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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Aveva Group Plc | LSE:AVV | London | Ordinary Share | GB00BBG9VN75 | ORD 3 5/9P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 3,219.00 | 3,219.00 | 3,220.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMAVV
RNS Number : 8985F
AVEVA Group PLC
23 May 2017
23 May 2017
AVEVA GROUP PLC
PRELIMINARY RESULTS FOR THE YEARED 31 MARCH 2017
AVEVA Group plc ('AVEVA' or 'the Group'), 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 2017.
Financial Summary
Hot Features
Premium
2017 2016 % change
--------------------- ---------- ---------- ---------
Revenue GBP215.8m GBP201.5m 7%
--------------------- ---------- ---------- ---------
Profit before tax GBP46.9m GBP29.4m 60%
--------------------- ---------- ---------- ---------
Adjusted* profit
before tax GBP55.0m GBP51.2m 7%
--------------------- ---------- ---------- ---------
Basic earnings per
share 59.52p 32.03p 86%
--------------------- ---------- ---------- ---------
Adjusted* diluted
earnings per share 66.81p 61.91p 8%
--------------------- ---------- ---------- ---------
Net cash GBP130.9m GBP107.9m 21%
--------------------- ---------- ---------- ---------
Total dividend per
share 40.0p 36.0p 11%
--------------------- ---------- ---------- ---------
* Adjusted profit before tax and adjusted earnings per share are calculated before amortisation of intangible assets (excluding other software), share-based payments, gain/loss on fair value of forward foreign exchange contracts and exceptional items. Adjusted earnings per share also include the tax effects of these adjustments.
Highlights
-- Revenue up 7.1% to GBP215.8 million (2016 - GBP201.5 million), assisted by currency translation
-- Constant currency revenue down 3.8%. H2 ex. Latin America flat on a constant currency basis
-- Recurring revenue up to 76.9% of total revenue (2016 - 76.4%)
-- Adjusted profit before tax up 7.4% to GBP55.0 million (2016 - GBP51.2 million)
-- Net cash from operating activities before tax up 58.2% to GBP57.2 million (2016 - GBP36.1
million)
-- Net cash up 21.3% to GBP130.9 million (2016 - GBP107.9 million) despite increased dividend
payments
-- Final dividend of 27.0 pence per share, taking the total dividend to 40.0 pence per share
(2016 - 36.0 pence), an increase of 11.1%
-- Strong progress in executing growth strategy with significant wins with new customers in growth
markets and industry verticals, with North America and Power performing strongly
Chief Executive Officer, James Kidd said:
"AVEVA's performance was resilient in the context of challenging conditions in our core Oil & Gas and Marine end markets. This demonstrated the strength of our business model, with high levels of recurring revenue and continued strong cash generation. We made good progress in delivering against our growth strategy, with significant new order wins in the Owner Operator market, growing sales of our More Than 3D products and success in broadening our end market exposure. Although the timing of a return to material demand growth in our core end markets is difficult to predict, I am confident that our strategy will deliver good growth in the medium-term and that AVEVA is well positioned to benefit from a recovery in our end markets."
Enquiries:
AVEVA Group plc
Matthew Springett, Head of Investor Relations: +44 (0) 1223 556 676
FTI Consulting LLP
Edward Bridges / Dwight Burden: +44 (0) 203 727 1000
Conference call and webcast
AVEVA management will host a conference call and audio-webcast at 09:30 (BST) today. A listen only webcast and replay will also be accessible via the AVEVA website.
To register for the webcast and access the presentation materials please visit the link below at least 15 minutes prior to the presentation commencing.
www.aveva.com/en/investors
Conference calls dial in details:
Telephone: +44(0)20 3427 1904
Conference call code: 6861317
Chairman's statement
Overview
I am pleased to report that AVEVA delivered a resilient performance during 2016/17, despite two of our key end markets, Oil & Gas and Marine remaining subdued. Revenue increased 7.1% to GBP215.8 million (2016 - GBP201.5 million) assisted by currency translation and profit before tax was GBP46.9 million (2016 - GBP29.4 million), supported by strong cost discipline. On an adjusted basis, profit before tax grew 7.4% to GBP55.0 million (2016 - GBP51.2 million).
The Group also increased cash from operating activities by 58.2% to GBP57.2 million (2016 - GBP36.1 million). We are maintaining our progressive dividend policy and propose to increase the total dividend for the year to 40.0 pence per share (2016 - 36.0 pence). This represents an increase of 11.1% over the prior year, underpinned by our confidence in the long term prospects for the business.
AVEVA's net cash position at the year-end grew to GBP130.9 million (2016 - GBP107.9 million). The Board believes that it is important to maintain a strong balance sheet. This gives our customers confidence in the strength of our business and allows us to have at hand sufficient resources to invest in AVEVA's future growth, for example, by investing in Research & Development and capitalising on acquisition opportunities as they become available.
Delivering on our strategy
In addition to delivering solid results, we have remained focused on executing upon our strategy, in order to position AVEVA to achieve growth well into the future.
AVEVA achieved good momentum in sales of products beyond the core 3D design software that currently makes up the majority of our revenues. We also made good progress with our strategy of increasing our sales to Owner Operators (OOs), growth in the key North American market and in broadening our market exposure outside of Oil & Gas and Marine. For example, during the year we had considerable success in the Power market, winning contracts with companies including KEPCO E&C, Southern Company and TerraPower.
These successes were made possible by the strength of our technologies and people. We continued to enhance our existing products and develop new offerings during the year through our development centres in Cambridge and Hyderabad.
Board developments
At the end of 2016, after 33 years with the Group, and 17 years as Chief Executive, Richard Longdon stepped down from his role as Chief Executive and as a Director of the Company. Richard oversaw the most successful phase in AVEVA's history and was the driving force in developing it into a global company. The Board and I are grateful to Richard for his contribution to AVEVA's success.
We were delighted to appoint James Kidd as Deputy Chief Executive in July and as Richard's successor as Chief Executive from 1 January 2017. James had been Chief Financial Officer and a member of the Board since January 2011.
We were also pleased to appoint David Ward to the Board as James' successor in the role of Chief Financial Officer in July. David had been Head of Finance at AVEVA since 2011.
James and David were both key to developing AVEVA's strategy and I have been impressed with the sharp focus that they have demonstrated in executing it in their new roles.
We also had changes within our Non-Executive team. Jonathan Brooks and Philip Dayer both reached their nine-year tenures during the year. Jonathan stepped down from the Board in November 2016 and Philip will retire at the AGM in July 2017. I would like to thank them both on behalf of the Board for their contributions to AVEVA.
We welcomed two new Non-Executives to the Board. Christopher Humphrey joined the Board in July 2016 and assumed the role of Chair of the Audit Committee in November. Rohinton (Ron) Mobed was appointed to the Board in March 2017. Christopher and Ron have a wealth of technology and information management experience, which will add further breadth and depth to the skills of the Board.
Summary
AVEVA is now in its 50(th) year, having been founded in 1967 as a government-funded research institute created by the then UK Ministry of Technology at Cambridge University. The Company's original mission, to develop computer-aided design techniques for use by British industry, has been achieved and indeed greatly exceeded.
The Group now operates in more than 30 countries across the globe and provides the design technology that has created some of the world's largest and most complex engineering assets. As I look ahead, the opportunities are as exciting as they have ever been, as industries look to drive efficiencies by adopting a Digital Asset approach throughout the life cycle of the physical asset.
We will continue to target growth, strengthening customer relationships, winning new customers in new areas and developing our product portfolio.
AVEVA's progress would not be possible without the hard work and dedication of all our employees. The Board would like to express its sincere thanks for their considerable efforts. We would also like to thank our customers, shareholders and other stakeholders for their continued support.
Philip Aiken AM
Chairman
23 May 2017
Chief Executive's strategic review
Summary
As expected, AVEVA's financial performance was resilient despite the challenging conditions in our core end markets. In addition to delivering solid results, we made good progress in delivering against our strategy during the year and in structuring the business to enable future growth.
Revenue increased 7.1% to GBP215.8 million (2016 - GBP201.5 million), assisted by a currency translation benefit of 11.4%. Profit before tax grew to GBP46.9 million (2016 - GBP29.4 million), supported by a strong focus on cost control. On an adjusted basis, profit before tax grew 7.4% to GBP55.0 million (2016 - GBP51.2 million).
On a regional basis, revenue in the Americas grew due to a strong performance in North America, partly offset by difficult market conditions in Latin America, specifically in Brazil. AVEVA's performance in EMEA and Asia Pacific was robust in the context of the subdued Oil & Gas and Marine markets. Overall Group revenue declined in constant currency terms by 3.8%, although we did see an improvement in the second half. Excluding Latin America, Group revenue declined only 2.3% in constant currency terms for the full year, and were flat in the second half.
We made good progress in executing our strategy. On a constant currency basis, we delivered good growth with More Than 3D (MT3D), Owner Operators and sales to the Power sector.
The strength of our product offering was demonstrated by several key new business wins during the year. These included wins in both markets that offer growth opportunities for us and in our more mature product and geographic areas.
During the year, I took over as CEO and David Ward transitioned to the post of CFO. We have both been in the business for many years and were core to formulating AVEVA's strategy. We plan to continue to pursue this strategy, with a sharp focus on execution and getting closer to our customers. As part of this, I have simplified AVEVA's management structure with greater decision-making capabilities and direct accountability for performance being allocated to our regions. I have also added more customer-facing people to our Executive team, including a recently recruited Chief Revenue Officer, who will take overall responsibility for leading Global Sales, Partnership Management and Marketing.
Delivery against our strategy
AVEVA's strategy is to increase revenues by growing the addressable market for its products as the concept of the Digital Asset is more widely adopted; to sell a wider range of products; and to grow in industry and geographic verticals where the Group's market share is underweight, versus the strength of its product offering.
Notwithstanding the cyclical headwinds in end markets that AVEVA has experienced in the recent past, we expect our strategy to deliver solid organic growth in the long term, across end market cycles.
The building blocks of this strategy are summarised below.
-- More Than 3D: We see a major market opportunity in leveraging our customer base and market
position by selling additional engineering software tools, extending beyond our core 3D design
platforms. Further to this, information management tools such as AVEVA NET(TM), can generate
revenue throughout the operation life cycle of assets, therefore expanding the market that
we address.
-- Owner Operators: OOs such as energy and power generation companies currently only account
for approximately 16% of our revenue. However, a significant market opportunity is developing
as OOs increasingly adopt the Digital Asset concept to help them manage their physical assets
throughout their life cycles.
-- Growth markets: AVEVA generates approximately half of its revenue from EMEA. This largely
relates to our heritage as a UK-based company. Over time, we intend to grow our revenues in
key markets such as the USA and China, using the competitive advantages that our products
offer.
-- Broaden market exposure: We aim to grow our market share in industries beyond our core Oil
& Gas and Marine markets, with a particular focus in the short term on Power, by applying
the strength of our core technology and the rich knowledge of our people in these markets.
-- Software as a Service (SaaS) and the Cloud: We intend to unify all of our applications onto
a common Cloud platform to provide greater value to our customers and address a wider customer
base.
More than 3D 'MT3D'
AVEVA's MT3D sales grew during the year, increasing 2.1% on a constant currency basis. MT3D products represented 26.5% of total revenue, increasing from 25.2% in the prior year. Sales of our wider product suite have been a feature of this year's key customer wins, with for example the AVEVA NET and AVEVA Engage(TM) information management tools helping to strengthen our offer to OOs.
We are also achieving success in leveraging our existing EPC customer base to sell MT3D products. We have developed our technology to help deliver Building Information Management (BIM) projects in Infrastructure - not only to help satisfy any BIM mandate, but also to support faster more effective project execution and handover through improved data management. A good example is Jacobs who have used AVEVA technologies (AVEVA NET, AVEVA Engineering(TM) and AVEVA Information Standards Manager(TM)) to meet their client's information management and BIM level 2 requirements, and to achieve efficiency improvements for a UK highways project.
Owner Operators
AVEVA's sales to OOs also grew during the year, increasing 5.4% on a constant currency basis. OOs represented 16.2% of total revenue, increasing from 14.9% in the prior year. We had particular success in North America and Asia, where we won contracts in the Petrochemical & Chemical and Power sectors. These included KEPCO E&C, a leading global energy solutions provider based in South Korea, which chose AVEVA for a full range of 3D and MT3D design and information management products for its new nuclear power plant projects. Similarly, another leading power generation OO, Southern Company, in the USA, selected our design and information management tools to help improve project execution efficiency and asset information access. Meanwhile, we strengthened our relationship with Eastman, a global specialty chemical company.
Growth markets
We enjoyed success in North America, where our local strategy of leading with sales to OOs and of MT3D products is working well, and we achieved significant new business wins. The business grew by 18.9% during the year on a constant currency basis. We continue to see growth potential in China, where successes during the year included expanding our business with Sinopec Engineering Group, which adopted AVEVA's Integrated Engineering and Design solution for effective design, collaboration and improved efficiency. However, overall our business there was broadly flat during the year, being impacted by tougher market conditions, particularly in shipbuilding.
Broaden market exposure
We made good progress during the year in broadening our market exposure away from the cyclical Oil & Gas and Marine end markets. We enjoyed particular success in Power where revenue increased 11.4% on a constant currency basis during the year. Our software is well suited to creating and managing large complex projects, such as gas powered and nuclear power stations. During the year, we achieved several key wins within the Power market with Southern Company and TerraPower in the USA, KEPCO EPC in Korea and Japan Nuclear Fuel. We also achieved success in Paper & Pulp, where Valmet, the leading global developer and supplier of technologies, automation and services for the pulp, paper and energy industries, signed a multi-year agreement for AVEVA Everything3D(TM) (AVEVA E3D).
AVEVA also enjoyed success in the steel fabrication market where sales increased by 10.0% on a constant currency basis as we continue to integrate and leverage the Bocad and FabTrol acquisitions.
SaaS and the Cloud
While AVEVA's business model already has the high level of recurring subscription revenues typically associated with Cloud delivery, we aim to be technologically ready to offer our products on a SaaS model in response to customer demand.
For the industries we serve, there are several challenges facing our customers which need to be overcome before there is a full transition to Cloud. However, over time we do expect that customers will want to explore ways of using the Cloud to drive efficiency and improve collaboration through the supply chain and operating cycle of their assets.
We launched our Cloud platform AVEVA Connect(TM) together with our first SaaS offering Asset Visualisation at the AVEVA World Summit in October 2016. AVEVA Connect is our SaaS ecosystem for Engineering, Design and Information Management solutions. Asset Visualisation is our new Information Management as a Service offering. There is a willingness from the OOs to move towards SaaS for the provision of the Digital Asset and we expect these products to gain traction with major customers in the medium-term.
In April this year, we launched a second SaaS offering on AVEVA Connect, Information Standards Management. The Sales team has now been equipped to sell these solutions and we have brought on board several major oil Owner Operators as early adopters. Both Asset Visualisation and Information Standards Management provide entry points for our Owner Operator customers to access Digital Asset-as-a-Service solutions flexibly and cost effectively.
Our technology
Our software is used by customers as they design, build and operate large capital-intensive assets, mainly in the Process, Power and Marine industries. Our vision is for the widespread adoption of constantly-evolving Digital Assets, enabling our customers to manage continual change as they design, build and operate some of the world's most complicated physical assets.
We believe that our products offer a strong advantage over competing offerings, due to their inherent integration based on our leading object modelling technology, which reduces complexity and lowers the total cost of ownership for our customers.
AVEVA's heritage is in 3D design, where our core products are AVEVA PDMS(TM) (Plant Design Management System), AVEVA E3D and AVEVA Marine products. These products represented 73.5% of FY17 revenues. AVEVA E3D is the latest generation 3D product which carries a price premium reflecting its higher productivity and advanced feature set.
AVEVA E3D grew strongly during the year as existing customers continued to migrate towards it and new contracts were won. It contributed almost 13% of total revenue, up from just below 10% in the prior year.
Within More Than 3D, the largest product sets are schematics applications such as Piping and Instrumentation Diagram (P&ID), Instrumentation & Electrical applications and our unique multi-discipline AVEVA Engineering solution; together with information management applications such as AVEVA NET. These areas grew during the year with strong growth in information management sales particularly to the Owner Operators.
Our markets and our customers
AVEVA's key end markets are Oil & Gas, Marine, Power and Petrochemical & Chemical. Other markets we serve include: Architecture, Construction & Steel Fabrication; Mining & Minerals Processing; Paper & Pulp and Pharmaceuticals. Oil & Gas accounts for 40-45% of revenue, Marine 20%; Power 15-20%; Petrochemical & Chemical 10% and the remainder 10%.
AVEVA has four main groups of customers. These are Engineering Procurement and Construction companies (EPCs), shipyards, OOs, and fabricators.
EPCs primarily use AVEVA's software to design and build industrial assets, such as oil platforms, power stations and process plants for OOs. Demand from EPCs for AVEVA's products is therefore impacted by end market demand and particularly the level of capital expenditure on new installations and brownfield projects. AVEVA has strong long-standing relationships with many leading EPCs. The large, global EPCs are managed as strategic partnerships through AVEVA's Global Accounts programme.
OOs are key to achieving AVEVA's vision of a constantly-evolving Digital Asset. Whereas historically the Digital Asset was core only to the design phase of physical assets, it is now widely accepted that Digital Assets can help OOs to drive efficiency and reduce risk through minimising downtime and unplanned outages, while complying with ever more stringent environmental and safety legislation.
We won 9 new OO customers during the year and significantly expanded our business with several existing OO customers.
Oil & Gas
In the Oil & Gas industry, end market demand was weak, with global industry capital expenditure falling by over 40% between calendar 2014 and calendar 2016 (Sources: Barclays, Bank of America Merrill Lynch).
This decline had a significant impact on the workloads of our EPC customers, with the more complex (and therefore design-intensive) greenfield upstream and offshore projects being impacted most significantly. This impacted demand for our software.
EPC customers tend to favour a rental model for software, meaning that their spend with AVEVA adjusts to market demand relatively quickly and some EPCs have reduced their seat count reflecting lower activity. There was also some consolidation amongst EPCs and in the oil services sector more generally. However, as OOs seek to extend the life of existing assets, we saw an increase in revamps and modifications (known as brownfield projects), which helped to sustain a level of demand from EPCs, although these projects are typically shorter in duration and lower in value.
Due to the downturn in the Oil & Gas industry, OOs are putting pressure on EPCs to reduce the cost of capital projects, often by up to 50%. This is putting pressure on the margins of the EPCs and they have been forced to look at how they become more efficient and reduce the cost of projects. EPCs are also increasingly looking to technology to help drive efficiency in projects. Our integrated engineering and design approach, which helps manage the engineering data across the different engineering disciplines is receiving very positive feedback, enabling customers to reduce the total cost of ownership compared to our competition.
An area of focus for EPCs has been around reducing the cost of supporting, maintaining and developing in-house systems by looking to third party vendors such as AVEVA to replace these with commercial software products. This is particularly pronounced around materials procurement and construction management, given that many still use in-house systems in these areas. As such we are seeing significant interest in our Enterprise Resource Management product.
We are also seeing EPCs start to consider standardising their engineering technology strategy on one toolset and we believe that we are well positioned to capitalise on that trend.
Oil & Gas industry capital expenditure is forecast to increase in future years as investments are made to maintain production and reserves. There are early signs of improvement in the market, however the exact timing of a market recovery is difficult to predict.
Marine
AVEVA is a market leader in Marine design software, with customers including 90% of the world's largest shipyards. The Marine market is in a cyclical trough, with a relatively low number of new ship builds ongoing. Shipyard customers typically prefer an Initial Licence Fee model, because they view software as a longer-term investment rather than being project specific. This results in annual maintenance payments continuing even in tougher market conditions. Our recurring revenue from the Marine market was broadly flat during the year.
We are also winning significant new business in the sector, with new wins in Europe including a customer focused on cruise ships and in Asia where we won a major South East Asian customer focused on marine and offshore capital projects.
As with Oil & Gas, the Marine market is forecast by commentators such as Clarksons Research to recover from the current trough conditions. We expect activity to increase as overcapacity in the world fleet reduces and demand for specialist ships such as Floating Production, Storage and Offloading vessels and naval vessels grows, although again, the exact timing of a market recovery is difficult to predict.
Power
We had significant success in the Power market during the year, winning several significant new contracts with both utilities and power systems design companies.
Longer-term trends in the Power market are positive as the world's emerging economies invest in their power generation requirements and the ageing infrastructure of the developed world is maintained and replaced.
In the shorter term, AVEVA benefited from market share gains and requirements from operators in the sector for both design and information management tools, as they seek to improve asset efficiency.
Petrochemical & Chemical
We saw ongoing investment in the sector during the year, particularly in Asia with stable market conditions on a global basis. AVEVA enjoyed success in winning new OO customers in Asia during the year in the refining sector.
Other markets
Conditions in AVEVA's other markets are less subject to cyclical volatility, meaning that AVEVA can grow in a more linear fashion through the execution of its strategy. Notable developments during the year included solid constant currency growth in sales to fabricators and a new OO customer win in the Pharmaceutical sector.
In the Fabrication sector, AVEVA provides integrated end-to-end solutions for 3D modelling, detailing and fabrication of structural steelwork. This enables rapid, high-quality fabrication and construction for on-time, on-budget, integrated project execution for customers specialising in the engineering, manufacturing and assembly of advanced steel structures. In 2016/17 our revenue from fabricator customers increased 10.0% on a constant currency basis.
Outlook
We believe that AVEVA has both the market opportunity and the right strategy to deliver substantial growth over the longer term.
In the short term, demand cycles within our end markets have had an impact on growth. Our core markets of Oil & Gas and Marine, which together account for over 60% of Group revenue, have been in a cyclical trough over the last three years.
There are early signs of improvement in Oil & Gas. Although the timing of a full recovery in demand is still uncertain, we expect that as the headwinds lessen, the growth resulting from our strategic initiatives will begin to show at the Group level.
The Board remains confident in the long-term strength of AVEVA's business model, the deliverability of its organic growth strategy and its positioning to benefit from a recovery in our end markets.
James Kidd
Chief Executive Officer
23 May 2017
Finance review
Overview of financial progress
AVEVA delivered a solid performance in the financial year ended 31 March 2017. Reported revenue and profit showed growth over the previous year and cash generation was particularly strong. We ended the year with GBP130.9 million in net cash and no debt (2016 - GBP107.9 million).
Total revenue for the year was GBP215.8 million which was up 7.1% compared to the previous year (2016 - GBP201.5 million) and reported profit before tax was GBP46.9 million which was up 59.5% compared to the previous year (2016 - GBP29.4 million). On an adjusted basis, profit before tax was GBP55.0 million which was an increase of 7.4% (2016 - GBP51.2 million).
The weakening of sterling had the impact of increasing reported revenues and costs by 11.4% and 9.4% respectively, reflecting the significant overseas operations of the Group. On a constant currency basis revenue declined 3.8%, although the rate of reduction decelerated during the year, with the second half being minus 2.1% on a constant currency basis, or broadly flat excluding the impact of the difficult market in Latin America.
The results for the year are summarised below.
Constant
2017 2016 Reported currency
GBPm Total Total change change**
Revenue
Annual Fees 71.8 63.4 13.2% (0.5)%
Rental Licence
Fees 94.2 90.6 4.0% (4.6)%
-------- -------- --------- ----------
Recurring
revenue 166.0 154.0 7.8% (2.9)%
Initial Licence
Fees 32.2 29.4 9.5% (2.7)%
Training and
Services 17.6 18.1 (2.8)% (13.8)%
-------- -------- --------- ----------
Total revenue 215.8 201.5 7.1% (3.8)%
-------- -------- --------- ----------
Cost of sales (14.2) (14.7) (3.4)% (12.2)%
Gross profit 201.6 186.8 7.9% (3.2)%
Operating
expenses* (147.0) (135.6) 8.4% (0.9)%
Net interest 0.4 - - -
Adjusted profit
before tax 55.0 51.2 7.4% (8.5)%
-------- -------- --------- ----------
Normalised
adjustments (8.1) (21.8)
-------- -------- --------- ----------
Reported profit
before tax 46.9 29.4 59.5% 31.6%
-------- -------- --------- ----------
* 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.
** Constant currency is calculated by restating the period's reported results to reflect the previous year's average exchange rates.
Revenue
Revenue model
The Group sells its proprietary software products by licensing rights to use the software directly to customers through our network of global sales offices. We operate a 'right-to-use' licensing model. Customers can choose to pay Initial Licence Fees, followed by lower mandatory Annual Fees to cover support, maintenance and upgrades; or Rental Licence Fees. The latter are usually paid upfront on an annual basis.
Over a long period, it is usually cheaper for a customer to adopt the Initial Licence Fee model. However, many customers, particularly EPCs, prefer to view software as a more flexible operational expense which can be charged to a project, as opposed to a capital expense and therefore use the rental model.
AVEVA also generates revenue from Training and Services. This is typically associated with the implementation of new installations, customisation to meet specific customer requirements and end user training.
Revenue by category
AVEVA generated 14.9% of revenue from Initial Licence Fees, 33.3% of revenue from Annual Fees, 43.6% of revenue from Rental Licence Fees, and 8.2% from Training and Services. Recurring revenue, which consists of Annual Fees and Rental Licence Fees, increased by 7.8% to GBP166.0 million (2016 - GBP154.0 million), representing 76.9% of revenue (2016 - 76.4%).
Annual fees grew 13.2% to GBP71.8 million (2016 - GBP63.4 million), but were broadly flat in constant currency terms. This reflects high rates of customer retention, new customer wins and a low impact from price increases.
Rental Licence Fees also grew in reported terms, but there was a decline in constant currency terms of 4.6%. This reduction was to a large part attributable to the continuing weak market conditions in Latin America, and specifically Brazil, which accounted for 2.8% of the decline. Outside of Latin America, Rental Licence Fees showed reasonable resilience in difficult market conditions, particularly for customers operating in the Oil & Gas, sector although some EPC customers did reduce their seat count reflecting lower activity.
Initial Licence Fee revenue was GBP32.2 million, representing an increase of 9.5% (2016 - GBP29.4 million) reflecting the impact of currency translation, with the constant currency result being a decrease of 2.7%. There were a few significant wins with Owner Operators who chose to buy initial licences.
Training and Services revenue was down by 2.8% to GBP17.6 million (2016 - GBP18.1 million) as a result of fewer customer implementation projects. On a constant currency basis, revenue was down 13.8%.
Regional execution
On a regional basis, the Group performed well in the Americas. Sales were particularly strong in North America, although the difficult market conditions in Latin America caused a further decline in revenues in that region. AVEVA's performance in EMEA and Asia Pacific was robust in the context of the subdued Oil & Gas and Marine markets.
Reported revenue was impacted by a GBP22.0 million (11.4%) benefit related to foreign exchange translation. Around 20% of the Group's revenues were in each of sterling and euros and the US dollar was the next most material currency at around 15%.
An analysis of revenue by geography is set out below.
GBPm Asia Pacific EMEA Americas Total Revenue 76.3 106.6 32.9 215.8 2016 71.6 101.6 28.3 201.5 Change 6.6% 4.9% 16.3% 7.1% Constant currency change (6.4)% (4.2)% 3.9% (3.8)%
Asia Pacific
Revenue from the Asia Pacific region was GBP76.3 million (2016 - GBP71.6 million) and increased 6.6% over the prior year but declined 6.4% in constant currency terms. More specifically, we saw strong performance in Japan with a few significant new wins, but marginally weaker performance in South Korea and India, in the face of a tough market for Marine. Our businesses in China and South East Asia were broadly flat when compared to the prior year.
EMEA
In EMEA revenue grew 4.9% to GBP106.6 million (2016 - GBP101.6 million). Market conditions in EMEA have been reasonably stable, but remain challenging for customers with heavy exposure to Oil & Gas. However, we saw real growth in Germany and Finland where we won business in Paper & Pulp and revenue from Central and Southern Europe was higher in reported terms but performance in constant currency terms was slightly down on the prior year. Our businesses in Russia and the Middle East performed broadly in line with last year.
Training and Services revenue declined from the prior year as a number of implementation projects were completed.
Americas
In the Americas revenue grew 16.3% to GBP32.9 million (2016 - GBP28.3 million) with a very strong performance in North America being partly offset by ongoing weakness in Latin America, where revenues have now declined to a level that is no longer material to the Group.
Our performance in North America was very pleasing with revenue in the USA increasing 18.9% in constant currency terms, following the aforementioned customer wins with Southern Company, TerraPower and a very large global industrial company.
Market conditions in Brazil remained very tough through 2016/17 and our revenues from Latin America more than halved over the prior year, on both a reported and constant currency basis. We took action during the second half of the year to right-size our team there for the reduced market size.
Cost focus
AVEVA has a largely fixed cost base, albeit with some annual inflation embedded within it. We exercised strong cost control during the financial year in the context of the difficult end market conditions. We have, however, maintained adequate levels of investment in R&D and sales capabilities to ensure that we can execute our strategy and grow sales over the medium and long term.
Overall, in constant currency terms, operating costs were 0.9% lower than the previous year with the effect of cost management actions more than compensating for inflationary pressures and planned areas of investment.
We continue to have a focused and disciplined approach to managing the cost base. During the year we undertook some restructuring activity, which included headcount reductions in Latin America and corporate management.
An analysis of operating expenses on a normalised basis is set out below.
GBPm Research Selling Administrative Total
& Development and distribution expenses
As reported 31.9 93.0 31.9 156.8
Normalised adjustments (4.7) (3.8) (1.3) (9.8)
Normalised costs 27.2 89.2 30.6 147.0
2016 25.7 83.2 26.7 135.6
Change 5.8% 7.2% 14.6% 8.4%
Constant currency
change (1.2)% (3.1)% 6.0% (0.9)%
Normalised items include amortisation of intangibles (excluding other software) of GBP5.8 million (2016 - GBP5.6 million), share-based payments of GBP1.1 million (2016 - GBP0.5 million), gains on fair value of forward foreign exchange contracts of GBP0.7 million (2016 - loss of GBP0.4 million) and exceptional items of GBP3.6 million (2016 - GBP15.2 million).
Research & Development costs were broadly flat on a normalised constant currency basis reflecting a few strategic investments and efficiencies achieved through expanding our presence in Hyderabad, India and reducing costs in other locations. Overall our average R&D headcount through the year increased by 12%.
Selling and distribution expenses include the costs of our direct sales force as well as our regionally based technical support and marketing teams and in total were GBP89.2 million in the year 2016/17. The cost of these teams decreased by 3.1% on a constant currency basis principally due to a lower bad debt charge than in the prior year of GBP0.6 million (2016 - GBP3.4 million).
Administrative expenses increased 6.0% (or GBP1.6 million) on a constant currency basis, with the increase due to some minor investments in the HR team and a small increase in the cost of staff bonuses.
Exceptional items
During the year, the Group incurred exceptional costs of GBP1.9 million (2016 - GBP15.2 million). These included restructuring costs of GBP4.2 million, which were partly offset by factors including an indemnified receivable claim relating to a previous business combination. The restructuring costs related to the rationalisation of offices and reduction in headcount in specific areas of the business. Also included are the redundancy costs incurred in eliminating the Regional Operations layer of management as part of the initiative to structure the business with clearer lines of accountability.
Prior year exceptional items included professional fees of GBP10.5 million, principally for legal and financial due diligence services related to the aborted Schneider Electric transaction and exceptional restructuring costs of GBP4.5 million.
Profit before tax
Adjusted profit before tax was GBP55.0 million (2016 - GBP51.2 million), an increase of 7.4%, principally caused by the growth in revenue. This resulted in an adjusted profit margin of 25.5% compared to (2016 - 25.4%).
Reported profit before tax was GBP46.9 million (2016 - GBP29.4 million). The growth of 59.5% was principally due to growth in revenue and reduction in exceptional items as described above.
Taxation
The Group's effective tax rate, on an adjusted basis, has steadily declined over recent years in line with the reductions seen in UK corporation tax. The adjusted effective tax rate for the 2016/17 financial year was 22.1%, which represented a further reduction from 2016 when the rate was 22.5%. We see this trend continuing as the UK corporate rate reduces and we increasingly benefit from Patent Box relief.
The headline, or unadjusted, effective rate for the year was 18.8% (2016 - 30.4%). The prior year rate was impacted by non-deductible acquisition-related exceptional costs of GBP10.5 million (see above).
Dividends
With consistent and strong cash flows and no net debt, the Group retains considerable financial flexibility. The Board remains focused on delivering growth both organically and through acquisitions. Our strong cash flows underpin the Board's sustainable, progressive dividend policy, which is balanced against keeping cash available for M&A opportunities, with excess capital being returned to shareholders from time to time.
The Board is proposing a final dividend of 27.0 pence per share, taking the total dividend for the year to 40.0 pence (2016 - 36.0 pence per share), an increase of 11.1%. The dividend will be payable on 4 August 2017, to shareholders on the register on 7 July 2017.
As announced previously, we have rebalanced the interim and final dividends, with more of the total dividend being paid at the interim. As a result, the final dividend proposed for 2016/17 of 27.0 is slightly lower than the final dividend paid in respect of 2015/16 (30.0 pence per share).
Earnings per share
Basic earnings per share were 59.52 pence and increased 85.8% over 2016 (32.03 pence) and diluted earnings per share were 59.36 pence (2016 - 31.96 pence).
On an adjusted basis, EPS increased 8.0% to 66.98 pence (2016 - 62.04 pence) and to 66.81 pence on a diluted basis (2016 - 61.91 pence).
Balance sheet and cash flows
AVEVA continues to maintain a strong balance sheet and has no debt. Net assets at 31 March 2017 were GBP220.7 million compared to GBP201.0 million at 31 March 2016.
Non-current assets increased marginally to GBP89.9 million (2016 - GBP87.5 million) principally due to foreign currency translation effects. During the year we purchased intangible software rights for a total of GBP2.3 million, which provided valuable additional functionality for our products.
Working capital
Gross trade receivables at 31 March 2017 were GBP91.1 million which was broadly in line with last year (2016 - GBP94.5 million). We again saw a strong finish to the year with a large number of our Global Account renewals occurring in the final quarter. This resulted in billings being more weighted towards the end of the period, although Q4 cash collections were marginally stronger than in 2015/16.
The bad debt provision at 31 March 2017 of GBP6.1 million was similar in scale to the level held at the previous year end of GBP5.9 million.
Deferred income remained stable at 31 March 2017 was GBP45.9 million compared to GBP46.9 million at 31 March 2016. Trade and other payables were higher than the prior year at GBP42.9 million (2016 - GBP37.2 million).
Cash generation
Net cash (including treasury deposits) at 31 March 2017 was GBP130.9 million compared to GBP107.9 million at 31 March 2016.
Cash generated from operating activities before tax was GBP57.2 million (2016 - GBP36.1 million), with the largest parts of this improvement being due to the increased profit recorded in 2016/17 and the high exceptional costs incurred and paid in 2015/16.
Pensions
On an accounting basis, the Group's net retirement benefit obligations decreased from GBP5.2 million last year to GBP2.6 million. This was principally caused by the valuation of the UK defined benefit pension scheme moving from a deficit of GBP2.3 million to a surplus of GBP1.2 million driven by employer contributions of GBP1.6 million and strong asset returns over the period. Since March 2015, the UK defined benefit pension scheme has been closed to future accrual.
Capital structure
At 31 March 2017, the Group had 63,975,869 shares of 3 5/9p each in issue (2016 - 63,961,113 shares). During the year the AVEVA Group Employee Benefit Trust 2008 ('the Trust') purchased 2,160 ordinary shares in the Company in the open market at an average price of GBP18.68 per share for total consideration of GBP40,349 in order to satisfy awards made under the AVEVA Group Management Bonus Deferred Share Scheme 2008. At 31 March 2017, the Trust owned 10,857 ordinary shares in the Company. 13,380 shares (2016 - 26,791) with an attributable cost of GBP296,431 were issued to employees in satisfying share options that were exercised.
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 continue to be, cash positive and at 31 March 2017 held net cash of GBP130.9 million. The treasury policy includes strict counterparty limits.
David Ward
Chief Financial Officer
23 May 2017
Review of principal risks and uncertainties
AVEVA faces a number of potential risks and uncertainties which could have a material impact on the Group's long-term performance. The Board is responsible for determining the nature of these risks and ensuring appropriate mitigating actions are in place to manage them effectively.
Strategic and market risks
Risk Mitigation
--------------------------------------- --------------------------------
Dependency on key markets AVEVA is expanding
AVEVA generates a substantial into new market segments
amount of its income from customers such as Power, Petrochemicals
whose main business is derived & Chemicals and Construction,
from capital projects in the albeit from a relatively
Oil & Gas, Power and Marine small base. It is
markets. Currently, some of central to our strategy
AVEVA's vertical end markets to diversify our customer
are under pressure with lower offerings into Owner
oil prices and inevitably this Operators and Plant
is having an impact on the operations. This will
Group's revenues. As the availability help secure a longer-term
of capital expenditure returns income stream that
to our key markets, particularly extends beyond the
Oil & Gas, the balance may design/build phase
shift away from our traditional of these capital projects.
core sector of complex off-shore In addition, our extensive
projects, towards simpler on-shore global presence provides
projects, such as shale gas some mitigation from
extraction. The risk of this over-reliance on key
further reinforces our need geographic markets.
for market diversification.
--------------------------------------- --------------------------------
Competition We carefully monitor
AVEVA operates in highly competitive customers and other
markets that serve the Oil suppliers operating
& Gas, Power and Marine markets. within our chosen
Our 3D design tools are well markets. We stay close
established in our markets to our customers and
and we believe that there are ensure we have a strong
a relatively small number of understanding of their
significant competitors. However, needs and their expectations
some of these competitors could, from the AVEVA product
in the future, pose a greater development roadmap.
competitive threat to AVEVA's
revenues, particularly if they We expect that the
consolidate or form strategic customers we serve
or commercial relationships will, over the next
among themselves or with larger, 3 to 5 years, show
well capitalised companies. an increased appetite
or insistence on their
Further threats are posed by software needs being
the entrance, into AVEVA's delivered with more
markets, of a much larger technology flexibility. AVEVA
competitor or transformational is already well progressed
technology, such as Cloud-based with its Cloud strategy
solutions. and expects to be
able to meet these
The Group's strategy to extend customer demands as
the digital asset footprint they develop.
is key to ensuring that our
customer penetration is broad
and that AVEVA's sources of
revenue are diversified.
--------------------------------------- --------------------------------
Professional Services We employ experienced
Where AVEVA assists customers industry professionals
with the deployment of an enterprise within our professional
solution this involves some services team and
degree of consulting and/or continue to build
implementation work. This requires commercial partnerships
specialist knowledge to be with third party systems
available and well managed integrators.
potentially in many geographic
locations. There is a risk We have rigorous processes
that the services provided and controls for the
do not meet the customer's appraisal of potential
expectations or that technical commercial opportunities
difficulties are encountered. prior to any bid being
submitted. Bids are
In some instances we may opt appraised on grounds
to partner with a third party of technical complexity
for this work and this relationship as well as financial
also requires careful management and commercial risk.
and maintenance to ensure that
AVEVA's strong reputation with
our customers is not damaged.
--------------------------------------- --------------------------------
Risk Mitigation
--------------------------------------- --------------------------------
Acquisitions
An acquisition by AVEVA or While each acquisition
of AVEVA could pose a significant and integration is
distraction to management and unique, AVEVA now
to the delivery of our business has an experienced
plan. team to appraise and
complete acquisitions.
The Group expects to continue The Group's experience
to review acquisition targets of previous 'bolt-on'
as part of its strategy. The acquisitions as well
integration of acquisitions as the aborted transaction
involves a number of unique with Schneider Electric
risks, including diversion provides a good understanding
of management's attention, of potential transaction
failure to retain key personnel and integration risks.
of the acquired business, failure
to realise the benefits anticipated
to result from the acquisition,
and successful integration
of the acquired intellectual
property.
--------------------------------------- --------------------------------
Operational risks
Risk Mitigation
-------------------------------------------------------- --------------------------------
Recruitment and retention of employees The Group endeavours
AVEVA's success has been built on the quality to ensure that employees
and reputation of its products and services, are motivated in their
which rely almost entirely on the quality of work and there are
the people developing and delivering them. Managing regular appraisals,
this pool of highly skilled and motivated individuals with staff encouraged
across all disciplines and geographies remains to develop their skills.
key to our ongoing success. 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.
-------------------------------------------------------- --------------------------------
Protection of intellectual property The Group uses third
The Group's success has been built upon the development party technology to
of its substantial intellectual property rights encrypt, protect and
and the future growth of the business requires restrict access to
the continual protection of these tools. its products. Access
limitations and rights
The protection of the Group's proprietary software are also defined within
products is achieved by licensing rights to use the terms of the software
the application, rather than selling or licensing licence agreement.
the computer source code.
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 AVEVA continually
The Group makes substantial investments in Research reviews the alignment
& Development in enhancing existing products of the activities
and introducing new products and must effectively of our Research &
appraise its investment decisions and ensure Development teams
that we continue to provide class-leading solutions to ensure that they
that meet the needs of our markets. remain focused on
areas that will meet
Our software products are complex and new products the demands of our
or enhancements may contain undetected errors, customers and deliver
failures, performance problems or defects which appropriate financial
may impact our strong reputation with our customers. 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 operates in over 30 countries globally The Group manages
and must determine how best to utilise its resources its overseas operations
across these diverse markets. Where necessary, by employing locally
the business must adapt its market approach to qualified personnel
best capitalise on local market opportunities, who are able to provide
particularly in the strategically key growth expertise in the appropriate
economies. language and an understanding
of local culture,
In addition, the Group is required to comply custom and practice.
with the local laws, regulations and tax legislation Local management is
in each of these jurisdictions. Significant changes supported by local
in these laws and regulations or failure to comply professional advisers
with them could lead to additional liabilities and further oversight
and penalties. is maintained from
the Group's corporate
legal and finance
functions.
-------------------------------------------------------- --------------------------------
Financial risks
Risk Mitigation
----------------------------------------------------- ----------------------------
Foreign exchange risk The overseas subsidiaries
Exposure to foreign currency gains and losses predominantly trade
can be material to the Group, with more than in their own local
80% of the Group's revenue denominated in a currency currencies, which
other than sterling, of which our two largest acts as a partial
are US Dollar and Euro. natural hedge against
currency movements.
The result of the UK referendum on European Union In addition, the Group
membership has led to significant weakening of enters into forward
the British Pound, and the volatility is likely foreign currency contracts
to continue until further certainty is reached to manage the risk
over exit negotiations. where material and
practical. The Group
limits its hedging
of revenue to US Dollar
and Euro, Japanese
Yen and its hedging
of costs to Swedish
Krona and Indian Rupee
----------------------------------------------------- ----------------------------
Consolidated income statement
for the year ended 31 March 2017
2017 2016
Notes GBP000 GBP000
----------------------------------------- ------ ---------- ----------
3,
Revenue 4 215,831 201,491
Cost of sales (14,233) (14,689)
----------------------------------------- ------ ---------- ----------
Gross profit 201,598 186,802
Operating expenses
Research & Development costs (31,884) (32,128)
Selling and administrative expenses 5 (124,948) (125,252)
----------------------------------------- ------ ---------- ----------
Total operating expenses (156,832) (157,380)
----------------------------------------- ------ ---------- ----------
Profit from operations 44,766 29,422
Other income 6 1,753 -
Finance revenue 777 633
Finance expense (396) (626)
----------------------------------------- ------ ---------- ----------
Analysed as:
Adjusted profit before tax 55,004 51,201
Amortisation of intangibles (excluding
other software) (5,806) (5,617)
Share-based payments (1,084) (494)
Gains/(losses) on fair value of forward
foreign exchange contracts 669 (432)
Exceptional items 6 (1,883) (15,229)
----------------------------------------- ------ ---------- ----------
Profit before tax 46,900 29,429
Income tax expense 7 (8,834) (8,955)
----------------------------------------- ------ ---------- ----------
Profit for the year attributable to
equity holders of the parent 38,066 20,474
----------------------------------------- ------ ---------- ----------
Earnings per share (pence)
* basic 9 59.52 32.03
* diluted 9 59.36 31.96
----------------------------------------- ------ ---------- ----------
Adjusted earnings per share (pence)
* basic 9 66.98 62.04
* diluted 9 66.81 61.91
----------------------------------------- ------ ---------- ----------
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 2017
2017 2016
Notes GBP000 GBP000
---------------------------------------------- ------ -------- --------
Profit for the year 38,066 20,474
Items that may be reclassified to profit
or loss in subsequent periods:
Exchange gain arising on translation
of foreign operations 6,675 3,812
Income tax effect 7(a) (406) -
---------------------------------------------- ------ -------- --------
Total of items that may be reclassified
to profit or loss in subsequent periods 6,269 3,812
---------------------------------------------- ------ -------- --------
Items that will not be reclassified
to profit or loss in subsequent periods:
Remeasurement gain on defined benefit
plans 2,170 7,837
Income tax effect 7(a) (395) (1,654)
---------------------------------------------- ------ -------- --------
Total of items that will not be reclassified
to profit or loss in subsequent periods 1,775 6,183
---------------------------------------------- ------ -------- --------
Total comprehensive income for the
year, net of tax 46,110 30,469
---------------------------------------------- ------ -------- --------
The accompanying notes are an integral part of this Consolidated statement of comprehensive income.
Consolidated balance sheet
31 March 2017
2017 2016
Notes GBP000 GBP000
-------------------------------- ------ -------- --------
Non-current assets
Goodwill 54,305 51,697
Other intangible assets 21,868 24,841
Property, plant and equipment 7,432 7,101
Deferred tax assets 3,594 2,617
Other receivables 1,499 1,257
Retirement benefit surplus 13 1,222 -
-------------------------------- ------ -------- --------
89,920 87,513
-------------------------------- ------ -------- --------
Current assets
Trade and other receivables 10 93,279 97,138
Treasury deposits 11 45,486 43,316
Cash and cash equivalents 11 85,462 64,611
Current tax assets 3,557 3,492
-------------------------------- ------ -------- --------
227,784 208,557
-------------------------------- ------ -------- --------
Total assets 317,704 296,070
-------------------------------- ------ -------- --------
Equity
Issued share capital 2,275 2,274
Share premium 27,288 27,288
Other reserves 12,896 5,965
Retained earnings 178,223 165,471
-------------------------------- ------ -------- --------
Total equity 220,682 200,998
-------------------------------- ------ -------- --------
Current liabilities
Trade and other payables 12 42,876 37,196
Deferred revenue 45,894 46,874
Financial liabilities 196 864
Current tax liabilities 865 1,789
-------------------------------- ------ -------- --------
89,831 86,723
-------------------------------- ------ -------- --------
Non-current liabilities
Deferred tax liabilities 3,381 3,187
Retirement benefit obligations 13 3,810 5,162
-------------------------------- ------ -------- --------
7,191 8,349
-------------------------------- ------ -------- --------
Total equity and liabilities 317,704 296,070
-------------------------------- ------ -------- --------
The accompanying notes are an integral part of this Consolidated balance sheet.
Consolidated statement of changes in shareholders' equity
31 March 2017
Other reserves
--------------
Cumulative Total
Share Share Merger Translation Treasury Other Retained Total
capital premium reserve adjustments shares reserves earnings equity
Notes GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- ----- -------- -------- -------- -------------- -------- --------- --------- --------
At 1 April 2015 2,274 27,288 3,921 (1,284) (982) 1,655 158,713 189,930
Profit for the
year - - - - - - 20,474 20,474
Other comprehensive
income - - - 3,812 - 3,812 6,183 9,995
-------------------- ----- -------- -------- -------- -------------- -------- --------- --------- --------
Total comprehensive
income - - - 3,812 - 3,812 26,657 30,469
Issue of share
capital - - - - - - - -
Share-based
payments - - - - - - 494 494
Tax arising
on share options - - - - - 13 13
Investment in
own shares - - - - (94) (94) - (94)
Cost of employee
benefit trust
shares issued
to employees - - - - 592 592 (592) -
Equity dividends 8 - - - - - - (19,814) (19,814)
-------------------- ----- -------- -------- -------- -------------- -------- --------- --------- --------
At 31 March
2016 2,274 27,288 3,921 2,528 (484) 5,965 165,471 200,998
Profit for the
year - - - - - - 38,066 38,066
Other comprehensive
income - - - 6,269 - 6,269 1,775 8,044
-------------------- ----- -------- -------- -------- -------------- -------- --------- --------- --------
Total comprehensive
income - - - 6,269 - 6,269 39,841 46,110
Issue of share
capital 1 - - - - - - 1
Share-based
payments - - - - - - 1,084 1,084
Tax arising
on share options - - - - - 29 29
Investment in
own shares - - - - (40) (40) - (40)
Cost of employee
benefit trust
shares issued
to employees - - - - 296 296 (296) -
Transfers - - - 406 - 406 (406) -
Equity dividends 8 - - - - - - (27,500) (27,500)
-------------------- ----- -------- -------- -------- -------------- -------- --------- --------- --------
At 31 March
2017 2,275 27,288 3,921 9,203 (228) 12,896 178,223 220,682
-------------------- ----- -------- -------- -------- -------------- -------- --------- --------- --------
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 2017
2017 2016
Notes GBP000 GBP000
---------------------------------------------- ------ --------- ---------
Cash flows from operating activities
Profit for the year 38,066 20,474
Income tax 7 8,834 8,955
Net finance revenue (381) (7)
Other income (indemnified receivable) 6 (1,753) -
Amortisation of intangible assets 6,160 5,954
Depreciation of property, plant and
equipment 2,487 2,167
(Profit)/loss on disposal of property,
plant and equipment (27) 2
Share-based payments 1,084 494
Difference between pension contributions
paid and amounts charged to operating
profit (1,139) (1,849)
Research & Development expenditure
tax credit (1,750) (2,076)
Changes in working capital:
Trade and other receivables 2,567 514
Trade and other payables 3,711 1,076
Changes to fair value of forward foreign
exchange contracts (669) 432
---------------------------------------------- ------ --------- ---------
Cash generated from operating activities
before tax 57,190 36,136
Income taxes paid (9,332) (11,798)
---------------------------------------------- ------ --------- ---------
Net cash generated from operating activities 47,858 24,338
---------------------------------------------- ------ --------- ---------
Cash flows from investing activities
Purchase of property, plant and equipment (2,419) (2,056)
Purchase of intangible assets (2,252) (393)
Acquisition of subsidiaries and business
undertakings, net of cash acquired - (2,540)
Refund of consideration from business
combinations 1,753 4,349
Proceeds from disposal of property,
plant and equipment 194 429
Interest received 777 633
(Purchase)/maturity of treasury deposits
(net) (2,170) 1,932
---------------------------------------------- ------ --------- ---------
Net cash flows (used in)/from investing
activities (4,117) 2,354
---------------------------------------------- ------ --------- ---------
Cash flows from financing activities
Interest paid (58) (48)
Purchase of own shares (40) (94)
Proceeds from the issue of shares 1 -
Dividends paid to equity holders of
the parent 8 (27,500) (19,814)
---------------------------------------------- ------ --------- ---------
Net cash flows used in financing activities (27,597) (19,956)
---------------------------------------------- ------ --------- ---------
Net increase in cash and cash equivalents 16,144 6,736
Net foreign exchange difference 4,707 (644)
Opening cash and cash equivalents 11 64,611 58,519
---------------------------------------------- ------ --------- ---------
Closing cash and cash equivalents 11 85,462 64,611
---------------------------------------------- ------ --------- ---------
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 2016 to 31 March 2017 and was approved by the Board on 23 May 2017.
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 2017 or 31 March 2016. The accounts for the year ended 31 March 2016 have been delivered to the Registrar of Companies. The statutory accounts for the years ended 31 March 2017 and 2016 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 2017 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 7 July 2017. 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 the 'adjusted profit before tax' and 'adjusted diluted and basic earnings per share' measures presented provide a reliable and consistent presentation of the underlying performance of the Group. Adjusted profit is not defined by IFRS and therefore may not be directly comparable with the 'adjusted' profit 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.
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 2016. 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:
2017 2016
GBP000 GBP000
------------------------ ------- -------
Annual fees 71,845 63,368
Rental licence fees 94,188 90,617
------------------------ ------- -------
Total recurring revenue 166,033 153,985
Initial licence fees 32,214 29,373
Training and services 17,584 18,133
------------------------ ------- -------
Total revenue 215,831 201,491
Finance revenue 777 633
------------------------ ------- -------
216,608 202,124
------------------------ ------- -------
Training and services consists of consultancy, implementation services and training fees.
4 Segment information
The Executive team 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. Balance sheet information is not included in the information provided to the Executive team. Support functions such as head office departments are controlled and monitored centrally. All regions sell all the products and services. Corporate costs include centralised functions such as Executive Management, IT, Finance and Legal.
Year ended 31 March 2017
-------------------------------------------------------
Asia
Pacific EMEA Americas Corporate Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- --------- --------- --------- ---------- ----------
Revenue
Annual fees 32,996 30,453 8,396 - 71,845
Initial fees 18,688 8,600 4,926 - 32,214
Rental fees 19,693 57,907 16,588 - 94,188
Training and services 4,913 9,719 2,952 - 17,584
---------------------------- --------- --------- --------- ---------- ----------
Regional revenue
total 76,290 106,679 32,862 - 215,831
Cost of sales (3,314) (8,968) (1,951) - (14,233)
Selling and administrative
expenses (26,938) (33,345) (18,593) (40,925) (119,801)
---------------------------- --------- --------- --------- ---------- ----------
Regional contribution 46,038 64,366 12,318 (40,925) 81,797
---------------------------- --------- --------- --------- ---------- ----------
Research & Development
costs (27,174)
Adjusted profit
from operations 54,623
Net finance revenue 381
---------------------------- --------- --------- --------- ---------- ----------
Adjusted profit
before tax 55,004
Exceptional items
and other normalised
adjustments(*) (8,104)
---------------------------- --------- --------- --------- ---------- ----------
Profit before tax 46,900
---------------------------- --------- --------- --------- ---------- ----------
* Normalised adjustments include amortisation of intangible assets (excluding other software), share-based payments and movements on fair value of forward foreign exchange contracts.
Year ended 31 March 2016
-------------------------------------------------------
Asia
Pacific EMEA Americas Corporate Total
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- --------- --------- --------- ---------- ----------
Revenue
Annual fees 27,608 28,528 7,232 - 63,368
Initial fees 18,403 8,787 2,183 - 29,373
Rental fees 21,486 53,270 15,861 - 90,617
Training and services 4,049 11,015 3,069 - 18,133
---------------------------- --------- --------- --------- ---------- ----------
Regional revenue
total 71,546 101,600 28,345 - 201,491
Cost of sales (3,117) (9,514) (2,058) - (14,689)
Selling and administrative
expenses (24,491) (33,270) (17,965) (34,171) (109,897)
---------------------------- --------- --------- --------- ---------- ----------
Regional contribution 43,938 58,816 8,322 (34,171) 76,905
---------------------------- --------- --------- --------- ---------- ----------
Research & Development
costs (25,711)
Adjusted profit
from operations 51,194
Net finance revenue 7
---------------------------- --------- --------- --------- ---------- ----------
Adjusted profit
before tax 51,201
Exceptional items
and other normalised
adjustments(*) (21,772)
---------------------------- --------- --------- --------- ---------- ----------
Profit before tax 29,429
---------------------------- --------- --------- --------- ---------- ----------
5 Selling and administration expenses
An analysis of selling and administration expenses is set out below:
2017 2016
GBP000 GBP000
Selling and distribution expenses 93,023 85,915
Administrative expenses 31,925 39,337
124,948 125,252
----------------------------------- -------- --------
6 Exceptional items
2017 2016
GBP000 GBP000
Acquisition and integration activities - 10,459
Restructuring costs 4,152 4,544
Indemnified receivable claim for previous
business combination (1,753) -
Movement in provision for sales taxes in
an overseas location (516) 226
1,883 15,229
------------------------------------------- -------- --------
The acquisition and integration expenses of the year ended 31 March 2016 relate to fees paid to professional advisers primarily for legal and financial due diligence services related to the aborted acquisition of certain software assets from Schneider Electric and the acquisition of FabTrol Systems Inc.
As described in the 2016 Annual Report, we intended to make continued cost savings in addition to those already made in 2015/16 to mitigate the impact of cost inflation and other planned investments elsewhere in the business. During the 2016/17 financial year the Group incurred exceptional restructuring costs of GBP4,152,000 in connection with the rationalisation of offices and reduction in headcount in specific areas of the business. Also included are the redundancy costs incurred in eliminating the Regional Operations layer of management. These activities are a continuation of the restructuring activities of the previous year which were ultimately more protracted than initially expected due to changes in the Executive management team.
The Group has provided for a potential 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.
Exceptional items were included in the Consolidated income statement as follows:
2017 2016
GBP000 GBP000
Research & Development costs 492 2,230
Selling and distribution expenses 2,190 1,290
Administrative expenses 954 11,709
Other income (1,753) -
1,883 15,229
----------------------------------- -------- --------
The Group received an exceptional credit of GBP1,753,000 to other income as a result of a partial refund received following an indemnity claim related to the 8over8 acquisition.
7 Income tax expense
a) Tax on profit
The major components of income tax expense are as follows:
2017 2016
GBP000 GBP000
-------------------------------------------------- ------- -------
Tax charged in Consolidated income statement
Current tax
UK corporation tax 5,129 3,863
Adjustments in respect of prior periods (881) (47)
-------------------------------------------------- ------- -------
4,248 3,816
-------------------------------------------------- ------- -------
Foreign tax 5,568 5,869
Adjustments in respect of prior periods 42 (704)
-------------------------------------------------- ------- -------
5,610 5,165
-------------------------------------------------- ------- -------
Total current tax 9,858 8,981
-------------------------------------------------- ------- -------
Deferred tax
Origination and reversal of temporary differences (851) (441)
Adjustments in respect of prior periods (173) 415
-------------------------------------------------- ------- -------
Total deferred tax (note 24) (1,024) (26)
-------------------------------------------------- ------- -------
Total income tax expense reported in Consolidated
income statement 8,834 8,955
-------------------------------------------------- ------- -------
2017 2016
GBP000 GBP000
------------------------------------------------ ------- -------
Tax relating to items charged directly to
Consolidated statement of comprehensive income
Deferred tax on actuarial remeasurements
on retirement benefit obligation 395 1,868
Current tax on pension contributions - (214)
Current tax on exchange gain on retranslation
of foreign operations 406 -
------------------------------------------------ ------- -------
Tax charge reported in Consolidated statement
of comprehensive income 801 1,654
------------------------------------------------ ------- -------
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:
2017 2016
GBP000 GBP000
----------------------------------------------------------- ------- -------
Tax on Group profit before tax at standard
UK corporation tax rate of 20% (2016 - 20%) 9,380 5,886
Effects of:
* expenses not deductible for tax purposes 299 988
* acquisition and integration activities (see note 7) - 1,935
* indemnified receivable (see note 7) (351) -
* patent box (500) -
* irrecoverable withholding tax 64 93
* movement on unprovided deferred tax balances 1,026 408
* differing tax rates (72) (19)
* adjustments in respect of prior years (1,012) (336)
----------------------------------------------------------- ------- -------
Income tax expense reported in Consolidated
income statement 8,834 8,955
----------------------------------------------------------- ------- -------
The Group's effective tax rate for the year was 18.8% (2016 - 30.4%). The Group's effective tax rate for the year before exceptional items was 22.2% (2016 - 22.1%). The Group's effective tax rate before exceptional and other normalised adjustments (see note 13) was 22.1% (2016 - 22.5%).
Contained within the prior year adjustment of GBP1,012,000 is a GBP1,200,000 exceptional tax credit related to the acquisition and integration activities in the previous period (see note 7).
At the previous balance sheet date, the UK government had substantively enacted a 1% reduction in the main rate of UK corporation tax to 19% from 1 April 2017 and by another 1% to 18% from 1 April 2020.
At this balance sheet date, the UK government had substantively enacted a further reduction to 17% from 1 April 2020. The effect of this reduction is immaterial to the UK net deferred tax liability.
8 Dividends paid and proposed on equity shares
2017 2016
GBP000 GBP000
---------------------------------------------- ------- -------
Declared and paid during the year
Interim 2016/17 dividend paid of 13.0 pence
(2015/16 - 6.0 pence) per ordinary share 8,316 3,836
Final 2015/16 dividend paid of 30.0 pence
(2014/15 - 25.0 pence) per ordinary share 19,184 15,978
27,500 19,814
---------------------------------------------- ------- -------
Proposed for approval by shareholders at
the Annual General Meeting
---------------------------------------------- ------- -------
Final proposed dividend 2016/17 of 27.0 pence
(2015/16 - 30.0 pence) per ordinary share 17,271 19,182
---------------------------------------------- ------- -------
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 7 July 2017 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 4 August 2017 to shareholders on the register at the close of business on 7 July 2017.
9 Earnings per share
2017 2016
Pence Pence
------------------------------------------ ------ ------
Earnings per share for the year:
* basic 59.52 32.03
* diluted 59.36 31.96
Adjusted earnings per share for the year:
* basic 66.98 62.04
* diluted 66.81 61.91
------------------------------------------ ------ ------
2017 2016
Number Number
------------------------------------------- ---------- ----------
Weighted average number of ordinary shares
for basic earnings per share 63,959,162 63,925,508
Effect of dilution: employee share options 163,002 137,389
------------------------------------------- ---------- ----------
Weighted average number of ordinary shares
adjusted for the effect of dilution 64,122,164 64,062,897
------------------------------------------- ---------- ----------
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 GBP38,066,000 (2016 - GBP20,474,000). 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 terms and conditions of share options are provided in note 26.
Details of the calculation of adjusted earnings per share are set out below:
2017 2016
GBP000 GBP000
--------------------------------------------- ------- -------
Profit after tax for the year 38,066 20,474
Intangible amortisation (excluding software) 5,806 5,617
Share-based payments 1,084 494
(Gain)/loss on fair value of forward foreign
exchange contracts (669) 432
Exceptional items 1,883 15,229
Tax effect on exceptional items (1,990) (936)
Tax effect on other normalised adjustments (1,343) (1,648)
--------------------------------------------- ------- -------
Adjusted profit after tax 42,837 39,662
--------------------------------------------- ------- -------
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
2017 2016
GBP000 GBP000
------------------------------------- ------- -------
Current
Amounts falling due within one year:
Trade receivables 85,041 88,618
Prepayments and other receivables 7,465 7,384
Accrued income 773 1,136
------------------------------------- ------- -------
93,279 97,138
------------------------------------- ------- -------
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.
2017 2016
GBP000 GBP000
---------------------------------- ------- -------
Non-current
Prepayments and other receivables 1,499 1,257
---------------------------------- ------- -------
Non-current prepayments and other receivables include rental deposits for operating leases.
As at 31 March 2017, the provision for impairment of receivables was GBP6,054,000 (2016 - GBP5,879,000) and an analysis of the movements during the year was as follows:
GBP000
--------------------------------------------- -------
At 1 April 2015 5,636
Charge for the year, net of amounts reversed 3,431
Utilised (3,141)
Exchange adjustment (47)
--------------------------------------------- -------
At 31 March 2016 5,879
Charge for the year, net of amounts reversed 635
Utilised (1,643)
Exchange adjustment 1,183
--------------------------------------------- -------
As at 31 March 2017 6,054
--------------------------------------------- -------
As at 31 March, the ageing analysis of trade receivables (net of provision for impairment) was as follows:
Past due not impaired
----- ------- ------------- ---------------------------------------
Less More
Neither than Four Eight than
past due four to eight to twelve twelve
Total nor impaired months months months months
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----- ------- ------------- ------- --------- ---------- -------
2017 85,041 61,729 20,661 1,258 1,393 -
2016 88,618 54,778 30,831 2,142 867 -
----- ------- ------------- ------- --------- ---------- -------
Further disclosures relating to the credit quality of trade receivables are included in note 23.
11 Cash and cash equivalents and treasury deposits
2017 2016
GBP000 GBP000
-------------------------------------------- ------- -------
Cash at bank and in hand 49,704 38,176
Short-term deposits 35,758 26,435
-------------------------------------------- ------- -------
Net cash and cash equivalents per cash flow 85,462 64,611
Treasury deposits 45,486 43,316
-------------------------------------------- ------- -------
130,948 107,927
-------------------------------------------- ------- -------
Treasury deposits represent bank deposits with an original maturity of over three months. Treasury deposits held with a fixed rate of interest were GBP336,000 (2016 - GBP23,296,000), with the remainder held at a floating rate.
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. GBP14,406,000 (2016 - GBP31,776,000) were at a fixed rate of interest and the remainder were held at a floating rate of interest.
The fair value of cash and cash equivalents and treasury deposits is GBP130,948,000 (2016 - GBP107,927,000).
12 Trade and other payables
2017 2016
GBP000 GBP000
------------------------------------------ ------- -------
Current
Trade payables 5,835 5,986
Social security, employee taxes and sales
taxes 14,699 13,502
Accruals and other payables 21,994 16,478
Deferred consideration 348 1,230
------------------------------------------ ------- -------
42,876 37,196
------------------------------------------ ------- -------
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 Retirement benefit obligations
The movement on the provision for retirement benefit obligations was as follows:
South
UK defined Korean
benefit German defined severance
scheme benefit schemes pay Total
GBP000 GBP000 GBP000 GBP000
------------------------------------------- ---------- ---------------- ---------- -------
At 31 March 2015 11,281 1,059 1,847 14,187
Current service cost - - 213 213
Net interest on pension scheme liabilities 506 30 42 578
Actuarial remeasurements (7,936) 211 (112) (7,837)
Employer contributions (1,580) (11) (471) (2,062)
Exchange adjustment - 104 (21) 83
------------------------------------------- ---------- ---------------- ---------- -------
At 31 March 2016 2,271 1,393 1,498 5,162
Current service cost - - 227 227
Net interest on pension scheme liabilities 274 28 36 338
Actuarial remeasurements (2,187) 27 (10) (2,170)
Employer contributions (1,580) 314 (100) (1,366)
Exchange adjustment - 122 275 397
------------------------------------------- ---------- ---------------- ---------- -------
At 31 March 2017 (1,222) 1,884 1,926 2,588
------------------------------------------- ---------- ---------------- ---------- -------
The UK defined benefit scheme surplus has been recognised as a non-current asset as the Group has a right to any remaining surplus after all liabilities are paid. The Trustees may not distribute any surplus without the agreement of the Group. If such agreement is withheld, the Trustees are required to repay any remaining funds to the Group.
14 Directors
Philip Aiken
Chairman
Philip Dayer
Non-Executive Director and Senior Independent Director
Jennifer Allerton
Non-Executive Director
Christopher Humphrey
Non-Executive Director
Ron Mobed
Non-Executive Director
James Kidd
Chief Executive
David Ward
Chief Financial Officer
15 Responsibility statement pursuant to FSA's Disclosure and Transparency Rule 4
(DTR 4)
Each Director of the Company (whose names and functions appear in note 14) 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 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
David Ward James Kidd Chief Financial Chief Executive Officer
23 May 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUWAAUPMGRP
(END) Dow Jones Newswires
May 23, 2017 02:01 ET (06:01 GMT)
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