Invensys remains cautiously optimistic

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Invensys plunged deeper into the red in the first quarter of this year as costs relating to its restructuring programme tarnished a gradual recovery in most of its core divisions.

The UK engineering group revealed pre-tax losses of £355m ($638m) in the three months to June 30, compared with a £96m loss last year. It incurred a £279m loss on disposals and £50m in costs relating to restructuring and goodwill write-offs.

However, the pre-tax figure was slightly better than expected and news that the group had cut net debt by £273m to £713m since the end of March helped push the shares up 1.7 per cent to 15¼p in Thursday morning trade.

Rick Haythornthwaite, chief executive, also struck a fairly optimistic note about the performance of the core business.

“Most of our businesses are experiencing a continuing recovery in the US, together with strengthening activity in Asia, particularly China, and localised imprisonments in Europe,” he said.

The group’s retained businesses generated a 1 per cent rise in sales at constant exchange rates.

Its process systems operations reported a £3m operating profit, compared to a loss of £8m, as volumes and efficiency increased and sales at the instrumentation arm improved.

Invensys’ Eurotherm and Appliance Controls businesses also reported slight increases in sales at constant exchange rates.

But sales at the group’s APV business fell 1 per cent as higher demand in Asia failed to offset declining revenue in the US. The group warned that conditions at the business were unlikely to improve until later in the year.

The rail systems and climate controls divisions also suffered sales declines.

Mr Haythornthwaite said that “despite issues around APV, short-term order delays in Rail Systems and materials price increases, we ... should deliver an improving year-on-year trend in group performance in the second-half”.

Total sales fell to £789m from £991m the previous year, while losses per share widened to 6.3p from 2.8p.

Earlier this year Invensys unveiled its third attempt in two years to create a new blueprint for its future, as it announced a broad restructuring backed by a £2.7bn refinancing package.

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