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Invensys Revenue Growth Lags Competitors' Sign Up to receive Daily News Alerts in your E-mail Inbox
Posted on Friday, February 08, 2008 3:03:00 PM |
Even as it finished its fiscal third quarter with net cash for the first time in its history, U.K.-based automation vendor Invensys on Thursday reported 5% year-over-year growth in sales, lagging fellow automation providers that have seen steady double-digit growth in their top lines.
Invensys' results come on the heels of an announcement from Emerson Electric this week that its first-quarter sales had jumped 12%. Invensys' 5% growth brought revenue for the period ended Dec. 31, 2007, to £545 million.
For continuing operations, pre-tax profit slumped 13% to £33 million, but the sale of Invensys' APV business sent net profit soaring to £184 million, from £42 million in the prior-year period.
Revenue gains in the Process Systems and Rail units outweighed a 7% decline in Controls, which slumped to £152 million from £164 million in last year's third quarter. The company blamed that slide on the ongoing slowdown in the U.S. housing market, where Invensys sells radiator controls and thermostats.
CEO Ulf Henriksson told analysts on a conference call Thursday that the company is continuing its shift to more software and services offerings. About 70% of the company's revenue now comes from Process and Rail.
"These businesses operate in markets such as global energy and infrastructure, which are expected to continue to exhibit growth, despite some uncertainty about the future direction of the world's economies," he said in a statement. The company said the order book for its InFusion enterprise control system, "is currently running at an annualized rate of around £100 million." It counts an ExxonMobil plant in Louisiana and a BP refinery in Australia among the customers for InFusion.
The decline in pre-tax profit came, in part, from restructuring costs. Invensys' Control division is closing manufacturing operations in Lomazzo, Italy, and Thyez, France, and is relocating a Long Beach, CA, plant to Mexicali, Mexico. It's also reducing its work force in Belluno, Italy, although it will not incur expenses for that action until next quarter at the earliest, it said. Currency fluctuations also contributed to the pre-tax profit drop.
Invensys' revenue stream was spread across the globe, with 42% in Western Europe (including the United Kingdom), 31% in the United States and Canada, 22% in emerging markets, and 5% in mature Asia Pacific markets.
The company's newfound cash-positive position helped buoy its outlook. Invensys raised £275 million by selling lower-margin businesses, such as its APV industrial food processing unit, its Reversing Valves refrigerator valve unit, and its FireX Safety smoke and gas detector business. The sales conformed to its de-emphasis of hardware in favor of software and services, and helped it achieve a positive cash position of £55 million — a first at Invensys.
"For the first time since Invensys was founded in 1999, we now have net cash," CFO Steve Hare said. It also marks a milestone in the recovery from the company's low point in 2005 when it had lost almost £3 billion over four years.
With its cash position strengthening, the company plans next month to redeem its outstanding high-yield bonds totaling £343 million, which will cost it £23 million in the fourth quarter, but which, it said, will significantly reduce future finance charges.
Invensys is now considering paying a dividend, which it hopes to do "in future years and in suitable circumstances," CEO Henriksson said.
"We will make further progress in the final quarter of the financial year," he said.
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