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% 
                                ----------  ----------  -------- 
 Recurring revenue(2)            GBP518.5m   GBP412.6m    25.7% 
                                ----------  ----------  -------- 
 Adjusted EBIT(3)                GBP216.8m   GBP175.9m    23.3% 
                                ----------  ----------  -------- 
 Adjusted EBIT margin              26.0%       22.9%     +310bps 
                                ----------  ----------  -------- 
 Profit before tax               GBP92.0m    GBP46.7m     97.0% 
                                ----------  ----------  -------- 
 Adjusted(3) diluted earnings 
  per share                       108.15p     86.60p      24.9% 
                                ----------  ----------  -------- 
 Diluted earnings per share       43.13p      20.90p     106.4% 
                                ----------  ----------  -------- 
 Final dividend per share          29.0p       29.0p        - 
                                ----------  ----------  -------- 
 

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

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June 09, 2020 02:00 ET (06:00 GMT)

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