19 May 2015

 

AVEVA GROUP PLC

 

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2015

 

AVEVA Group plc ('AVEVA'; stock code : AVV), one of the world's leading providers of engineering data and design IT systems, today announces its preliminary results for the year ended 31 March 2015.

 

Financial Highlights

 

	2015	2014	% Change
Revenue	£208.7m	£237.3m	-12%
Organic constant currency revenue**	£220.4m	£237.3m	-7%
Adjusted* profit before tax	£62.1m	£78.3m	-21%
Profit before tax	£54.9m	£69.0m	-20%
Adjusted* profit before tax margin	29.8%	33.0%
Basic earnings per share	65.07p	78.12p	-17%
Adjusted* basic earnings per share	74.51p	89.05p	-16%
Net cash	£103.8m	£117.5m	-12%
Final dividend per share	25.0p	22.0p	+14%

 

* Adjusted profit before tax, adjusted profit margin and adjusted basic earnings per share are calculated before amortisation of intangible assets (excluding other software), share-based payments, gain/loss on fair value of forward foreign exchange contracts and exceptional items.  In addition, adjusted basic earnings per share also include the tax effects of these adjustments.

** Organic constant currency revenue is defined as the period's reported revenue restated to reflect the previous year's average exchange rates and excludes the contribution from 8over8.

 

Highlights

·	Resilient performance in difficult markets with revenue and profit in line with expectations
·	Focus on sales execution with 'One AVEVA' beginning to deliver benefits
·	Strong performance from AVEVA Everything 3D™ (AVEVA E3D™), now a meaningful revenue contributor
·	Second half organic, constant currency revenue was £128.1 million, broadly flat on prior year (2014 H2 - £128.8 million) reflecting our focus on sales execution
·	Rental licence revenue grew by 8% in the second half to £67.8 million (2014 H2 - £62.7 million) on a constant currency basis, reflecting good renewals and new agreements with Global Accounts
·	Delivered against planned cost efficiencies
·	Proposed final dividend of 25.0 pence per share, an increase of 14% over prior year (2014 - 22 pence)
·	Net cash balance of £117.6 million on 30 April 2015, reflecting strong cash collection since the year end

Commenting, Chief Executive Richard Longdon said:

"Overall I am very pleased with the strategic and operational progress we have made during the period. Despite the difficult trading environment, we have demonstrated our ability to capitalise on our strengths: a broad international reach and strong competitive positioning in all of our markets."
 

Enquiries:

 

 

AVEVA Group plc

Richard Longdon, Chief Executive

James Kidd, Chief Financial Officer

Derek Brown, Head of Investor Relations

On 19 May 2015            Tel: 020 7796 4133

Thereafter                      Tel: 01223 556655

 

Hudson Sandler

Andrew Hayes / Wendy Baker / Alex Brennan

Tel: 020 7796 4133

 

Conference call and webcast

AVEVA management will host a conference call and audio-webcast, for registered participants, at 09:30 (BST) today. The audio-webcast will be also accessible via the AVEVA website following the presentation.

To register for the webcast and access the presentation materials please visit:

http://www.aveva.com/en/Investors.aspx.

Conference calls dial in details:

Telephone:        +44(0)20 3427 1904

Conference call code: 5208663

Participants are advised to visit the website at least 15 minutes prior to the commencement of the call in order to register and, for those accessing the webcast, in order to download and install any audio software that may be required.

NB: Conference call participants will be able to ask questions during the Q&A session, but those on the webcast will be in a listen only mode.

A full replay facility will be made available later in the day.

Additional information can be accessed at www.aveva.com/investors or by contacting the AVEVA Investor Relations team or Hudson Sandler directly.

 

 

Chairman's statement

Introduction

Overview

I am pleased to report that AVEVA has made good progress in difficult market conditions, and that the resilience of the Group's business model has been a key feature of the past twelve months.

The full year results reflect our particular focus on execution in the second half of the financial year. Total recurring revenue for the second half of the year was up 5%, demonstrating the resilience of our business.  We were also able to deliver the £10.0 million of cost efficiencies we had targeted.

Group revenue of £208.7 million (2014 - £237.3 million), was in line with our revised expectations and adjusted* profit before tax was £62.1 million (2014 - £78.3 million), resulting in an adjusted profit margin of 29.8% (2014 - 33.0%). The reported profit before tax was £54.9 million (2014 - £69.0 million). Adjusted basic earnings per share declined 16% to 74.51 pence (2014 - 89.05 pence). Basic earnings per share declined 17% to 65.07 pence (2014 - 78.12 pence). We closed the year with net cash of £103.8 million (2014 - £117.5 million).

This result reflects a reduced market demand throughout the year due to the significantly lower oil price and subsequent reduction in customer activity, as well as the previously reported weakness in South America and North East Asia during the first half. The strength of sterling also had a pronounced negative effect on our reported results, trimming Group revenue by 6%, as our overseas revenue was translated at less favourable rates compared to the last financial year.

Strategic progress

Notwithstanding the tougher market backdrop, I am pleased to report that AVEVA has continued to make excellent strategic progress on a number of fronts. This is particularly evident in the newly realigned organisation reflected within our sales, Research & Development and solution delivery activities. A year ago we introduced 'One AVEVA' to better support our Engineering, Procurement and Construction (EPC) and Owner Operator (OO) customers through a single sales approach. This has proved to be very effective at helping us to grow the number of solution sales we make. In addition, we have recently unified our development teams across all of our solutions and technologies and streamlined our solution delivery capabilities.

We have continued to make very good progress with our Global Accounts. Many customers are responding to more uncertain markets by investing in new technologies from AVEVA to maximise competitiveness and efficiency. AVEVA E3D has been an outstanding example of this and has proved to be a powerful catalyst for us to deepen our relationships with these key customers. As a result we are pleased to be able to report significant new contracts with Aker Solutions,WS Atkins and KBR, among others.

AVEVA E3D is a clear example of AVEVA's position as the leading innovator within its industry. We have also delivered a range of new products and functional enhancements to many of our other products over the last twelve months. Of particular note is the Activity Visualisation Platform and the new Cloud-enabled version of AVEVA E3D, both of which have generated much excitement from customers in recent months.

During the year we were pleased to acquire 8over8 Limited. Based in Northern Ireland, 8over8's core product, ProCon™, is a software solution designed to minimise risk and increase control and capital discipline for some of the world's most complex projects. This demonstrates AVEVA is well placed to use its balance sheet to deliver well-timed, strategically important acquisitions with a strong logical fit. We are confident that the addition of 8over8 will enable us to further broaden our relationships with the OO community, and serve to further differentiate AVEVA in its markets.

 

 

Market environment                                       

The lower oil price has led to a reduction in global upstream E&P capital expenditure, and it is well documented that a number of projects have been postponed or moth-balled, although the overall effect for AVEVA is mixed. This has had an impact on our EPC customers, their backlogs and general levels of activity.

We have market-leading, well-invested technology solutions that underpin our competitive advantage across our target sectors and geographies. Our mission to enable our customers to work globally with less risk, shorter lead-times and greater business efficiency throughout the asset lifecycle ensures we are aligned to robust long-term growth drivers, particularly given demand for energy, the increasing complexity of their assets, the focus on health and safety and environmental considerations. However, despite some stabilisation in the oil price, it is difficult to predict when the delayed capital projects will be restarted.

Operationally, we demonstrated our ability to react with agility to changing market conditions, and our early actions enabled us to deliver cost efficiencies ahead of our original plans. This protected profitability in the second half of the financial year.

The Board

I am pleased to report further progress in developing the Board's role in supporting and reviewing the Group's strategy for long-term growth. I believe that the scope and effectiveness of this process is now delivering results which can be clearly seen in the various strategic and organisational achievements noted above. As a Board, we continue to monitor closely the achievement of business objectives alongside the oversight of risks and the maintenance of strong governance processes.

Dividend

AVEVA has a progressive dividend policy, reflecting the Board's confidence in the underlying strength of the business and its ability to deliver profitable long-term growth and strong cash generation. Consequently, the Board is recommending a final dividend of 25.0 pence (2014 - 22 pence), an increase of 14% over the prior year, payable on 3 August 2015 to shareholders on the register on 3 July 2015. This gives a full year dividend of 30.5 pence (2014 - 27 pence), an increase of 13% over last year.

Outlook

I believe that the quality and commitment of the AVEVA team worldwide has been central to our ability to show the resilience of our business in the face of more challenging and uncertain market conditions, and on behalf of the Board I would like to thank everyone in the organisation for the effort and dedication that has enabled us to achieve this.

The Board is convinced that there continues to be exciting growth opportunities for AVEVA in the coming years, and that the strength of the long-term fundamentals across our various end markets remains undiminished.  We will continue to focus on managing our cost base to further improve efficiency. As a result, we are confident in our ability to make further progress in capitalising on these opportunities in the future.

Philip Aiken
Chairman
19 May 2015

 

 

 

Chief Executive's strategic review

Summary of Performance

Resilience in difficult markets

The financial year 2014/15 proved the resilience of AVEVA's business model, given the mixed trading environment we experienced. Our revenue mix, broad international reach and strong competitive positioning proved to be key strengths. Our emphasis was on execution in the second half of the year and I am pleased to say that we were able to deliver the £10.0 million of cost efficiencies we had targeted. Full year constant currency revenue of £220.4 million (2014 -£237.3 million) reflected a second half performance in line with the previous year, with an increase in annual fees and rental licences broadly flat despite the difficult market backdrop. Rental deals that had shifted into the second half closed successfully in line with expectations. We were also able to demonstrate that the significant investment we have made in Research & Development in recent years has been well-timed, enabling us to expand our penetration within Global Accounts despite the difficult economic backdrop facing many of our customers.

Overall, I am pleased with the strategic and operational progress we have made during the period. We have continued to expand our sales to OOs through a more coordinated approach, founded upon the 'One AVEVA' sales strategy, implemented at the start of the year. This has had the effect of increasing solution sales to customers and positions us well for the future. We also continued our strategy of reinvesting cash in strategically important acquisitions, with the addition of 8over8 Limited in January 2015, an industry-leading provider of contract risk management solutions.

Over the course of the year, we have seen substantially more challenging conditions in our Oil & Gas end market, which represents around 45% of Group revenue, with the material weakening in the oil price leading to sharp reductions in exploration and production capital expenditure. In addition to this, our business in Latin America was further impacted by Brazil's ongoing political difficulties. In the Marine market, global shipbuilding activity remained subdued, driven by ongoing over-capacity, reduction in new orders for specialist off-shore vessels and relatively low global GDP growth. In the Power market, we continued to see steady single digit growth.

We have an international business with over 50 offices operating in more than 30 countries worldwide. Sterling has strengthened materially during the course of our financial year, in particular against the Euro but also against many other currencies in which we do business, and we saw a 6% negative translation impact on our reported revenue. This is covered in more detail in the Finance Review.

Why customers in our end markets buy our software

Our software is used by our customers as they design, build and operate large capital-intensive assets, in the Process, Power and Marine industries. We sell our solutions principally to the EPC companies, shipyards and OO customers worldwide. Our vision of the Digital Asset is enabling our customers to manage continual change as they deliver and operate some of the world's most complex assets.

Increasingly, our customers are demanding a combination of our products and this, backed by our 'One AVEVA' sales strategy, is driving wider adoption of the entire AVEVA product portfolio delivering strong upsell opportunities. This has been particularly evident in the success we have achieved in expanding our footprint within our Global Accounts. Other notable customers opting for a broader portfolio of our products include Southern California Gas Company, a good example of an OO combining a range of AVEVA applications in order to improve capital efficiency, reliability and compliance.

Engineering & Design Systems (EDS) review and drivers

As a result of the difficult end markets our EDS business was subdued. Revenue for this line of business declined by 14% to £182.7 million, reflecting in particular the downturn in Brazil and South Korea where rental licence renewals were depressed in the first half of the year. Our initial licence business was influenced principally by the reduced levels of activity among our Asian shipyard customers compared to the previous year. Nevertheless, sales of AVEVA E3D continued to gain momentum throughout the year and we have achieved significant strategic progress with our Global Accounts. In general, rental renewals remained robust among our key accounts, and we concluded significant deals with Aker Solutions, Jacobs Engineering, Technip, WorleyParsons and AMEC Foster Wheeler, among others.

Enterprise Solutions (ES) review and drivers

The market backdrop for our information management products has been challenging, with lengthy sales cycles and pressures on discretionary spend amongst our customers. This was reflected in the financial performance for this line of business which did not deliver the level of growth that we expected, with revenue of £24.9 million (2014 -£25.9 million), excluding the impact of the acquired 8over8 business. However, the innovations delivered to our customers this year are driving increased demand for our solutions to create and manage our customers' Digital Assets. Despite the tough market backdrop, there were a number of notable projects during the period including Husky, Davie, BASF and BAE. We also successfully completed important milestones at Chevron's Wheatstone project and at ConocoPhillips.

Innovation leadership driving new opportunities

Our commitment to being the leading innovator in our industry remains undiminished and customer feedback on the products showcased at our AVEVA World Summit in October 2014 was hugely positive. With AVEVA E3D gaining momentum in the market, the next step will be the Cloud-enabled version. We demonstrated a full function version of AVEVA E3D on a Cloud platform proving no difference in performance to a locally installed solution. The addition of a Cloud-based solution will offer customers rapid deployment as well as the flexibility to mix both cloud and on premise users in the same project. The Cloud technology is already being tested by several customers as part of our early adopter programme. Building on our position as the industry leader in visualisation technology, we demonstrated our new ability to 'walk through' laser scans in an environment indistinguishable from the actual facility. We also demonstrated combined AVEVA E3D and AVEVA NET™ technology on a large touchscreen that is now with early adopter clients, including Lundin and Shell, to demonstrate the next generation in navigating project and asset information in context.

We also announced major enhancements to AVEVA NET with improved 3D interaction and faster, more powerful search, visualisation and navigation capabilities.

Elsewhere, the launch of our new Information Standards Manager has been well received by customers. AVEVA ISM™ bridges the gap between OOs and EPCs, enabling greater control over critical engineering information standards across their projects and enterprises.

We have an exciting product pipeline over the medium term, particularly as our design tools and information management solutions continue to converge.

Regional performance

Across our three main regions, we saw a mixed performance. Asia Pacific was down 20% in the year on a constant currency basis, which reflected a reduction in initial licence fees compared to a very strong performance a year ago, as well as a particular weakness in South Korea where our shipyard customers have experienced lower activity levels due to a reduction in offshore Oil & Gas projects.

Revenue in EMEA and the Americas on a constant currency basis was broadly flat compared to the prior year, reflecting weakness in Brazil and parts of EMEA offset by growth from our Global Accounts.

Further details on our regional performance are contained in the Finance Review.

 

 

Our Focus

Long-term opportunity in global growth markets

Our business remains strongly positioned in its target markets, where the fundamentals support long-term growth. Despite the near-term effects of a weaker oil price, over the long term, with increased energy usage and a growing global population, significant infrastructure investment will be required in order to meet demand; the International Energy Authority (IEA) estimates that global energy demand will increase by 37% by 2040, with the majority of this increase occurring in China and India. Oil & Gas is increasingly difficult to extract, necessitating more hours to be spent in detailed design. This is set against a backdrop where the IEA forecast that liquids demand alone is set to rise from 87 million to 98 million barrels per day within just five years. Our software is critical to solving the biggest engineering challenges in the harshest environments. With similar fundamental drivers, Power offers attractive growth opportunities over the long term as the world's emerging economies invest in their power generation requirements and the ageing infrastructure of the developed world is maintained and replaced. Our global presence and international reach positions us well to capitalise on these opportunities. Meanwhile, in times of uncertainty we are focused on supporting our customers as they seek to become more efficient and adapt to the fast changing environment.

Our strong position in engineering design also offers us a unique opportunity to support the lifecycle of the assets our software tools are used to create. Our information management solutions, with the support of our growing partner network, are increasingly relevant to a wide range of asset-intensive industries beyond the core markets we have traditionally served.

Solution sales, our organisation and the convergence of technologies

We have been pursuing a strategy of increasing the number of solution sales we make, whereby customers opt for a number of our products and we increase our footprint within our customer base. With this in mind, we reported at the interim stage that we had realigned our sales organisation behind a 'One AVEVA' approach in order to better promote the entire AVEVA product range to all customers, supporting both design and operations. As previously indicated, we have also unified our technology organisation, following the convergence of our two key product areas, detailed engineering design and information management. Finally, the Digital Asset is now firmly reinforced as the vision that lies at the heart of our service organisation, to better focus on service delivery and grow our specialist service capabilities over time.

We expect that this streamlined solutions and product strategy will deliver major benefits to our business in coming years as our technologies are used increasingly in combination. Our future financial reporting will, from 2015/16, also be re-aligned behind this convergence and this year is the last in which we will disclose EDS and ES as our primary segments. From 2015/16, we are monitoring the business on a regional basis and, therefore, this will become our primary method of segmental financial reporting.

Management of our cost base

Recognising the more difficult trading conditions in the first half of the financial year, we took early action to achieve cost-efficiencies. This, combined with lower sales commissions and bonuses during the period, has enabled us to limit the impact on profitability caused by lower than planned revenue. In addition, we have taken further action to address the cost base by rationalising some of our regional offices and reducing headcount in some areas of the business. This will deliver annualised savings of approximately £3.0 million which will help offset the cost increases we face in 2015/16 as a result of inflation, increased bonus and commission costs and the annualised effect of new hires made in 2014/15.

 

 

Our Achievements

Strategic progress with Global Accounts

Our Global Accounts EPC program continued to bear fruit over the past year. The challenges seen in our end user markets are prompting our Global Accounts to take the opportunity to invest in the latest AVEVA technologies in order to maximise their competitiveness and business advantage. The integrated Bubbleview™ laser capability within AVEVA E3D is now making this solution the de facto standard for all future brownfield projects, eliminating or reducing re-modelling activities by over 90%. Beyond AVEVA E3D, there is also increased uptake and deployment of AVEVA NET across our Global Accounts, as they continue their journey towards true data-centric working built around a trusted digital asset.

I am especially pleased to be able to report a new significant contract with Aker Solutions of Norway which builds on the fantastic relationship we have enjoyed with them over the last 20 years. Aker has invested in PDMS™ throughout this period and is now using this platform to develop and deploy AVEVA E3D across their business. This is a good example of how we are deepening the relationships with our customers whilst increasing the revenue opportunity.

Development of the partner channel

We continue to strengthen our partnerships with leading consulting, technology and outsourcing companies as we build our presence in the operational lifecycle of the asset. During the period we announced a global alliance with Capgemini to cover asset-intensive industries. Capgemini's Digital Asset Lifecycle Management (DiALM) solution is based on AVEVA's information management technology and enables OOs to control and manage project and operational performance of their assets. We are already supporting Capgemini on the Nuclear New Build programme in the UK and we expect this agreement to help extend our presence within our existing markets and into the other asset-intensive industries served by Capgemini, for example transport. We also announced a new collaboration with EMC to deliver an integrated software solution for capital projects and asset operations. Under the terms of this agreement, AVEVA and EMC have combined the two best-in-class product suites, AVEVA NET and EMC® Documentum® Engineering, Plant and Facilities Management (EPFM), into a single solution. Elsewhere, we formalised our partnership agreement with ETAP for seamless data exchange on the most complex electrical installations in all types of process and power plants, ships and offshore facilities.

Strong growth from AVEVA E3D

As mentioned above, AVEVA E3D has proven to be a catalyst for more solution sales particularly within our Global Accounts business, but we are also making progress across the rest of our customer base. Notable deals in the period included WS Atkins, who have chosen AVEVA E3D and Laser Modeller™ to support lean construction processes. KBR selected AVEVA E3D for global projects as part of a complete integrated engineering and design environment. Tianchen, one of China's largest engineering contractors in the chemical processing industry, standardised on AVEVA E3D. D3SCOM Engineering Sdn. Bhd., a specialist in intelligent modelling engineering services, also adopted AVEVA E3D and Laser Modeller for brownfield projects with Owner Operators in Malaysia.

We now have more than 230 customers who have licensed AVEVA E3D, and the cumulative revenue to date since launch has exceeded £11.0 million. Thus, as we look at the current financial year AVEVA E3D is expected to be a material contributor to revenue for the first time and the long-term outlook is exciting.

 

 

Strategic development through M&A

The acquisition of 8over8 Limited in January 2015 was strategically important and is being integrated according to plan. 8over8's core software platform, ProCon, is sold principally to organisations that design, build and operate high value assets, where it is used as a risk management tool for increased project control and capital discipline. Acquiring this business is an example of how we can use M&A as a strategic tool for growing our business into related technologies and market areas and shows our disciplined approach to acquisitions. There is a strong logical fit and we have several AVEVA NET customers who have ProCon implemented alongside our solution. AVEVA has always had the capabilities for managing changes in design and other data via our existing tools and solutions and now ProCon brings us the capability to manage the impact of those changes on a project's cost and outcome. We are, therefore, optimistic that this acquisition opens up a range of new opportunities for growth both in our existing markets and other related industries.

The Future

Adapting to shifting customer priorities

Efficiency is even more important than ever for our customers and it is AVEVA's goal to provide the tools to deal with ever shorter time-frames and greater cost constraints. Via the creation of the Digital Asset we help our customers to focus on profitability and a lean organisation. This is a journey for our customers, many of whom are now placing the Digital Asset at the heart of their technology vision. Our solutions in the design world are increasingly being called upon to integrate information about the 'as-built' asset, via integrated laser modelling capabilities, as well as operational asset information, via AVEVA NET. As a result OOs can extend the life of their assets whilst our EPC customers can use our solutions to design more efficient assets, handling the data in the project phase far more efficiently and incorporating operational lessons learned ready to handover to the operator.

Summary and outlook

For much of the year under review AVEVA has faced more challenging market conditions. We have been particularly affected by the reduction in activity in the upstream Oil & Gas sector. Over time we expect capital investment in Oil & Gas infrastructure to return to growth, but the timing of this is uncertain. Despite the mixed trading environment, we have demonstrated our ability to capitalise on our strengths: a broad international reach and strong competitive positioning in all of our markets. We aim to continue to lead through innovation and, as has been demonstrated by the milestones achieved with AVEVA E3D, to drive growth through exciting new offerings.

It is a testament to the dedication of all of our people around the world that we were able to deliver significant cost efficiencies in the second half of the year and looking ahead we shall have an even greater focus on costs during the current financial year. Whilst we recognise the challenges in our markets, we are focused on the opportunities that lie before us both strategically and operationally. As a result, the Board is confident that we can achieve our growth targets over the medium term.

 

Richard Longdon
Chief Executive
19 May 2015

 

 

Finance Review

Summary

The strength of AVEVA's business model, good sales execution and tight cost management supported a resilient financial performance in the second half of the financial year, following a disappointing first half. The business is well positioned for future growth with a sound financial footing and solid business model capable of dealing with short term volatility in our end markets.

The results for the year are summarised as follows:

£m	2014/15 Organic	2014/15 8over8	2014/15 Total	2014/15 Organic constant currency**	2013/14 Total	Organic constant currency change
Revenue
Annual fees	60.2	0.5	60.7	64.4	57.1	13%
Rental licence fees	97.2	0.3	97.5	102.2	109.9	(7%)
Recurring revenue	157.4	0.8	158.2	166.6	167.0	-
Initial licence fees	31.1	-	31.1	33.5	48.4	(31%)
Training and Services	19.1	0.3	19.4	20.3	21.9	(7%)
Total revenue	207.6	1.1	208.7	220.4	237.3	(7%)
Cost of sales	(15.2)	(0.3)	(15.5)	(16.1)	(17.4)	(7%)
Gross profit	192.4	0.8	193.2	204.3	219.9	(7%)
Operating expenses*	(130.0)	(1.4)	(131.4)	(138.9)	(142.1)	(2%)
Net finance interest	0.3	-	0.3	0.3	0.5	(40%)
Adjusted profit/(loss) before tax	62.7	(0.6)	62.1	65.7	78.3	(16%)

 

* Operating expenses adjusted to exclude amortisation of intangible assets (excluding other software), share-based payments, gain/loss on forward foreign exchange contracts and exceptional items.

** Organic constant currency is defined as the period's reported results restated to reflect the previous year's average exchange rates and excludes the contribution from 8over8.

Total revenue for the year was £208.7 million which was down 12% compared to 2013/14 (2014 - £237.3 million). Included in the results is £1.1 million from 8over8 Limited, the business we acquired in January 2015. Our organic revenue on a constant currency basis was £220.4 million, which was down 7% compared to 2013/14.

Following H1 revenue of £92.3 million (2014 - £108.5 million) on an organic, constant currency basis, the second half of the year delivered organic, constant currency revenue of £128.1 million.  This was broadly flat compared to 2013/14 (2014 - £128.8 million) and was a good, resilient performance considering the market conditions we faced, particularly in Oil & Gas.

Adjusted profit before tax was £62.1 million (2014 - £78.3 million) and on a reported basis, profit before tax was £54.9 million (2014 - £69.0 million).  Within this, the acquired 8over8 business contributed a loss of £0.6m in the short period since the acquisition on 5 January 2015.

 

 

Revenue

An analysis of organic revenue by geography is set out below:

£m	2014/15 Reported	2014/15 Organic constant currency	2013/14 Reported	Organic constant currency change
EMEA	103.5	112.9	112.0	1%
Americas	36.8	38.2	38.4	(1%)
Asia Pacific	67.3	69.3	86.9	(20%)
Total revenue	207.6	220.4	237.3	(7%)

As highlighted within the interim results, revenue was impacted by foreign exchange on the retranslation of our overseas subsidiaries by £12.8 million or 6%. EMEA was impacted most significantly as a result of the weakness of the Euro and Russian rouble.

EMEA

In EMEA, reported revenue was down 8%. On a constant currency basis, revenue was broadly flat at £112.9 million (2014 - £112.0 million) and reflected a mixed performance across the countries we operate in. Annual fees grew by 8% which was principally from the larger Owner Operators. Rental fees increased by 3% mainly driven by growth from the Global EPC accounts, many of whom have signed multi-year contracts, and an acceleration in sales of AVEVA E3D. This was offset by reduced usage by some EPCs in the UK and Norway with offshore Oil & Gas exposure. Initial licence fees were down 7% due to tougher market conditions generally in Central Europe which was offset by a robust performance in Russia despite the political situation and the threat of sanctions for some of our customers. Services were down 16% due to lower levels of activity for Enterprise Solutions within some of the Owner Operators.

Americas

In the Americas, reported revenue was down 4%. On a constant currency basis, the performance was broadly flat with revenue of £38.2 million (2014 - £38.4 million). Within this we saw a good level of renewals within our Global EPC accounts based in the US which was offset by the performance in Latin America which was down 28% compared to last year. Our Brazilian customers continued to be impacted by the lower levels of activity in Oil & Gas and this resulted in Americas' rental fee revenue declining by 6%. Initial licence fees grew by 34% and services by 8% illustrating our success in selling into Owner Operators in North America demonstrating that the increased focus is beginning to show benefits. Annual fees increased by 2% following the increase in initial licence fees.

Asia Pacific

Revenue in Asia Pacific was down 23% on a reported basis and down 20% on a constant currency basis which reflected a mixed picture across the geographies that we operate in. As indicated at the half year, we have seen lower levels of activity in the offshore Oil & Gas projects in South Korea and parts of South East Asia. In 2013/14, we benefited from some large initial licence fees in South Korea which have not repeated in 2014/15 resulting in a decline of 46%. On a positive note we saw double digit growth in China driven by customers in the Power and Process industries.

Annual fees increased by 22% due to the strong initial licence fees in 2013/14, and we also benefitted by approximately £3.0 million from Chinese customers who had stopped paying annual fees and wanted to reactivate, for which we charge a catch-up fee.

As highlighted in the interim results, customers in Asia Pacific often use rental licences to flex their usage over and above their core entitlement under the initial/annual licences. Because of the lower levels of activity, some customers have not renewed their rental licences. We also had one large customer who, towards the end of 2013/14, changed the structure of their arrangement from a rental to an initial licence model. As a result, rental licence fees were down 26% compared to last year.

Revenue by category

The Group's recurring revenue, which consists of annual fees, and rental licence fees was flat year on year on a constant currency basis at £166.6 million (2014 - £167.0 million) and represented 76% of revenue (2014 - 70%).

Annual fees grew by 13% to £64.4 million on a constant currency basis which reflects the strong initial licence performance a year ago, particularly in South Korea and the catch-up fees in China. Annual fees have continued to grow reflecting the continued resilience of our business model.

Rental licence fee revenue fell by 7% to £102.2 million on a constant currency basis. Following a disappointing first half, we saw a good second half performance with growth of 8% delivering revenue of £67.8 million compared to £62.7 million in second half of 2013/14. This was mostly generated from Global Account customers through the benefits of the new multi-year contracts and overall a good level of renewals, although we did see some reduced activity levels within those EPCs with a higher level of exposure to offshore Oil & Gas projects. Also included within rental licences are the two customers that renewed as planned in second half which we referenced in the interim results. Despite the robust performance in rental licences in the second half, we remain cautious as we enter 2015/16 because of the mixed outlook within our EPC customers who are exposed to Oil & Gas.

Initial licence fee revenue felt the largest impact of the Oil & Gas market, down 31% to £33.5 million. This was mostly felt in Asia Pacific, which is a market that prefers the initial licence fee model and we had a tough comparable following the very strong growth in South Korea in 2013/14. We did see good growth in initial licences in North America.

Training and services revenue was broadly flat at £20.3 million (2014 - £21.9 million).

Segment performance

The organic performance of our primary segments is set out below:

£m	2014/15 Reported	2014/15 Organic constant currency	2013/14 Reported	Constant currency change
EDS
Revenue	182.7	193.9	211.5	(8%)
Segment costs	(45.7)	(47.9)	(48.5)	(1%)
Contribution	137.0	146.0	163.0	(10%)
ES
Revenue	24.9	26.5	25.9	3%
Segment costs	(25.5)	(26.9)	(29.3)	(8%)
Contribution	(0.6)	(0.4)	(3.4)	(91%)

 

Engineering & Design Systems (EDS)

Revenue from EDS on a constant currency basis was £193.9 million (2014 - £211.5 million), a decrease of 8%.

On a constant currency basis, segment costs for EDS were £47.9 million, a reduction of 1% compared to the previous year and delivered a segment contribution of £146.0 million (2014 - £163.0 million).

 

Enterprise Solutions (ES)

ES revenue for the year was £26.5 million on an organic constant currency basis compared to £25.9 million in 2013/14. The backlog at 31 March 2015 was £10.8 million (31 March 2014 - £10.7 million).

ES costs fell by 8% to £26.9 million on an organic constant currency basis compared to £29.3 million last year. We maintained tight discipline over the ES cost base during the year which has delivered these savings.

ES incurred a segment loss of £0.4 million (2014 - £3.4 million), which reflects the tight control of costs during the year in light of the difficult market conditions we faced.

The consolidated results include the results from 8over8 with revenue of £1.1 million and segment costs of £1.1 million.

New segment reporting

As described in the Chief Executive's review, from 1 April 2015, the ES and EDS lines of business will merge. As a result we will no longer be disclosing these as our primary segments in our financial statements. From 1 April 2015, the Executive management team will monitor and appraise the business based on geographic performance and therefore this will become the basis for our primary segments in our financial statements.

Cost analysis

An analysis of organic operating expenses on a normalised basis is set out below:

£m	2014/15 Reported	2014/15 Organic constant currency	2013/14 Reported	Organic constant currency change
Research & Development	28.1	29.3	32.9	(11%)
Selling and distribution	85.3	90.3	90.4	-
Administrative expenses	16.6	19.3	18.8	3%
Total costs	130.0	138.9	142.1	(2%)

 

Following the disappointing first half results driven by weaker revenue, we completed a review of our planned investment in staff and discretionary spend in the second half of the year with a view to reducing operating expenses by £10.0 million compared to the original plan. We successfully delivered against this target and as a result our overall cost base reduced by 2% or £3.3 million from £142.1 million to £138.9 million on a constant currency basis. Compared to 2013/14, the savings were made in the following areas:

·	Reduction in discretionary spend in areas of travel, contractors and consulting/professional fees
·	Lower Research & Development costs from moving to in-house facility in Hyderabad from outsourcing.

We also saw a one-off effect from reduced levels of sales commissions and bonuses which reflected the business performance during the year.

Our Research & Development activities are carried out in the UK, Sweden, Norway, Denmark, USA and India and therefore costs are exposed to movements in exchange rates. Research & Development costs fell by 11% on a constant currency basis due to savings made by moving projects from third-party outsource providers in India to our in-house facility in Hyderabad as indicated above, as well as savings from lower discretionary costs such as travel within Research & Development.

Selling and distribution expenses were flat on a constant currency basis. This was principally due to lower sales commissions and bonuses because of the reduced level of revenue offset by the cost of additional sales and marketing staff to ensure that we take advantage of growth opportunities in key markets such as North America.

Administrative expenses increased by 3% on a constant currency basis because of some one-off costs and continued investment in our information systems offset by lower bonus costs.

The business faces a mixed outlook in its end markets together with an increased cost base from inflation and the annualised impact of the cost of hires made in H1 of 2014/15. Further, we do not expect all of the savings from reduced bonuses and commissions in 2014/15 to recur. As a result in March 2015, we initiated further action by executing on a number of cost saving initiatives including rationalisation of some of our regional offices and reduction in the number of employees in specific areas of the business. These initiatives took place in March, April and May and will result in annual savings of approximately £3.0 million. We have incurred an exceptional charge for redundancy and related costs and property lease costs of £0.8 million in the year to 31 March 2015 and we expect to incur further exceptional costs of approximately £2.5 million in 2015/16 in respect of these initiatives.

Acquisition of 8over8 Limited

The Group acquired 8over8 Limited on 5 January 2015 for consideration of £26.9 million. The acquired business held £1.3 million of cash at that date. Prior to being acquired, the business had a calendar financial year and therefore the quarter to 31 March has historically been seasonally the lowest quarter. Since becoming part of the AVEVA Group, 8over8 contributed £1.1 million of revenue and incurred an adjusted loss before tax of £0.6 million. 8over8 has, so far, mainly sold to Owner Operators within Oil & Gas, but we believe that there are good opportunities to cross-sell the solution into Mining and other capital intensive industries.

Costs for 8over8 Limited include £0.3 million in cost of sales, £0.8 million in Research & Development, £0.5 million in selling and distribution costs and £0.1 million in administrative expenses.

Exceptional items

During the year the Group incurred exceptional costs of £1,990,000 (2014 - £3,395,000), relating to acquisition costs for 8over8 of £371,000 (2014 - £102,000), exceptional restructuring costs of £851,000 (2014 - £1,762,000) and a provision for underpaid sales taxes in an overseas location of £768,000 (2014 - £1,531,000).

 

The acquisition and integration fees relate to fees paid to professional advisers for legal and due diligence advice related to the acquisition of 8over8 Limited. 

 

The exceptional restructuring costs incurred during 2014/15 relate to the redundancy and related costs in connection to the rationalisation of offices and reduction in employees in specific areas of the business.

 

The Group has provided for a potential underpaid sales tax liability, in respect of prior periods, related to the local sales of one of the Group's subsidiary companies. The provision includes an estimate of the underpaid tax as well as related interest for late payment.

Profit before tax

Adjusted profit before tax for the year ended 31 March 2015 was £62.1 million (2014 - £78.3 million), a decrease of 21%. This resulted in an adjusted profit margin of 29.8% on a reported basis compared to 33.0% for 2013/14.

Reported profit before tax was £54.9 million (2014 - £69.0 million).

Taxation

The effective tax rate for the year was 24.2% (31 March 2014 - 26.1%) as the Group benefited from the reduction of 2% in the underlying UK corporate tax rate to 21%. Our effective rate was higher than the underlying UK rate because of profits earned in higher tax jurisdictions and non-deductible expenses. 

Dividends

The Board is declaring a final dividend of 25.0 pence per share (2014 - 22 pence per share), an increase of 14%. The dividend will be payable on 3 August 2015, to shareholders on the register on 3 July 2015.

Earnings per share

Basic earnings per share were 65.07 pence (2014 - 78.12 pence) and diluted earnings per share were 64.92 pence (2014 - 77.99 pence). Adjusted basic earnings per share were 74.51 pence (2014 - 89.05 pence).

Balance sheet and cash flows

AVEVA continues to maintain a strong balance sheet and has no debt. Net assets at 31 March 2015 were £189.9 million compared to £185.0 million at 31 March 2014.

Non-current assets

Non-current assets increased from £74.0 million to £90.9 million mainly due to the goodwill and intangible assets acquired as part of the acquisition of 8over8 Limited in January 2015.

Working capital

Gross trade receivables at 31 March were £94.2 million (2014 - £82.9 million). The increase was due to the strong finish to the year resulting in our billings in the final quarter being more weighted towards the end of the period. In addition the balance includes trade receivables of £1.3 million related to 8over8 Limited. The bad debt provision at 31 March 2015 was £5.6 million compared to £5.2 million at 31 March 2014.

Deferred income at 31 March 2015 was £48.2 million compared to £36.5 million at 31 March 2014. This includes £4.5 million related to 8over8 Limited, the impact of rental contracts moving to the second half and £0.9 million related to the change of rate for deferring post contractual support used when accounting for rental licences.

Trade payables and other liabilities were lower than last year due to lower accruals for bonuses and commissions.

Cash generation

Net cash (including treasury deposits) at 31 March 2015 was £103.8 million compared to £117.5 million at 31 March 2014. Cash generated from operating activities after tax was £30.9 million (2014 - £52.0 million). The Group showed strong cash generation in the first half of the year but the phasing of billings as noted above meant that overall our cash generation for the year was lower than previous years. There has been no change in the credit terms offered to customers and cash collection has generally been in line with previous periods. In addition, during the year the Group paid additional contributions to the UK defined benefit pension scheme of £5.9 million (31 March 2014 - £2.5 million). The cash conversion for the year was 83% (2014 - 102%). The cash balance at 30 April 2015 was £117.6 million reflecting strong cash collections since the year end.

Pensions

On an accounting basis, the Group's pension liabilities increased from £8.8 million last year to £14.2 million at the year-end. This was principally caused by the UK defined benefit scheme deficit increasing from £5.9 million to £11.3 million driven by a reduction in government gilt and corporate bond yields, leading to a corresponding reduction in the discount rate used to discount our long-term liabilities, and is despite a strong asset performance.

On 31 March 2015, the Group closed the UK defined benefit pension scheme to future accrual. This decision was taken to manage the current and future risk on the Group's balance sheet, with a view to ultimately effecting an insurance buy-out. Previously accrued pension benefits will continue to be revalued in line with RPI. The Group agreed a deficit recovery plan with the trustees following the triennial valuation in 2013 with the plan to contribute £12 million over the 5 year period to March 2019. As part of this plan the Group paid lump sum contributions of £3.9 million during the year (2013/14 - £2.5 million) as well as a further voluntary contribution of £2.0 million to further improve the funding level of the scheme.

Capital structure

At 31 March 2015, the Group had 63,948,241 shares of 3 5/9p each in issue (31 March 2014 - 63,873,360 shares). During the year the AVEVA Group Employee Benefit Trust 2008 ("the Trust") purchased 13,991 ordinary shares in the Company in the open market at an average price of £21.72 per share for total consideration of £305,000 in order to satisfy awards made under the AVEVA Group Management Bonus Deferred Share Scheme 2008. At 31 March 2015, the Trust owned 44,722 ordinary shares in the Company.

In the prior year the Company paid a special dividend of £100 million, which was also accompanied by a share consolidation of 15 new ordinary shares for every 16 ordinary shares held. This reduced the number of shares in issue by approximately 4.3 million.

Treasury policy

The Group treasury policy aims to ensure that the capital held is not put at risk and the treasury function is managed under policies and procedures approved by the Board. These policies are designed to reduce the financial risk arising from the Group's normal trading activities, which primarily relate to credit, interest, liquidity and currency risk. The Group is, and expects to be, cash positive and at 31 March 2015 held net cash of £103.8 million. The treasury policy includes strict counter party limits.

 

James Kidd

Chief Financial Officer

19 May 2015

 

 

 

Review of principal risks and uncertainties

Dependency on key markets

AVEVA generates a substantial amount of its income from customers whose main business is derived from capital projects in the Oil & Gas, Power and Marine markets. World economic conditions or funding constraints for new capital projects may adversely affect our financial performance, as we have experienced during 2014/15.

AVEVA is expanding into new market segments such as mining, petrochemicals and AEC, albeit from a relatively small base. It is central to our strategy to diversify our customer offerings into Owner Operators and Plant operations. This will help secure a longer-term income stream that extends beyond the design/build phase of these capital projects. In addition, our ever-expanding global presence provides some mitigation from over-reliance on key geographic markets.

Competition

AVEVA operates in highly competitive markets that serve the Oil & Gas, Power and Marine markets. We believe that there are a relatively small number of significant competitors serving our markets. However, some of these competitors could, in the future, pose a greater competitive threat, particularly if they consolidate or form strategic or commercial relationships among themselves or with larger, well capitalised companies. Further threats are posed by the entrance, into AVEVA's markets, of a much larger technology competitor or transformational technology, such as Cloud-based solutions.

We carefully monitor customers and other suppliers operating within our chosen markets. We stay close to our customers and ensure we have a strong understanding of their needs and their expectations from the AVEVA product development roadmap.

Recently we have launched AVEVA E3D. This, together with a number of other new products, will help cement our relationships with our customers and reinforce barriers to competition.

Professional Services

The development of the Group's Enterprise Solutions represents a significant opportunity for the Group but this is a market with different characteristics compared to our traditional Engineering & Design software products. It therefore brings different challenges and opportunities for the Group which we must manage effectively.

Most significantly, the deployment for our customers of an enterprise solution will involve some degree of consulting and/or implementation work. This requires specialist knowledge to be available and well managed potentially in many geographic locations. In some instances we may opt to partner with a third party for this work and this relationship also requires careful management and maintenance.

We employ experienced industry professionals within our professional services team and continue to build commercial partnerships with third party systems integrators.

We have rigorous processes and controls for the appraisal of potential commercial opportunities prior to any bid being submitted. Bids are appraised on grounds of technical complexity as well as financial and commercial risk.

Identification and successful integration of acquisitions

In recent years, the Group has completed a number of acquisitions and expects to continue to review acquisition targets as part of its strategy. The integration of acquisitions involves a number of unique risks, including diversion of management's attention, failure to retain key personnel of the acquired business, failure to realise the benefits anticipated to result from the acquisition, and successful integration of the acquired intellectual property.

While each acquisition and integration is unique, AVEVA now has an experienced team to appraise and complete acquisitions. The Group's experience of previous 'bolt-on' acquisitions provides a good understanding of potential integration risks and as a result we feel well placed to successfully manage these risks. Were the Group to undertake a much larger acquisition, we would ensure that appropriate resources and experience were applied to manage the risks and that we had access to the best possible professional advice.

Protection of intellectual property

The Group's success has been built upon the development of its substantial intellectual property rights and the future growth of the business requires the continual protection of these tools.

The protection of the Group's proprietary software products is achieved by licensing rights to use the application, rather than selling or licensing the computer source code. The Group uses third party technology to encrypt, protect and restrict access to its products. Access limitations and rights are also defined within the terms of the software licence agreement. The Group seeks to ensure that its intellectual property rights are appropriately protected by law and seeks to vigorously assert its proprietary rights wherever possible.

Research & Development

The Group makes substantial investments in Research & Development in enhancing existing products and introducing new products and must effectively appraise its investment decisions and ensure that we continue to provide class-leading solutions that meet the needs of our markets.

Our software products are complex and new products or enhancements may contain undetected errors, failures, performance problems or defects which may impact our strong reputation with our customers.

AVEVA continually reviews the alignment of the activities of our Research & Development teams to ensure that they remain focused on areas that will meet the demands of our customers and deliver appropriate financial returns. This process is managed by developing a product roadmap that identifies the schedule for new products and the enhancements that will be made to successive versions of existing products. Products are extensively tested prior to commercial launch.

International operations

The Group has offices in 30 countries and must determine how best to utilise its resources across these diverse markets. Where necessary, the business must adapt its market approach to best capitalise on local market opportunities, particularly in the strategically key growth economies.

In addition, the Group is required to comply with the local laws, regulations and tax legislation in each of these jurisdictions. Significant changes in these laws and regulations or failure to comply with them could lead to additional liabilities and penalties.

The Group manages its overseas operations by employing locally qualified personnel who are able to provide expertise in the appropriate language and an understanding of local culture, custom and practice. Local management is supported by local professional advisers and further oversight is maintained from the Group's corporate legal and finance functions.

Recruitment and retention of employees

AVEVA's success has been built on the quality and reputation of its products and services, which rely almost entirely on the quality of the people developing and delivering them. Managing this pool of highly skilled and motivated individuals across all disciplines and geographies remains key to our ongoing success.

The Group endeavours to ensure that employees are motivated in their work and there are regular appraisals, with staff encouraged to develop their skills. Annually there is a Group-wide salary review that rewards strong performance and ensures salaries remain competitive. Commission and bonus schemes help to ensure the success of the Group and individual achievement is appropriately rewarded.

Foreign exchange risk

Exposure to foreign currency gains and losses can be material to the Group, with more than 80% of the Group's revenue denominated in a currency other than sterling, of which our two largest are US dollar and Euro.

The overseas subsidiaries predominantly trade in their own local currencies, which acts as a partial natural hedge against currency movements. In addition, the Group enters into forward foreign currency contracts to manage the risk where material and practical. The Group limits its hedging of revenue to US dollar, Euro, Japanese yen and its hedging of costs to Swedish krona and Indian rupee.

 

 

Consolidated income statement

for the year ended 31 March 2015

 

 

	Notes	2015 £000	2014 £000
Revenue	3, 4	208,686	237,336
Cost of sales		(15,538)	(17,378)
Gross profit		193,148	219,958
Operating expenses
Research & development costs		(32,696)	(38,278)
Selling and distribution expenses		(87,863)	(92,967)
Administrative expenses		(18,036)	(20,186)
Total operating expenses		(138,595)	(151,431)
Profit from operations		54,553	68,527
Finance revenue		765	1,208
Finance expense		(456)	(746)
Analysed as:
Adjusted profit before tax		62,098	78,257
Amortisation of intangibles (excluding other software)		(4,707)	(4,677)
Share-based payments		441	(2,317)
(Loss)/gain on fair value of forward foreign exchange contracts		(980)	1,121
Exceptional items	5	(1,990)	(3,395)
Profit before tax		54,862	68,989
Income tax expense	6	(13,303)	(17,978)
Profit for the year attributable to equity holders of the parent		41,559	51,011
Earnings per share (pence)
- basic	8	65.07	78.12
- diluted	8	64.92	77.99
Adjusted earnings per share (pence)
- basic	8	74.51	89.05
- diluted	8	74.34	88.90

 

 

 

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 2015

 

 

	Notes	2015 £000	2014 £000
Profit for the year		41,559	51,011
Items that may be reclassified to profit or loss in subsequent periods:
Exchange differences arising on translation of foreign operations		(9,393)	(6,933)
Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial (loss)/gain on retirement benefit obligations	12	(11,496)	5,672
Tax on items relating to components of other comprehensive income	6(a)	2,657	(1,275)
Total of items that will not be reclassified to profit or loss in subsequent periods		(8,839)	4,397
Total comprehensive income for the year, net of tax		23,327	48,475

 

 

The accompanying notes are an integral part of this Consolidated statement of comprehensive income.

 

 

 

Consolidated balance sheet

31 March 2015

 

	Notes	2015 £000	2014 £000
Non-current assets
Goodwill		50,589	38,474
Other intangible assets		27,506	21,540
Property, plant and equipment		7,595	8,395
Deferred tax assets		3,800	4,131
Other receivables	9	1,440	1,498
		90,930	74,038
Current assets
Trade and other receivables	9	96,468	83,596
Financial assets		-	547
Treasury deposits	10	45,248	40,238
Cash and cash equivalents	10	58,519	77,309
Current tax assets		2,195	2,162
		202,430	203,852
Total assets		293,360	277,890
Equity
Issued share capital		2,274	2,271
Share premium		27,288	27,288
Other reserves		1,655	10,589
Retained earnings		158,713	144,829
Total equity		189,930	184,977
Current liabilities
Trade and other payables	11	81,613	72,954
Financial liabilities		432	-
Current tax liabilities		5,718	9,108
		87,763	82,062
Non-current liabilities
Deferred tax liabilities		1,480	2,003
Retirement benefit obligations	12	14,187	8,848
		15,667	10,851
Total equity and liabilities		293,360	277,890

 

The accompanying notes are an integral part of this Consolidated balance sheet.

 

The financial statements were approved by the Board of Directors and authorised for issue on 19 May 2015. They were signed on its behalf by:

 

Philip Aiken Chairman

Richard Longdon Chief Executive

Company number 2937296

 

 

 

Consolidated statement of changes in shareholders' equity

31 March 2015

 

 

					Other reserves
	Notes	Share capital £000	Share premium £000	Merger reserve £000	Cumulative translation adjustments £000	Treasury shares £000	Total other reserves £000	Retained earnings £000	Total equity £000
At 1 April 2013		2,269	27,288	3,921	15,042	(1,251)	17,712	204,337	251,606
Profit for the year		-	-	-	-	-	-	51,011	51,011
Other comprehensive income		-	-	-	(6,933)	-	(6,933)	4,397	(2,536)
Total comprehensive income		-	-	-	(6,933)	-	(6,933)	55,408	48,475
Issue of share capital		2	-	-	-	-	-	-	2
Share-based payments		-	-	-	-	-	-	2,317	2,317
Tax arising on share options		-	-	-	-	-	-	(255)	(255)
Investment in own shares		-	-	-	-	(717)	(717)	-	(717)
Cost of employee benefit trust shares issued to employees		-	-	-	-	527	527	(527)	-
Equity dividends	7	-	-	-	-	-	-	(116,451)	(116,451)
At 31 March 2014		2,271	27,288	3,921	8,109	(1,441)	10,589	144,829	184,977
Profit for the period		-	-	-	-	-	-	41,559	41,559
Other comprehensive income		-	-	-	(9,393)	-	(9,393)	(8,839)	(18,232)
Total comprehensive income		-	-	-	(9,393)	-	(9,393)	32,720	23,327
Issue of share capital		3	-	-	-	-	-	-	3
Share-based payments		-	-	-	-	-	-	(441)	(441)
Tax arising on share options		-	-	-	-	-	-	(73)	(73)
Investment in own shares		-	-	-	-	(305)	(305)	-	(305)
Cost of employee benefit trust shares issued to employees		-	-	-	-	764	764	(764)	-
Equity dividends	7	-	-	-	-	-	-	(17,558)	(17,558)
At 31 March 2015		2,274	27,288	3,921	(1,284)	(982)	1,655	158,713	189,930

 

 

The accompanying notes are an integral part of this Consolidated statement of changes in shareholders' equity.

 

 

 

Consolidated cash flow statement

for the year ended 31March 2015

 

 

	Notes	2015 £000	2014 £000
Cash flows from operating activities
Profit for the year		41,559	51,011
Income tax	6(a)	13,303	17,978
Net finance revenue		(309)	(462)
Amortisation of intangible assets		5,335	4,879
Depreciation of property, plant and equipment		2,914	2,932
(Gain)/loss on disposal of property, plant and equipment		191	(83)
Share-based payments		(441)	2,317
Difference between pension contributions paid and amounts charged to operating profit		(6,565)	(2,993)
Research & development expenditure tax credit		(930)	(875)
Changes in working capital:
Trade and other receivables		(11,752)	(3,221)
Trade and other payables		852	(159)
Changes to fair value of forward foreign exchange contracts		980	(1,121)
Cash generated from operating activities before tax		45,137	70,203
Income taxes paid		(14,231)	(18,217)
Net cash generated from operating activities		30,906	51,986
Cash flows from investing activities
Purchase of property, plant and equipment		(2,571)	(3,118)
Purchase of intangible assets		(522)	(2,119)
Acquisition of subsidiaries and business undertakings, net of cash acquired		(25,651)	-
Proceeds from disposal of property, plant and equipment		345	427
Interest received		765	1,208
Maturity/(purchase) of treasury deposits (net)	10	(5,010)	95,847
Net cash flows from/used in investing activities		(32,644)	92,245
Cash flows from financing activities
Interest paid		(73)	(98)
Purchase of own shares		(305)	(717)
Proceeds from the issue of shares		3	2
Dividends paid to equity holders of the parent	7	(17,558)	(116,451)
Net cash flows used in financing activities		(17,933)	(117,264)
Net (decrease)/increase in cash and cash equivalents		(19,671)	26,967
Net foreign exchange difference		881	(3,930)
Opening cash and cash equivalents	10	77,309	54,272
Closing cash and cash equivalents	10	58,519	77,309

 

 

The accompanying notes are an integral part of this Consolidated cash flow statement.

 

 

1.  Basis of preparation

 

The Group is required to prepare its Consolidated financial statements in accordance with IFRS as adopted by the European Union. For the purposes of this document the term IFRS includes International Accounting Standards.

The preliminary announcement covers the period 1 April 2014 to 31 March 2015 and was approved by the Board on 19 May 2015.

 

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 2015 or 31 March 2014. The accounts for the year ended 31 March 2014 have been delivered to the Registrar of Companies. The statutory accounts for the years ended 31 March 2015 and 2014 have been reported on by the Company's auditors; the reports on these accounts were 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 2015 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 9 July 2015. 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.

 

The Group presents a non-GAAP performance measure on the face of the Consolidated income statement. The Directors believe that this alternative measure of profit provides a reliable and consistent measure of the Group's underlying performance. The face of the Consolidated income statement presents adjusted profit before tax and reconciles this to profit before tax as required to be presented under the applicable accounting standards. Adjusted earnings per share is calculated having adjusted profit after tax for the same items and their tax effect. The term adjusted profit is not defined under IFRS and may not be comparable with similarly titled profit measures reported by other companies. It is not intended to be a substitute for, or superior to, GAAP measures of profit.

 

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 2014. New standards and interpretations which came into force during the year did not have a significant impact on the Group's financial statements.

 

 

3 REVENUE

An analysis of the Group's revenue is as follows:

 

	2015 £000	2014 £000
Annual fees	60,724	57,084
Rental licence fees	97,489	109,936
Total recurring revenue	158,213	167,020
Initial licence fees	31,122	48,394
Training and services	19,351	21,922
Total revenue	208,686	237,336
Finance revenue	765	1,208
	209,451	238,544

 

 

Services consist of consultancy, implementation services and training fees.

 

Included within revenue for the year ended 31 March 2015 are annual fees of £534,000, rental fees of £296,000 and services of £321,000 related to the acquired business of 8over8 Limited.

 

 

4 Segment information

 

During the year, the Group was organised into two lines of business, being Engineering & Design Systems and Enterprise Solutions, which are considered to be the two reportable segments for the Group. The products of each of the lines of business are taken to market by a shared sales force that is itself organised into three geographical sales divisions: Asia Pacific; Americas; and Europe, Middle East and Africa (EMEA).

 

The Executive Board monitors the operating results of the lines of business for the purposes of making decisions about performance assessment and resource allocation. Performance is evaluated based on adjusted profit contribution using the same accounting policies as adopted for the Group's financial statements. There is no inter-segment revenue. Balance sheet information is not included in the information provided to the Executive Board. Support functions such as head office departments are controlled and monitored centrally.

 

Year ended 31 March 2015	Engineering & Design Systems £000	Enterprise Solutions £000	Total £000
Income statement
Revenue
Annual fees	54,662	6,062	60,724
Rental licence fees	92,730	4,759	97,489
Initial licence fees	27,376	3,746	31,122
Training and services	7,925	11,426	19,351
Segment revenue	182,693	25,993	208,686
Operating costs	(45,660)	(26,637)	(72,297)
Segment profit/(loss) contribution	137,033	(644)	136,389
Reconciliation of segment profit contribution to profit before tax
Shared selling and distribution expenses			(58,236)
Other shared operating expenses			(16,364)
Net finance revenue			309
Adjusted profit before tax			62,098
Exceptional items and other normalised adjustments#			(7,236)
Profit before tax			54,862

 

#   Normalised adjustments include amortisation of intangible assets (excluding other software), share-based payments and (losses)/gains on fair value of forward foreign exchange contracts.

 

Enterprise Solutions includes revenue of £1,151,000 and contribution of £21,000 relating to the acquired business of 8over8 Limited.

 

 

4 Segment information continued

 

Year ended 31 March 2014	Engineering & Design Systems £000	Enterprise Solutions £000	Total £000
Income statement
Revenue
Annual fees	51,382	5,702	57,084
Rental licence fees	105,489	4,447	109,936
Initial licence fees	45,525	2,869	48,394
Training and services	9,090	12,832	21,922
Segment revenue	211,486	25,850	237,336
Operating costs	(48,457)	(29,233)	(77,690)
Segment profit contribution	163,029	(3,383)	159,646
Reconciliation of segment profit contribution to profit before tax
Shared selling and distribution expenses			(58,016)
Other shared operating expenses			(23,835)
Net finance revenue			462
Adjusted profit before tax			78,257
Exceptional items and other normalised adjustments#			(9,268)
Profit before tax			68,989

 

 

 

Analysis of revenue by geographical location

 

	Year ended 31 March 2015
	Asia Pacific £000	EMEA £000	Americas £000	Total £000
Revenue
Annual fees	25,137	29,838	5,749	60,724
Rental licence fees	21,625	51,365	24,499	97,489
Initial licence fees	16,855	10,537	3,730	31,122
Training and services	3,992	12,034	3,325	19,351
Total revenue	67,609	103,774	37,303	208,686

 

 

	Year ended 31 March 2014
	Asia Pacific £000	EMEA £000	Americas £000	Total £000
Revenue
Annual fees	21,013	30,400	5,671	57,084
Rental licence fees	30,036	53,047	26,853	109,936
Initial licence fees	32,364	13,135	2,895	48,394
Training and services	3,443	15,454	3,025	21,922
Total revenue	86,856	112,036	38,444	237,336

 

Other segmental disclosures

The Company's country of domicile is the UK. Revenue attributed to the UK and all foreign countries amounted to £16,038,000 and £192,648,000 (2014 - £20,667,000 and £216,669,000) respectively. In 2013/14 South Korea accounted

 

4 Segment information continued

 

for 16% of the Group's total revenue. No individual country accounted for more than 10% of the Group's total revenue.  Revenue is allocated to countries on the basis of the location of the customer.

 

Non-current assets (excluding deferred tax assets) held in the UK and all foreign countries amounted to £46,594,000 and £40,536,000 (2014 - £22,723,000 and £47,184,000) respectively. There are no material non-current assets located in an individual country outside of the UK.

 

No single external customer accounted for 10% or more of the Group's total revenue (2014 - none).

 

Further information concerning revenue by type of product and service is disclosed in note 3.

 

5 Exceptional items

 

During the year the Group incurred exceptional costs of £1,990,000 (2014 - £3,395,000), relating to acquisition and integration activities of £371,000 (2014 - £102,000), exceptional restructuring costs of £851,000 (2014 - £1,762,000) and a provision for underpaid sales taxes in an overseas location of £768,000 (2014 - £1,531,000).

 

The acquisition and integration fees paid during the year, relate to fees paid to professional advisers for legal and due diligence advice related to the acquisition of 8over8 Limited with prior year costs related to Bocad.

 

The exceptional restructuring costs incurred during 2014/15 relate to the accrued redundancy and related costs in connection to the rationalisation of offices and reduction in headcount in specific areas of the business.

 

The Group has provided for a potential underpaid sales tax liability in respect of prior periods, related to the local sales of one of the Group's subsidiary companies. The provision includes an estimate of the underpaid tax as well as related interest for late payment.

 

 

6 Income tax expense

a) Tax on profit

The major components of income tax expense for the years ended 31 March 2015 and 2014 are as follows:

 

	2015 £000	2014 £000
Tax charged in Consolidated income statement
Current tax
UK corporation tax	5,362	8,440
Adjustments in respect of prior periods	3	(503)
	5,365	7,937
Foreign tax	6,667	9,962
Adjustments in respect of prior periods	553	267
	7,220	10,229
Total current tax	12,585	18,166
Deferred tax
Origination and reversal of temporary differences	785	(246)
Adjustment in respect of prior periods	(67)	58
Total deferred tax	718	(188)
Total income tax expense reported in Consolidated income statement	13,303	17,978

 

	2015 £000	2014 £000
Tax relating to items (charged)/credited directly to Consolidated statement of comprehensive income
Deferred tax on retranslation of intangible assets	380	236
Deferred tax on actuarial remeasurements on retirement benefit obligation	1,085	(1,511)
Current tax on pension contributions	1,192	-
Tax credit reported in Consolidated statement of comprehensive income	2,657	(1,275)

 

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 UK corporation tax to the profit before tax are as follows:

 

	2015 £000	2014 £000
Tax on Group profit before tax at standard UK corporation tax rate of 21% (2014 - 23%)	11,521	15,866
Effects of:
- expenses not deductible for tax purposes	646	823
- irrecoverable withholding tax	132	256
- movement on unprovided deferred tax balances	387	933
- change in UK tax rate for deferred tax balances	-	(147)
- differing tax rates on overseas earnings	128	425
- adjustments in respect of prior years	489	(178)
Income tax expense reported in Consolidated income statement	13,303	17,978

 

 

7 Dividends paid and proposed on equity shares

 

	2015 £000	2014 £000
Declared and paid during the year
Interim 2014/15 dividend paid of 5.5 pence (2013/14 - 5.0 pence) per ordinary share	3,515	3,178
Final 2013/14 dividend paid of 22.0 pence (2012/13 - 19.5 pence) per ordinary share	14,043	13,261
Special dividend paid of 147.0 pence per share	-	100,012
	17,558	116,451
Proposed for approval by shareholders at the Annual General Meeting
Final proposed dividend 2014/15 of 25.0 pence (2013/14 - 22.0 pence) per ordinary share	15,976	14,052

 

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 9 July 2015 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 3 August 2015 to shareholders on the register at the close of business on 3 July 2015.

 

 

8 Earnings per share

 

	2015 Pence	2014 Pence
Earnings per share for the year:
- basic	65.07	78.12
- diluted	64.92	77.99
Adjusted earnings per share for the year:
- basic	74.51	89.05
- diluted	74.34	88.90

 

 

	2015 Number	2014 Number
Weighted average number of ordinary shares for basic earnings per share	63,872,070	65,297,504
Effect of dilution: employee share options	146,272	112,020
Weighted average number of ordinary shares adjusted for the effect of dilution	64,018,342	65,409,524

 

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 £41,559,000 (2014 - £51,011,000). 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 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 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:

 

	2015 £000	2014 £000
Profit after tax for the year	41,559	51,011
Intangible amortisation (excluding software)	4,707	4,677
Share-based payments	(441)	2,317
Loss/(gain) on fair value of forward foreign exchange contracts	980	(1,121)
Exceptional items	1,990	3,395
Tax effect on exceptional items	(134)	(781)
Tax effect on other normalised items	(1,067)	(1,351)
Adjusted profit after tax	47,594	58,147

 

 

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 a more representative presentation of the underlying performance of the business.

 

 

9 Trade and other receivables

 

	2015 £000	2014 £000
Current
Amounts falling due within one year:
Trade receivables	88,618	77,762
Prepayments and other receivables	6,590	5,402
Accrued income	1,260	432
	96,468	83,596

 

Trade receivables are non-interest bearing and generally on terms of between 30 and 90 days. The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

 

	2015 £000	2014 £000
Non-current
Prepayments and other receivables	1,440	1,498

 

Non-current prepayments and other receivables include rental deposits for operating leases.

 

As at 31 March 2015 the provision for impairment of receivables was £5,636,000 (2014 - £5,161,000) and an analysis of the movements during the year was as follows:

 

	£000
At 1 April 2013	4,771
Charge for the year, net of amounts reversed	1,302
Utilised	(399)
Exchange adjustment	(513)
At 31 March 2014	5,161
Arising from business combination	1,011
Charge for the year, net of amounts reversed	3,327
Utilised	(3,612)
Exchange adjustment	(251)
As at 31 March 2015	5,636

 

 

As at 31 March, the ageing analysis of trade receivables (net of provision for impairment) was as follows:

 

			Past due not impaired
	Total £000	Neither past due nor impaired £000	Less than four months £000	Four to eight months £000	Eight to  twelve months £000	More than twelve months £000
2015	88,618	65,058	20,712	1,650	1,176	22
2014	77,762	53,304	20,264	3,322	780	92

 

 

 

10 Cash and cash equivalents and treasury deposits

 

	2015 £000	2014 £000
Cash at bank and in hand	50,635	64,293
Short-term deposits	7,884	13,016
Net cash and cash equivalents per cash flow	58,519	77,309
Treasury deposits	45,248	40,238
	103,767	117,547

 

Treasury deposits represent bank deposits with an original maturity of over three months.

 

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 short-term deposit rates.

 

The fair value of cash and cash equivalents and treasury deposits is £103,767,000 (2014 - £117,547,000).

 

 

11 Trade and other payables

	2015 £000	2014 £000
Current
Trade payables	3,251	4,116
Social security, employee taxes and sales taxes	14,500	11,347
Accruals and other payables	15,232	20,521
Deferred revenue	48,213	36,490
Deferred consideration	417	480
	81,613	72,954

 

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.

 

 

12 Retirement benefit obligations

The movement on the provision for retirement benefit obligations was as follows:

 

	UK defined benefit scheme £000	German defined benefit schemes £000	South Korean severance pay £000	Total £000
At 31 March 2013	13,214	1,945	1,800	16,959
Current service cost	1,628	55	312	1,995
Net interest on pension scheme liabilities	562	36	63	661
Actuarial remeasurements	(5,573)	10	(109)	(5,672)
Employer contributions	(3,978)	(951)	(60)	(4,989)
Exchange adjustment	-	(21)	(85)	(106)
At 31 March 2014	5,853	1,074	1,921	8,848
Current service cost	1,487	-	246	1,733
Net interest on pension scheme liabilities	276	42	65	383
Actuarial remeasurements	11,389	122	(15)	11,496
Employer contributions	(7,724)	(47)	(526)	(8,297)
Exchange adjustment	-	(132)	156	24
At 31 March 2015	11,281	1,059	1,847	14,187

 

 

The Group operated a UK defined benefit pension plan providing benefits based on final pensionable pay which is funded. This scheme was closed to new employees on 30 September 2002, was converted to a Career Average Revalued Earnings basis on 30 September 2004 and then closed to future accrual from 31 March 2015. No service cost or curtailment gain arose upon closure of the scheme, due to all previously accrued past service benefits retaining the same link to future inflation or future earnings.

 

The latest triennial valuation of the scheme's liabilities was completed as at 31 March 2013, and showed a funding deficit of £13,231,000. To eliminate this funding shortfall the Trustees and the Company agreed that additional cash contributions will be paid to the scheme. £2.5 million was contributed in February 2014, £2.5 million was contributed in April 2014 and 60 additional monthly payments of £116,667 are to be made starting April 2014.  The Company made an additional unscheduled contribution of £2 million in March 2015.