aveva group plc/media/aveva/english/investors... · 2015-05-27 · r&d benefited from moving...

AVEVA Group plc

Results for the year

ended 31 March 2015

19 May 2015

Copyright © 2015 AVEVA Solutions Limited and its subsidiaries. All rights reserved.

This presentation may include predictions, estimates,

intentions, beliefs and other statements that are or may be

construed as being forward-looking. While these forward-

looking statements represent our current judgment on what

the future holds, they are subject to risks and uncertainties

that could result in actual outcomes differing materially from

those projected in these statements. No statement contained

herein constitutes a commitment by AVEVA to perform any

particular action or to deliver any particular product or

product features. Readers are cautioned not to place undue

reliance on these forward-looking statements, which reflect

our opinions only as of the date of this presentation. The

Company shall not be obliged to disclose any revision to these

forward-looking statements to reflect events or circumstances

occurring after the date on which they are made or to reflect

the occurrence of future events.

2


CEO review

Richard Longdon, CEO


Highlights

AVEVA’s business model has shown resilience

– Results in line with expectations against a difficult demand backdrop

– Organic c/c revenue of £220.4 million (FY14: £237.3 million)

– Adj. PBT £62.1 million (FY14: £78.3 million)

Good progress against key strategic objectives

– Focus on sales execution – ‘One AVEVA’ delivering benefits

– Further success with our Global Accounts

– Strong performance from AVEVA Everything 3D™ (AVEVA E3D™)

– Broadened and deepened our partner channel

– Acquisition of 8over8 Limited

4


Innovation

Further extended our industry leadership

AVEVA E3D in the

Cloud

- Highly flexible and

cost efficient

- Seamless, secure

interface

AVEVA NET

- Major enhancements

- Improved 3D

interaction,

visualisation,

navigation and search

Visualisation

- Developed with

industrial input from

Shell and Lundin

- Convergence of design

and data management

New products

- New products and

enhancements

- e.g. AVEVA ISM, AVEVA

Control of Work

5


Investing in latest AVEVA technology to maximise

business benefit, create efficiencies

Active across a range of end markets, not just Oil & Gas

Notable enhanced relationship with Aker Solutions

Rental renewals remained generally robust

– Key deals with Jacobs Engineering, Technip, WorleyParsons,

AMEC Foster Wheeler, among others

Global Accounts

Maximising competitive advantage

6


Partner network

Broadened and deepened

Global alliance with Capgemini to provide DiALM™

solution, based on AVEVA NET™, for asset-intensive

industries

New partnership with EMC for an integrated software

solution in capital projects and asset operations

New partnership with ETAP seamless data exchange for

complex Electricals

7


AVEVA E3D

Strong pace of adoption continues

At March ’15, 230 customers and cumulative revenue

>£11m since launch

Catalyst for more ‘One AVEVA’ solution sales

Notable deals included Atkins, KBR, Tianchen, D3SCOM,

and Aker Solutions

Pricing is in line with plan

8


Acquisition of 8over8

Contract risk management

Risk management software solution for increased

project control and capital discipline for high value,

complex projects

– Through using ProCon, customers have saved $12.4 billion

in reduced cost overruns and enhanced cost recovery

– ProCon used on over 300 major capital projects totalling

>$600 billion in capex

– ‘Smart cities’ are also an area of potential growth over the

longer term

9


End markets

Update

10

Opportunity

downstream

Brownfield plays to

our strengths in

laser modelling

Investing more into

our North American

operations

Robust long-term

growth drivers

Oil & Gas

Stable outlook but

no signs of a

sustained recovery

Global GDP remains

the key driver for

the industry

Marine

New build in

developing

economies – China

and India

Replacement and

life-extension

elsewhere

Nuclear remains a

significant long-

term opportunity

Power

North America a

particularly active

market

Projects typically

less complex

Opportunity for

further growth

Chemical & Petrochem

Metals & Mining

Pulp & Paper

Food processing

Other process plant

Other

c.45-50% c.15-20% c.10-15% c.5-10% c.5-10%


Customer examples

Recent success stories

11

Upstream onshore Oil & Gas Owner Operator. Selected AVEVA’s

Digital Asset approach for engineering data management. Multiple

products including AVEVA IE&D™, AVEVA Bocad™, AVEVA NET,

AVEVA ERM™ and AVEVA LFM™.

Historically used home-grown system for domestic nuclear plant

design, but expansion prompted the need for a commercially

available design platform to meet international standards and

systems.

The world’s largest ship, ‘Pioneering Spirit’, goes into operation

later this summer. Designed using AVEVA’s tools.

Replacing competitor technology, customer is creating Digital

Assets for a large energy company in the UK. Laser scanning

technology and integration with AVEVA E3D were key.


Financial review

James Kidd, CFO


Financial highlights

FY

2015

FY

2014

Change

Total revenue £208.7m £237.3m 12%

Organic constant currency revenue* £220.4m £237.3m 7%

Adjusted** profit before tax £62.1m £78.3m 21%

Adjusted** basic EPS 74.5p 89.1p 16%

Adjusted** profit before tax margin 29.8% 33.0%

Final dividend per share 25.0p 22.0p 14%

Net cash £103.8m £117.5m 12%

Operating cash flow before tax £45.1m £70.2m 36%

*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

revenue from 8over8.

**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 the fair value of forward foreign exchange contracts and exceptional items. In addition, adjusted basic earnings per

share also includes the tax effects of these adjustments.

13


Summary income statement

Organic

£m

8over8

£m

FY 2015

£m

FY 2014

£m

Total revenue 207.6 1.1 208.7 237.3

Cost of sales (15.2) (0.3) (15.5) (17.4)

Gross profit 192.4 0.8 193.2 219.9

Operating expenses (130.0) (1.4) (131.4) (142.1)

Net interest receivable 0.3 - 0.3 0.5

Adjusted** profit/(loss) before tax 62.7 (0.6) 62.1 78.3

Normalised items (7.2) (9.3)

Reported profit before tax 54.9 69.0

Income tax (13.3) (18.0)

Profit after tax 41.6 51.0

Adjusted** profit margin 29.8% 33.0%

Effective tax rate 24.2% 26.1%

Adjusted** basic EPS (pence) 74.5 89.1

14


Summary balance sheet

March 2015

£m

March 2014

£m

Non-current assets 90.9 74.0

Accounts receivable (net of provision £5.6m (2014 - £5.2m)) 88.6 77.8

Other receivables 10.1 8.6

Net cash and deposits 103.8 117.5

Total assets 293.4 277.9

Other liabilities 41.1 47.5

Deferred revenue 48.2 36.5

Pension liabilities 14.2 8.9

Shareholders’ equity 189.9 185.0

Total shareholders’ equity and liabilities 293.4 277.9

Accounts receivable high because of back-end loaded Q4 billings

Deferred revenue up due to 8over8 (£4.5m) and the impact of maintenance deferral and multi-year contracts

Pension liability valuation in UK impacted by discount rate – scheme closed to future accrual from 31/3/15

15


Organic revenue by category

2014/15

Reported

£m

2014/15

Constant

currency*

£m

2013/14

Reported

£m Change

Annual fees 60.2 64.4 57.1 13%

Rental licence fees 97.2 102.2 109.9 (7%)

Recurring revenue 157.4 166.6 167.0 -

Initial licence fees 31.1 33.5 48.4 (31%)

Services 19.1 20.3 21.9 (7%)

Total 207.6 220.4 237.3 (7%)

Strong growth in annual fees following ILF performance in FY14 and China catch-up benefit

Initial licences impacted by lower offshore Oil & Gas activity in Asia Pacific

Rental fees impacted by renewals in Asia Pacific and Latin America but resilient in H2

* Revenue on a constant currency basis is defined as the period’s reported revenue restated to reflect the previous year’s average exchange rates and excludes the


16


Resilient performance in H2 FY15

2014/15

£m

2013/14

£m Change

Annual fees 32.6 28.7 14%

Rental licence fees 67.8 62.7 8%

Recurring revenue 100.4 91.4 10%

Initial licence fees 17.7 26.8 (34%)

Services 10.0 10.6 (6%)

Total 128.1 128.8 -

* Revenue is stated on an organic, constant currency basis.

17


Global performance

Global Account

renewals strong,

Central Europe

weaker

Oil & Gas in

Norway/UK tough

EMEA

£112.9m*

(2014 - £112.0m)

Asia Pacific

£69.3m*

(2014 - £86.9m)

Rental fees

Initial fees

Annual fees

Training & services

Good level of

EPC renewals in

North America

Impact of Oil &

Gas in Brazil

Double digit

growth in China,

Oil & Gas projects

impact in SE Asia

and South Korea

Americas

£38.2m*

(2014 - £38.4m)

(Reported £36.8m)

(Reported £103.5m)

(Reported £67.3m)

* Revenue is stated on an organic, constant currency basis.

18


Organic cost base

2014/15

Reported

£m

2014/15

Constant

currency*

£m

2013/14

Reported

£m Change

Cost of sales 15.2 16.1 17.4 (7%)

Research & Development 28.1 29.3 32.9 (11%)

Selling & distribution 85.3 90.3 90.4 –

Administrative 16.6 19.3 18.8 3%

Total opex 130.0 138.9 142.1 (2%)

Total costs 145.2 155.0 159.5 (3%)

R&D benefited from moving headcount from outsourced model in India and cuts in discretionary spend

Selling and distribution flat due to investment in sales offset by savings in commissions

Admin expenses increased due to some one-off costs and investment in information systems, offset by lower

bonuses

* Costs are stated on a constant currency and after adjusting for amortisation of intangible assets (excluding other software), share-based payments, gain/loss on the fair value of forward foreign exchange contracts and exceptional items. Constant currency is defined as the period’s reported costs restated to reflect the previous year’s average exchange rates. This also excludes the costs from 8over8.

19


Cost base (2)

Reduction in opex of £10m+ in H2 delivered against original plan

Total costs in constant currency terms reduced by 3% v FY14

FY16 focus on efficiency and effectiveness

– Further action taken on costs in FY15/16 to offset cost increases

• Annualised saving £3m

• Exceptional costs £0.9m FY15, expected cost c£2.5m in FY16

• Continued control over discretionary spend – travel, sub-contractors etc

– Merger of EDS and ES will also help drive efficiencies

20


Profit analysis

10

20

30

40

50

60

70

80

FY14 Adj PBT Revenue COS OPEX Net interest 8over8 FY15 Adj PBT

78.3 (29.7)

2.2

12.1 (0.2) (0.6) 62.1

£ m

illio

n

Bonuses and commissions

21

Adjusted profit before tax

margin 29.8% (2014 – 33%)

Reduction in revenue offset in

part by reduced costs

Small loss from 8over8 in its

first quarter post acquisition


Movement in net cash position

Cash from operations down due to phasing of billings in Q4 Acquisition of 8over8 Limited for £25.6m (net of cash on balance sheet) Cash conversion 83% (2014 – 102%)

0

50

100

150

200

250

31-Mar-14 Cash from

operationsTax CAPEX Acquisitions Dividends FX/other 31-Mar-15

117.5

45.1 (14.2)

(2.7) (25.6)

(17.6)

1.3 103.8

£ m

illio

n

22


Segmental reporting update

AVEVA’s segmental reporting will change for FY16

– ‘One AVEVA’ initiative firmly established within Sales

– We are seeing an acceleration in the convergence of our Engineering

Design Tools and Information Management software

– We have recently unified our Solutions and Technology and professional

services teams, to optimise R&D and delivery

– FY15 is the last time we will report Engineering & Design Systems and

Enterprise Solutions as lines of business

FY16 reporting shall include geographic segments

– Revenue and profitability by region

– Interims will contain full details and comparatives

23


Summary and outlook

Richard Longdon, CEO


Outlook

Capitalising on AVEVA’s traditional strengths

– Industry-leading technology

– First-class customer service

Drive further penetration of installed base via

innovative new products

Focus on efficient use of resources, balancing costs

with opportunity

Core fundamental drivers of our markets are

unchanged, although cautious near-term outlook

Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.25


Appendices


Revenue by category

Organic

£m

8over8

£m

2014/15

Reported

£m

2014/15

Organic

Constant

Currency*

£m

2013/14

Reported

£m

Organic

Constant

Currency

change

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%)

Services 19.1 0.3 19.4 20.3 21.9 (7%)

Total 207.6 1.1 208.7 220.4 237.3 (7%)

* 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


27


Cost base

Organic

£m

8over8

£m

2014/15

Normalised

£m

2014/15

Organic

Constant

Currency*

£m

2013/14

Normalised

£m

Organic

Constant

Currency

change

Cost of sales 15.2 0.3 15.5 16.1 17.4 (7%)

Research &

Development28.1 0.8 28.9 29.3 32.9 (11%)

Selling & distribution 85.3 0.5 85.8 90.3 90.4 –

Administrative 16.6 0.1 16.7 19.3 18.8 3%

Total opex 130.0 1.4 131.4 138.9 142.1 (2%)

Total costs 145.2 1.7 146.9 155.0 159.5 (3%)

* Organic constant currency costs are defined as the period’s reported costs restated to reflect the previous year’s exchange rates and excludes costs from 8over8.

28


Summary cash flow

FY 2015

£m

FY 2014

£m

Net cash from operating activities 45.1 70.2

Tax paid (14.2) (18.2)

Acquisitions (25.6) -

Capital expenditure (net) (2.7) (4.9)

Interest received (net) 0.7 1.1

Purchase of own shares (0.3) (0.7)

Dividends paid (17.6) (116.5)

Net decrease in cash (14.6) (69.0)

Foreign exchange movement 0.9 (3.9)

Opening cash and deposits 117.5 190.4

Closing cash and deposits 103.8 117.5

29


Engineering & Design Systems

FY 2015

£m

FY 2014

£m

Revenue 182.7 211.5

Annual fees 54.7 51.4

Rental licence fees 92.7 105.5

Recurring revenue 147.4 156.9

Initial licence fees 27.4 45.5

Services 7.9 9.1

Total revenue 182.7 211.5

Operating costs (45.7) (48.5)

Contribution 137.0 163.0

30


Enterprise Solutions

Organic

£m

8over8

£m

FY 2015

Total £m

FY 2014

£m

Revenue 24.9 1.1 26.0 25.9

Annual fees 5.6 0.5 6.1 5.7

Rental licence fees 4.5 0.3 4.8 4.5

Recurring revenue 10.1 0.8 10.9 10.2

Initial licence fees 3.7 - 3.7 2.9

Services 11.1 0.3 11.4 12.8

Total revenue 24.9 1.1 26.0 25.9

Operating costs (25.5) (1.1) (26.6) (29.3)

Contribution (0.6) - (0.6) (3.4)

31


Currency effect on revenue – FY16

Currency % of FY15 revenue

A: Average rate FY15

B: Spot rate 31/3/15

Delta(A / B)

FY16 rev impact

EMEA 50% -7%

EUR 1.27 1.36 +7%

NOK 10.78 11.85 +10%

RUB 72.43 85.83 +18%

Asia Pacific 32% 1%

CNY 9.92 9.08 -8%

INR 98.53 92.87 -6%

JPY 176.76 177.48 0%

KRW 1,709.88 1,641.33 -4%

AUD 1.84 1.92 +4%

Americas 18% -2%

USD 1.61 1.48 -8%

BRL 3.97 4.82 +21%

MXP 22.09 22.60 +2%

Total 100% -4-5%

32


Definition of terms

Item Definition

Initial Licence FeeInitial Licence Fee (ILF) - users are charged an initial licence fee per seat together with an obligatory annual

fee.

Annual FeeCharged in association with an ILF providing customer support and maintenance, which includes core

updates. Users must pay the annual fee in order to maintain the right to use the software.

Rental licence modelAn alternative to the ILF plus annual fee model, there are three different types of rental licence: Monthly

invoicing, contractual period (typically one year, invoiced up front) or token licensing.

Token-based licensingThe user pays for a 'basket of tokens' representing licences to use different software products over a

defined period of time. The customer can draw down on these licences as required.

Revenue recognition

ILFs – recognised upfront after usual delivery and acceptance conditions are met. Annual fees – recognised

ratably over the period (typically 12 months). Rental licences - an estimated licence element is recognised

up front, and the remaining maintenance element is recognised ratably over the contracted period. Services

are recognised on a percentage complete basis.

Revenue by geography

The sales force is organised into three geographic regions. Revenue is allocated based on where the

contracting entity of the customer is based. AVEVA's Global Accounts often choose to purchase software in

one geography for use in another.

Recurring revenue Annual fees plus rental fees.

Adjusted PBTProfit Before Tax adjusted to exclude the effects of amortisation of intangibles (excluding software), share-

based payments, gain/loss on fair value of forward foreign exchange contracts and exceptional items.

Constant currencyThe period’s reported result restated to reflect the previous year’s average exchange rates, for the purpose

of a constant currency comparison.

Adjusted EPSAdjusted PBT is used to calculate the adjusted earnings per share, after an adjustment for the tax effect of

the items adjusted.

Cash conversion Cash flow from operations divided by the operating profit for the period, measured as a percentage.

BacklogContracted revenue that has not yet been recognised but which is expected to be recognised in the next 12

months. Revenue backlog also includes 12 months of annual fees.

33

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