Industrial Controls supplies automation and control products for the discrete manufacturing industries. Our products provide identification and tracking solutions during the manufacturing process, displays for process monitoring and control, and data interfaces for a broad range of manufacturing industries. Sales are indirectly to end users via distributors as well as directly to original equipment manufacturers, with a significant proportion of repeat business. The operating companies in this segment are Microscan and Red Lion Controls.

Manufacturing automation is growing in importance as customers compete in an increasingly global environment where improving efficiency and reducing unit costs are key to survival. Another significant factor driving automation and control equipment is the demand for increased operational data regarding product manufacture, and the need to improve processes to reduce rework and scrap, for example by tracking products through the manufacturing process and beyond so that they can be traced in the event of a product recall. In some industries, such as the aerospace and pharmaceutical industries, product tracking by means of barcodes is a regulatory requirement.

Sales in Industrial Controls increased by 19% (9% at constant currencies) to £45.7 million. Operating profit was £8.4 million compared with £8.6 million in the prior year. Operating margins were 18.4% (2007: 22.5%). Changes in the product mix, an increase in research and development expenditure, and acquisition integration costs resulted in margins being lower than in the previous year.

The acquisition of the Siemens Machine Vision Business expands Microscan's range of vision and smart camera products for tracking and traceability applications, from basic barcode reading to complex inspection and measurement. The acquisition has added ten product lines and over 60 technology patents. Microscan saw good success for its products in the life sciences and electronics manufacturing sectors, particularly for the Quadrus MINI Velocity mini imager for general factory automation, and launched the QX-830, the first in a series of products with the new QX platform technology. This compact laser scanner combines the 'Quick Connect' system of cabling and easy networking with 'X-Mode' symbol technologies to deliver high performance barcode reading with simplified connectivity and networking in industrial automation environments.

Red Lion Controls continued to expand sales of its human machine interface and data station products internationally, particularly in China and India. A number of new products were launched in the second half of the year, including large plant floor marquee displays for factory floors, the G3 Kadet series of operator interface panels with touchscreen displays for process machinery, and universal signal conditioners with detachable LCD display and programming modules.

Whilst the longer-term demand drivers for general automation continue to be positive, this segment is particularly sensitive to general manufacturing and industrial output. The acquisition of the Siemens Machine Vision Business has enabled us to increase the served market within the broader industrial controls space, estimated to be in the region of £10 billion, particularly in the area of product tracking.