Turkish and Saudi contracts boost Invensys

Two new emerging market contracts lifted Invensys, the UK-based engineering company, in spite of the announcement of weaker than expected half-year results on Thursday.

Invensys, whose products help control the smooth running of railways, nuclear power stations and washing machines, confirmed its rail division had won a €195m ($269m) contract in Turkey. Last week, the company said it had won a £420m ($673m) rail contract in Saudi Arabia.

Wayne Edmunds, chief executive, said: “We’ve spent a lot of time trying to diversify our revenue base.”

Revenues from Asia and the Pacific rose 22 per cent in the first half, outpacing the 10 per cent rise in the UK.

Operating profits before exceptional items for the half-year ending September 30 were up 2 per cent to £102m compared to the same period a year ago. Net profit fell 6.7 per cent to £55m after one-off costs of £24m. Diluted earnings per share dropped 7 per cent to 6.6p.

Like-for-like sales in the company’s controls division, which is highly susceptible to falling demand in household appliance purchases, were down 15 per cent.

The company’s large pension liability, a hangover from its predecessor company BTR, dropped by 45 per cent to £327m under IAS methodology, though the company noted that the actuarial valuation of the liability was higher.

The company’s net assets grew by 75 per cent to £673m, mostly due to the changes in pension liability.

The company said it “was not happy” about the 43 per cent decline in net cash to £194m, but expected this to improve in the second half.

Martin Wilkie, an analyst at Deutsche Bank, said: “Cash holdings came down £100m lower than we were expecting. They are definitely waiting for some payments but that is not expected to make up for this decline.”

Shares in the FTSE 250 company, which is chaired by Sir Nigel Rudd, rose 6 per cent to 220p. Shares have dropped 35 per cent since Mr Edmunds took over as chief executive on March 24.

Mark Fielding, an analyst at Citi, said the shares were now slightly undervalued. “They’ve reduced expectations twice this year at the start of the year and in May,” he said. “They’ve also seen a deflation of expectations on a possible takeover.”

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