TIDMAVV
RNS Number : 0403T
AVEVA Group PLC
12 November 2019
AVEVA GROUP PLC
RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2019
AVEVA delivers on the Digital Twin with strong results and makes
continued progress against its medium-term targets
AVEVA Group plc ('AVEVA' or 'the Group') announces its results
for the six months ended 30 September 2019
Summary results
Six months ended 30 September H1 FY20 H1 FY19 Change
Revenue(1) GBP391.9m GBP336.5m 16.5%
---------- ---------- --------
Recurring revenue(2) GBP242.5m GBP170.7m 42.1%
---------- ---------- --------
Adjusted EBIT(3) GBP90.6m GBP54.4m 66.5%
---------- ---------- --------
Adjusted EBIT margin 23.1% 16.2% +690bps
---------- ---------- --------
Profit/(Loss) before tax GBP24.0m GBP(5.5)m -
---------- ---------- --------
Adjusted(3) diluted earnings
per share 43.31p 26.25p 65.0%
---------- ---------- --------
Diluted earnings per share 11.13p (3.61)p -
---------- ---------- --------
Highlights
-- Revenue grew 16.5% to GBP391.9m (H1 FY19: GBP336.5m)
-- Organic constant currency revenue(4) growth of 11.9%
reflected strong sales execution and benefited from early contract
renewals
-- Good growth across all geographic regions with Asia Pacific
showing particular strength. Each of the Business Units also grew,
with particularly strong growth in Engineering
-- Recurring revenue up 42.1% to GBP242.5m (H1 FY19: GBP170.7m)
representing 61.9% of total revenue (H1 FY19: 50.7%)
-- Adjusted EBIT up 66.5% to GBP90.6m (H1 FY19: GBP54.4m).
Constant currency adjusted EBIT grew by 46.5%
-- Interim dividend up 10.7% to 15.5 pence per share (H1 FY19: 14.0 pence)
-- Net cash and deposits of GBP58.6m following payment of the
final dividend and acquisition of MaxGrip (FY19: GBP127.8m)
-- Strong progress on product integration with the launch of
AVEVA Unified Engineering and AVEVA Unified Operations Control
Centre
-- Outlook remains positive
Chief Executive Officer, Craig Hayman said:
"AVEVA delivered a strong set of first half results. Recurring
revenue accelerated as a proportion of overall revenue. Overall
revenue grew above the industry growth rate and adjusted EBIT
margins also grew significantly. We made good progress against our
medium-term targets.
I'm pleased with these results and proud of the focus and
execution at AVEVA that is realising our ambition and vision for
the digitalisation of the industrial world. By working to
understand our customers' needs, delivering innovation to
accelerate their digital transformation and meticulous business
execution, we are producing on all fronts and continue to recruit
globally for world class talent.
Looking ahead, we see strong demand for digitalisation and
industrial software within the industries we serve and remain
confident in the outlook."
Notes
(1) Revenue is shown on a statutory basis. In H1 FY19 revenue
was also shown on a pro forma basis.
(2) Recurring revenue is defined as rental and subscriptions
software licence revenue plus support and maintenance revenue.
(3) Adjusted Earnings Before Interest and Tax (EBIT) and
adjusted earnings per share are calculated before amortisation of
intangible assets (excluding other software), share-based payments,
gain/loss on fair value of forward foreign exchange contracts and
exceptional items. Adjusted earnings per share also includes the
tax effects of these adjustments.
(4) Organic constant currency revenue excludes the reverse
acquisition accounting adjustment to deferred revenue of GBP6.5m in
H1 FY19; a currency translation benefit of GBP10.8m in H1 FY20; and
adjusts for the disposal of Wonderware Italy and the acquisition of
MaxGrip.
Enquiries:
AVEVA Group plc
Matt Springett, Head of Investor Relations
Tel: 01223 556 676
FTI Consulting LLP
Edward Bridges / Dwight Burden / Harry Staight
Tel: 020 3727 1000
Conference call and webcast
AVEVA will host a conference call and webcast, for registered
participants, at 09:30 (GMT) today.
To register for the webcast and access the presentation
materials please visit: www.aveva.com/Investors
Conference calls dial in details:
Telephone: +44 (0) 207 1928 000 / +1 866 966 1396
Conference call code: 5887706
Conference call participants will be able to ask questions
during the Q&A session, but those on the webcast will be in a
listen only mode.
A replay of the call will be made available later in the
day.
Chief Executive's review
Summary
AVEVA delivered strong first half results as the benefits of
business integration and actions taken to optimise performance
started to yield results. Organic constant currency revenue grew by
11.9% and constant currency adjusted EBIT increased by 46.5% versus
the prior year.
The Group achieved statutory revenue growth of 16.5% to GBP391.9
million (H1 FY19: GBP336.5 million) and growth in adjusted EBIT of
66.5% to GBP90.6 million (H1 FY19: GBP54.4 million). The operating
margin benefited from an improvement in gross margin, from
operational leverage and underlying cost savings. At the same time,
investment in sales and marketing was increased to help underpin
future growth.
In addition, the Group launched AVEVA Unified Engineering, the
Unified Operations Control Centre and acquired the software assets
of Asset Performance Management (APM) leader MaxGrip.
Trading and markets
The industries that AVEVA serves are making increasing use of
technology to reduce both capital and operating costs in the
context of competitive pressures to increase efficiency, output,
flexibility and improve overall sustainability. This is being
enabled by ongoing technological mega trends that are enabling the
digitalisation of the industrial world, notably the industrial
internet of things, data visualisation and artificial
intelligence.
This is driving growth in demand for industrial software. AVEVA
is optimally placed to help its customers digitalise, due to its
end-to-end product portfolio, which runs from simulation through
design and construction and into operations. In addition, AVEVA has
well-established market-leading positions serving the process,
marine, batch and hybrid industries.
AVEVA achieved growth across all of its geographical reporting
segments and Business Units during the period.
End markets
Around 40% of AVEVA's revenue comes from the Oil & Gas end
market and the Group has become more diversified since the
combination with the Schneider Electric industrial software
business, with Marine, Chemicals & Petrochemicals, Packaged
Goods (such as Food & Beverage and Pharma), Power and Metals
& Mining accounting for 5% to 10% of revenue each. Other
markets include Water & Wastewater, Infrastructure and Discrete
Manufacturing.
Within Oil & Gas the Group's business is diversified across
the capital and operational expenditure phases of the asset
lifecycle, with AVEVA supplying customers in the upstream,
midstream and downstream markets.
The ongoing structural growth drivers in each of our end markets
are strong.
In Oil & Gas, overall end market conditions were stable,
with steady capital and operating expenditure across the upstream,
midstream and downstream segments. In Marine, AVEVA delivered a
good performance, driven by product cycle upgrades and a large
multi-year rental contract win with a shipbuilder in Asia Pacific.
The Group's other end markets such as Power and Food &
Beverages are largely non-cyclical and are primarily driven by
structural growth as industries make increasing use of technology
to drive efficiency.
Sales channel and geographical performance
AVEVA delivered growth across all geographies and saw improved
execution from both direct and indirect sales channels, the latter
of which represented approximately one third of total revenue.
Performance from the direct sales channel was strong, benefiting
from investment and revised sales incentives.
The indirect sales channel performed well, achieving double
digit growth across all regions. AVEVA invested in and simplified
its partner network, including enabling Schneider Electric to
process sales leads through this channel.
Growth was assisted by the sale of additional AVEVA products,
particularly APM, in addition to its historical focus on Monitoring
& Control. The Group also launched the AVEVA Partner Network,
which will lead to the channel being able to sell the entire AVEVA
portfolio, further leveraging this distribution capability.
As part of the partner network simplification, AVEVA divested a
wholly owned distributor in Italy and intends to divest other
wholly owned distributors in Germany and Scandinavia.
The Group achieved significant success in cross selling its
wider portfolio and expanding within enterprise accounts, for
example achieving major orders with customers including Worley and
Suncor.
EMEA achieved 14.3% recurring revenue growth. Overall revenue
increased by 4.4%, including the impact of a reduction in Initial
& Perpetual Licences and Training & Services.
Americas performed well across all Business Units, although
again reported revenue growth was impacted by a planned reduction
in Initial & Perpetual Licences and Training & Services
revenue. Overall revenue increased 7.2%.
Asia Pacific saw growth across its key markets, with strong
growth in Korea, China and Australia, with particular strength in
Engineering and Planning & Operations. Regional growth further
benefited from a large multi-year contract with a key global
account customer in Australia. Overall revenue increased 48.9%.
Business Unit performance
Engineering consists of design and simulation software and
represented 42% of total revenue. Growth was strong during the
period at around 20% on a constant currency basis led by strong
growth in both Plant and Marine 3D. Within the revenue mix there
was strong growth in rentals & subscriptions and as planned a
reduction in initial & perpetual licences.
Monitoring & Control represented 32% of total revenue.
Growth was low single digit on a constant currency basis, with
solid growth in HMI SCADA being partly offset by lower sales in
pipeline Monitoring & Control due to more selective bidding for
contracts.
AVEVA Flex, the Group's new token-based rentals &
subscriptions selling model for Monitoring & Control was well
received by customers and this Business Unit achieved very strong
growth in rentals & subscriptions revenue, albeit from a low
base, together with a planned reduction in the lower margin
services revenue.
Asset Performance Management represented 14% of the Group's
total revenue. AVEVA's APM offering is strongly differentiated. It
addresses the broadest dimensions of APM using design and
engineering information, real-time and historical operational data,
and maintenance execution workflows, together with model-based
machine learning for predictive asset analytics.
This differentiation and a growing overall market for APM
solutions resulted in double digit revenue growth for AVEVA on a
constant currency basis, with particularly strong growth from AVEVA
Predictive Analytics, which achieved a large order win in North
America. Again, AVEVA saw strong growth in rentals &
subscriptions revenue from a low base, with a planned reduction in
initial & perpetual licences.
The acquisition of MaxGrip, a company that optimises asset
performance with Reliability Centred Maintenance (RCM) solutions,
was completed in April 2019. MaxGrip enhances AVEVA's APM offering
by providing a templated approach to asset strategy optimisation
and RCM software for risk-based maintenance. Additionally,
MaxGrip's rich library of asset fault codes and remediations
strengthens the power of AVEVA's predictive asset analytics
capabilities and accelerates the deployment of artificial
intelligence for prescriptive maintenance.
Since the acquisition, the focus has been on integrating the
MaxGrip toolset into the overall AVEVA APM offering.
Planning & Operations represented 12% of the Group's total
revenue. The Business Unit achieved mid-teens revenue growth on a
constant currency basis with particularly strong growth from
Planning & Scheduling and Asset Optimisation. AVEVA saw strong
growth in rentals & subscriptions and a planned reduction in
training & services.
Integration and product development
AVEVA made good progress and has exited around 80% of its
Transitional Service Agreements with Schneider Electric. The areas
left to complete include moving applications currently hosted by
Schneider Electric, mostly Enterprise Resource Planning (ERP), and
further real estate consolidation. The implementation of the new
ERP system is progressing well, with roll-out expected during 2020.
Major remaining office consolidations include Houston, Beijing,
Tokyo and Sydney.
The integration of AVEVA's research and development teams has
enabled key integrated products to be delivered with the launch of
AVEVA Unified Engineering and Unified Operations Control
Centre.
AVEVA Unified Engineering provides end-to-end integration of
conceptual, front-end engineering design and detailed design into
an environment that handles all process simulation and engineering
(1D, 2D and 3D) from one single data hub with bi-directional
information flow.
AVEVA Unified Operations Control Centre helps customers
capitalise on digital technologies to transform their business by
integrating and visualising operations, process, engineering,
maintenance and financial data in context.
Progress against our medium-term targets
In September 2018, AVEVA outlined medium-term targets around
revenue growth, increasing recurring revenue as a proportion of
overall revenue and adjusted EBIT margin progression. AVEVA made
excellent progress against these targets during the first half.
Medium-term revenue growth
The Group aims to grow medium-term revenue on a constant
currency basis at least in line with the blended growth rate of the
industrial software market.
This revenue growth target reflects AVEVA expecting to grow its
underlying software business in excess of market growth rates,
driven by a combination of the strength of the Group's market
positions, sales execution, revenue synergies and additional value
levers, including pricing and more sophisticated management of
discounting.
As previously indicated, this above-market growth is expected to
be partly offset in terms of reported revenue by the impact of a
phased transition towards greater rentals and subscriptions
revenue, together with potentially lower growth rates in services
revenue.
Progress report: AVEVA delivered revenue growth of 11.9% on an
organic constant currency basis, which was ahead of target. This
growth was driven by strong sales execution and benefited from
cross selling of our combined product portfolio to our enlarged
customer base and certain multi-year contracts, including a large
Engineering, Procurement and Construction (EPC) contract, for which
the revenue has been partly recognised upfront.
AVEVA made substantial investments in sales and marketing to
drive future growth, including further strengthening of the
marketing team and expansion of the sales force.
In addition to this, further governance and sales incentive
changes were put in place to manage discounting and price
increases.
Medium-term adjusted EBIT margin
The Group aims to increase adjusted EBIT margins to 30%. This
margin improvement is expected to be driven by a combination of
revenue growth, previously announced cost savings, cost control and
a focus on high margin revenue growth through pricing and revenue
mix optimisation.
Progress report: AVEVA's adjusted EBIT margin increased to 23.1%
(H1 FY19: 16.2%). This improvement was driven by a positive sales
mix, which benefited gross margin, revenue growth driving operating
leverage and underlying cost savings. AVEVA expects to make steady
progress towards the medium-term adjusted EBIT margin target of
30%.
Medium-term recurring revenue
AVEVA aims to grow the proportion of recurring revenue to total
revenue to over 60% in the medium term. Recurring revenue is
defined as rentals & subscriptions software licence revenue,
plus support and maintenance revenue. This will be driven by
growing software as part of the revenue mix and by increasing the
mix of rentals & subscriptions revenue as a proportion of new
software revenue in a financial year.
The transition to greater levels of recurring revenue is
expected to increase long-term free cash flow generation. Rentals
and subscriptions offer customers benefits including greater
flexibility, lower up-front costs and simplicity in pricing. These
benefits are reflected in higher customer lifetime value of a
rentals & subscriptions model, versus a perpetual licence
model.
Progress report: AVEVA made accelerated progress during the
period and recurring revenue as a proportion of overall revenue was
ahead of target at 61.9% (H1 FY19: 50.7%). This overachievement was
assisted by early contract renewals, including an EPC contract, and
an element of upfront revenue recognition on multi-year
contracts.
Sales incentive structures were modified to encourage recurring
revenue growth with a focus on driving rentals & subscriptions
revenue, versus initial and perpetual licences and the introduction
of AVEVA Flex.
The Group has seen very strong demand for public Cloud-based
solutions with both an increase in the volume of significant order
wins and substantial expansions from existing Cloud customers.
AVEVA Cloud Development Operations, which was formed at the time
of the combination of AVEVA and the Schneider Electric industrial
software business, covers all AVEVA's Cloud offerings, and has
achieved above 99.9% uptime for our customers.
Outlook
Demand for AVEVA's products is strong, driven by the ongoing
digitalisation of the industrial world and stable conditions in key
end markets. AVEVA's combined product offering is seeing growing
industry recognition. Against this backdrop, the benefits of
integration and measures taken to drive growth, improve revenue mix
and increase margin are having a positive impact. The Group's order
pipeline is solid and the outlook remains positive.
Craig Hayman
Chief Executive Officer
12 November 2019
Finance Review
Overview
Revenue was GBP391.9 million, which was up 16.5% compared to the
previous half year (H1 FY19: GBP336.5 million) on a statutory
basis. Adjusted EBIT grew 66.5% to GBP90.6 million (H1 FY19:
GBP54.4 million), primarily due to the revenue growth, higher gross
margin and operational leverage.
Organic constant currency revenue grew 11.9%, excluding a
deferred revenue haircut of GBP6.5m in H1 FY19; a currency
translation benefit of GBP10.8 million in H1 FY20; and the effects
of the disposal of Wonderware Italy and the acquisition of
MaxGrip.
H1 FY20 H1 FY19
Six months ended 30 September GBPm GBPm Change
------------------------------- -------- -------- -------
Revenue 391.9 336.5 16.5%
Cost of sales (92.3) (92.8) (0.5)%
------------------------------- -------- -------- -------
Gross profit 299.6 243.7 22.9%
Operating expenses (209.0) (189.3) 10.4%
------------------------------- -------- -------- -------
Adjusted EBIT 90.6 54.4 66.5%
Net interest (1.5) (0.3) -
------------------------------- -------- -------- -------
Adjusted profit before tax 89.1 54.1 64.7%
Tax charge (19.0) (11.7) 62.4%
------------------------------- -------- -------- -------
Adjusted profit after tax 70.1 42.4 65.3%
Adjusted diluted EPS (pence) 43.31 26.25 65.0%
Gross margin 76.4% 72.4% 400bps
Adjusted EBIT margin 23.1% 16.2% 690bps
Tax charge 21.3% 21.5% -
Revenue overview
Revenue growth was driven by strong sales execution in the
context of stable end market conditions and an ongoing trend
towards digitalisation. Overall revenue growth benefited from an
increase in the proportion of rental contracts sold on a multi-year
versus one year basis compared to the same period last year and
early contract renewals. Revenue from the direct salesforce in the
first half was around two-thirds of total revenue and one-third was
from the channel, including Schneider Electric (SE).
During the first half there was a change in mix of sales
contracts through SE. There was a higher proportion of agent sales
where the sale is processed by AVEVA's sales channel partners and
SE receives a commission rather than distributor sales where SE is
charged a transfer price by AVEVA. This resulted in a reduction of
related-party revenue from SE to GBP31.9 million (H1 FY19: GBP39.2
million).
Revenue by type is set out below:
Organic
constant
GBPm H1 FY20 % of total H1 FY19 % of total Change currency
Rentals and subscriptions 141.0 36.0% 76.8 22.8% 83.6% 76.7%
Support and maintenance 101.5 25.9% 93.9 27.9% 8.1% (0.3)%
Total recurring
revenue 242.5 61.9% 170.7 50.7% 42.1% 33.6%
Initial fees and
perpetuals 85.4 21.8% 96.7 28.7% (11.7)% (13.3)%
Training and services 64.0 16.3% 69.1 20.6% (7.4)% (9.5)%
--------------------------- -------- ----------- -------- ----------- -------- ----------
Total 391.9 100.0% 336.5 100.0% 16.5% 11.9%
Rentals and subscriptions
Rentals and subscriptions revenue grew 83.6% to GBP141.0 million
(H1 FY19: GBP76.8 million).
This growth was driven by new sales force incentives to promote
sales of these contracts over initial & perpetual licences and
Services. The proportion of rental & subscription revenue was
also enhanced by revenue recognition on multi-year contracts, which
under IFRS 15 recognises the licence revenue upfront. Overall
growth was increased by a large multi-year contract renewal with a
key EPC customer in Asia Pacific. This contract was renewed earlier
than planned and for a higher order value, with the renewal having
originally been planned for the third quarter. Excluding this
benefit the proportion of recurring revenue in the first half was
60%.
Support and maintenance
Support and maintenance revenue grew by 8.1% to GBP101.5 million
(H1 FY19: GBP93.9 million). On an organic constant currency basis,
revenue was flat. Growth in standalone support and maintenance
revenue is expected to be impacted by the transition to rentals and
subscriptions revenue, and this was seen in the half year period as
certain customers were successfully switched into higher annual
value subscription contracts.
Initial fees and perpetuals
Initial fees and perpetual revenue reduced by 11.7% to GBP85.4
million (H1 FY19: GBP96.7 million). This reduction was driven by
execution against AVEVA's strategy of moving the business model of
the combined Group towards increasing recurring revenue versus
perpetual licences.
Training and services
Training and services revenue reduced by 7.4% to GBP64.0 million
(H1 FY19: GBP69.1 million). Services are sold alongside the
software licence to ensure efficient deployment and to generate
value faster for customers. This planned reduction was driven by
AVEVA's focus on increasing the proportion of higher gross margin
software as part of its overall revenue mix and the implementation
of the change in sales incentives at the beginning of the financial
year to drive this.
To improve efficiency, the Services team have focused on higher
margin projects together with initiatives to increase standard,
repeatable solutions, which reduces configuration and
customisation, and the use of partners where possible.
Adjusted EBIT and cost management
Together with cost control, the revenue growth delivered an
increase in constant currency adjusted EBIT of 46.5% versus the
prior year (excluding the GBP6.5 million adjustment to deferred
revenue). Without adjusting for currency, EBIT grew 66.5% to
GBP90.6 million (H1 FY19: GBP54.4 million).
EBIT margin is typically lower in the first half of any
financial year relative to the full year given that revenue is more
heavily weighted to the second half but these operational
improvements increased adjusted EBIT margin to 23.1% versus 16.2%
in H1 FY19 and is positive encouragement that the targeted
medium-term improvement to 30% is on track.
Total normalised costs were GBP301.3 million (H1 FY19: GBP282.2
million), an increase of 6.8% over the previous year and 3.5% on a
constant currency basis. This was broadly in line with AVEVA's
target of inflationary cost increases due to a reduction in cost of
sale and controlled operating cost increases despite incremental
investment in sales, marketing and R&D.
On an underlying basis, AVEVA has been implementing a cost
synergies programme through rationalisation of duplicated
functions, the implementation of common systems, shared services
for back office functions, real estate consolidation and enhanced
R&D effectiveness. The Group targeted annualised cost synergies
of approximately GBP25 million, which are on track to be fully
implemented by the end of the current financial year.
An analysis of total expenses is summarised below:
Net impairment
loss from
Cost Selling Admin. financial
GBPm of sales R&D and distribution expenses assets Total
Statutory 92.5 92.0 113.1 67.2 1.6 366.4
Amortisation - (31.7) (13.6) - - (45.3)
Share-based payments - - - (6.4) - (6.4)
Loss on FX contracts - - - (0.1) - (0.1)
Exceptional items (0.2) (0.2) (1.2) (11.7) - (13.3)
---------------------- ---------- ------- ------------------ ---------- --------------- -------
Normalised costs 92.3 60.1 98.3 49.0 1.6 301.3
H1 FY19 92.8 54.2 89.1 44.7 1.4 282.2
Change (0.5)% 10.9% 10.3% 9.6% 14.3% 6.8%
Constant currency (3.3)% 7.7% 7.0% 5.1% 14.3% 3.5%
Cost of sales decreased 0.5% to GBP92.3 million (H1 FY19:
GBP92.8 million) and the gross margin improved to 76.4% (H1 FY19:
72.4%). On a constant currency basis cost of sales reduced 3.3%.
The cost of sales reduction related to both a focus on both higher
margin revenue and a focus on efficient delivery of services.
The cost of sales reduction was also helped by the disposal of
Wonderware Italy, a wholly-owned distributor.
Research & Development costs were GBP60.1 million (H1 FY19:
GBP54.2 million) representing an increase of 10.9%. On a constant
currency basis R&D expenditure increased by 7.7% due to
investment in product integration and new product launches, being
partly offset by cost synergies.
Selling and distribution expenses were GBP98.3 million (H1 FY19:
GBP89.1 million), a 10.3% increase versus the prior year. On a
constant currency basis, the increase was 7.0%. The increase
represents investments made during the year in Sales and in
strengthening the marketing team and in customer events to showcase
AVEVA's enlarged product portfolio.
Administrative expenses were GBP49.0 million (H1 FY19: GBP44.7
million) an increase of 9.6%. On a constant currency basis, the
increase was 5.1%, due to wage inflation and investment in support
functions.
Net impairment loss from financial assets represents the
impairment of accounts receivable during the year of GBP1.6 million
(H1 FY19: GBP1.4 million).
Normalised and exceptional items
The following exceptional and other normalised items have been
excluded in presenting the adjusted results:
Six months ended 30 September
GBPm 2019 2018
Acquisition and integration
activities 12.5 7.8
Restructuring costs 1.0 3.0
Profit from the sale of
a business (0.2) -
Total exceptional items 13.3 10.8
----------------------------- ----------------- -------------
Amortisation (excl. other
software) 45.3 43.8
Share-based payments 6.4 4.3
Loss on FX contracts 0.1 0.7
----------------------------- ----------------- -------------
Total normalised items 51.8 48.8
----------------------------- ----------------- -------------
Acquisition and integration activities principally related to
contractors, consultancy costs paid to advisers for integration
support, functional integration, investment in new systems and deal
related executive retention costs.
Restructuring costs related to severance payments for employees
as part of the continuing cost synergy programme, started in FY19
following completion of the combination with the Schneider Electric
industrial software business.
Amortisation mainly relates to the amortisation of the fair
valued heritage AVEVA intangible assets under acquisition
accounting, following the combination with the Schneider Electric
industrial software business.
Taxation
The statutory tax charge was GBP6.0 million (H1 FY19: GBP0.3
million). The effective rate of tax of 25.0% differs from the US
effective corporation tax rate of 23.3% mainly due to higher
overseas tax rates and overseas losses in certain locations, for
which no deferred tax asset has been recognised. The tax rate
benefited from R&D tax incentives in the UK and the US.
The adjusted tax rate was 21.3% (H1 FY19: 21.5%) and is expected
to be around 20% on a full year basis.
Earnings per share
Statutory diluted EPS was 11.13 pence (H1 FY19: (3.61) pence).
Adjusted diluted basis EPS grew 65.0% to 43.31 pence (H1 FY19:
26.25 pence). Growth on prior year adjusted diluted EPS, before the
effect of the deferred revenue haircut, was 46.9%.
Dividends
In line with the Board's progressive dividend policy, AVEVA
intends to pay an interim dividend of 15.5 pence per share at a
cost of GBP25.0 million (H1 FY19: 14.0 pence per share at a cost of
GBP22.5 million). The interim dividend will be payable on 7
February 2020 to shareholders on the register on 10 January
2020.
Balance sheet and cash flow
The Group continues to maintain a strong balance sheet, with net
cash and treasury deposits of GBP58.6 million and no long-term
debt. As at 30 September non-current assets were GBP1,983.3 million
(31 March 2019: GBP1,923.0 million) reflecting goodwill and
intangible assets that arose from the combination with the
Schneider Electric industrial software business.
In April 2019, the Group completed the acquisition of MaxGrip
for consideration of GBP21.6 million. The transaction resulted in
net assets of GBP10.3 million being acquired and goodwill of
GBP11.3 million being created.
Trade and other receivables at 30 September 2019 were GBP204.1
million (31 March 2019: GBP237.9 million). Contract assets
increased to GBP127.3 million from GBP100.5 million at 31 March
2019, largely due to the impact of the multi-year contracts closed
in the period. Contract liabilities representing deferred revenue
were GBP148.3 million (31 March 2019: GBP174.6 million) and were
lower due to phasing of renewals and the switch from support and
maintenance contracts, to rental and subscription.
Cash generated from operating activities before tax was GBP43.5
million, compared to GBP44.6 million in the previous year,
resulting in conversion of adjusted EBIT to operating cash flow of
48.0%. This reflects the impact of multi-year contracts and
particularly those contracts where customers pay in annual
instalments, but revenue is recognised earlier under IFRS 15. First
half cash flow was also negatively impacted by the payment of
higher sales commissions and bonuses resulting from the successful
close to FY19. Finally, these metrics are somewhat distorted by
exceptional costs paid during the period of GBP17.5 million and the
adoption of IFRS 16. Cash conversion is expected to improve
significantly in the second half of the financial year.
James Kidd
Deputy CEO & CFO
12 November 2019
Independent review report
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2019 which comprise the Consolidated
income statement, the Consolidated statement of comprehensive
income, the Consolidated balance sheet, the Consolidated statement
of changes in shareholders' equity, the Consolidated cash flow
statement and the related notes 1 to 16. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
This report is made solely to the Company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRS as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity' issued by the Auditing Practices Board for use in the
United Kingdom. A review of interim financial information consists
of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2019 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
12 November 2019
Consolidated income statement
for the six months ended 30 September 2019
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
GBPm GBPm GBPm
------------------------------- ------ ------------ ------------ -----------
Notes (unaudited) (unaudited) (audited)
------------------------------- ------ ------------ ------------ -----------
Revenue 5 391.9 336.5 766.6
Cost of sales (92.5) (95.0) (193.2)
------------------------------- ------ ------------ ------------ -----------
Gross profit 299.4 241.5 573.4
Operating expenses
Research & Development
costs (92.0) (84.4) (178.0)
Selling and administration
expenses 7 (180.3) (160.9) (341.9)
Net impairment loss on
financial assets (1.6) (1.4) (6.3)
Total operating expenses (273.9) (246.7) (526.2)
------------------------------- ------ ------------ ------------ -----------
Profit/(Loss) from operations 25.5 (5.2) 47.2
Finance revenue 0.1 0.1 0.2
Finance expense (1.6) (0.4) (0.7)
------------------------------- ------ ------------ ------------ -----------
Profit/(Loss) before tax 24.0 (5.5) 46.7
Income tax expense 9 (6.0) (0.3) (12.9)
------------------------------- ------ ------------ ------------ -----------
Profit/(Loss) for the period
attributable to equity
holders of the parent 18.0 (5.8) 33.8
------------------------------- ------ ------------ ------------ -----------
Profit/(Loss) from operations 25.5 (5.2) 47.2
Amortisation of intangibles
(excluding other software) 45.3 43.8 88.1
Share-based payments 6.4 4.3 11.2
Losses on fair value of
forward foreign exchange
contracts 0.1 0.7 0.5
Exceptional items 8 13.3 10.8 28.9
------------------------------- ----- ------ ------
Adjusted EBIT 90.6 54.4 175.9
------------------------------- ----- ------ ------
Earnings/(Loss) per share
(pence) 11
- basic 11.19 (3.61) 20.97
- diluted 11.13 (3.61) 20.90
--------------------------- --- ------ ------- ------
All activities relate to continuing activities.
Consolidated statement of comprehensive income
for the six months ended 30 September 2019
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
----------------------------------------- ------------ ------------ -----------
Profit/(Loss) for the period 18.0 (5.8) 33.8
Items that may be reclassified to
profit or
loss in subsequent periods:
Exchange gain arising on translation
of foreign operations 8.6 11.3 8.4
Total of items that may be reclassified
to profit or loss in subsequent
periods: 8.6 11.3 8.4
----------------------------------------- ------------ ------------ -----------
Items that will not be reclassified
to profit
or loss in subsequent periods:
Remeasurement gain/(loss) on defined
benefit plans 0.8 0.8 (0.5)
Deferred tax effect (0.1) (0.3) (0.4)
----------------------------------------- ------------ ------------ -----------
Total of items that will not be
reclassified to profit or loss in
subsequent periods 0.7 0.5 (0.9)
----------------------------------------- ------------ ------------ -----------
Total comprehensive income for the
period, net of tax 27.3 6.0 41.3
----------------------------------------- ------------ ------------ -----------
Consolidated balance sheet
30 September 2019
As at 30 As at 30 As at 31
September September March
2019 2018 2019
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
-------------------------------- ------ ------------ ------------ ----------
Non-current assets
Goodwill 1,298.8 1,291.4 1,285.3
Other intangible assets 558.7 638.5 599.5
Property, plant and equipment 20.4 14.9 17.1
Right-of-use assets 16 81.0 - -
Deferred tax assets 12.3 8.4 11.8
Other receivables 13 3.5 1.2 2.2
Retirement benefit surplus 8.6 7.8 7.1
1,983.3 1,962.2 1,923.0
-------------------------------- ------ ------------ ------------ ----------
Current assets
Inventories 0.6 0.9 0.8
Trade and other receivables 13 204.1 196.2 237.9
Contract assets 127.3 77.9 100.5
Treasury deposits - 0.2 0.6
Cash and cash equivalents 78.6 93.5 127.2
Current tax assets 17.7 11.1 10.8
428.3 379.8 477.8
-------------------------------- ------ ------------ ------------ ----------
Total assets 2,411.6 2,342.0 2,400.8
-------------------------------- ------ ------------ ------------ ----------
Equity
Issued share capital 5.7 5.7 5.7
Share premium 574.5 574.5 574.5
Other reserves 1,184.7 1,186.5 1,178.8
Retained earnings 143.5 142.2 165.5
-------------------------------- ------ ------------ ------------ ----------
Total equity 1,908.4 1,908.9 1,924.5
-------------------------------- ------ ------------ ------------ ----------
Current liabilities
Trade and other payables 14 134.2 145.5 156.8
Contract liabilities 148.3 128.6 174.6
Loans and borrowings 20.0 11.9 -
Lease liabilities 16 17.3 - -
Financial liabilities 0.6 0.2 0.1
Provisions 1.2 - 1.9
Current tax liabilities 4.4 14.7 12.8
-------------------------------- ------ ------------ ------------ ----------
326.0 300.9 346.2
-------------------------------- ------ ------------ ------------ ----------
Non-current liabilities
Lease liabilities 16 53.0 - -
Deferred tax liabilities 109.2 120.0 111.3
Other liabilities 0.8 0.2 3.1
Provisions 1.1 - 2.6
Retirement benefit obligations 13.1 12.0 13.1
-------------------------------- ------ ------------ ------------ ----------
177.2 132.2 130.1
-------------------------------- ------ ------------ ------------ ----------
Total equity and liabilities 2,411.6 2,342.0 2,400.8
-------------------------------- ------ ------------ ------------ ----------
Consolidated statement of changes in shareholders' equity
30 September 2019
Other reserves
----------------------------------------
Cumulative Capital Capital Reverse Total
Share Share Merger translation contribution redemption acquisition Treasury other Retained Total
capital premium reserve adjustments reserve reserve reserve shares reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------- -------- -------- -------- ------------ ------------- ----------- ------------ --------- --------- --------- --------
At 1 April
2018 5.7 574.5 615.6 9.9 - 101.7 452.5 (0.3) 1,179.4 195.1 1,954.7
Loss for the
period - - - - - - - - - (5.8) (5.8)
Other
comprehensive
income - - - 11.3 - - - - 11.3 0.5 11.8
--------------- -------- -------- -------- ------------ ------------- ----------- ------------ --------- --------- --------- --------
Total
comprehensive
income - - - 11.3 - - - - 11.3 (5.3) 6.0
Share-based
payments - - - - - - - - - 4.3 4.3
Tax arising
on share
options - - - - - - - - - 0.6 0.6
Investment
in own shares - - - - - - - (4.4) (4.4) - (4.4)
Cost of
employee
benefit trust
shares issued
to employees - - - - - - - 0.2 0.2 (0.2) -
Transactions
with
Schneider
Electric - - - - - - - - - (8.8) (8.8)
Equity
dividends - - - - - - - - - (43.5) (43.5)
--------------- -------- -------- -------- ------------ ------------- ----------- ------------ --------- --------- --------- --------
At 30
September
2018 5.7 574.5 615.6 21.2 - 101.7 452.5 (4.5) 1,186.5 142.2 1,908.9
Profit for
the period - - - - - - - - - 39.6 39.6
Other
comprehensive
income - - - (2.9) - - - - (2.9) (1.4) (4.3)
--------------- -------- -------- -------- ------------ ------------- ----------- ------------ --------- --------- --------- --------
Total
comprehensive
income - - - (2.9) - - - - (2.9) 38.2 35.3
Share-based
payments - - - - - - - - - 6.9 6.9
Tax arising
on share
options - - - - - - - - - 0.6 0.6
Investment
in own shares - - - - - - - (4.9) (4.9) - (4.9)
Capital
contribution - - - - 0.1 - - - 0.1 - 0.1
Equity
dividends - - - - - - - - - (22.4) (22.4)
--------------- -------- -------- -------- ------------ ------------- ----------- ------------ --------- --------- --------- --------
At 31 March
2019 5.7 574.5 615.6 18.3 0.1 101.7 452.5 (9.4) 1,178.8 165.5 1,924.5
Profit for
the period - - - - - - - - - 18.0 18.0
Other
comprehensive
income - - - 8.6 - - - - 8.6 0.7 9.3
--------------- -------- -------- -------- ------------ ------------- ----------- ------------ --------- --------- --------- --------
Total
comprehensive
income - - - 8.6 - - - - 8.6 18.7 27.3
Share-based
payments - - - - - - - - - 6.4 6.4
Investment
in own shares - - - - - - - (3.1) (3.1) - (3.1)
Cost of
employee
benefit trust
shares issued
to employees - - - - - - - 0.4 0.4 (0.4) -
Equity
dividends - - - - - - - - - (46.7) (46.7)
--------------- -------- -------- -------- ------------ ------------- ----------- ------------ --------- --------- --------- --------
At 30
September
2019 5.7 574.5 615.6 26.9 0.1 101.7 452.5 (12.1) 1,184.7 143.5 1,908.4
--------------- -------- -------- -------- ------------ ------------- ----------- ------------ --------- --------- --------- --------
Consolidated cash flow statement
for the six months ended 30 September 2019
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
------------------------------------------- ------------ ------------ -----------
Cash flows from operating activities
Profit/(Loss) for the period 18.0 (5.8) 33.8
Income tax expense 6.0 0.3 12.9
Net finance expense 1.5 0.3 0.5
Amortisation of intangible assets 46.1 44.6 88.8
Depreciation of property, plant and
equipment, and right of use assets 10.1 3.2 5.4
Loss on disposal of property, plant
and equipment 0.1 - 0.1
Gain on disposal of subsidiary (0.2) - -
Share-based payments 6.4 4.3 11.2
Difference between pension contributions
paid and amounts charged to operating
profit (0.1) (0.3) 0.1
Research & Development expenditure
tax credit (1.2) (0.8) (2.0)
Changes in working capital:
Trade and other receivables 6.6 13.8 (51.4)
Trade and other payables (50.3) (15.7) 69.2
Changes to fair value of forward
foreign exchange contracts 0.5 0.7 0.5
------------------------------------------- ------------ ------------ -----------
Cash generated from operating activities
before tax 43.5 44.6 169.1
Income taxes paid (27.6) (8.6) (32.4)
------------------------------------------- ------------ ------------ -----------
Net cash generated from operating
activities 15.9 36.0 136.7
------------------------------------------- ------------ ------------ -----------
Cash flows from investing activities
Purchase of property, plant and equipment (7.1) (3.5) (7.4)
Purchase of intangible assets (0.1) (0.1) (0.2)
Acquisition of a subsidiary, net
of cash acquired (22.2) - -
Proceeds from sale of subsidiaries,
net of cash (1.5) - -
Consideration paid on completion
of business combination - - (19.4)
Sale/(Purchase) of treasury deposits 0.6 - (0.4)
Interest received 0.1 0.1 0.2
Net cash flows used in investing
activities (30.2) (3.5) (27.2)
------------------------------------------- ------------ ------------ -----------
Cash flows from financing activities
Interest paid (0.3) (0.4) (0.7)
Proceeds from/(repayment of) borrowings 20.0 1.9 (10.0)
Payment of lease liabilities (7.7) - -
Purchase of own shares (3.1) (4.4) (9.3)
Dividends paid to equity holders
of the parent (46.7) (43.5) (66.0)
------------------------------------------- ------------ ------------ -----------
Net cash flows used in financing
activities (37.8) (46.4) (86.0)
------------------------------------------- ------------ ------------ -----------
Net (decrease)/increase in cash and
cash equivalents (52.1) (13.9) 23.5
Net foreign exchange difference 3.5 1.8 (1.9)
Opening cash and cash equivalents 127.2 105.6 105.6
------------------------------------------- ------------ ------------ -----------
Closing cash and cash equivalents 78.6 93.5 127.2
------------------------------------------- ------------ ------------ -----------
Notes to the Interim Report
1 The Interim Report
The Interim Report was approved by the Board on 12 November
2019. The interim condensed financial statements set out in the
Interim Report are unaudited but have been reviewed by the auditor,
Ernst & Young LLP, and their report to the Company is set out
above.
The Interim Report will be made available to shareholders in due
course from the Company's website at www.aveva.com.
2 Basis of preparation and accounting policies
The Interim Report for the six months ended 30 September 2019
has been prepared in accordance with IAS 34 Interim Financial
Reporting and the disclosure requirements of the Listing Rules.
The Interim Report does not include all the information and
disclosures required in the annual financial statements and should
be read in conjunction with the Annual Report for the year ended 31
March 2019.
In accordance with IFRS 3, the consolidated financial
information has been prepared as a reverse acquisition of AVEVA
Group by the Schneider Electric industrial software business, which
occurred on 1 March 2018.
The financial information set out within this report does not
constitute AVEVA's Consolidated statutory financial statements as
defined in Section 435 of the Companies Act 2006. The results for
the year ended 31 March 2019 have been extracted from the
Consolidated statutory financial statements for AVEVA Group plc for
the year ended 31 March 2019 which are prepared in accordance with
IFRS as adopted by the European Union, on which the auditor gave an
unqualified report (which made no statement under Section 498 (2)
or (3) respectively of the Companies Act 2006 and did not draw
attention to any matters by way of emphasis) and have been filed
with the Registrar of Companies.
The Group presents a non-GAAP performance measure on the face of
the Consolidated income statement. The Directors believe that this
alternative measure of profit provides a reliable and consistent
measure of the Group's underlying performance. The face of the
Consolidated income statement presents adjusted EBIT and reconciles
this to profit from operations as required to be presented under
the applicable accounting standards. Adjusted earnings per share is
calculated having adjusted profit after tax for the same items and
their tax effect. The term 'EBIT' is not defined under IFRS and may
not be comparable with similarly titled profit measures reported by
other companies. It is not intended to be a substitute for, or
superior to, GAAP measures of profit.
The business is managed and measured on a day-to-day basis using
adjusted results. To arrive at adjusted results, certain
adjustments are made for normalised and exceptional items that are
individually important and which could, if included, distort the
understanding of the performance for the year and the comparability
between periods.
The Interim Report has been prepared on the basis of the
accounting policies set out in the most recently published Annual
Report of the Group for the year ended 31 March 2019, with the
exception of the adoption of IFRS 16 Leases, as set out below.
IFRS 16 Leases - Accounting policies applied from 1 April
2019
The Group adopted IFRS 16 using the modified retrospective
method of adoption with the date of initial application of 1 April
2019. Set out below are the new accounting policies of the
Group:
The Group recognises right-of-use assets at the commencement
date of the lease (i.e. the date that the underlying asset is
available for use). Right-of-use assets are measured at cost, less
any accumulated depreciation and impairment losses, and adjusted
for any remeasurement of lease liabilities. The cost of
right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made
at or before the commencement date less any lease incentives
received. Unless the Group is reasonably certain to obtain
ownership of the leased asset at the end of the lease term, the
recognised right-of-use assets are depreciated on a straight-line
basis over the shorter of its estimated useful life and the lease
term. Right-of-use assets are subject to impairment review.
At the commencement date of the lease, the Group also recognises
lease liabilities. They are measured at the present value of lease
payments to be made over the lease term. The lease payments include
fixed payments (including in substance fixed payments) less any
lease incentives receivable, variable lease payments that depend on
an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by
the Group and payments of penalties for terminating a lease, if the
lease term reflects the Group exercising the option to terminate.
The variable lease payments that do not depend on an index or a
rate are recognised as expense in the period on which the event or
condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group
uses the incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying asset.
The Group applies the short-term lease recognition exemption to
its short-term leases (i.e. those leases that have a lease term of
12 months or less from the commencement date and do not contain a
purchase option). It also applies the lease of low-value assets
recognition exemption to leases of assets that are considered of
low value (i.e. below GBP5,000). Lease payments on short-term
leases and leases of low-value assets are recognised as expense on
a straight-line basis over the lease term.
The Group determines the lease term as the non-cancellable term
of the lease, together with any periods covered by an option to
extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease, if it is
reasonably certain not to be exercised.
Significant judgments
The Group has an extension option for some of the leases. The
Group applies judgement in evaluating whether it is reasonably
certain to exercise the option to renew. That is, it considers all
relevant factors that create an economic incentive for it to
exercise the renewal. After the commencement date, the Group
reassesses the lease term if there is a significant event or change
in circumstances that is within its control and affects its ability
to exercise (or not to exercise) the option to renew (e.g. a change
in business strategy).
3 Going concern
The Group has significant financial resources. At 30 September
2019, the Group had bank, cash and treasury deposits of GBP78.6m
(31 March 2019: GBP127.8m) and debt draw down of GBP20.0m (31 March
2019: nil). The cash generation profile of the Group in the first
half of the year was significantly impacted by the 2018/19 final
dividend paid and the acquisition of MaxGrip in April 2019. The
Group is expected to generate significant positive cash flows in
the second half of the financial year.
After making enquiries and considering the cash flow forecasts
for the Group, the Directors have a reasonable expectation that the
Group has adequate resources to continue its operational existence
for the foreseeable future. For this reason they continue to adopt
the going concern basis in preparing the interim financial
statements.
4 Risks and uncertainties
As with any organisation, there are a number of potential risks
and uncertainties which could have a material impact on the Group's
long-term performance. The principal risks and uncertainties faced
by the Group have not changed from those set out in the Annual
Report for the year ended 31 March 2019. These are:
-- Talent Acquisition & Retention
-- Move to Subscription Model
-- Cloud Initiatives
-- Digital Transformation Agenda
-- Integration & Synergies
-- Competitors
-- Dependency on Cyclical Markets
-- AVEVA Products Implicated in Industrial Accidents or Customer Cyber-Attack
-- Cyber Attack
-- Regulatory Compliance
-- Internal Systems
-- Disruptive Technologies
These risks are described in more detail on pages 26-30 of the
2019 Annual Report. The Directors routinely monitor these risks and
uncertainties and appropriate actions are taken to manage them
within agreed risk appetites. Included in the Business Review is a
commentary on the outlook of the Group for the remaining six months
of the year.
At an executive level, risk management remains the
responsibility of the Strategic Leadership Team (SLT) who report to
the Board on risk matters.
5 Revenue
An analysis of the Group's revenue is as follows:
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
------------------------------------- ------------ ------------ -----------
Support and maintenance, including
annual fees 101.5 93.9 194.4
Rental and subscriptions 141.0 76.8 218.2
Initial fees and perpetual licences 85.4 96.7 211.6
Training and services 64.0 69.1 142.4
------------------------------------- ------------ ------------ -----------
391.9 336.5 766.6
------------------------------------- ------------ ------------ -----------
Timing of revenue recognition
Services transferred at a point in
time 169.2 121.0 357.3
Services transferred over time 222.7 215.5 409.3
------------------------------------- ------------ ------------ -----------
391.9 336.5 766.6
------------------------------------- ------------ ------------ -----------
Finance revenue 0.1 0.1 0.2
------------------------------------- ------------ ------------ -----------
392.0 336.6 766.8
------------------------------------- ------------ ------------ -----------
6 Segment information
The Executive Leadership Team monitors and appraises the
business on a geographic basis with three operating regions: Asia
Pacific; EMEA; and Americas. These three regions are the basis of
the Group's primary operating segments reported in the financial
statements. Performance is evaluated based on regional contribution
using the same accounting policies as adopted for the Group's
financial statements. Balance sheet information is not included in
the information provided to the Executive Leadership Team.
Six months ended 30 September 2019
(unaudited)
-----------------------------------------
Asia Pacific EMEA Americas Corporate Total
GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------- -------- --------- ---------- --------
Revenue
Support and maintenance,
including annual fees 23.8 34.6 43.1 - 101.5
Rental and subscriptions 58.2 46.1 36.7 - 141.0
Initial fees and perpetual
licences 27.1 32.9 25.4 - 85.4
Training and services 15.2 21.1 27.7 - 64.0
---------------------------- ------------- -------- --------- ---------- --------
Regional revenue total 124.3 134.7 132.9 - 391.9
Cost of sales (14.2) (16.8) (27.5) (33.8) (92.3)
Selling and administrative
expenses (21.7) (34.7) (33.1) (57.8) (147.3)
Net impairment loss
on financial assets 0.7 (0.3) (2.0) - (1.6)
---------------------------- ------------- -------- --------- ---------- --------
Regional contribution 89.1 82.9 70.3 (91.6) 150.7
Research & Development
costs (60.1)
---------------------------- ------------- -------- --------- ---------- --------
Adjusted EBIT 90.6
---------------------------- ------------- -------- --------- ---------- --------
Exceptional items, other
normalised adjustments(1)
and net interest (66.6)
---------------------------- ------------- -------- --------- ---------- --------
Profit before tax 24.0
---------------------------- ------------- -------- --------- ---------- --------
1 Normalised adjustments include amortisation of intangible
assets (excluding other software), share-based payments and
movements on fair value of forward exchange contracts.
As the combination of the two businesses completed so close to
the start of the financial period it was not possible to report
cost data between the three regions for the period ended 30
September 2018. Neither was it possible to consistently report the
combined business on any other segmental basis. Therefore, the
segmental information provided has had to be limited to regional
revenue only.
Six months ended 30 September 2018 (unaudited)
Asia Pacific EMEA Americas Total
GBPm GBPm GBPm GBPm
----------------------------------- ------------------ --------- ------------ --------
Revenue
Support and maintenance including
annual fees 21.8 30.3 41.8 93.9
Rental and subscriptions 22.2 40.3 14.3 76.8
Initial fees and perpetual
licences 26.4 35.0 35.3 96.7
Training and services 13.1 23.4 32.6 69.1
----------------------------------- ------------------ --------- ------------ --------
83.5 129.0 124.0 336.5
----------------------------------- ------------------ --------- ------------ --------
Year ended 31 March 2019 (audited)
-----------------------------------------
Asia Pacific EMEA Americas Corporate Total
GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------- -------- --------- ---------- --------
Revenue
Support and maintenance,
including annual fees 45.0 71.7 77.7 - 194.4
Rental and subscriptions 49.4 107.2 61.6 - 218.2
Initial fees and perpetual
licences 57.3 86.6 67.7 - 211.6
Training and services 27.8 48.8 65.8 - 142.4
---------------------------- ------------- -------- --------- ---------- --------
Regional revenue total 179.5 314.3 272.8 - 766.6
Cost of sales (28.8) (42.6) (66.2) (53.7) (191.3)
Selling and administrative
expenses (36.6) (65.9) (60.9) (115.2) (278.6)
Net impairment loss on
financial assets (4.0) (1.6) (0.7) - (6.3)
---------------------------- ------------- -------- --------- ---------- --------
Regional contribution 110.1 204.2 145.0 (168.9) 290.4
Research & Development
costs (114.5)
---------------------------- ------------- -------- --------- ---------- --------
Adjusted EBIT 175.9
---------------------------- ------------- -------- --------- ---------- --------
Exceptional items, other
normalised adjustments(1)
and net interest (129.2)
---------------------------- ------------- -------- --------- ---------- --------
Profit before tax 46.7
---------------------------- ------------- -------- --------- ---------- --------
1 Normalised adjustments include amortisation of intangible
assets (excluding other software), share-based payments and
movements on fair value of forward exchange contracts.
7 Selling and administration expenses
An analysis of selling and administration expenses is set out
below:
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
----------------------------------- ------------ ------------ -----------
Selling and distribution expenses 113.1 106.9 235.6
Administrative expenses 67.2 54.0 106.3
180.3 160.9 341.9
----------------------------------- ------------ ------------ -----------
8 Exceptional items
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
---------------------------------------- ------------ ------------ -----------
Acquisition and integration activities 12.5 7.8 23.0
Restructuring costs 0.8 3.0 5.9
13.3 10.8 28.9
---------------------------------------- ------------ ------------ -----------
Acquisition and integration costs incurred related principally
to consultancy fees paid to advisors and the costs of additional
temporary resources required for the integration of AVEVA Group plc
and the Schneider Electric industrial software business. Key
integration activities included work undertaken to exit the
Transitional Service Arrangements provided by Schneider Electric;
costs incurred in the initial design and build phases of a new
harmonised global ERP system for the enlarged Group; and assistance
from consultants to the Group in running programmes designed to
deliver revenue and cost synergies from the Combination.
Restructuring costs related to severance payments in a number of
global office locations. The costs incurred through the period
ended 30 September 2019 are a continuation of the project started
in the prior year, following the Combination.
The tax credit on the exceptional items of GBP13.3m (H1 FY19:
GBP10.8m) is GBP2.5m (H1 FY19: GBP1.7m).
9 Income tax expense
The total tax charge for the half year ended 30 September 2019
is GBP6.0m (H1 FY19: GBP0.3m).
The effective tax rate on the profit before tax is 25.0%. The
difference from the US tax rate of 23.3% is mainly due to higher
overseas tax rates, overseas losses, and the benefit of UK and US
tax incentives.
The tax charge on adjusted profit before tax is GBP19.0m (H1
FY19: GBP11.6m) which equates to an effective tax rate of 21.3% (H1
FY19: 21.5%).
10 Ordinary dividends
The proposed interim dividend of 15.5 pence per ordinary share
will be payable on 7 February 2020, to shareholders on the register
on 10 January 2020. In accordance with IFRS, no provision for the
interim dividend has been made in these financial statements.
The dividends relating to the year ended 31 March 2019 were
declared and paid relating to AVEVA Group plc.
An analysis of dividends paid is set out below:
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
------------------------------------ ------------ ------------ -----------
Final 2018/19 paid at 29.0 pence
per share 46.7 - -
Interim 2018/19 paid at 14.0 pence
per share - - 22.5
Final 2017/18 paid at 27.0 pence
per share - 43.5 43.5
46.7 43.5 66.0
------------------------------------ ------------ ------------ -----------
11 Earnings per share
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
pence pence Pence
(unaudited) (unaudited) (audited)
----------------------------------- ------------ ------------ -----------
Earnings/(Loss) per share for the
period:
- basic 11.19 (3.61) 20.97
- diluted 11.13 (3.61) 20.90
Adjusted earnings per share:
- basic 43.54 26.33 91.24
- diluted 43.31 26.25 90.90
----------------------------------- ------------ ------------ -----------
The calculation of EPS is based on the profit after tax for the
six months ended 30 September 2019 of GBP18.0m and the following
weighted average number of shares:
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
Number of Number of Number of
shares shares shares
(unaudited) (unaudited) (audited)
------------------------------------- ------------ ------------ ------------
Weighted average number of ordinary
shares for basic EPS 161,014,600 161,092,331 161,081,559
Effect of dilution: employee share
options 853,703 514,688 589,978
------------------------------------- ------------ ------------ ------------
Weighted average number of ordinary
shares adjusted for the effect
of dilution 161,868,303 161,607,019 161,671,537
------------------------------------- ------------ ------------ ------------
Details of the calculation of adjusted EPS are set out
below:
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
-------------------------------------------- ------------ ------------ -----------
Profit/(Loss) after tax for the period 18.0 (5.8) 33.8
Intangible amortisation (excluding
other software) 45.3 43.8 88.1
Share-based payments 6.4 4.3 11.2
Losses on fair value of forward foreign
exchange contracts 0.1 0.7 0.5
Exceptional items 13.3 10.8 28.9
Effect of acquisition accounting
adjustments - - 8.6
Tax effect on exceptional items (2.5) (1.7) (4.4)
Tax effect on other normalised adjustments
(excluding net finance expense) (10.5) (9.7) (18.1)
Tax effect on acquisition accounting
adjustments - - (1.6)
-------------------------------------------- ------------ ------------ -----------
Adjusted profit after tax 70.1 42.4 147.0
-------------------------------------------- ------------ ------------ -----------
12 Business combinations
Acquisition of MaxGrip
On 17 April 2019, the Group completed the acquisition of the
software assets of MaxGrip, a pioneer in optimising asset
performance with Reliability Centred Maintenance (RCM) solutions.
The preliminary fair values of the identifiable assets and
liabilities of MaxGrip as at the date of acquisition were:
Carrying
value Fair value
at acquisition adjustment Fair value
GBPm GBPm GBPm
--------------------------- ---------------- ------------ -----------
Intangible assets 2.4 11.5 13.9
Trade receivables 1.4 - 1.4
Contract assets 0.2 - 0.2
Cash and cash equivalents (0.6) - (0.6)
Trade and other payables (0.9) - (0.9)
Contract liabilities (0.6) 0.3 (0.3)
Deferred tax - (3.4) (3.4)
Net assets acquired 1.9 8.4 10.3
Goodwill 11.3
Total consideration 21.6
--------------------------- ---------------- ------------ -----------
The goodwill recognised is primarily attributed to the expected
synergies and other benefits from combining the assets and
activities of MaxGrip with those of the Group.
The consideration of GBP21.6m was settled in cash. The
associated transaction costs of GBP0.3m were expensed and are
included in administrative expenses.
Revenue and contributed net profit before tax from the date of
acquisition are immaterial to the Group. If the acquisition had
taken place at the beginning of the year, revenue and contributed
net profit before tax would also be immaterial.
Disposal of Wonderware Italy
On 30 April 2019 the Group disposed of a wholly owned
distributor business in Italy for GBP2.2m, of which GBP1.3m
deferred consideration is recognised in other receivables at 30
September 2019.
13 Trade and other receivables
Current
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
----------------------------------- ------------- ------------- ----------
Trade receivables 141.0 121.6 174.9
Amounts owed from related parties 32.3 45.7 35.5
Prepayments and other receivables 30.8 28.9 27.5
----------------------------------- ------------- ------------- ----------
204.1 196.2 237.9
----------------------------------- ------------- ------------- ----------
Non-current
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
------------------- ------------- ------------- ----------
Other receivables 3.5 1.2 2.2
------------------- ------------- ------------- ----------
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value.
14 Trade and other payables
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
------------------------------------- ------------- ------------- ----------
Trade payables 18.2 12.0 20.3
Amounts owed to related parties 7.3 36.4 10.5
Social security, employee and sales
taxes 14.5 11.2 22.6
Accruals 92.3 56.3 100.5
Other payables 1.9 29.6 2.9
134.2 145.5 156.8
------------------------------------- ------------- ------------- ----------
15 Related party transactions
Transactions between Group subsidiaries have been eliminated on
consolidation. A list of subsidiaries can be found in the notes to
the AVEVA Group plc financial statements in the 2019 Annual
Report.
During the period, Group companies entered into the following
transactions with Schneider Electric group companies:
Six months ended Year ended
30 September 31 March
--------------------------
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Sales of goods and services 31.9 39.2 80.1
Purchase of goods and services (6.9) (13.4) (19.7)
Completion accounts adjustment - (17.4) (19.4)
Other non-trading transactions 2.9 4.0 4.3
-------------------------------- ------------ ------------ -----------
As at the balance sheet date, group companies held the following
balances with Schneider Electric group companies:
30 September 30 September 31 March
2019 2018 2019
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Trade and other receivables 28.0 41.8 34.1
Trade and other payables (7.3) (19.0) (10.5)
Non-trading receivables 4.3 3.9 1.4
Non-trading payables - (17.4) -
Loan payable - (1.9) -
----------------------------- ------------- ------------- ----------
16 Changes in accounting policies
The Group adopted IFRS 16 using the modified retrospective
method of adoption with the date of initial application of 1 April
2019. The Group elected to use the transition practical expedient
allowing the standard to be applied only to contracts that were
previously identified as leases applying IAS 17 and IFRIC 4 at the
date of initial application. The Group also elected to use the
recognition exemptions for lease contracts that, at the
commencement date, have a lease term of 12 months or less and do
not contain a purchase option ('short term leases'), and lease
contracts for which the underlying asset is of low value
('low-value assets').
The Group has lease contracts for various items of property,
computer equipment and motor vehicles. Before the adoption of IFRS
16, the Group classified each of its leases (as lessee) at the
inception date as either a finance lease or an operating lease. At
the date of transition, no finance leases were held, and all leases
were classified as operating. Leased property was not capitalised
and the lease payments were recognised as rent expense in the
statement of profit or loss on a straight-line basis over the lease
term. Any prepaid rent and accrued rent were recognised under
prepayments and accruals, respectively.
Upon adoption of IFRS 16, the Group applied a single recognition
and measurement approach for all leases that it is the lessee,
except for short-term leases and leases of low-value assets. The
right-of-use assets for most leases were recognised based on the
carrying amount as if the standard had always been applied, apart
from the use of incremental borrowing rate at the date of initial
application. In some leases, the right-of-use assets were
recognised based on the amount equal to the lease liabilities,
adjusted for any related prepaid, accrued lease payments and
onerous lease provision previously recognised. Lease liabilities
were recognised based on the present value of the remaining lease
payments, discounted using the incremental borrowing rate at the
date of initial application. In accordance with the modified
retrospective method of adoption, the Group has restated the
opening balances as at 1 April 2019. The comparative financial
information in this Interim Report has not been restated.
Impact on the statement of financial position
(increase/(decrease)) as at 1 April 2019:
31 March 1 April
2019 2019
GBPm GBPm GBPm
------------------------- --------- ------- --------
Other intangible assets 599.5 (14.4) 585.1
Right-of-use assets - 76.1 76.1
------------------------- --------- ------- --------
Non-current assets 61.7
------------------------- --------- ------- --------
Lease liabilities - 15.0 15.0
Provisions 1.9 (0.6) 1.3
------------------------- --------- ------- --------
Current liabilities 14.4
------------------------- --------- ------- --------
Lease liabilities - 49.9 49.9
Provisions 2.6 (2.6) -
------------------------- --------- ------- --------
Non-current liabilities 47.3
------------------------- --------- ------- --------
The lease liabilities as at 1 April 2019 can be reconciled to
the operating lease commitments as of 31 March 2019 as follows:
GBPm
--------------------------------------------- ------
Operating lease commitments as at 31 March
2019 46.3
Less:
Impact of discounting (5.9)
Commitments relating to short-term leases (3.3)
Commitments relating to leases of low-value
assets (0.1)
Add:
Service charges 5.7
Payments in optional extension periods not
recognised as at 31 March 2019 22.2
Lease liabilities as at 1 April 2019 64.9
--------------------------------------------- ------
Set out below are the carrying amounts of the Group's
right-of-use assets and lease liabilities and the movements during
the period:
Lease
Right-of-use assets liabilities
------------------------------------------------ -------------
Long leasehold Computer Motor
buildings equipment vehicles Total
GBPm GBPm GBPm GBPm GBPm
------------------------- --------------- ----------- ---------- ------ -------------
As at 1 April 2019 73.2 0.2 2.7 76.1 (64.9)
Additions 8.2 - 0.6 8.8 (8.8)
Depreciation expense (6.2) - (0.6) (6.8) -
Interest expense - - - - (1.2)
Payments - - - - 7.7
Exchange adjustment 2.8 - 0.1 2.9 (3.1)
------------------------- --------------- ----------- ---------- ------ -------------
As at 30 September 2019 78.0 0.2 2.8 81.0 (70.3)
------------------------- --------------- ----------- ---------- ------ -------------
The Group recognised rent expense from short-term leases of
GBP3.3m and leases of low-value assets of GBP0.1m for the six
months ended 30 September 2019.
Responsibility statement of the Directors
in respect of the Interim Report
The Directors of the Company confirm that to the best of our
knowledge:
-- the Interim Report has been prepared in accordance with IAS 34;
-- the Interim Report includes a fair review of the information
required by DTR 4.2.7R, being an indication of the important events
that have occurred during the first six months of the financial
year and a description of the principal risks and uncertainties for
the remaining six months of the year; and
-- the Interim Report includes a fair review of the information
required by DTR 4.2.8R, being disclosure of related party
transactions and changes therein since the last Annual Report.
By order of the Board
Craig Hayman James Kidd
Chief Executive Officer Deputy CEO & CFO
12 November 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UAVRRKWAAAUA
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