TIDMAVV
RNS Number : 3365P
AVEVA Group PLC
09 June 2020
9 June 2020
AVEVA GROUP PLC
RESULTS FOR THE YEARED 31 MARCH 2020
AVEVA delivers strong growth and makes significant progress
towards its medium-term targets .
Summary results
Year ended 31 March FY20 FY19 Change
Revenue(1) GBP833.8m GBP766.6m 8.8%
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Recurring revenue(2) GBP518.5m GBP412.6m 25.7%
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Adjusted EBIT(3) GBP216.8m GBP175.9m 23.3%
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Adjusted EBIT margin 26.0% 22.9% +310bps
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Profit before tax GBP92.0m GBP46.7m 97.0%
---------- ---------- --------
Adjusted(3) diluted earnings
per share 108.15p 86.60p 24.9%
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Diluted earnings per share 43.13p 20.90p 106.4%
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Final dividend per share 29.0p 29.0p -
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Highlights
-- Revenue grew 8.8% to GBP833.8m (FY19: GBP766.6m)
-- Organic constant currency revenue(4) grew 7.4%
-- Recurring revenue up 25.7% to GBP518.5m (FY19: GBP412.6m)
representing 62.2% of total revenue (FY19: 53.8%)
-- Growth across all geographic regions with Asia Pacific showing particular strength
-- Each of the Business Units grew, with strong growth in Asset
Performance Management (APM) and Planning & Operations
-- Successful introduction of AVEVA Flex subscription model
supporting strong growth in subscription
-- Cloud growth accelerating with an increase of some 200% in total contract value
-- Adjusted EBIT up 23.3% to GBP216.8m (FY19: GBP175.9m) with
margins up to 26.0% (FY19: 22.9%), in-line with expected progress
towards medium term target of 30%
-- Strong balance sheet with cash and deposits of GBP114.6m, no
debt and strong cash collection post year end
-- Final dividend maintained at 29.0 pence per share reflecting
confidence in AVEVA's resilience, strong balance sheet position and
ongoing cash generation, balanced with prudence regarding the
global economic crisis. The Company has not furloughed any
employees or made any reductions to headcount related to Covid-19.
We also do not expect to utilise any government-backed
financing
-- Business outlook resilient with digitalisation key to driving
customers' efficiency and high levels of recurring revenue for
AVEVA
Chief Executive Officer, Craig Hayman said:
"I am very pleased with AVEVA's performance over the last year.
The Group has grown as we play a leading role in the digitalisation
of the industrial world, which is being driven by a need for
sustainability, the industrial internet of things, Cloud, data
visualisation and artificial intelligence . At the same time, we
continued to drive operational improvement in the business, which
is increasing recurring revenue and margins.
AVEVA's team has adapted impressively to the current market and
operating environment. The safety of our employees is paramount and
I was very pleased that we managed to deliver a successful close to
our financial year with 95% of employees working remotely. We are
focused on being digital in everything that we do, accelerating
Cloud and driving the roll out of our subscription offering, AVEVA
Flex".
Looking forward, AVEVA is well placed to navigate through the
challenges of the current environment, with the benefit of
recurring revenue from multi-year contracts. AVEVA is in a strong
position and our strategy and medium-term objectives remain
unchanged."
Notes
(1) Revenue is shown on a statutory basis. In FY19 revenue was
also shown on a pro forma basis.
(2) Recurring revenue is defined as subscription revenue plus
maintenance revenue.
(3) Adjusted Earnings Before Interest and Tax (EBIT) and
Adjusted Earnings Per Share (EPS) 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 in FY19 and
FY20; a currency translation benefit of GBP7.6 million; and adjusts
for the disposals of Wonderware Italy, Germany and Scandinavia, and
the acquisition of MaxGrip.
Enquiries:
AVEVA Group plc
Matt Springett, Head of Investor Relations
Tel: 07789 818 684
FTI Consulting LLP
Edward Bridges / Dwight Burden
Tel: 0203 727 1017
Webcast and conference call
AVEVA will host a conference call and webcast, for registered
participants, at 09:30 (BST) today.
To register for the webcast and access the presentation
materials please visit: www.aveva.com/Investors
Conference calls dial in details:
Telephone UK: +44 (0) 2071 928 000 / 0800 376 7922
Telephone US: +1 866 966 1396 / +1 631 510 7495
Conference call code: 4799483
Conference call participants will be able to ask questions
during the Q&A session and are also advised to watch the
webcast.
A replay of the webcast call will be made available later in the
day.
Chief Executive's review
Summary
AVEVA delivered good financial results achieving revenue growth
of 8.8% and adjusted EBIT growth of 23.3%, while continuing to
drive a business model transition to subscription. Recurring
revenue increased as a proportion of total revenue to 62.2% (FY19:
53.8%). This transition offers increased flexibility to customers,
while generating long-term value for shareholders.
The Group's operating margin benefited from an improvement in
gross margin, due to a better sales mix and increased operational
efficiency, operational leverage and underlying cost savings. At
the same time, investment in areas including Sales & Marketing
and Research & Development was increased to help generate
future growth.
Covid-19
AVEVA achieved a good close to its financial year, despite the
challenges related to Covid-19. The safety of AVEVA's employees is
paramount and the business has adapted well to remote working.
AVEVA's software drives efficiency gains for the industries it
serves. As such, digitalisation is key in dealing with the
challenges that these industries are facing, for example helping
drive efficiency in difficult operating environments and enabling
unmanned operations. The Group has been accelerating its Cloud
roll-out, while increasing investment in Cloud development, to
provide flexibility for customers in how they consume software.
Despite this, the overall level of macroeconomic disruption has
had some impact on customer confidence and in certain sectors it
has caused supply chain disruption, making the overall business
environment more challenging. Restrictions on mobility are
resulting in services being performed remotely where possible and
we expect to see the ongoing and planned reduction in perpetual
licences increase. This is likely to lead to subscription revenues,
which have continued to grow, comprising a greater proportion of
the total.
Against a more challenging revenue growth backdrop, AVEVA is
taking actions which are expected to result in a reduction in costs
of approximately GBP50-60 million versus the Group's pre-Covid-19
plans for FY21. At this point, AVEVA does not intend to make staff
reductions in response to the economic environment, furlough any
staff, or make use of government support programmes. Savings will
be generated from reductions in discretionary spend, travel costs
and lower costs from switching key events from physical to
virtual.
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 driving the
digitalisation of the industrial world, notably the industrial
internet of things, Cloud, 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 its geographical reporting
segments and Business Units during the year.
End markets
AVEVA primarily serves process, batch, hybrid and marine
industries. These industries provide staple requirements for basic
consumption, such as Energy, Food, and Transport. As such, they
have some level of resilience to the macroeconomic downturn.
AVEVA's largest end market is Oil & Gas at around 40% of
revenue, with around 10% of revenue exposed to greenfield capex in
the sector. The Group has become more diversified since the
combination with the Schneider Electric industrial software
business. Packaged Goods (such as Food & Beverage and Pharma),
Power, Marine, Chemicals & Petrochemicals, and Metals &
Mining each accounted for 5-10% of Group revenue. 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. AVEVA's supply chain planning
software is particularly well placed to help customers adjust to
the current market conditions.
The ongoing structural growth drivers in each of our end markets
are strong.
In Oil & Gas, overall end market conditions were stable for
most of the year, with steady capital and operating expenditure
across the upstream, midstream and downstream segments. The Group
won contracts with both owner-operators such as BP and Engineering
Procurement and Construction (EPC) customers, such as Worley. There
was however a sharp reduction in oil consumption associated with
the Covid-19 crisis towards the end of the financial year. This has
led to several oil companies announcing reductions in capital
expenditure, particularly for upstream projects, which will have a
knock-on impact on the business of some of AVEVA's EPC customers.
Most of these EPC customers have signed multi-year subscription
contracts in the past two years with a minimum level of spend,
which will provide some insulation for AVEVA. Tough market
conditions also offer opportunities to drive further efficiencies
through digitalisation, particularly in operations, where AVEVA's
software can offer solutions to supply chain planning
challenges.
In Marine, AVEVA delivered a good performance, driven by product
cycle upgrades and a large multi-year subscription contract win
with Hyundai Heavy Industries in Asia Pacific.
The Group's other end markets are largely non-cyclical and are
primarily driven by structural growth as industries make increasing
use of technology to drive efficiency. During the year we saw
customer wins in the consumer packaged goods market with Procter
& Gamble and Colgate Palmolive, the semi-conductor market with
Micron and the food and beverage space with the coffee division of
Olam International, a leading food and agri-business.
AVEVA has a strategy to grow in new markets, such as the
infrastructure market around cities, water and wastewater
utilities, power utilities, facility and campus managers,
transportation operators and data centres. There have been several
new customers, particularly in smart cities, with the Unified
Operations Centre and water and wastewater.
AVEVA recently launched its Unified Operations Centre for
Datacentres in collaboration with Schneider Electric, to provide a
homogenous view of engineering, operations, and performance across
a heterogeneous, legacy installed base. Datacentre providers will
benefit from this partnership by connecting platforms and data sets
that previously existed in disparate systems. They will also be
able to scale regardless of the number of sites or global location.
Datacentre staff will be empowered to make faster, more informed
decisions and optimise asset and operational efficiency throughout
the datacentre lifecycle. As a result, datacentre providers can
deliver a globally consistent experience to address the expanding
digital infrastructure needs of their clients.
Sales channel and geographical performance
AVEVA delivered growth across all geographies and saw good
execution from both direct and indirect sales channels, the latter
of which represented approximately one third of total revenue,
including sales made through Schneider Electric and leveraging its
end-to-end EcoStruxure architecture. The recent combined launch of
a Datacentre product, which will be taken to Schneider's top global
accounts, highlights the value of this relationship.
Performance from the direct sales channel was strong, benefiting
from investment and revised sales incentives.
The indirect sales channel performed well, achieving 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 AVEVA Asset Performance Management (APM), as channel
sales moved beyond its historical focus on Monitoring &
Control. Towards the end of the year, AVEVA introduced the AVEVA
Select programme, which provides our partners with the opportunity
to become distributors of the full AVEVA portfolio.
As part of the partner network simplification, AVEVA divested
distributors in Italy, Germany and Scandinavia. This had an
immaterial impact on the financial results.
EMEA: Overall revenue increased by 4.1% driven by strong growth
in Russia and CIS in the Oil & Gas, power and industrial
markets, supported by collaboration with Schneider Electric. The
other regions in EMEA produced flat to mid-single digit growth,
reflecting the economic environment and subdued North Sea oil
activity. There were a number of key deals in the food and
beverage, power, water and marine markets as well as expansion with
existing EPC customers.
Americas: Overall revenue increased by 2.3% and grew in both in
North America and Latin America, with Brazil performing very well
due to both expansion deals and new wins. The reduction in Services
revenue remained higher in the Americas than other regions as AVEVA
continued to reduce the Services element of its pipeline Monitoring
& Control business.
Asia Pacific: Overall revenue increased by 26.7% driven by good
performance across the whole region. In particular, Australia and
India were strong. China was on track for an outstanding year
before the impact of Covid-19 hit the fourth quarter. Despite that,
China still delivered double digit growth for the year.
Business Unit performance
AVEVA has four business units: Engineering, Monitoring &
Control, Asset Performance Management and Planning &
Operations.
The Group is driving recurring revenue increases in all these
divisions. In FY20, over 80% of Engineering's revenue was
recurring, compared to 45% to 50% for the other business units.
Engineering consists of design and simulation software and
contributed 43% of total revenue. The Business Unit achieved
approximately 25% growth in Subscription licences, helped by the
benefit from multi-year contracts signed in the year. Overall
revenue growth was approximately 7% on a constant currency basis,
driven by growth in design software.
Monitoring & Control represented 31% of total revenue. The
Business Unit achieved approximately 150% growth in Subscription
licences following the introduction of AVEVA Flex. Overall revenue
growth was approximately 3% on a constant currency basis, with
solid growth in the core Wonderware business being partly offset by
significantly lower services associated with the pipeline SCADA due
to a focus on higher margin revenues and the disposal of
distribution businesses. Growth was particularly good in consumer
packaged goods and life sciences.
Asset Performance Management represented 14% of the Group's
total revenue. The Business Unit achieved approximately 250% growth
in Subscription licences. Overall revenue growth was approximately
12% on a constant currency basis, led by strong growth in AVEVA
Predictive Analytics. 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.
Key wins in the year included Suncor.
Planning & Operations represented 12% of the Group's total
revenue. The Business Unit achieved approximately 70% growth in
Subscription licences. Overall revenue growth was 13% on a constant
currency basis with particularly good growth from Planning &
Scheduling and Asset Optimisation. During the year, Discrete Lean
Manufacturing software was launched to support digital
transformation in the discrete manufacturing market. The new
offering improves operational efficiency through the digitalisation
of lean work management for both manual and automated production
lines. The software solution is used in Schneider Electric's
manufacturing plants and has been successfully deployed in more
than 70 smart factories globally. This resulted in circa 10%
productivity increases due to downtime mitigation and 70% improved
response times due to automated escalation of production
issues.
Cloud
AVEVA's Cloud products are designed to be flexible, scalable and
available everywhere and are offered in each of AVEVA's Business
Units. The Group achieved growth of some 200% in Cloud orders with
significant new order wins, such as Veolia Water and continued
expansion from existing customers as they increased consumption, by
for example rolling solutions out across their asset bases.
AVEVA's Cloud platform, AVEVA Connect, was operationally strong,
achieving 99.95% uptime during the year.
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 year, achieving
its recurring revenue target ahead of plan.
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 subscription revenue, together
with potentially lower growth rates in services revenue.
Progress report: AVEVA delivered revenue growth of 7.4% on an
organic constant currency basis, which was consistent with the
target.
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.
The global economic disruption relating to Covid-19 is expected
to impact the growth rate of the industrial software market in the
short term.
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 26.0%
(FY19: 22.9% on a statutory basis, 23.8% before the impact of a
reverse acquisition accounting adjustment). 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 continued progress towards the
medium-term adjusted EBIT margin target of 30%, although progress
during the current financial year will be impacted by the
macroeconomic disruption.
Medium-term recurring revenue
AVEVA's target was to grow the proportion of recurring revenue
to total revenue to over 60% in the medium term. Recurring revenue
is defined as subscriptions revenue plus maintenance revenue. This
will be driven by growing software as part of the revenue mix and
by increasing the mix of subscription 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.
Subscription offers customers benefits including greater
flexibility, lower up-front costs and simplicity in pricing. These
benefits are reflected in higher customer lifetime value of a
subscription model, versus a perpetual licence model.
Progress report: AVEVA met its target early, with recurring
revenue reaching 62.2% of total revenue (FY19: 53.8%). This was
helped by the modification of sales incentive structures to
encourage recurring revenue growth with a focus on driving
subscription revenue versus perpetual licences, and the
introduction of AVEVA Flex.
The Group has seen very strong demand for Cloud-based solutions
with both an increase in the volume of significant order wins and
substantial expansions from existing Cloud customers.
Growing recurring revenue and Cloud remains a key focus and
AVEVA expects to increase both during the current financial
year.
Outlook
AVEVA's business is expected to be resilient in the context of
the challenging global macroeconomic environment. Many of our
customers are accelerating their adoption of digital technology in
the new environment with a particular focus on Cloud which supports
remote working and fast start up. AVEVA's products are key to
driving efficiency in our customers operations and AVEVA has high
levels of recurring revenue.
The Group will continue to drive its business model transition
to subscription, increasing recurring revenue as a proportion of
overall revenue and accelerating Cloud adoption. This will offer
increased flexibility to customers, while generating long-term
value for shareholders.
As expected in AVEVA's April 2020 trading update,
notwithstanding AVEVA's resilience, we are seeing some impact from
the disruption caused by the global downturn and we expect this to
continue, particularly in the first six months of the financial
year.
In the context of this challenging growth environment, AVEVA is
managing its cost base appropriately, while protecting the
longer-term growth prospects of the Group. This includes protecting
investments in strategic areas such as Cloud and Artificial
Intelligence, whilst significantly reducing costs to support
operating margin and cash generation. This combination of actions
will support profitability in the short term, while underpinning
AVEVA's ability to drive longer-term growth as the trends towards
digitalisation of the industrial world continue.
Craig Hayman
Chief Executive Officer
9 June 2020
Finance Review
Overview
Revenue was GBP833.8 million, which was up 8.8% versus the
previous year (FY19: GBP766.6 million on a statutory basis).
Adjusted EBIT grew by 23.3% to GBP216.8 million (FY19: GBP175.9
million), primarily due to revenue growth, higher gross margin and
operational leverage. For the same reasons, on a statutory basis,
profit before tax increased by 97% to GBP92.0 million.
Organic constant currency revenue grew 7.4%, adjusted for a
currency translation benefit of GBP7.6 million in FY20, and the
effects of the deferred revenue haircut, disposal of Wonderware
Italy, Germany and Scandinavia and the acquisition of MaxGrip.
FY20 FY19
Year ended 31 March GBPm GBPm Change
------------------------------ -------- -------- ---------
Revenue 833.8 766.6 8.8%
Cost of sales (190.1) (191.3) (0.6)%
------------------------------ -------- -------- ---------
Gross profit 643.7 575.3 11.9 %
Operating expenses (426.9) (399.4) 6.9%
------------------------------ -------- -------- ---------
Adjusted EBIT 216.8 175.9 23.3 %
Net interest (3.0) (0.5) 500%
------------------------------ -------- -------- ---------
Adjusted profit before tax 213.8 175.4 21.9 %
Tax charge (38.8) (35.4) 9.6%
------------------------------ -------- -------- ---------
Adjusted profit after tax 175.0 140.0 25.0%
Profit before tax 92.0 46.7 97.0%
Adjusted diluted EPS (pence) 108.15 86.60 24.9%
Gross margin 77.2% 75.0% +220bps
Adjusted EBIT margin 26.0% 22.9% +310bps
Tax charge 18.1% 20.2% (210)bps
Revenue overview
Revenue growth was driven by strong sales execution in the
context of stable end market conditions for the majority of the
year and an ongoing trend towards digitalisation.
Revenue by type is set out below:
Organic
constant
GBPm FY20 % of total FY19 % of total Change currency
Subscription 316.8 38.0% 218.2 28.4% 45.2% 43.2%
Maintenance 201.7 24.2% 194.4 25.4% 3.8% (0.6)%
Total recurring
revenue 518.5 62.2% 412.6 53.8% 25.7 % 22.8%
Perpetual licences 179.3 21.5% 211.6 27.6% (15.3)% (16.8)%
Services 136.0 16.3% 142.4 18.6% (4.5)% (5.0)%
-------------------- ------ ----------- ------ ----------- -------- ----------
Total 833.8 100.0% 766.6 100.0% 8.8% 7.4%
Business model transition
As previously highlighted, AVEVA is driving a business model
transition with the strategy to increase levels of recurring
revenue. There are two aspects to this switch: increasing
subscription revenue, and the transformation of the services
business.
Recurring revenue
Strong progress was made during the year on our strategy to
increase the level of recurring revenue as a proportion of total
revenue with the medium-term target of 60% surpassed. Overall
recurring revenue grew by 25.7% to GBP518.5 million (FY19: GBP412.6
million) driven by very strong growth in subscription resulting in
recurring revenue of 62.2% (FY19: 53.8%).
Subscriptions revenue, which includes rental contracts, token
contracts and subscriptions, grew 45.2% to GBP316.8 million (FY19:
GBP218.2 million). There was consistent growth in subscriptions
across all regions. This reflected a change in customer buying
behaviour from perpetual licences to subscription, helped by the
introduction of AVEVA Flex, the increased number of multi-year
contracts and a switch from maintenance contracts to subscription.
Furthermore, the new sales force incentives to promote subscription
over perpetual licences and services contributed significantly to
the growth.
The introduction of the AVEVA Flex subscription offering for
products in the Monitoring and Control business unit was successful
with growth of over 150%, with several large enterprise accounts,
particularly in North America and EMEA opting for the new
subscription offering. Many of these contracts were closed through
the indirect channel. AVEVA Flex is being enabled for the entire
portfolio.
Across all three regions there were customers on maintenance
contracts who successfully transitioned to higher annual value
subscription contracts. This compressed our maintenance revenue
growth to 3.8%, equivalent to GBP201.7 million (FY19: GBP194.4
million).
Perpetual licences
The corresponding impact from the business model transition to
subscription was seen in perpetual licences, which reduced 15.3%
year-on-year to GBP179.3 million (FY19: GBP211.6 million) as more
customer orders moved to subscription.
Services
Services revenue reduced by 4.5% to GBP136.0 million (FY19:
GBP142.4 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.
Adjusted EBIT and cost management
Together with cost control, the revenue growth delivered an
increase in adjusted EBIT of 23.3% versus the prior year. Adjusted
EBIT margin improved to 26.0% (FY19: 22.9%).
Total adjusted costs were GBP617.0 million (FY19: GBP590.7
million), an increase of 4.5% over the previous year and 3.3% 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
as part of the combination with Schneider Electric's industrial
software business and by the end of the financial year achieved
annualised savings of circa GBP33 million compared to the target of
GBP25 million. These savings have been re-invested in capabilities
to drive future revenue growth, such as R&D and sales.
An analysis of total expenses is summarised below:
Net impairment
loss from
Cost Selling financial Other
GBPm of sales R&D and distribution Admin. assets income Total
Statutory 190.7 184.6 240.1 127.7 7.6 (11.9) 738.8
Amortisation ex other
software - (63.5) (27.1) - - - (90.6)
Share-based payments - - - (12.0) - - (12.0)
Loss on FX contracts - - - (0.4) - - (0.4)
Exceptional items (0.6) (0.4) (3.9) (25.8) - 11.9 (18.8)
----------------------- ---------- ------- ------------------ ------- --------------- -------- -------
Adjusted costs 190.1 120.7 209.1 89.5 7.6 - 617.0
FY19 191.3 114.5 196.7 81.9 6.3 - 590.7
Change (0.6)% 5.4% 6.3% 9.3% 20.6% - 4.5%
Constant currency (1.6)% 3.9% 5.6% 7.1% 20.6% - 3.3%
Cost of sales decreased by 0.6% to GBP190.1 million (FY19:
GBP191.3 million) and the gross margin improved to 77.2% (FY19:
75.0%).
To improve efficiency, the Services team have focused on higher
margin projects together with initiatives to increase standard,
repeatable solutions, which reduce the need for configuration and
customisation. We have also used more offshore service delivery
teams in Mexico, Spain and India to deliver projects. As part of
the services transformation programme, AVEVA has embarked on a
strategy to strengthen its network of system integrators and
provide them with the capability and skills to successfully
implement AVEVA's products with a number of projects started in the
year.
Research & Development costs were GBP120.7 million (FY19:
GBP114.5 million) representing an increase of 5.4% due to
investment in areas including Cloud and Artificial
Intelligence.
Selling and distribution expenses were GBP209.1 million (FY19:
GBP196.7 million), a 6.3% increase versus the prior year. 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 GBP89.5 million (FY19: GBP81.9
million) an increase of 9.3%. This was due investment in support
functions, such as Human Resources, IT and Finance as the
transitional services from Schneider Electric were exited and
replaced with in-house capabilities
Net impairment loss from financial assets represents the
impairment of accounts receivable and contract assets during the
year of GBP7.6 million (FY19: GBP6.3 million). This included an
incremental provision amount for possible increased risk resulting
from Covid-19 related macroeconomic disruption.
Cost management in FY21
In the context of this challenging growth environment, AVEVA is
managing its cost base appropriately, while continuing to invest to
support longer-term growth.
Cost of sales: Approximately 50% of AVEVA's cost of sale relates
to the delivery of services. This is expected to reduce during the
current financial year as Services revenue is further reduced. The
largest part of the remainder of cost of sale relates to the cost
of delivering support to customers as part of the support or
subscription contracts. Other elements of cost of sale include
royalties and payments to third parties, such as cloud hosting
fees.
Operating costs: AVEVA is protecting investments in strategic
areas within Research & Development such as Cloud and
Artificial Intelligence, whilst significantly reducing costs to
support operating margins and cash generation. Actions being taken
include pay and recruitment freezes and a reduction in travel and
event costs. The annual bonus scheme is also dependent on sales and
profitability. Overall, these actions are expected to result in a
reduction in costs of approximately GBP50-60 million versus AVEVA's
pre-Covid-19 plans for FY21.
Normalised and exceptional items
The following normalised and exceptional items have been
excluded in presenting the adjusted results:
Year ended 31 March
GBPm 2020 2019
Acquisition and integration
activities 29.0 23.0
Restructuring costs 1.7 5.9
Other income (11.9) -
Total exceptional items 18.8 28.9
----------------------------- ------------ --------
Amortisation (excl. other
software) 90.6 88.1
Share-based payments 12.0 11.2
Loss on FX contracts 0.4 0.5
----------------------------- ------------ --------
Total normalised items 103.0 99.8
----------------------------- ------------ --------
Acquisition and integration activities principally related to
contractors working on functional integration, consultancy costs
paid to advisers for integration support, investment in new systems
and deal-related executive retention costs.
Other income includes a GBP7.7 million gain on sale of three
distribution businesses and GBP3.8 million received from Schneider
Electric in reimbursement for capital expenditure incurred as part
of the migration from activities covered by TSAs following the
Combination.
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 GBP22.2 million (FY19: GBP12.9
million). The effective rate of tax of 24.1% is in line with the US
effective corporation tax rate of 24%. This rate was affected by
the cost of increase in the rate of UK corporation tax from 17% to
19% on the calculation of deferred tax liabilities for intangible
fixed assets, but this cost was offset by the benefit of tax
incentives for intellectual property in the current and prior
periods.
The adjusted tax rate was 18.1% (FY19: 20.2%), benefiting from
tax incentives for intellectual property in the current and prior
periods.
Earnings per share
Statutory diluted EPS was 43.13 pence (FY19: 20.90 pence).
Adjusted diluted EPS grew 24.9% to 108.15 pence (FY19: 86.60
pence).
Dividends
AVEVA's Board intends to maintain a final dividend of 29.0 pence
per share at a cost of GBP46.8 million (FY19: 29.0 pence per share
at a cost of GBP46.8 million). Subject to approval at AVEVA's AGM
on 21 July 2020, the final dividend will be payable on 11 August
2020 to shareholders on the register as at 10 July 2020.
Balance sheet and cash flow
The Group continues to maintain a strong balance sheet, with net
cash and treasury deposits of GBP114.6 million and no debt. As at
31 March 2020 non-current assets were GBP1,956.0 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.
Trade and other receivables at 31 March 2020 were GBP241.1
million (31 March 2019: GBP238.7 million). Contract assets
increased to GBP142.4 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 GBP177.0 million (31 March 2019: GBP174.6 million).
Cash generated from operating activities before tax was GBP161.4
million, compared to GBP169.1 million in the previous year,
resulting in conversion of adjusted EBIT to operating cash flow of
74.4%. 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, as
well as the impact of exceptional costs.
Integration
The integration of the heritage AVEVA business and the heritage
Schneider Electric software business is largely complete and has
been successfully delivered in line with the plans.
The areas still being completed are in real estate and IT. There
are office consolidations to complete in Sydney, Beijing, and Tokyo
together with some smaller sites. The IT transitional arrangements
with Schneider Electric which are still to be fully exited, are in
two main areas: the transition of heritage SES offices onto the new
AVEVA IT infrastructure and the implementation of the new ERP
system which will replace the legacy systems in both businesses.
These areas are progressing well and are in execution phase for
end-user computing, applications, data, security, connectivity,
systems and hosting. However, the Covid-19 pandemic has disrupted
activities with staff not being able to physically visit offices
and alternative plans have been created and are now in place. As a
result, agreement has been reached with Schneider Electric to
extend the transitional services agreement in those areas to 1
March 2021.
The merger of the two businesses has delivered value to our
customers and our shareholders. As such, we aim to participate in
further consolidation of the industrial software industry, as and
when value-creating opportunities arise.
James Kidd
Deputy CEO & CFO
9 June 2020
Review of principal risks and uncertainties
Risk Management Approach
Whilst the Board of Directors has overall responsibility for
risk management, The Executive Leadership Team (ELT) actively
monitor and manage risks as a core part of operational management.
The ELT's approach to risk management continued to evolve and
improve during FY20 and a new Executive Risk Committee (ERC) was
established. The main risk responsibilities of the ERC are to
monitor the management and mitigation activities of principal and
key Group risks and to ensure the effectiveness of business unit
and functional risk management. The ERC will meet not less than
four times per year.
Strategic Internal Risks
Risk Mitigation
Talent Acquisition & Retention Mitigating activities include
AVEVA is heavily reliant on in-house talent acquisition
the people it employs and if expertise, partnerships with
we are unable to attract or universities, an employee referral
retain the niche skills and programme and communicating
experience we need to drive our culture.
the business forward, creating AVEVA endeavours to ensure that
innovation and growth, this employees are motivated in their
could materially impact the work and there are regular appraisals,
success of our business. with staff encouraged to develop
The technology sector is competitive their skills. Annually there
when seeking talent and the is a Group-wide salary review
AVEVA brand must remain attractive, that rewards strong performance
particularly to niche skills and ensures salaries remain
such as developers, technical competitive. Commission and
sales, services, consultants bonus schemes help to ensure
and leadership. the success of AVEVA and individual
Impacts from the Covid-19 pandemic achievement is appropriately
have increased this risk. There rewarded.
are now further challenges involved Throughout the initial period
in protecting, retaining and of Covid-19 disruption, leadership
acquiring talent during an extended have continually supported and
period of disruption and where communicated with employees,
continued remote working and enabling them and providing
social distancing is required. the tools to work from home
as effectively as possible whilst
staying connected with colleagues
and customers. Effective processes
such as interviews via video
conferencing are being used
to support and fulfil recruitment
needs. HR and the ELT are continually
reviewing the best approaches
to employee and talent support.
Move to Subscription Model Whilst AVEVA is ambitious to
AVEVA's strategic move towards gain the benefits of more widely
a subscription-based licence adopting subscription-based
model is designed to offer customers licensing and to provide the
improved flexibility when addressing benefits of this model to its
their software needs. It could customers, the expansion of
however fail to create the improved the offering remains within
recurring revenue and cashflow the Monitoring & Control business
generation expected for AVEVA unit of AVEVA currently. This
if customers do not utilise continues to allow AVEVA to
the subscription offering as both manage the risk and refine
anticipated. the model.
AVEVA will continue to offer
traditional licensing models
throughout as further mitigation.
A transition strategy is in
place and continues to be closely
monitored.
Cloud AVEVA has recently announced
AVEVA is committed to providing the appointment of a Chief Cloud
market leading value-adding, Officer responsible for driving
reliable and secure cloud services the Cloud portfolio and go-to-market
to its customers and is therefore strategy. This appointment has
investing in this initiative. been made principally to address
This investment requires careful the rapid shift in consumption
management otherwise AVEVA risks patterns in industrial software
not realising anticipated returns and position AVEVA both during
in addition to reputational the period of global disruption
damage. and in a 'new normal' environment.
This risk has increased from
the prior year for two main
reasons:
1) Due to increased demand and
corresponding security requirements
surrounding cloud products and
the criticality for AVEVA to
meet these demands.
2) Due to global disruption
caused by the Covid-19 pandemic
and the increased necessity
of remote working, AVEVA is
accelerating its shift to digital
and cloud services which, in
turn, increases risk around
consistent and quality provision
of Cloud services to customers
(including security threats).
Digital Transformation Agenda Alongside careful management
AVEVA's strategy to capitalise of the right Digital Transformation
on the opportunities of digital strategy, AVEVA further mitigates
transformation could ultimately this risk by having in place
fail or not provide the expected a dedicated Sales and Consulting
levels of return, leading to team, targeted marketing campaigns,
increased costs, reputational continued portfolio rationalisation
damage or lost market positions. and use case prioritisation.
There is no change in this risk
level for AVEVA reflecting the
continuing digitalisation of
industry trend and the importance
of AVEVA in being strategically
aligned with it.
====================================== ========================================
External Risks
Risk Mitigation
Sustainability The AVEVA Sustainability pledge
Increased international focus includes many key mitigating
on Sustainability - Environment, steps which the Company is executing
Societal, Economic - and AVEVA's including:
response to it could deter employees/talent -commitments to minimising carbon
(existing and potential), investors, emissions via increasing the
customers and other key stakeholders use of recycling opportunities,
from AVEVA leading to: removal of single use plastic,
-loss of existing customers and the use of valuable natural
and/or failure to acquire new resources,
customers, -continually improving tracking
-reputational impact including of AVEVA's emissions data,
loss of investment, and -AVEVA Action for Good,
-failure to attract and/or retain -donation of 1% of AVEVA profit
knowledge and talent in the after tax towards initiatives,
business (niche dependency skills). and
-serving industries that are
of environmental importance,
e.g. water, and the ability
to increase efficiency across
a range of industries.
Competitors AVEVA carefully monitors customer
AVEVA operates in highly competitive requirements, trends and other
markets. Other technology companies suppliers operating within our
could acquire, merge or move chosen markets. We invest in
into AVEVA's market space to innovation and strive to offer
compete with AVEVA's offering superior products to meet these
creating a material threat, market trends.
or existing competitors could Other areas of specific mitigation
respond quicker to market demands include leveraging our relationship
and trends resulting in reduced with Schneider Electric, attractive
market share and missed growth proposals for additional complementary
opportunities for AVEVA. products for existing customers
The risk is increased where and flexibility to meet changing
there is more uncertainty in market demands and competitive
the marketplace caused by the forces.
Covid-19 pandemic. It may be Further, AVEVA has recently
that competitor strategies change announced the appointment of
or that there are consolidations a Chief Cloud Officer as previously
in the industry which could referred to in the Cloud Initiatives
impact AVEVA. principal risk.
Regulatory Compliance Local management are supported
AVEVA is required to comply by local
with both professional advisers and further
international and local laws oversight is
in each of the maintained from the corporate
jurisdictions in which it operates. legal and finance
If one or functions.
more AVEVA employees or persons In addition, AVEVA uses compliance
acting policies
on AVEVA's behalf commit, or and guidance materials, communications
are alleged &
to have committed, a violation training platforms for its employees
of law, as and external
a result, AVEVA could face substantial partners.
investigative, defence and/or As a further step dedicated
remediation Compliance resource is being
costs, and be exposed to severe added to enhance management
financial and
penalties and reputational damage. monitoring of this principal
Specific regulatory risk areas risk - this includes
this applies both people and systems.
to are trade compliance, data
protection
and privacy (including GDPR,
anti-trust,
anti-bribery and corruption
(including
corporate gifts and hospitality),
child
and forced labour and people
trafficking,
failure to prevent facilitation
of tax evasion
(CCO), anti-money laundering,
failures
in Know Your Customer (KYC)
and Know
Your Supplier (KYS) (including
indirect
sales partners), related party
transactions,
whistleblowing procedures, market
abuse
regulations and corporate governance.
There is no change in the threat
level for this
principal risk from the prior
year.
AVEVA Products Implicated in AVEVA products are extensively
Industrial Accidents or Customer tested prior to commercial launch.
Cyber-Attack In addition, AVEVA has a robust
Our software products are complex Security Development Lifecycle
and new products or enhancements as a key component of our overall
may contain undetected errors, software development process
failures, performance problems and has created formal and collaborative
or defects which may impact relationships with third-party
our strong reputation with our security researchers and security
customers or create financial organisations to proactively
implications. ensure our software is as safe
This is no change in the threat and secure as is reasonable.
level for this principal risk
from the prior year which continues
to reflect the portfolio of
products in the AVEVA range,
their functionality and increasing
threats in the external cyber-environment.
Cyber-Attack AVEVA has a low tolerance to
Threats within the global cyber-environment this risk and utilises multiple
continue to grow. AVEVA depends layers of cyber security threat
on its IT systems and should defences including access control,
we be specifically targeted encryption, firewalls, etc.
by a cyber-attack or be impacted Additionally, regular external
by a general global cyber-incident, penetration testing is conducted
this could potentially lead across critical corporate and
to suspension of some operations, online services.
regulatory breaches and fines, Further steps have been taken
reputational damage, loss of to increase security measures
customer and employee information whilst AVEVA's workforce operates
and loss of customer confidence. remotely. These will permanently
This principal risk is increased remain in place.
from the previous year due to
increased cyber threats associated
with remote working because
of the Covid-19 pandemic.
Dependency on Cyclical Markets AVEVA products deliver Capex
AVEVA's revenue is materially certainty and
derived from Opex reduction and thus deliver
customers operating in markets meaningful
which are efficiency in downturn environments.
mainly cyclical in nature such An
as Oil & Gas extensive global presence also
and Marine. As and when those provides some
markets mitigation from over-reliance
reach downturn stages, our customers on key geographic
have markets.
less funding available for capital Over half of AVEVA's revenue
projects, is derived from
including the purchase of AVEVA's customers operating in non-cyclical
software markets
products. Significant end market such as Food & Beverages and
downturns Utilities. A
could materially impact AVEVA's new strategic approach and rationalisation
revenues programme was launched during
and profits. the year
The risk is considered to have for the Food & Beverages and
increased since Infrastructure
the prior year. Global disruption markets and there is continued
caused by leveraging of Schneider Electric
the Covid-19 pandemic has led relationships into non-cyclical
to significant markets.
volatility in oil markets and AVEVA's strategic move towards
subsequently a subscription
within AVEVA's customer base. based licensing model also further
A longer mitigates this
period of volatility increases risk as it can offer customers
risk of revenue greater flexibility
impacts to AVEVA. over their expenditure. Three
of AVEVA's
business units are more Opex
than Capex
focused.
Global Economic Disruption and AVEVA has entered the period
Declined GDPs of global economic disruption
Because of the global Covid-19 in a strong cash and financial
pandemic, AVEVA must now operate position. Further mitigations
in an environment where there which have already been announced
is economic disruption and declined by executive leadership include
GDPs. This could have many impacts employee pay and recruitment
including significantly decreased freezes, plus cuts to discretionary
demand for our products and spending. Leadership continue
services from our customers, to review AVEVA's position and
unexpected disruptions in the are prepared to take further
industries that we serve or mitigating steps as and when
limited access to funding should considered necessary.
it be necessary. Further, as mentioned above,
AVEVA products deliver Capex
certainty and Opex reduction
and thus deliver meaningful
efficiency in downturn environments.
AVEVA intends to orientate completely
around supporting its valued
customers and deliver this meaningful
efficiency.
============================================= ============================================
Operational Risks
Risk Mitigation
Internal IT Systems (Suitability AVEVA has appointed an experienced
& Continuity) Chief Information Officer and
AVEVA depends on its many IT additional people resources
systems for day-to-day operations to lead and drive the various
and to meet its customers' expectations. IT initiatives, including a
If they fail to operate effectively new Enterprise Resource Planning
and efficiently then this could (ERP) implementation project
result in reputational damage, designed to provide and support
negative employee engagement industry best practice processes.
or poor customer experiences. This includes respective governance
frameworks and support from
As in the prior year, this remains expert external advisors and
a high gross risk for AVEVA, integration specialists.
reflecting both range of legacy
IT systems in the AVEVA IT estate
and the ongoing significant
programmes that are in place
to consolidate, improve, create
competitive advantage and maintain
business as usual processes.
These programmes could become
more complex or delayed because
of continued global disruption
caused by the Covid-19 pandemic.
Extended Period of Remote Working AVEVA leadership have announced
(Operational Resilience) their dedication to shifting
Because of the global Covid-19 to a digital business model
pandemic, there could be an and operating successfully in
extended period during which a 'new world'.
AVEVA must successfully operate
remotely. This would include In addition to providing the
employees continuing to work necessary tools to enable our
at home and being unable to employees to be effective remotely,
physically visit our customers. innovative ways of working are
being introduced and refined.
If AVEVA fails to operationally For example, the ability for
adapt to an efficient and effective our Global Services team to
distance business model, which operate remotely and run customer
includes continuing to provide integration projects has already
the value our customers demand been successfully demonstrated.
and giving our people the support Innovation will continue to
they need, this could impact allow long-term and sustainable
AVEVA's results and reputation. remote and digital working models.
========================================== =====================================
Disruptive Risks
Risk Mitigation
Disruptive Technologies AVEVA largely mitigates this
New and unforeseen technology, threat through its own leading
software or business models innovation initiatives and remaining
which threaten AVEVA's value at the forefront of technological
offering could be developed advances. This a core strategic
and become significantly commercially strength of AVEVA. In addition,
viable resulting in material AVEVA continually scans the
impacts to AVEVA's profits and disruptive technology environment
prospects. to ensure it is well informed
and placed to respond to any
This is no change in the threat material threats.
level for this principal risk
from the prior year reflecting
the increased potential threats
from disruptive forces which
seek to capitalise on digitisation
of industry trends.
======================================= ======================================
Consolidated income statement
for the year ended 31 March 2020
2020 2019
Notes GBPm GBPm
---------------------------------------------------- ------ -------- --------
Revenue 3,4 833.8 766.6
Cost of sales (190.7) (193.2)
---------------------------------------------------- ------ -------- --------
Gross profit 643.1 573.4
Operating expenses
Research & Development costs (184.6) (178.0)
Selling and administrative expenses 5 (367.8) (341.9)
Net impairment loss on financial assets (7.6) (6.3)
Other income 11.9 -
Total operating expenses (548.1) (526.2)
---------------------------------------------------- ------ -------- --------
Profit from operations 95.0 47.2
Finance revenue 0.3 0.2
Finance expense (3.3) (0.7)
---------------------------------------------------- ------ -------- --------
Profit before tax from continuing operations 92.0 46.7
Income tax expense 7 (22.2) (12.9)
---------------------------------------------------- ------ -------- --------
Profit for the year attributable to equity holders
of the parent 69.8 33.8
---------------------------------------------------- ------ -------- --------
Profit from operations 95.0 47.2
Amortisation of intangibles (excluding other software) 90.6 88.1
Share-based payments 12.0 11.2
Loss on fair value of forward foreign exchange
contracts 0.4 0.5
Exceptional items 6 18.8 28.9
Adjusted EBIT 216.8 175.9
------
Earnings per share (pence)
- basic 9 43.35 20.97
- diluted 9 43.13 20.90
---------------------------- ------ ------
All activities relate to continuing activities.
The accompanying notes are an integral part of this Consolidated
income statement.
Consolidated statement of comprehensive income
for the year ended 31 March 2020
2020 2019
Notes GBPm GBPm
---------------------------------------------------- ------ ------ ------
Profit for the year 69.8 33.8
Items that may be reclassified to profit or loss
in subsequent periods:
Exchange gain arising on translation of foreign
operations 4.2 8.4
---------------------------------------------------- ------ ------ ------
Total of items that may be reclassified to profit
or loss in subsequent periods 4.2 8.4
---------------------------------------------------- ------ ------ ------
Items that will not be reclassified to profit
or loss in subsequent periods:
Remeasurement gain/(loss) on defined benefit plans 6.2 (0.5)
Deferred tax effect 7(a) (1.2) (0.4)
---------------------------------------------------- ------ ------ ------
Total of items that will not be reclassified to
profit or loss in subsequent periods 5.0 (0.9)
---------------------------------------------------- ------ ------ ------
Total comprehensive income for the year, net of
tax 79.0 41.3
---------------------------------------------------- ------ ------ ------
The accompanying notes are an integral part of this Consolidated
statement of comprehensive income.
Consolidated balance sheet
31 March 2020
2020 2019
Notes GBPm GBPm
-------------------------------- ------ -------- --------
Non-current assets
Goodwill 1,295.7 1,285.3
Other intangible assets 514.8 599.5
Property, plant and equipment 27.6 17.1
Right-of-use assets 79.5 -
Deferred tax assets 19.1 11.8
Trade and other receivables 4.4 2.2
Retirement benefit surplus 14.9 7.1
1,956.0 1,923.0
-------------------------------- ------ -------- --------
Current assets
Trade and other receivables 10 242.2 238.7
Contract assets 3 142.4 100.5
Treasury deposits 11 0.1 0.6
Cash and cash equivalents 11 114.5 127.2
Current tax assets 20.2 10.8
-------------------------------- ------ -------- --------
519.4 477.8
-------------------------------- ------ -------- --------
Total assets 2,475.4 2,400.8
-------------------------------- ------ -------- --------
Equity
Issued share capital 5.7 5.7
Share premium 574.5 574.5
Other reserves 1,180.3 1,178.8
Retained earnings 181.2 165.5
-------------------------------- ------ -------- --------
Total equity 1,941.7 1,924.5
-------------------------------- ------ -------- --------
Current liabilities
Trade and other payables 12 149.4 156.8
Contract liabilities 3 177.0 174.6
Lease liabilities 16.6 -
Financial liabilities 0.4 0.1
Provisions 0.1 1.9
Current tax liabilities 5.5 12.8
-------------------------------- ------ -------- --------
349.0 346.2
-------------------------------- ------ -------- --------
Non-current liabilities
Lease liabilities 53.3 -
Deferred tax liabilities 119.9 111.3
Other liabilities 0.7 3.1
Provisions - 2.6
Retirement benefit obligations 10.8 13.1
-------------------------------- ------ -------- --------
184.7 130.1
-------------------------------- ------ -------- --------
Total equity and liabilities 2,475.4 2,400.8
-------------------------------- ------ -------- --------
The accompanying notes are an integral part of this Consolidated
balance sheet.
Consolidated statement of changes in shareholders' equity
31 March 2020
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 31 March
2018 5.7 574.5 615.6 9.9 - 101.7 452.5 (0.3) 1,179.4 195.1 1,954.7
Profit for the
year - - - - - - - - - 33.8 33.8
Other
comprehensive
income - - - 8.4 - - - - 8.4 (0.9) 7.5
-------------- ------- ------- ------- ----------- ------------ ---------- ----------- -------- -------- -------- -------
Total
comprehensive
income - - - 8.4 - - - - 8.4 32.9 41.3
Share-based
payments - - - - - - - - - 11.2 11.2
Tax arising on
share options - - - - - - - - - 1.3 1.3
Investment in
own
shares - - - - - - - (9.3) (9.3) - (9.3)
Capital
contribution - - - - 0.1 - - - 0.1 - 0.1
Transactions
with
Schneider
Electric - - - - - - - - - (8.8) (8.8)
Cost of
employee
benefit trust
shares
issued to
employees - - - - - - - 0.2 0.2 (0.2) -
Equity
dividends - - - - - - - - - (66.0) (66.0)
-------------- ------- ------- ------- ----------- ------------ ---------- ----------- -------- -------- -------- -------
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
year - - - - - - - - - 69.8 69.8
Other
comprehensive
income - - - 4.2 - - - - 4.2 5.0 9.2
-------------- ------- ------- ------- ----------- ------------ ---------- ----------- -------- -------- -------- -------
Total
comprehensive
income - - - 4.2 - - - - 4.2 74.8 79.0
Share-based
payments - - - - - - - - - 12.0 12.0
Tax arising on
share options - - - - - - - - - 1.0 1.0
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 - - - - - - - - - (71.7) (71.7)
-------------- ------- ------- ------- ----------- ------------ ---------- ----------- -------- -------- -------- -------
At 31 March
2020 5.7 574.5 615.6 22.5 0.1 101.7 452.5 (12.1) 1,180.3 181.2 1,941.7
-------------- ------- ------- ------- ----------- ------------ ---------- ----------- -------- -------- -------- -------
The accompanying notes are an integral part of this Consolidated
statement of changes in shareholders' equity.
Consolidated cash flow statement
for the year ended 31 March 2020
2020 2019
Notes GBPm GBPm
--------------------------------------------------- ------ ------- -------
Cash flows from operating activities
Profit for the year 69.8 33.8
Income tax expense 7(a) 22.2 12.9
Net finance expense 3.0 0.5
Amortisation of intangible assets 91.7 88.8
Depreciation of property, plant and equipment
and right-of-use assets 24.4 5.4
Loss on disposal of property, plant and equipment 0.7 0.1
Gain on disposal of pension scheme (0.4) -
Gain on disposal of subsidiaries (7.7) -
Share-based payments 12.0 11.2
Difference between pension contributions paid
and amounts charged to operating profit (1.2) 0.1
Research & Development expenditure tax credit (2.3) (2.0)
Changes in working capital:
Trade and other receivables (12.2) (18.6)
Contract assets (43.8) (32.8)
Trade and other payables (5.8) 36.1
Contract liabilities 10.7 33.1
Changes to fair value of forward foreign exchange
contracts 0.3 0.5
--------------------------------------------------- ------ ------- -------
Cash generated from operating activities before
tax 161.4 169.1
Income taxes paid (39.3) (32.4)
--------------------------------------------------- ------ ------- -------
Net cash generated from operating activities 122.1 136.7
--------------------------------------------------- ------ ------- -------
Cash flows from investing activities
Purchase of property, plant and equipment (18.5) (7.4)
Purchase of intangible assets (0.6) (0.2)
Payment on disposal of pension scheme (2.0) -
Acquisition subsidiaries, net of cash acquired (25.1) -
Consideration paid on completion of business
combination - (19.4)
Proceeds from sale of subsidiaries, net of cash 5.5 -
Sale/(purchase) of treasury deposits 0.5 (0.4)
Interest received 0.3 0.2
--------------------------------------------------- ------ ------- -------
Net cash flows used in investing activities (39.9) (27.2)
--------------------------------------------------- ------ ------- -------
Cash flows from financing activities
Interest paid (3.3) (0.7)
Purchase of own shares (3.1) (9.3)
Repayment of borrowings - (10.0)
Payment of principal element of lease liability (15.5) -
Dividends paid to shareholders of the parent (71.7) (66.0)
--------------------------------------------------- ------ ------- -------
Net cash flows used in financing activities (93.6) (86.0)
--------------------------------------------------- ------ ------- -------
Net increase in cash and cash equivalents (11.4) 23.5
Net foreign exchange difference (1.3) (1.9)
Opening cash and cash equivalents 11 127.2 105.6
--------------------------------------------------- ------ ------- -------
Closing cash and cash equivalents 11 114.5 127.2
--------------------------------------------------- ------ ------- -------
The accompanying notes are an integral part of this Consolidated
cash flow statement.
1 Basis of preparation
The Consolidated financial statements of AVEVA Group plc and all
its subsidiaries (the Group) have been prepared in accordance with
IFRS, as adopted by the European Union, as they apply to the
financial statements of the Group for the year ended 31 March
2020.
The preliminary announcement covers the period from 1 April 2019
to 31 March 2020 and was approved by the Board on 9 June 2020. It
is presented in Pounds Sterling (GBP) and all values are rounded to
the nearest GBP0.1m except when otherwise indicated.
The financial information contained in this preliminary
announcement of audited results does not constitute the Group's
statutory accounts for the years ended 31 March 2020 or 31 March
2019. The accounts for the year ended 31 March 2019 have been
delivered to the Registrar of Companies. The statutory accounts for
the year ended 31 March 2020 have been reported on by the Company's
auditors; the report on these accounts was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain any statement under section 498(2) or (3) of the Companies
Act 2006 or equivalent preceding legislation.
The statutory accounts for the year ended 31 March 2020 are
expected to be posted to shareholders in due course and will be
delivered to the Registrar of Companies after they have been laid
before the shareholders in a general meeting on 21 July 2020.
Copies will be available from the registered office of the Company,
High Cross, Madingley Road, Cambridge CB3 0HB and can be accessed
on the AVEVA website, www.aveva.com. The registered number of AVEVA
Group plc is 2937296.
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 ('the
Combination'), which occurred on 1 March 2018.
The Group presents a non-GAAP performance measure on the face of
the Consolidated income statement. The Directors believe that
'adjusted EBIT' provides a reliable and consistent presentation of
the underlying performance of the Group. Adjusted EBIT is not
defined by IFRS and therefore may not be directly comparable with
the 'adjusted EBIT' measures of other companies.
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.
Normalised items: These are recurring items which management
considers to have a distorting effect on the underlying results of
the Group, and are non-cash items. These items relate to
amortisation of intangibles (excluding other software), share-based
payment charges and fair value adjustments on financial
derivatives, although other types of recurring items may arise.
Recurring items are adjusted each year irrespective of materiality
to ensure consistent treatment.
Exceptional items: These are items which are non-recurring and
are identified by virtue of either their size or their nature.
These items can include, but are not restricted to, the costs of
significant restructuring exercises, fees associated with business
combinations and costs incurred in integrating acquired
companies.
Going concern statement
In adopting the going concern basis for preparing the financial
statements, the Directors have considered the business activities
and the Group's principal risks and uncertainties in the context of
the current operating environment. This includes possible impacts
of the global Covid-19 pandemic on the Group and reviews of
liquidity and covenant forecasts.
The Group's business planning cycle has taken account of
potential impacts of Covid-19 to create a base case going concern
model, reflecting the current business disruption, deterioration in
economic conditions and the resulting impact on customers and
ability to operate effectively during a period of remote
working.
The Directors have considered sensitivities in respect of
potential downside scenarios over and above the Covid-19 base case
going concern model and the mitigating actions available in
concluding that the Group is able to continue in operation for a
period of at least twelve months from the date of approving the
financial statements.
The sensitivities are designed to model potential downside
scenarios relating to Covid-19, whereby the Group experiences:
-- A period of depressed economic activity across the entire
going concern period, with resulting reduction in revenues as a
result of reduced conversion of the revenue pipeline, lower new
customer demand and impacts on pricing;
-- Business disruption including the impact of stay-at-home
orders on the ability to operate efficiently as well as the ability
to deliver Project services work remotely;
-- Delays in the working capital cycle, including the impact of
customer failures, credit defaults and delays in customers making
contractual payments.
The specific scenarios modelled are as follows:
-- Scenario 1 stresses the base going concern model further with
materialisation of principal risks linked to continued pandemic
disruption.
-- Scenarios 2-4 also use the Covid-19 adjusted business plans
as a base model, upon which further materialisation of a
combination of various of the principal risks identified above are
considered. Each scenario assumes delays in the working capital
cycle, including the impact of customer failures, credit defaults
and delays in customers making contractual payments, as well as the
following other assumptions.
Scenario 1: Given the current risk environment in relation to
the global Covid-19 pandemic, this Scenario incorporates the impact
of the following three principal risks as outlined above, reducing
base model revenue by circa 9% across the three-year forecast
period.
-- Dependency on cyclical markets;
-- Global economic disruption and declined GDPs ; and
-- Extended period of remote working.
Scenario 2: A "severe but plausible" scenario which model's
materialisation of all the following principal risks as outlined
above, being applied to the Covid-19 adjusted financial forecasts,
reducing base model revenues by circa 15-20% across the three-year
forecast period.
-- Move to subscription model;
-- Cloud product initiatives; and
-- Sustainability.
Scenario 3: A "severe but plausible" scenario which model's
materialisation of all the following principal risks as outlined
above, being applied to the already Covid-19 adjusted financial
forecasts, which also reduces base model revenues by circa 15-20%
across the three-year forecast period.
-- Move to subscription model;
-- Cloud product initiatives; and
-- Cyberattack.
Scenario 4: A further scenario was created to model
circumstances required to breach AVEVA's credit facilities. This
scenario assumes severe cash collection delays and does not include
any mitigating actions that the Group would take. It is overall
considered very unlikely.
Under the base case scenario, there is no expected requirement
to drawdown on the RCF across the going concern period. Under the
four downside scenarios, the Group would utilise the RCF, however
within the current liquidity levels available.
Throughout all the four downside scenarios, the Group continues
to have liquidity headroom on existing facilities and against the
RCF financial covenants during the period under assessment. Should
a more extreme downside scenario occur, additional mitigating
actions could be taken such as the cancellation or deferral of
dividend payments and reductions in other discretionary operating
costs. The financial statements for the year ended 31 March 2020
have therefore been prepared under the going concern basis of
accounting.
2 Accounting policies
The preliminary statement has been prepared on a consistent
basis with the accounting policies set out in the last published
financial statements for the year ended 31 March 2019 except where
noted below. Other new standards and interpretations which came
into force during the year did not have a significant impact on the
Group's financial statements.
Whilst the revenue accounting policy has not changed, the
revenue descriptions have been amended to be more consistent with
industry practice:
-- Support and maintenance, including annual fees has been renamed Maintenance;
-- Rental and subscriptions has been renamed Subscription;
-- Initial fees and perpetual licences has been renamed Perpetual licences; and
-- Training and services has been renamed Services.
The Group has adopted IFRS 16 Leases from 1 April 2019, using
the modified retrospective method. This has resulted in changes in
accounting policies and adjustments to the amounts recognised in
the financial statements. In accordance with this approach prior
year balances have not been restated, and are presented as
historically disclosed under IAS 17. 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. The Group has adopted
the practical expedient to view certain arrangements containing
both lease and non-lease components as a single lease
component.
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
carrying amount of right-of-use assets are also remeasured to
reflect this change in lease liabilities.
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.
The effect on the income statement for the year ended 31 March
2020 was to reduce profit after tax by GBP1.3 million.
3 Revenue
An analysis of the Group's revenue is as follows
Services
transferred Services
at a transferred
point over
in time time Total
Year ended 31 March 2020 GBPm GBPm GBPm
-------------------------- ---- ------------- ------------- ------
Subscription 228.7 88.1 316.8
Maintenance - 201.7 201.7
Perpetual licences 179.3 - 179.3
Services - 136.0 136.0
-------------------------------- ------------- ------------- ------
408.0 425.8 833.8
------------------------------ ------------- ------------- ------
Services
transferred Services
at a transferred
point over
in time time Total
Year ended 31 March 2019 GBPm GBPm GBPm
-------------------------- ---- ------------- ------------- ------
Subscription 145.7 72.5 218.2
Maintenance - 194.4 194.4
Perpetual licences 211.6 - 211.6
Services - 142.4 142.4
-------------------------------- ------------- ------------- ------
357.3 409.3 766.6
------------------------------ ------------- ------------- ------
Contract balances are as below:
2020 2019 2018
GBPm GBPm GBPm
--------------------------------- ------ ------ ------
Trade receivables (non-current) 2.0 - -
Trade receivables (current) 181.2 174.9 146.9
Contract assets 142.4 100.5 67.6
Contract liabilities 177.0 174.6 141.7
--------------------------------- ------ ------ ------
Contract assets have increased year-on-year predominantly due to
the recognition of a number of multi-year subscription licences,
resulting in the cumulative revenue recognised for these contracts
to be greater than the cumulative amounts invoiced. Contract assets
is stated net of a provision of GBP5.4 million (2019: GBP0.4
million). The provision has increased year-on-year due to forward
looking considerations in light of Covid-19.
Revenue for the year ended 31 March 2020 includes GBP157.1
million (2019: GBP127.6 million) which was included in contract
liabilities at the beginning of the year. Revenue of GBP3.1 million
recognised in the year ended 31 March 2020 related to performance
obligations satisfied in previous years (2019: GBPnil).
The transaction price allocated to the remaining performance
obligations (unsatisfied or partially unsatisfied) as at 31 March
is as follows:
2020 2019
GBPm GBPm
-------------------- ------ ------
Within one year 323.8 248.0
More than one year 178.0 164.6
-------------------- ------ ------
4 Segment information
The Executive Leadership Team (ELT) monitors and appraises the
business based on the performance of three geographic regions: Asia
Pacific; Europe, Middle East and Africa (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. There is
no inter-segment revenue. Corporate costs include centralised
functions such as Executive Management, Information Management,
Finance and Legal. Balance sheet information is not included in the
information provided to the ELT.
Year ended 31 March 2020
----------------------------------------
Asia Pacific EMEA Americas Corporate Total
GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------- ------- --------- ---------- --------
Revenue
Subscription 95.6 140.0 81.2 - 316.8
Maintenance 47.9 67.9 85.9 - 201.7
Perpetual licences 52.1 69.6 57.6 - 179.3
Services 31.9 49.6 54.5 - 136.0
---------------------------- ------------- ------- --------- ---------- --------
Regional revenue total 227.5 327.1 279.2 - 833.8
Cost of sales (27.3) (34.6) (49.9) (78.3) (190.1)
Selling and administrative
expenses (44.7) (72.5) (69.4) (112.0) (298.6)
Net impairment loss
on financial assets (0.8) (2.7) (4.1) - (7.6)
Regional contribution 154.7 217.3 155.8 (190.3) 337.5
Research & Development
costs (120.7)
---------------------------- ------------- ------- --------- ---------- --------
Adjusted EBIT 216.8
---------------------------- ------------- ------- --------- ---------- --------
Exceptional items, other
normalised adjustments(1)
and net interest (124.8)
---------------------------- ------------- ------- --------- ---------- --------
Profit before tax 92.0
---------------------------- ------------- ------- --------- ---------- --------
(1) Normalised adjustments include amortisation of intangible
assets (excluding other software), share-based payments and
movements on fair value of forward exchange contracts.
Year ended 31 March 2019
----------------------------------------
Asia Pacific EMEA Americas Corporate Total
GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------- ------- --------- ---------- --------
Revenue
Subscription 49.4 107.2 61.6 - 218.2
Maintenance 45.0 71.7 77.7 - 194.4
Perpetual licences 57.3 86.6 67.7 - 211.6
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.
5 Selling and administrative expenses
An analysis of selling and administrative expenses is set out
below:
2020 2019
GBPm GBPm
----------------------------------- ------ ------
Selling and distribution expenses 240.1 235.6
Administrative expenses 127.7 106.3
----------------------------------- ------ ------
367.8 341.9
----------------------------------- ------ ------
6 Exceptional items
2020 2019
GBPm GBPm
---------------------------------------- ------- ------
Acquisition and integration activities 29.0 23.0
Restructuring costs 1.7 5.9
Other income (11.9) -
18.8 28.9
---------------------------------------- ------- ------
Acquisition and integration costs incurred related principally
to consultancy fees paid to advisers and the costs of additional
temporary resources required for the integration of heritage AVEVA
and the Schneider Electric industrial software business (SES). Key
integration activities included work undertaken to exit the
Transitional Service Agreements (TSA) 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. Projects relating to the TSA exits and global ERP
system continue into the financial year ending 31 March 2021.
Restructuring costs related to severance payments in a number of
global office locations. The costs incurred for the year ended 31
March 2020 are a continuation of the project started in the prior
year, following the Combination, which is now completed.
Other income includes a GBP7.7 million gain on sale of three
wholly owned distributor businesses. Wonderware Italy was disposed
of on 30 April 2019, Wonderware Scandinavia on 1 January 2020, and
Schneider Electric Software Germany GmbH on 31 January 2020. Total
consideration of GBP12.4 million was recognised, with GBP1.4
million of net assets disposed. Goodwill of GBP3.1 million was
allocated to the three entities and disposed of on sale. The gain
of sale was recognised net of selling costs of GBP0.2 million.
Also included in other income is GBP3.8 million received from
Schneider Electric in reimbursement for capital expenditure
incurred as part of the Company's migration from activities covered
by TSAs following the Combination.
The total cash net outflow during the year as a result of
exceptional items was GBP23.3 million (2019: GBP18.9 million).
Exceptional items were included in the Consolidated income
statement as follows:
2020 2019
GBPm GBPm
----------------------------------- ------- ------
Cost of sales 0.6 1.9
Research & Development costs 0.4 1.7
Selling and distribution expenses 3.9 12.6
Administrative expenses 25.8 12.7
Other income (11.9) -
18.8 28.9
----------------------------------- ------- ------
7 Income tax expense
a) Tax on profit
The major components of income tax expense are as follows:
2020 2019
GBPm GBPm
---------------------------------------------------------- ------ -------
Tax charged in Consolidated income statement
Current tax
UK corporation tax 11.1 5.8
Foreign tax 26.3 29.8
Adjustments in respect of prior periods (9.6) (0.5)
---------------------------------------------------------- ------ -------
27.8 35.1
---------------------------------------------------------- ------ -------
Deferred tax
Origination and reversal of temporary differences (9.9) (22.0)
Adjustments in respect of prior periods 4.3 (0.2)
---------------------------------------------------------- ------ -------
(5.6) (22.2)
---------------------------------------------------------- ------ -------
Total income tax expense reported in Consolidated income
statement 22.2 12.9
---------------------------------------------------------- ------ -------
2020 2019
GBPm GBPm
---------------------------------------------------------------- ------ ------
Tax relating to items charged directly to Consolidated
statement of comprehensive income
Deferred tax on actuarial remeasurements on retirement
benefits 1.2 0.4
---------------------------------------------------------------- ------ ------
Tax charge reported in Consolidated statement of comprehensive
income 1.2 0.4
---------------------------------------------------------------- ------ ------
b) Reconciliation of the total tax charge
The differences between the total tax charge shown above and the
amount calculated by applying the standard rate of US corporation
tax to the profit before tax are as follows:
2020 2019
GBPm GBPm
----------------------------------------------------------- ------ ------
Tax on Group profit before tax at standard US corporation
tax rate of 24% (2019: 24%) 22.1 11.2
Effects of:
- expenses not deductible for tax purposes 2.0 1.9
- Research & Development incentives (5.8) (4.1)
- UK rate change impact on deferred tax 8.9 -
- irrecoverable withholding tax 1.2 0.7
- movement on unprovided deferred tax balances (1.1) 1.4
- differing tax rates 0.2 2.5
- adjustments in respect of prior years (5.3) (0.7)
----------------------------------------------------------- ------ ------
Income tax expense reported in Consolidated income
statement 22.2 12.9
----------------------------------------------------------- ------ ------
The Group's effective tax rate for the year was: 24.1% (2019:
27.6%). The Group's effective tax rate for the year before
exceptional items was 24.2% (2019: 22.9%). The Group's effective
tax rate before exceptional and other normalised adjustments (see
note 6) was 18.1% (2019: 20.2%).
8 Dividends paid and proposed on equity shares
The following dividends were declared, paid and proposed in
relation to the legal entity AVEVA Group plc:
2020 2019
GBPm GBPm
--------------------------------------------------------- ------ ------
Declared and paid during the year
Interim 2019/20 dividend paid of 15.5 pence (2018/19:
14.0 pence) per ordinary share 25.0 22.5
Final 2018/19 dividend paid of 29.0 pence (2017/18:
27.0 pence) per ordinary share 46.7 43.5
--------------------------------------------------------- ------ ------
71.7 66.0
--------------------------------------------------------- ------ ------
Proposed for approval by shareholders at the Annual
General Meeting
--------------------------------------------------------- ------ ------
Final proposed dividend 2019/20 of 29.0 pence (2018/19:
29.0 pence) per ordinary share 46.8 46.8
--------------------------------------------------------- ------ ------
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting on 21 July 2020 and has
not been included as a liability in these financial statements. If
approved at the Annual General Meeting, the final dividend will be
paid on 11 August 2020 to shareholders on the register at the close
of business on 10 July 2020.
9 Earnings per share
2020 2019
Pence Pence
------------------------------------------ ------- -------
Earnings per share for the year:
- basic 43.35 20.97
- diluted 43.13 20.90
Adjusted earnings per share for the year
- basic 108.70 86.91
- diluted 108.15 86.60
------------------------------------------ ------- -------
2020 2019
Number Number
----------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares for
basic earnings per share 161,046,059 161,081,559
Effect of dilution: employee share options 826,621 589,978
----------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares adjusted
for the effect of dilution 161,872,680 161,671,537
----------------------------------------------------- ------------ ------------
The calculations of basic and diluted earnings per share are
based on the net profit attributable to equity holders of the
parent for the year of GBP69.8 million (2019: GBP33.8 million).
Basic earnings per share amounts are calculated by dividing the net
profit attributable to equity holders of the parent by the weighted
average number of AVEVA Group plc ordinary shares outstanding
during the year.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to equity holders of the parent by the
weighted average number of ordinary shares outstanding during the
year as described above, plus the weighted average number of
ordinary shares that would be issued on the conversion of all the
potentially dilutive share options into ordinary shares.
Details of the calculation of adjusted earnings per share are
set out below:
2020 2019
GBPm GBPm
---------------------------------------------------------- ------- -------
Profit after tax for the year 69.8 33.8
Intangible amortisation (excluding software) 90.6 88.1
Share-based payments 12.0 11.2
Loss on fair value of forward foreign exchange contracts 0.4 0.5
Exceptional items 18.8 28.9
Tax effect on exceptional items (4.6) (4.4)
Tax effect on other normalised adjustments (excluding
net finance expense) (12.0) (18.1)
Adjusted profit after tax 175.0 140.0
---------------------------------------------------------- ------- -------
The denominators used are the same as those detailed above for
both basic and diluted earnings per share.
The adjustment made to profit after tax in calculating adjusted
basic and diluted earnings per share has been adjusted for the tax
effects of the items adjusted. The Directors believe that adjusted
earnings per share is more representative of the underlying
performance of the business.
10 Trade and other receivables
2020 2019
GBPm GBPm
--------------------------------------------- ------ ------
Current
Amounts falling due within one year:
Trade receivables 181.2 174.9
Amounts owed from related parties (note 13) 28.4 35.5
Prepayments and other receivables 32.6 28.3
--------------------------------------------- ------ ------
242.2 238.7
--------------------------------------------- ------ ------
11 Cash and cash equivalents
2020 2019
GBPm GBPm
--------------------------------------------- ------ ------
Cash at bank and in hand 112.8 126.5
Short-term deposits 1.7 0.7
--------------------------------------------- ------ ------
Net cash and cash equivalents per cash flow 114.5 127.2
Treasury deposits 0.1 0.6
--------------------------------------------- ------ ------
114.6 127.8
--------------------------------------------- ------ ------
Treasury deposits represent bank deposits with an original
maturity of over three months and are held with a fixed rate of
interest.
Short-term deposits are made for varying periods of between one
day and three months, depending on the immediate cash requirements
of the Group, and earn interest at the respective fixed short-term
deposit rates.
12 Trade and other payables
2020 2019
GBPm GBPm
------------------------------------------------- ------ ------
Current
Trade payables 20.1 20.3
Amounts owed to related parties (note 13) 7.6 10.5
Social security, employee taxes and sales taxes 18.5 22.6
Accruals 99.1 100.5
Other payables 4.1 2.9
------------------------------------------------- ------ ------
149.4 156.8
------------------------------------------------- ------ ------
Trade payables are non-interest bearing and are normally settled
on terms of between 30 and 60 days. Social security, employee taxes
and sales taxes are non-interest bearing and are normally settled
on terms of between 19 and 30 days. The Directors consider that the
carrying amount of trade and other payables approximates their fair
value.
13 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
During the year, Group companies entered into the following
transactions with Schneider Electric group companies:
2020 2019
GBPm GBPm
--------------------------------- ------- -------
Sales of goods and services 69.1 80.1
Purchases of goods and services (11.2) (19.7)
Completion accounts adjustment - (19.4)
Other non-trading transactions 13.4 4.3
--------------------------------- ------- -------
Other non-trading transactions related to amounts received from
Schneider Electric in reimbursement for expenditure incurred as
part of the Company's migration from activities covered by TSAs
following the Combination. Of these transactions, GBP9.6 million
(2019: GBP4.3 million) related to operating expenses incurred, and
GBP3.8 million (2019: GBPnil) to capital expenditure.
During the year ended 31 March 2019, the Group paid GBP17.4
million to Schneider Electric SE, the parent company of the
Schneider Electric group. All other transactions were with
subsidiary companies within the Schneider Electric group.
As at 31 March, Group companies held the following balances with
Schneider Electric group companies:
2020 2019
GBPm GBPm
----------------------------- ------ -------
Trade and other receivables 23.6 34.1
Trade and other payables (7.6) (10.5)
Non-trading receivables 4.8 1.4
----------------------------- ------ -------
All balances held were with subsidiary companies within the
Schneider Electric group.
Terms and conditions of transactions with related parties
Outstanding balances at 31 March 2020 are unsecured, and
settlement occurs in cash. There have been no guarantees provided
or received for any related party receivables or payables. For the
year ended 31 March 2020, the Group has not recorded any provision
for impairment of receivables relating to amounts owed by related
parties (2019: nil). This assessment is undertaken each financial
year through examining the financial position of the related party
and the market in which the related party operates.
Directors
Philip Aiken
Chairman
Craig Hayman
CEO
James Kidd
Deputy CEO & CFO
Christopher Humphrey
Senior Independent Non-Executive Director
Jennifer Allerton
Independent Non-Executive Director
Ron Mobed
Independent Non-Executive Director
Paula Dowdy
Independent Non-Executive Director
Peter Herweck
Non-Executive Director
Olivier Blum
Non-Executive Director
14. Responsibility statement pursuant to FSA's Disclosure and Transparency Rule 4
(DTR 4)
Each Director of the Company (whose names and functions appear
above) confirms that (solely for the purpose of DTR 4) to the best
of his/her knowledge:
-- the financial information in this document, prepared in
accordance with the applicable UK law and applicable accounting
standards, give a true and fair view of the assets, liabilities,
financial position and result of the Company and of the Group taken
as a whole; and
-- the Chairman's statement, Chief Executive's strategic review
and Finance review include a fair review of the development and
performance of the business and the position of the Company and
Group taken as a whole, together with a description of the
principal risks and uncertainties that they face.
On behalf of the Board
Craig Hayman James Kidd
CEO Deputy CEO & CFO
9 June 2020
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
FR UPUMWQUPUPWR
(END) Dow Jones Newswires
June 09, 2020 02:00 ET (06:00 GMT)
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