intelligent systems to monitor and control processes. The group operates in a range of industries, such as hydrocarbons, chemicals, oil and gas, telecommunications and pharmaceuticals. The company is multinational with operations in over 60 countries, employing around 20,000 employees. Invensys is quoted on the London Stock Exchange and is a constituent of the FTSE 100 Index.

HL Comment (24 May 2010)

Process control specialist Invensys recently (24th May 2010) announced full year results which saw net profit rise to £151 million, from £133 million last year. The performance was largely due to the gain of £36 million arising from the curtailment of its U.S. defined benefit pension plans. The company, which for more than five years has been restructuring its operations to cut costs and reduce cyclicality in its businesses, said its order book rose 11 per cent, to £2.31 billion from £2.1 billion, with 40 per cent now represented by orders from emerging markets. Management outlook is positive highlighting an improved performance throughout the recession providing further confidence for growth as markets recover.

Negative Points:

• Invensys derives nearly 50 per cent of its profits from North America. Its earnings are therefore influenced by exchange rates and the overall level of performance of the US economy.
• The group’s overall pension deficit at the year end stood at £581million compared with £308million at the end of the previous year.
• The delicate state of the global economy could have an impact on the group’s earning capability over the short term, with operating margins squeezed within its operation management and rail divisions in particular.

Positive Points:

• During the past two years, Invensys’s order book has grown by 78 per cent, a result of successes in winning large orders, especially in emerging markets.
• The group holds a strong financial position with no debt, and cash totalling £363million in the bank.
• The company recommended a final dividend of 2 pence per share, giving a total dividend of 3p per share, compared with 1.5p per share in 2009.

Consensus
On balance, market consensus indicates a cautious buy.

All yield figures are variable and not guaranteed.

Fundamental Data

Year Ending	Revenue (m)	Profit Before Tax (m)	EPS (p)	P/E Ratio	PEG	EPS Growth (%)	Total Dividend	Dividend Yield
31-03-2010	2,243.00	179.00	18.50	25.40	n/a	(5.00)	3.00	0.90
31-03-2009	2,284.00	165.00	17.40	11.80	n/a	(17.00)	1.50	0.90
31-03-2008	2,108.00	199.00	21.10	13.20	0.40	35.00	n/a	n/a
31-03-2007	1,999.00	81.00	8.20	23.10	0.30	87.00	n/a	n/a
31-03-2006	2,457.00	(26.00)	(6.16)	31.90	n/a	n/a	n/a	n/a