Automation systems provider Invensys plc reported tepid fiscal third-quarter results yesterday, and attributed much of the malaise to decreases in its residential controls business and foreign exchange rates that negatively impacted revenue.
For its third quarter, ended Dec. 31, 2006, Invensys reported revenues from continuing operations of £637 million, up just 4% over the £611 million reported in the same period last year. Orders received from continuing operations dropped 4% year over year to £630. Net profit came in at £42 million, which compared to a £3 million loss for the fiscal 2005/06 third quarter. The company is "normalizing," according to Invensys executives, as it moves away from exceptional restructuring costs that have plagued the company's turnaround bid.
Amidst the lukewarm results, a bright spot for Invensys in the quarter was its Process Systems group, which experienced a 9% increase in orders, pushing the total to £218 million.
On a conference call to announce the results yesterday, Invensys officials noted that foreign exchange rates had negatively impacted the quarter's revenue by £31 million. But despite that factor, as well as some weakness in the U.S. residential controls business, where new construction is slow, officials said Invensys is picking up momentum.
"Operating margins continue to improve, there's a stable consistency between quarters, and our ability to execute and become more predictable is gaining momentum," said Invensys CEO Ulf Henriksson during yesterday's conference call.
The Process Systems group continues to be a stabilizing force for the company as it serves the needs of strong markets such as oil and gas and power generation, Henrikkson said. Process Systems generated revenue of £200 million for the quarter on an operating profit of £28 million. That compares to the same period last year, when the group reported revenue of £183 million and operating profit of £22 million.
"In Process Systems, the cycle in oil and gas and power is very favorable, [and] we succeeded in following the upturn," Henriksson said. In addition, the group is getting ready for a slight repositioning. "We see ourselves gradually transitioning to solution and service. We just recruited a new leader, Paulett Eberhart, which will be tremendous in helping us make this transition to more solutions integration," Henriksson said.
In January, Eberhart joined the Process Systems group as CEO and president. Prior to joining Invensys, she had held a variety of positions at EDS, an IT services company. In an interview with Managing Automation last month, she said she plans to use her EDS experience to build out a similar solutions-based service group at Invensys.
"The new hire of Paulett Eberhart as a leader or Process Systems will give us the opportunity to expand our business within the large install base, but also address the larger market as a whole by transitioning more to service and solutions and reducing our dependency on the CAPEX cycle we are now undergoing," Henriksson said.
Henriksson would not offer any color on what the year-end results might look like, except to say, "The board remains confident of satisfactory output for the financial year as a whole."