2006 Annual General Meeting

1
2006 Annual General Meeting

• 3 August 2006

2
2006 Annual General MeetingUlf Henriksson CEO

• 3 August 2006

3
Who are we ?

• Diversified global engineering company
• Serving customers that have need for industrial
  process automation, rail signalling and control
  products for residential applications
• The values we bring are safety, durability,
  efficiency and attractiveness
• We do it with engineered solutions, software and
  products and supported with service

4
Our global footprint
Employees UK 3,000 Western Europe 5,000 Eastern
Europe 1,000
Employees Japan 500 Australia NZ 800 China
2,100 Other 1,300
Employees North America 6,800 Mexico 5,300 South
America 2,200
40 of employees are in Low Cost Countries
at 31 March 2006
5
Market servedFY 2006 revenue - continuing
operations
Rail 18
Residential Applications 21
Other 19
Industrial Process Automation 42
6
Market servedFY 2006 revenue - continuing
operations
Appliance 15
Rail 18
Residential 6
General Industries 12
Beverage Dairy 12
Other 7
Discrete Manufacturing 6
Oil Gas 13
Utilities Power 7
Petrochemicals 4
7
Well-known brands
Residential Applications
Industrial Process Automation
APV
Eurotherm
Process Systems
Controls
8
Approach to create value
EPS
Grow market share / earnings

• Objectives
• People
• Execution efficiency
• Improve free cash flow
• Increase operating margin
• Improve capabilities to grow
• Reduce legacy liabilities
• Divest businesses for sale

• Built a foundation

• Dealt with the past

P/E
9
People
Health and Safety

• Foundation for doing business
• Significant improvement to acceptable levels

Total recordable cases Lost workdays
Incidents per 100 employees
10
Free cash flow trend pre legacy

• Solid progress
• 89m improvement in working capital since March
  2004
• Improved relationship with our customers

2004/05
2005/06
2006/07
m
Note Total Group - MAT
11
Operating margin trend

• Improved from 7.2 (Q1 04/05) to 8.2 (Q1 06/07)
• Through cost reduction
• Improved linearity in 2005/06 and execution
  efficiency

2004/05
2005/06
2006/07

Group ROCE improved from 2 to 9 Group RONA
improved from 6 to 39 from Q1 04/05 to Q1
06/07
Note Continuing operations - MAT
12
Growth trend Orders and revenue

• Growth in Rail Systems, Process Systems and APV
  Controls is stabilising
• New offerings brought to market
• Revenue gaining momentum from a large order book

2004/05
2005/06
2006/07
Orders
m
Revenue
11 Orders growth from Q1 2004/05
Note Continuing operations - MAT
13
Performance trends
Free cash flow total Group

• Succeeded to improve cash generation

2004/05
2005/06
2006/07
m

• Improved financial stability and platform for
  growth

Operating margins continuing operations
2004/05
2005/06
2006/07

Orders and revenue continuing operations

• Orders growing in line with market
• Large order book 2.1 billion

2004/05
2005/06
2006/07
Orders
m
Revenue
Note MAT
14
Net debt movement from March 2004
997m
Pension legacy payments 229m Operating
pension payments 92m Total pension payments
321m
757m
m
298m

• Good progress in generating free cash
• Good value from disposals
• Set base to fund pension and other legacy
  liabilities
• Therefore enabled 2006 Refinancing

15
Legacy liabilities, excl. Pension
Environmental / Litigation / Transition /
Discounting / Taxation
Down 83
m

• Successful management of liabilities, now more
  predictable
• Reduced to low levels
• Long tail on remainder

16
Pensions
m
FRS17/ IAS19 basis

• All pension benefits are being paid
• Funded schemes are 94 funded compared to 84 at
  March 2003
• UK scheme deficit is planned to be cleared in a
  little over 8 years under agreement with Trustee
• UK scheme moving to 80 bond investment and 20
  diversified other assets
• Awaiting new US legislation to clarify how
  funding deficit in US scheme to be dealt with

17
2006 Refinancing
18
The 2006 Refinancing

• Rights Issue
• Raised 341 million
• 95 take up by shareholders
• New Senior Credit Facilities
• Raised 700 million of new borrowing facilities
• Banking syndicate by HSBC, Banc of America,
  Deutsche Bank, Lloyds TSB, RBS and Morgan Stanley
• Syndication 3 times oversubscribed creating
  additional earnings improvement

19
The 2006 Refinancing

• 2006 pro forma cash interest cost down by 45m
• Pro forma earnings improve by 51m due to no tax
  impact due to losses
• End of expensive escrow arrangement
• Developing normal banking relationships

20
Operational benefits

• Increased customer/ supplier confidence
• More flexible operational covenants i.e.
  strategic flexibility to partner
• Enabling improved growth dialogue with employees,
  customers and suppliers
• Improved ability to attract and retain staff
• Lower bonding costs

21
What now !
A gradual transition from accumulating cash to
growing earnings
22
Business unit mixFY 2006 revenue - continuing
operations
Rail Systems 18
Controls 32
APV 16
Eurotherm 4
Process Systems 30
23
Corporate Strategy

• Allocate investments for best value
• Stabilise Controls performance and minimise the
  effect of a consumer end market slow down
• Invest for earnings growth for businesses with
  strong end markets, i.e. Oil Gas
• Stabilise APV performance
• Create headroom for the unforeseen
• Further improve credibility through consistent
  improvements

24
Controls
Orders and revenue trend

• Market position/ Environment
• Number one or two in main markets
• Operational inefficiencies have affected customer
  confidence
• Pricing pressure and raw material cost increases
• Strategy
• Stabilise the business
• Improve capabilities to deliver value
• Transfer from restructuring to capital
  expenditure
• Explore joint ventures to reduce risk and spread
  costs
• Increase price and deliver value to our customers

2004/05
2005/06
2006/07
m
OPBIT and operating margin trend
2004/05
2005/06
2006/07
m
Note MAT
25
Process Systems
Orders and revenue trend

• Market position/ Environment
• Regained technology leadership through InFusion
• Leader in rapidly growing oil/gas and power
  markets
• Continued success with large global customers
• Large installed base 20 billion
• Strategy
• Capture growth in strong end markets
• Grow outside installed base
• Expand service and solutions mix
• Delivery of InFusion

2004/05
2005/06
2006/07
TM
m
OPBIT and operating margin trend
2004/05
2005/06
2006/07
m
TM
Note MAT
26
InFusion an industry dream now a reality
TM

• Real-time information available throughout
  enterprise
• Market Invensys installed base and competitors
• Offers true asset optimisation
• Partnership with SAP and Microsoft
• Launch customer Wisconsin Public Service
• AMR Invensys is decidedly breaking rank with its
  peer group..

For further information http//www.infusionecs.co
m/ and Invensys Annual report accounts 2006 p.17
27
Eurotherm
Orders and revenue trend

• Market position/ Environment
• Niche player with high service levels
• Customers demanding solutions
• Customers moving East
• Strategy
• Focus on growing end markets and solutions
• Improve sales and engineering skills for solution
  model
• Creating Polish and Chinese manufacturing
  facilities
• Outsourcing of component manufacturing

m
OPBIT and operating margin trend
2004/05
2005/06
2006/07
m
Note MAT
28
APV

• Market position/ Environment
• Strong brand name in global food and beverage
  market
• Market players have no significant technological
  advantage
• Large installed base
• Strategy
• Create profitable and stable growth
• Change sales mix to more products and aftermarket
• Reduce project execution risk
• Overhead to match future business model and mix

Orders and revenue trend
m
OPBIT and operating margin trend
2004/05
2005/06
2006/07
m
Note MAT
29
Rail Systems

• Market position/ Environment
• Major supplier of signalling and other equipment
  in UK, Iberia, US and Australia
• High market shares in major markets
• Leading innovator European Rail Traffic
  Management System and Westlock
• Strategy
• Secure core market with excellent delivery and
  technology
• Grow in targeted export markets

Orders and revenue trend
m
OPBIT and operating margin trend
2004/05
2005/06
2006/07
m
Note MAT
30
Business group summary

• Controls Resolving operational issues to
  regain customer confidence and organising
  for flexibility to create value
• Process Systems Going for growth in strong
  markets
• Eurotherm Restructuring of business model to
  enable growth
• APV Stabilising and slowly growing earnings
  whilst changing the sales mix
• Rail Systems Going for growth in strong markets

31
Summary

• Considerable progress made since the 2004
  refinancing
• Legacy liabilities have been sharply reduced and
  a funding agreement has been reached with the UK
  pension Trustee
• The 2006 Refinancing has resulted in a more
  normalised capital structure
• The Group has firm basis from which to invest in
  its future and to generate shareholder value
• Our future is about being a growth company

32
2006 Annual General Meeting

• 3 August 2006