With merely a month under his belt as CEO, Invensys plc's Ulf Henriksson disclosed the company's first-quarter results, which showed signs that the automation vendor is turning the corner toward profitability.
Invensys reported an operating profit of £32 million on revenue of £577 million for its first quarter of its 2005/06 fiscal year ended June 30th. Compared to the year ago period, revenue was down 2% at constant exchange rates (CER) to £586 million. Operating profit, on the other hand, was up a dramatic 82% at CER, compared to £17 million for the 2004/05 first quarter.
The numbers, announced last Thursday, are reflective of Invensys' five continuing businesses: Controls, Process Systems, Rail Systems, APV and Eurotherm. Over the past few years the company has been actively disposing non-strategic businesses in an effort to reduce debt. In May, the company announced it had successfully paid down almost all of its £4 billion debt, at which time the incumbent CEO, Rick Haythornthwaite, announced his departure from the company.
After shedding its debt, passing the corporate reins to Henriksson, who industry observers have described as a hands-on operations guy, Invensys is beginning to show much-needed operational improvements. "The company seems more stable now compared to a couple of years ago," said Larry O'Brien, research analyst at ARC Advisory Group. "Now that they've gone through all of this restructuring, they have to roll up their sleeves and get back to hitting the street."
According to the Invensys financial statement, the Process Systems group and APV (the business unit focused on food, beverage and healthcare) grew revenue 4% and 9%, respectively. The Process Systems Group, which is under the direction of President Michael Caliel, reported revenue of £160 million this quarter, compared with £153 million in the year ago period. Henriksson attributes much of the group's success to its strong leadership team.
Among the Process Systems group's seven global key accounts, Invensys said orders rose 43% compared with last year's first quarter. In addition, a new focus on small and mid-market manufacturers is in the company's future growth plans. "The Process Systems group in North America has high internal ambitions," said Henriksson, during a conference call with financial analysts last week. "We've done okay in Europe, done well in the Middle East and Asia, and in North America we've done very well with key accounts. Where we have not done as well is with small and mid-size customers."
Ironically, Foxboro -- a company within the Process Systems business -- has a mid-market control systems offering called Foxboro A2, but sales and marketing has not been effective as of yet, say industry observers.
"They just need to be more savvy," said ARC's O'Brien. "They have all of the tools. It's just a matter of reinforcing their strategy and making a commitment to the markets they want to be in."
Commenting on the recent first quarter fiscal year results announced by Invensys plc, Mike Caliel, president of Invensys Process Systems, said: "While our journey is still incomplete, Invensys Process Systems is clearly on the right path. Thanks to a tremendous effort all around, our products, people and processes continue to improve. Orders are up, particularly from key global accounts, and our profit margins have improved significantly. Through continued hard work, our goal is to help our customers -- large and small -- to improve the performance of their industrial assets while meeting or surpassing our own financial expectations."