TIDMAVV
RNS Number : 7039Z
AVEVA Group PLC
25 May 2021
AVEVA GROUP PLC
RESULTS FOR THE YEARED 31 MARCH 2021
Strong second half performance following a Covid-affected first
half
Strategic position further enhanced following acquisition of
OSIsoft
AVEVA Group plc ('AVEVA' or 'the Group') announces its
preliminary results for the year ended 31 March 2021.
On 19 March 2021, the Group announced the completion of the
acquisition of OSIsoft, LLC ('OSIsoft) enhancing AVEVA's ability to
accelerate the digital transformation of the industrial world.
The statutory results(1) reflect 12 months of trading for
standalone AVEVA and 13 days of trading for OSIsoft since the
acquisition. To provide a better understanding of the combined
trading performance and to improve transparency, non-statutory
results are also shown for the combined Group on a pro forma
12-month basis(2) ; and summary results are shown for the AVEVA and
OSIsoft business on a 12-month standalone basis.
We believe that the pro forma results for the combined Group
give the most insight both into the historic performance of the
Group as it is structured today and the most appropriate basis from
which to consider the outlook.
Highlights
Statutory results
-- Revenue was GBP820.4m (FY20: GBP833.8m) including GBP803.0m
from AVEVA and GBP17.4m from OSIsoft.
-- Profit from operations was GBP36.6m (FY20: GBP95.0m).
-- Proposed final dividend of 23.5 pence, representing a small
increase versus the prior year after adjusting for the rights issue
bonus factor.
Combined AVEVA Group on a 12-month pro forma basis
(unaudited)
-- On an organic constant currency basis (3) pro forma revenue
for the combined Group grew 2.2%, with both the standalone AVEVA
business and OSIsoft delivering double digit revenue growth in the
second half of the financial year.
-- Pro forma constant currency Annualised Recurring Revenue
(ARR) (4) increased 8.6% to GBP704.8m (FY20: GBP648.9m).
-- Pro forma revenue reduced by 1.4% to GBP1,196.1m (FY20:
GBP1,213.2m) and adjusted(5) EBIT grew 8.1% to GBP354.7m (FY20:
GBP328.1m), representing a margin of 29.7% (FY20: 27.0%).
-- The standalone AVEVA business was resilient, achieving
revenue growth of 0.2% on an organic constant currency basis, while
increasing recurring revenue as a percentage of total revenue to
67.9% (FY20: 62.2%) and adjusted EBIT margin to 27.1% (FY20:
26.0%).
-- The standalone OSIsoft business performed well, strengthening
its growth as the year progressed to achieve full year revenue
growth of 6.6% on an organic constant currency basis, while
increasing recurring revenue as a percentage of total revenue to
64.8% (FY20: 59.2%) and adjusted EBIT margin to 34.8% (FY20:
29.3%).
-- The business environment has improved in most major markets
following the disruption caused by Covid-19 in the first half of
FY20 and the board is confident in the outlook for AVEVA in
FY22.
Chief Executive Officer, Peter Herweck said:
"The last year has been transformational for AVEVA. The Group
reacted quickly to the Covid crisis, so that despite a challenging
first half, the second half saw double-digit revenue growth. At the
same time, our transition to Subscription continues at pace.
The acquisition of OSIsoft has established AVEVA as a clear
global leader in operational industrial software, further enhancing
our ability to lead the digital transformation of the industrial
world, with a more diversified customer base, supporting their
energy transition and sustainability journeys.
Initial customer feedback on the combination of AVEVA and
OSIsoft has been extremely positive and I look forward to capturing
the significant value opportunity over the coming years. Although
early in the financial year, trading has started we ll for the
enlarged AVEVA Group and it is performing in-line with our
expectations."
Summary results
Year ended 31 March 2021 2020 Change
Combined AVEVA Group on a 12-month pro forma basis (unaudited)
Revenue GBP1,196.1m GBP1,213.2m (1.4)%
------------ ------------ --------
AVEVA GBP803.0m GBP833.8m (3.7)%
------------ ------------ --------
OSIsoft GBP393.1m GBP379.4m 3.6%
------------ ------------ --------
Annualised recurring revenue GBP704.8m GBP648.9m 8.6%
------------ ------------ --------
Adjusted EBIT GBP354.7m GBP328.1m 8.1%
------------ ------------ --------
AVEVA GBP218.0m GBP216.8m 0.6%
------------ ------------ --------
OSIsoft GBP136.7m GBP111.3m 22.8%
------------ ------------ --------
Profit before tax GBP50.6m GBP19.0m 166.3%
------------ ------------ --------
Adjusted profit before tax GBP338.7m GBP299.0m 13.3%
------------ ------------ --------
Adjusted diluted earnings per
share 105.3p 94.1p 11.9%
------------ ------------ --------
AVEVA Group plc statutory results
Revenue GBP820.4m GBP833.8m (1.6)%
------------ ------------ --------
Profit from operations GBP36.6m GBP95.0m (61.5)%
------------ ------------ --------
Adjusted EBIT GBP226.4m GBP216.8m 4.4%
------------ ------------ --------
Diluted earnings per share (7) 11.27p 34.60p (67.4)%
------------ ------------ --------
Adjusted diluted earnings per
share 81.31p 86.75p (6.3)%
------------ ------------ --------
Notes
(1) Statutory results include the results for the standalone
AVEVA Group for the 12 months to 31 March 2021 and results for
OSIsoft since the acquisition date, compared to the results of the
standalone AVEVA business only for FY20.
(2) FY21 combined Group pro forma results include results for
both AVEVA and OSIsoft for the 12 months to 31 March 2021, as if
the acquisition of OSIsoft and the associated financing had
occurred at the start of FY20.
(3) Organic constant currency revenue excludes a currency
translation reduction of GBP31.2 million; and adjusts for the
disposals of Wonderware Italy, Germany and Scandinavia.
(4) The annualised value of recurring revenue streams including
Maintenance, Subscription and Cloud contracts.
(5) Adjusted metrics are calculated before amortisation of
intangible assets (excluding other software), share-based payments,
gain/loss on fair value of forward foreign exchange contracts and
exceptional items. Adjusted Earnings Per Share also includes the
tax effects of these adjustments.
(6) Recurring revenue is defined as subscription revenue plus
maintenance revenue.
(7) Basic and diluted EPS figures for the standalone AVEVA in
comparative periods have been restated and adjusted for a bonus
factor of 0.8 to reflect the bonus element of the November 2020
rights issue.
Enquiries:
AVEVA Group plc
Matt Springett, Head of Investor Relations Tel: 07789 818
684
FTI Consulting LLP
Edward Bridges / Dwight Burden Tel: 0203 727 1017
Conference call details
AVEVA will host a conference call for registered participants,
at 09:30 (BST) today.
Conference calls dial in details:
UK: 020 3936 2999
USA: 1 646 664 1960
All other locations: +44 203 936 2999
Conference call code: 848591
A replay of the call will be made available later in the
day.
Chairman's Statement
Overview
The last year was one of strong progress for AVEVA, despite the
challenges posed by the Covid-19 pandemic. The Group adapted
swiftly to the new operating environment, with the business
demonstrating resilience. Although the first half of the financial
year was significantly impacted by disruption, business improved in
the second half as our customers and employees got used to new ways
of working.
We continued to invest in AVEVA's future growth increasing our
investment in core areas of Research & Development, such as
Cloud and Artificial Intelligence, while completing the acquisition
of OSIsoft, a global leader in real-time industrial data software
and services.
We are proposing a final dividend of 23.5 pence per share, which
represents a small increase after adjusting for the bonus factor in
relation to the rights issue.
Strategic developments
Three years after the combination of heritage AVEVA and the
Schneider Electric industrial software business created a global
leader in industrial software, AVEVA acquired OSIsoft, further
enhancing the Group's ability to accelerate the digital
transformation of the industrial world, as a leading independent,
hardware-agnostic software company. I would like to extend a warm
welcome from the Board to all our new colleagues who have joined
the Group from OSIsoft.
Combining the complementary product offerings of AVEVA and
OSIsoft, which brings together industrial software applications
with the market-leading industrial data platform, will enable AVEVA
to broaden and deepen its relationships with customers, while
further diversifying the Group's end markets and developing its
ability to assist customers on their energy transition journeys.
This is expected to result in substantial revenue synergies, in
addition to GBP20 million of cost synergies.
We continue to align all aspects of our business to ESG best
practice, creating products that meet the current and future needs
of our customers whilst ensuring that we are encouraging an
organisational ethos that embraces diversity and inclusion, such
that AVEVA remains a great place to work and an employer of choice
in a highly competitive marketplace.
Board developments
As I covered in my Statement last year, Emmanuel Babeau resigned
as a Non-Executive Director, Vice Chairman of the Board and member
of the Remuneration Committee effective 30 April 2020. Emmanuel was
replaced by Olivier Blum as a Non-Executive Director and member of
the Remuneration Committee. Peter Herweck assumed the role of Vice
Chairman on the same date.
Peter Herweck stepped up to become AVEVA's CEO on 1 May 2021. He
is very familiar with AVEVA's business having served on AVEVA's
Board since 2018 and was instrumental in the creation of the AVEVA
Group as it is now structured. Peter played a key role in both
bringing together AVEVA and the Schneider Electric industrial
software business and more recently AVEVA and OSIsoft.
Craig Hayman stepped down as CEO on 1 May and will retire from
the Board following our AGM in July. During his three-year tenure,
Craig has overseen the successful integration of the Schneider
Electric industrial software business, the progress of the Group to
a FTSE100 position, and the completion of the acquisition of
OSIsoft. The Board would like to thank Craig for his service as CEO
and wish him all the best for the future.
Summary
The Board would also like to thank all our employees for their
hard work and flexibility over the last year, particularly given
the additional challenges arising from the Covid crisis. We also
thank our customers, shareholders and other stakeholders for their
continued support, and we look forward to a successful future
together.
Philip Aiken AM
Chairman
25 May 2021
Chief Executive's review
Summary
AVEVA made strong operational and strategic progress during the
financial year, making good headway on our subscription transition
journey and completing the acquisition of OSIsoft.
During the first half of the year, revenue for the standalone
AVEVA Group was impacted by the disruptions of the Covid-19
pandemic, although performance improved significantly during the
second half, resulting in broadly flat year-on-year revenue on an
organic constant currency basis.
The OSIsoft business experienced a similar pattern to the
financial year, with a strong second half leading to 6.6% growth in
organic constant currency revenue. This resulted in combined Group
pro forma revenue growing by 2.2% on the same basis. Although this
is well below longer-term trends, it was an acceptable outcome
given the global challenges faced during the period. Cost control
measures, together with saving on expenditure such as travel due to
the Covid restrictions, led to an improvement in overall Group
adjusted EBIT of 8.1% to GBP354.7 million (FY20: GBP328.1 million)
and adjusted EBIT margin to 29.7% (FY20: 27.0%) on a pro forma
basis.
The standalone AVEVA business increased recurring revenue as a
percentage of total revenue to 67.9% (FY20: 62.2%). This was ahead
of the Group's medium-term target of 60%. AVEVA remains committed
to its subscription transition journey. With the standalone AVEVA
target exceeded and the addition of OSIsoft to the Group, AVEVA is
formulating new Subscription transition targets and will disclose
increased targets at the forthcoming Capital Markets Day on 1
July.
Operating during the Covid-19 pandemic
AVEVA adapted quickly to a new way of working, with a focus on
the safety and wellbeing of employees.
From a demand generation perspective, we made substantial
investments in digital marketing, for example by hosting virtual
AVEVA World Digital conferences. In the context of the experiences
since the beginning of the Covid-19 pandemic, the Group has
undertaken a 'Dynamic Work' project and will retain many of the
efficiency and productivity gains achieved into the longer-term,
for example with less travel and more flexible working
practices.
Acquisition of OSIsoft
On 25 August 2020, AVEVA announced that it had reached agreement
to acquire OSIsoft at an enterprise value of $5.0 billion. OSIsoft
is a global leader in real-time industrial data software. Through
OSIsoft's PI System, customers draw insights, make better
decisions, optimise operations, and drive digital
transformation.
The acquisition completed on 19 March 2021. This followed a
successful rights issue and the securing of a $900 million term
loan in order to part finance the purchase, and the receipt of
regulatory approvals.
AVEVA is now the clear global leader in operational industrial
software, with Engineering software representing around one-third
of Group revenue and operational software two-thirds.
OSIsoft performed well during the year ended 31 March 2021,
achieving 6.6% growth on a constant currency basis. As with
standalone AVEVA, OSIsoft experienced more difficult trading
conditions in the first half of the year, followed by a recovery in
the second half. Revenue growth in the second half was 10.6%, up
from 2.0% in the first half on an organic constant currency basis.
On an end market basis, growth was driven by a strong performance
in OSIsoft's largest market, Power. Chemicals and Pharma & Life
Sciences also saw strong growth, while Energy saw a moderate
decline.
AVEVA expects substantial revenue synergies from areas including
cross selling, expanding OSIsoft's global reach and developing and
launching new combined products. In addition to this, pre-tax cost
synergies are expected of not less than GBP20 million per annum on
a run rate basis by the end of FY23.
AVEVA has appointed a Senior Vice President to lead the
integration function, reporting to the Deputy CEO and CFO. The
integration of OSIsoft has begun, with a management structure for
the combined Group having been implemented. The next stage of
integration is to begin the implementation of value capture
opportunities. These include both revenue and cost synergies.
Of these, the revenue synergy opportunity is the largest.
OSIsoft's global market-leading data platform provides an
unrivalled base from which to run and integrate industrial software
applications and discussions with key customers have been very
positive, showing demand for integrated products. An example of
this is AVEVA's plan to integrate Predictive Analytics with
OSIsoft's capabilities and bring a combined offer to Power
customers. In terms of cost synergies, work to remove duplicate
overhead costs, systems and processes has begun. For example, AVEVA
has a programme to consolidate offices in 17 locations where there
is overlap.
Trading and market trends
AVEVA and OSIsoft were run separately during the financial year,
with the acquisition completing shortly before the year end.
Notwithstanding this, both businesses experienced similar market
trends during the year and so the commentary below relates to the
wider Group. We have reported this on a pro forma basis, which is
unaudited.
The industries that AVEVA serves are making ever-greater use of
technology to reduce both capital and operating costs in the
context of competitive pressures to increase efficiency, output,
flexibility and improve overall sustainability. This is being
enabled by ongoing technological mega trends that are driving the
digitalisation of the industrial world, notably the industrial
internet of things, Cloud, data visualisation and AI.
This is driving long-term growth in demand for industrial
software. AVEVA is optimally placed to help its customers
digitalise, due to its end-to-end product portfolio, which runs
from simulation through design and construction and into operations
and now also includes OSIsoft's rich industrial data layer.
AVEVA primarily serves process, batch and hybrid industries.
These industries provide staple requirements for basic consumption,
such as Energy, Food, and Transport. As such, they have some level
of resilience to Covid disruption. Notwithstanding this, the Group
experienced tough trading conditions in the first half of the
financial year across most markets. This was primarily due to
general disruption and uncertainty impacting the speed of
customers' decision making.
AVEVA's largest end market is Energy at around 35% of pro forma
revenue, which includes upstream, mid-stream and downstream Oil
& Gas and the emerging renewable energy sector. Power is
AVEVA's second largest market at around 15% of revenue, while
Packaged Goods (such as Food & Beverage and Pharma) and
Chemicals both account for around 10% of revenue. Other end markets
include Metals & Mining, Marine and Infrastructure.
Energy was particularly challenged due to the extreme volatility
in oil prices. Other large markets have been more resilient,
including Power, Food & Beverage, Packaged Goods and Pharma.
The shipbuilding market has continued to experience depressed
trading conditions.
Standalone AVEVA Cloud
Demand for Cloud products was good with overall SaaS and
customer-hosted Cloud sales increasing strongly. In line with
AVEVA's 'Cloud First' focus, several key products were launched on
AVEVA Connect, the Group's Cloud platform. These included AVEVA
Unified Engineering, providing key engineering products such as
E3D, Engineering and Simulation in a single Cloud environment;
AVEVA Unified Supply Chain; AVEVA Insight Guided and Advanced
Analytics; and AVEVA Asset Information Management. The number of
customers using AVEVA Connect increased substantially.
Standalone AVEVA business unit performance
During the year, AVEVA was organised into four business units:
Engineering, Monitoring & Control, Asset Performance Management
and Planning & Operations.
Following the year end, this structure has been simplified, with
AVEVA's business being organised into two areas, Engineering and
Operations. Engineering contains products that are focused on the
capital expenditure lifecycle of industrial assets and Operations
contains products that are focused on the operating lifecycle of
these assets. The new Operations business unit consists of the
software that was previously in Monitoring & Control, Asset
Performance Management, Planning & Operations and OSIsoft.
In terms of the performance of the former business units,
Engineering consists of simulation, design and project execution
software. It contributed 42% of revenue for the standalone AVEVA
during the year. On an organic constant currency basis, revenue
declined by 4.3%, while recurring revenue declined by 2.4%, which
in the context of the difficult global capital expenditure
environment was robust, helped by our ability to help customers
mitigate risk in capital project execution and use engineering
information management in operations.
AVEVA's strength across both engineering and operational
software, and the associated benefits to customers of using AVEVA
as a supplier for both, led to an increase in orders from owner
operators managing engineering information as the core of their
digitalisation strategies to build the Digital Twin within their
existing plant facilities. We saw significant wins from Shell and
BHP Group.
From our EPC customers, we saw significant contract wins from
Wood, Worley and Petrofac. Although the Covid crisis had an impact
on planned capital projects being postponed, we saw demand shift
from 3D design software to project execution software, as AVEVA
continues to drive digital transformation with these customers.
In terms of end markets, there was a reduction in orders from
Oil & Gas and Marine, but assisted by the energy transition, we
saw an increase in orders from the Power end market with
significant contract wins, for example from EDF.
Monitoring & Control represented 32% of total revenue for
the standalone AVEVA. On an organic constant currency basis,
revenue grew by 6.4%, while recurring revenue increased by 28.5%.
Customers continued to focus on operations efficiency, remote
operations and collaboration. Enterprise visibility and performance
management are being realised by AVEVA's Unified Operations Center
solutions. Transition to AVEVA's Flex Subscription offer continued
successfully. In terms of end markets, AVEVA saw strength in
mid-stream Oil & Gas with a number of key wins including from
SoCalGas, and in other sectors AVEVA achieved significant order
wins from customers including BHP Group.
Asset Performance Management represented 14% of total revenue
for the standalone AVEVA. On an organic constant currency basis,
revenue declined by 2.1% while recurring revenue increased by
15.0%. This was due to lower sales of perpetual licences and
services as part of AVEVA's Subscription transition, with strong
growth in Subscription. AVEVA won its first mining customer in APM
and continued a substantial global roll-out with an Energy
major.
Planning & Operations represented 12% of total revenue for
the standalone AVEVA. On an organic constant currency basis,
revenue grew by 2.9% while recurring revenue increased by 20.3%.
Growth was supported by sales of Supply Chain planning solutions to
help customers in the Energy sector operate efficiently in the
context of the disrupted market. AVEVA also saw growth in the Food
& Beverage and Metals & Mining sectors for Manufacturing
Execution software.
Standalone AVEVA regional performance
EMEA revenue was GBP328.4 million, representing a small increase
on the previous year (FY20: GBP327.1 million). On an organic
constant currency basis, sales grew 5.4%. In the first half of the
year we saw our customers respond to the challenges of remote
working with the successful conclusion of new business based on
AVEVA Connect Cloud supporting access to AVEVA's solutions. As the
second half saw customers adopt to new ways of working, AVEVA saw
material new contract extensions in the Food & Beverage,
Marine, and Energy sectors, with notable new customer wins
addressing renewable energy and carbon capture.
Sales growth was helped by the renewal of large Global Account
contracts in the second half; reflecting AVEVA's long standing
strategic engagements with the world's largest EPC contractors and
new wins with global Super Majors. In addition, EMEA won a new
commitment with our largest and longest standing customer in
nuclear power generation, which lays the foundation of the next 20
years of strategic engagement.
Americas revenue was GBP255.8 million, representing a decline of
8.4% on the previous year (FY20: GBP279.2 million). On an organic
constant currency basis, sales declined 3.7%, with significant
reductions in perpetual licences and services partly offset by good
growth in subscription and Cloud sales. Trading conditions were
challenging due to the depressed economy and difficult conditions
in the Oil & Gas sector in particular.
Asia Pacific revenue was GBP218.8 million, representing a 3.8%
decline on the previous year (FY20: GBP227.5 million). On an
organic constant currency basis, sales declined 2.4% against a very
tough comparative in the previous year, which included a large
Global Accounts contract. AVEVA delivered strong double-digit
growth during the second half of the year, following a difficult
first half due to the Covid pandemic.
The Group delivered successfully on an end market
diversification strategy, with Chemicals and Metal & Mining
delivering very strong performance while Oil & Gas has been
under pressure and the Marine market was challenging. AVEVA grew
its business in South Korea and Japan, while performance in China
was broadly flat due to the strong pandemic influence at the
beginning of the year and with strong recovery in the second half.
Due to a reduction in capital expenditure, Engineering revenue
declined as anticipated, however Operations solutions showed strong
growth, particularly in the area of Asset Performance and Planning
& Operations.
Environmental, Social and Governance
Many of AVEVA's customers are focused on sustainability, as they
transition to business models that are aligned with objectives such
as carbon reduction and circularity.
The Group's software supports the development of industries such
as clean power generation. In more mature industries it increases
energy efficiency, helps reduce waste and boosts circularity
throughout engineering and operations to maximise sustainable
performance.
During the year, the remote deployment of AVEVA Unified
Operations Centre enabled Saudi Aramco to monitor emissions and
optimise energy usage; while Neste, the world's leading producer of
renewable diesel and sustainable aviation fuel, used AVEVA's
Unified Supply Chain to drive collaboration between its remote
teams, boosting efficiency. Several of AVEVA's EPC customers used
AVEVA(TM) Unified Engineering to help pioneer hydrogen production
designs while other engineering companies use our software for
onshore windfarms.
The acquisition of OSIsoft has significantly strengthened
AVEVA's position in the power generation, transmission and
distribution end markets, where software is essential to help power
networks cope with intermittent supply from wind and solar.
AVEVA has accelerated investment in the area of sustainability
and hosts a sustainability Customer Advisory Board, with members
including global market leaders across the process, batch and
hybrid industries.
In addition to the strong contribution that AVEVA is making to
sustainability through its products, the Group also invested in
other areas of ESG during the year. For example, AVEVA recruited a
Head of Diversity & Inclusion (D&I) and has run global
D&I training and is implementing a five-year D&I
strategy.
Outlook
The ongoing digitalisation of the industrial world continues to
drive demand for AVEVA's software. Notwithstanding the continued
uncertainties in relation to Covid, trading conditions have largely
normalised in our major markets following the global disruption at
the start of the crisis. Organic currency neutral growth rates for
the AVEVA and OSIsoft business are expected to be similar to their
long-term trends in the current financial year. As such, the
outlook for AVEVA remains in line with the Board's expectations.
AVEVA will update its long-term targets to include the acquisition
of OSIsoft at its upcoming Capital Markets Day on 1 July.
Peter Herweck
Chief Executive Officer
25 May 2021
Finance review
Overview
On 25 August 2020, AVEVA announced that it had reached agreement
to acquire OSIsoft at an enterprise value of $5.0 billion. The
transaction subsequently completed on 19 March 2021 and therefore
the FY21 statutory results include 13 days of OSIsoft's performance
up to 31 March 2021. The finance review begins with a commentary of
those statutory results.
The finance review then covers the unaudited standalone results
of AVEVA and OSIsoft for FY21 and FY20, and also what the combined
Group would look like on an unaudited pro forma basis for the same
period as if AVEVA had owned OSIsoft from 1 April 2019. This is to
show the underlying performance of both AVEVA and OSIsoft, and to
provide a view of how the combined business now looks.
Statutory results for the year ended 31 March 2021
The statutory results for the year ended 31 March 2021 include
12 months of AVEVA trading and OSIsoft trading since the date of
its acquisition (19 March 2021) compared with the FY20 results for
standalone AVEVA only. OSIsoft contributed GBP17.4 million of
revenue and GBP8.4 million of adjusted EBIT for the 13 days to 31
March 2021.
The statutory results are summarised below:
GBPm Reported
change
------------------ ---------
FY21 FY20
Revenue 820.4 833.8 (1.6)%
Cost of sales* (180.5) (190.1) (5.0)%
Gross profit 639.9 643.7 (0.6)%
Operating expenses* (413.5) (426.9) (3.1)%
Adjusted EBIT 226.4 216.8 4.4%
Net interest and
other income (2.4) (3.0) (20.0)%
Adjusted PBT 224.0 213.8 4.8%
Normalised adjustments (189.8) (121.8) 55.8%
-------- -------- ---------
Reported PBT 34.2 92.0 (62.8)%
-------- -------- ---------
* Cost of sales and 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.
On a statutory basis, revenue for the period was GBP820.4
million which was 1.6% lower compared with the previous year (FY20:
GBP833.8 million). This change was due to tougher trading
conditions due to the Covid crisis and FX translation, partly
offset by the inclusion of OSIsoft for 13 days of the year.
Subscription revenue, which includes rental contracts, token
contracts and Cloud contracts, grew 13.5% to GBP359.7 million
(FY20: GBP316.8 million), primarily due to the growth set out in
the standalone AVEVA commentary below, which grew by 11.4%.
Maintenance revenue reduced by 2.0% to GBP197.7 million (FY20:
GBP201.7 million), due to foreign exchange translation and some
conversion of Maintenance contracts to Subscription.
Perpetual licences reduced 21.0% year-on-year to GBP141.6
million (FY20: GBP179.3 million), due to the tough business
environment and some impact from the transition of customer
purchases into subscription licence models.
Services revenue reduced by 10.7% to GBP121.4 million (FY20:
GBP136.0 million). As part of our planned strategy as set out in
the standalone AVEVA commentary below.
The Group made a profit before tax of GBP34.2 million (FY20:
GBP92.0 million) and on an adjusted basis, driven by the
acquisition and integration costs incurred in the year. The Group
made an adjusted profit before tax of GBP224.0 million (FY20:
GBP213.8 million).
Basic earnings per share was 11.35p (FY20: 34.78p) and diluted
earnings per share was 11.27p (FY20: 34.60p).
Cash generated from operating activities before tax was GBP91.2
million, compared to GBP161.4 million in the previous year. This
reflects the cash paid out in respect of exceptional items of
GBP63.2 million (FY20: GBP28.8 million and the effect of multi-year
contracts and resulting working capital movements on contract
assets.
The statutory tax charge for the year ended 31 March 2021 was
GBP9.4 million (FY20: GBP22.2 million). The effective rate of 27.5%
(FY20: 24.1%) is in line with the US corporation tax rate of 23.7%.
The tax rate was most affected by US alternative minimum tax and
reduced benefits from intellectual property tax incentives, both of
which are calculated on statutory profits.
Dividends
The Directors propose to pay a final dividend of 23.5 pence per
share. After adjustment to reflect the bonus element of the Rights
Issue, this represents an increase of 1% versus the FY20 final
dividend. The final dividend will be payable on 4 August 2021 to
shareholders on the register on 9 July 2021.
Terms and financing of the acquisition of OSIsoft, debt and
capital structure
The acquisition of OSIsoft was at an enterprise value of $5.0
billion, on a cash-free and debt-free basis, assuming a normal
level of working capital and subject to customary completion
adjustments. Completion accounts are in the process of being drawn
up and any final adjustments to the purchase price will be made in
the first half of FY22.
AVEVA funded the $5,086.5 million (GBP3,831.4 million)
consideration via a rights issue raising approximately $3,734.3
million (GBP2,806.9 million), the issue of 13.7 million
consideration shares to the majority selling shareholder worth
$648.4 million (GBP465.7 million) and $703.8 million (GBP558.8
million) from existing cash and new debt facilities including a
$900 million term loan from Schneider Electric.
The rights issue and the issue of consideration shares resulted
in an additional 139.4m AVEVA shares being issued. This resulted in
total shares in issue at 31 March 2021 of 301.2 million (FY20:
161.5 million) ordinary shares of 3.56 pence each.
The $900.0 million debt facility was entered into on 9 October
2020 with Schneider Electric SE and was subsequently assigned to
another Schneider entity. The debt is repayable over a three-year
term, and bears interest at LIBOR plus a margin. The initial margin
was 1.30% but varies dependent upon the net leverage ratio. The
term loan was drawn down on 19 March 2021 when the acquisition
completed and expires on 19 March 2024. The balance as at 31 March
2021 was GBP654.0 million (2020: nil).
Balance sheet
Cash and treasury deposits were GBP286.9 million (FY20: GBP114.6
million) at 31 March 2021. A proportion of this cash was committed
to pay transaction related costs and after payment of these costs
net cash and treasury deposits were GBP217.1 million on 16 May
2021. There will be additional payments to the vendors of OSIsoft
as part of the completion accounts mechanism during the first half
of FY22.
Non-current assets were GBP5.8 billion (31 March 2020: GBP2.0
billion), reflecting goodwill and intangible assets that arose from
the combination with the Schneider Electric industrial software
business and the OSIsoft acquisition. Goodwill and intangible
assets increased to GBP5.6 billion (FY20: GBP1.8 billion) as a
result of the acquisition.
Trade and other receivables were GBP317.0 million (31 March
2020: GBP242.2 million). Contract assets increased to GBP215.6
million from GBP142.4 million at 31 March 2020, due to the upfront
revenue recognition on multi-year contracts signed in the year.
Contract liabilities were GBP239.7 million (31 March 2020:
GBP177.0 million), reflecting the increased size of the Group.
Pro forma results for the year ended 31 March 2021
(unaudited)
We now present the pro forma result for the year. OSIsoft was a
transformational acquisition which helped AVEVA on its journey to
become the global leader in industrial software, further enhancing
the Group's ability to lead the digital transformation of the
industrial world. The OSIsoft business has a strong financial
profile with a track record of delivering strong growth,
profitability and cash conversion, which will enhance AVEVA's
profile.
The acquisition has created a larger business with pro forma
FY21 revenue of GBP1,196.1 million, versus AVEVA's standalone FY21
revenue of GBP803.0 million. The largest proportion of this revenue
now relates to software used for the operation of industrial assets
at around two thirds, with engineering making up the remaining one
third.
GBPm FY21 FY20 Change
unaudited unaudited
------------------------------ ---------- ---------- --------
Revenue 1,196.1 1,213.2 (1.4)%
Cost of sales (229.1) (249.9) (8.3)%
------------------------------ ---------- ---------- --------
Gross profit 967.0 963.3 0.4%
Operating expenses (612.3) (635.2) (3.6)%
------------------------------ ---------- ---------- --------
Adjusted EBIT 354.7 328.1 8.1%
Net interest (16.0) (29.1) (45.0)%
------------------------------ ---------- ---------- --------
Adjusted profit before tax 338.7 299.0 13.3%
Tax charge (20.1) (15.3) (31.4)%
------------------------------ ---------- ---------- --------
Adjusted profit after tax 318.6 283.7 12.3%
Adjusted diluted EPS (pence) 105.3 94.1 11.9%
Gross margin 80.8% 79.4% 140bps
Adjusted EBIT margin 29.7% 27.0% 270bps
Tax charge 5.9% 5.1% 80bps
Combined Group pro forma revenue (unaudited)
Revenue for the combined Group was GBP1,196.1 million,
representing a reduction of 1.4% (FY20: GBP1,213.2 million).
Organic constant currency revenue grew 2.2%, adjusted for a
currency translation headwind of GBP31.2 million and the disposals
of Wonderware Italy, Germany and Scandinavia in the prior year.
As previously announced, the Board believes that there is an
opportunity to generate significant revenue synergies over the
medium term through the combination of AVEVA and OSIsoft. These
include cross-selling AVEVA's portfolio into the OSIsoft customer
base, expansion of OSIsoft's global reach in Asia Pacific and EMEA
through AVEVA's global footprint and enhancing AVEVA's Digital Twin
offering through the combination of engineering and operations
data.
Recurring revenue for the combined Group grew 7.7% to GBP800.2
million (FY20: GBP743.0 million) representing 66.9% (FY20: 61.2%)
of overall revenue. This was driven by strong growth in
subscription of 17.4% with maintenance flat compared with FY20.
Perpetual licence revenue fell by 16.8% principally as a result of
the tougher business environment and the business model transition
in standalone AVEVA. AVEVA intends to continue with its strategy of
increasing the combined Group's overall levels of recurring through
subscription revenue.
The revenue mix for the combined Group is shown below:
Organic
constant
Reported currency % of FY21
GBPm FY21 FY20 change change total
Subscription 387.4 330.1 17.4% 19.8% 32.4%
Maintenance 412.8 412.9 0.0% 4.0% 34.5%
-------- -------- --------- ---------- ----------
Total recurring
revenue 800.2 743.0 7.7% 11.0% 66.9%
Perpetual licences 271.2 326.0 (16.8)% (12.2)% 22.7%
Services 124.7 144.2 (13.5)% (11.3)% 10.4%
-------- -------- --------- ---------- ----------
Total 1,196.1 1,213.2 (1.4%) 2.2% 100%
-------- -------- --------- ---------- ----------
Combined Group pro forma adjusted EBIT (unaudited)
Adjusted EBIT increased by 8.1% to GBP354.7 million (FY20:
GBP328.1 million), reflecting cost control and cost savings
relating to global Covid related restrictions. This resulted in an
adjusted EBIT margin of 29.7% (FY20: 27.0%).
The year-on-year margin improvement resulted from some Covid-19
related cost reductions and an element of these is expected to
return as the restrictions in certain countries are eased, for
example in the areas of travel and customer events.
As announced as part of the acquisition, pre-tax cash cost
synergies are expected of not less than GBP20 million per annum on
a run rate basis by the end of the second full financial year
following completion, which is year ending 31 March 2023.
Combined Group pro forma net interest charge (unaudited)
The combined pro forma assumes that the $900 million term loan
was drawn down on 1 April 2019 and therefore a full year's interest
is charged in each year. Total pro forma net interest would have
been GBP16.0 million (FY20: GBP29.1 million). The year-on-year
reduction was due to lower LIBOR rates in FY21.
Combined Group pro forma earnings per share (unaudited)
Pro forma diluted adjusted EPS increased by 11.9% to 105.3 pence
(FY20: 94.1 pence) primarily as a result of the higher adjusted
EBIT.
Standalone AVEVA r evenue (unaudited)
Revenue for the year on an organic constant currency basis grew
by 0.2%. On a reported basis, revenue declined by 3.7% to GBP803.0
million (FY20: GBP833.8 million). Following a challenging first
half, AVEVA saw second half revenue of GBP470.4 million (FY20:
GBP441.9 million) which was a growth of 6.5% in reported terms or
10.6% in organic constant currency terms driven by strong contract
renewals in Q3.
Revenue by type is set out below:
Organic
constant
GBPm FY21 % of total FY20 % of total Change currency
Subscription 353.0 44.0% 316.8 38.0% 11.4% 13.5%
Maintenance 192.3 23.9% 201.7 24.2% (4.7)% 0.5%
Total recurring
revenue 545.3 67.9% 518.5 62.2% 5.2% 8.5%
Perpetual licences 136.5 17.0% 179.3 21.5% (23.9)% (17.9)%
Services 121.2 15.1% 136.0 16.3% (10.9)% (8.7)%
-------------------- ------ ----------- ------ ----------- -------- ----------
Total 803.0 100% 833.8 100.0% (3.7)% 0.2%
Recurring revenue
Growing recurring revenue, both as a proportion of overall
revenue and in absolute terms, remains a key focus for AVEVA. Total
recurring revenue increased by 5.2% to GBP545.3m (FY20: GBP518.5m).
On an organic constant currency basis, the increase was 8.5%.
Subscriptions revenue, which includes rental contracts, token
contracts and Cloud contracts, grew 11.4% to GBP353.0 million
(FY20: GBP316.8 million) or 13.5% on an organic constant currency
basis. The second half saw strong growth in Subscriptions following
the large contract renewals in the third quarter. Going forward,
AVEVA expects considerable growth in Cloud orders, which are
recognised rateably over the term of the contract. This will impact
the amount of revenue recognised within a year on new Subscription
contracts, but does create backlog for future years.
Maintenance revenue was resilient, reducing by 4.7% to GBP192.3
million (FY20: GBP201.7 million), largely due to foreign exchange
translation (organic constant currency was an increase of 0.5%) and
some conversion of Maintenance contracts to Subscription.
Perpetual licences
Perpetual licences reduced 23.9% year-on-year to GBP136.5
million (FY20: GBP179.3 million), or 17.9% on an organic constant
currency basis, due to the tough business environment and some
impact from the transition of customer purchases into Subscription
licence models.
Services
As planned, services revenue reduced by 10.9% to GBP121.2
million (FY20: GBP136.0 million), or 8.7% on an organic constant
currency basis. Services are sold alongside software licences to
ensure efficient deployment and to generate value faster for
customers. This planned reduction was driven by AVEVA's focus on
increasing the proportion of higher gross margin software as part
of its overall revenue mix in the longer term, while still
undertaking services that support long-term growth, particularly in
newer areas of the business such as Asset Performance Management
and Digital Twin projects.
Standalone AVEVA adjusted EBIT and cost management
(unaudited)
Adjusted EBIT increased 0.6% to GBP218.0 million (FY20: GBP216.8
million). The adjusted EBIT margin increased to 27.1% (FY20: 26.0%)
due to tight cost control and savings archived due to the Covid
pandemic. Some of these costs are expected to come back in FY22 as
restrictions on travel are gradually lifted.
AVEVA continued to invest in strategic areas such as Cloud,
Artificial Intelligence and digital marketing, whilst significantly
reducing costs elsewhere.
Total adjusted costs were GBP585.0 million (FY20: GBP617.0
million), a decrease of 5.2% over the previous year and a decrease
of 3.4% on a constant currency basis.
An analysis of total expenses is summarised below:
Net impairment
loss from
Cost Selling financial Other
GBPm of sales R&D and distribution Admin assets income Total
Statutory 179.8 179.3 222.9 189.7 3.4 (5.5) 769.6
Amortisation ex
other software - (63.9) (26.6) - - - (90.5)
Share-based payments - - - (16.3) - - (16.3)
Gain on FX contracts - - - 0.7 - - 0.7
Exceptional items (0.8) (0.3) (4.6) (78.3) - 5.5 (78.5)
---------------------- ---------- ------- ------------------ ------- --------------- -------- -------
Adjusted costs 179.0 115.1 191.7 95.8 3.4 - 585.0
FY20 190.1 120.7 209.1 89.5 7.6 617.0
Change (5.8)% (4.6)% (8.3)% 7.0% (55.3)% (5.2)%
Constant currency (4.1)% (3.1)% (6.2)% 8.6% (55.3)% (3.4)%
Cost of sales decreased by 5.8% to GBP179.0 million (FY20:
GBP190.1 million). This was driven by a significant reduction in
the cost of delivering services and customer support, including
reduced travel costs, partially offset by significantly higher
Cloud hosting costs.
Research & Development costs were GBP115.1 million (FY20:
GBP120.7 million), representing a decrease of 4.6% with tight cost
control being partly offset by investment in areas including Cloud
and AI.
Selling and distribution expenses were GBP191.7 million (FY20:
GBP209.1 million), an 8.3% decrease versus the prior year. This was
primarily due to lower Sales costs, relating largely to reduced
travel costs, partly offset by an increase in investment in
Marketing and in particular, digital marketing.
Administrative expenses were GBP95.8 million (FY20: GBP89.5
million) representing an increase of 7.0%. This was primarily due
to investment in the IT function to support the larger Group as the
transitional services with Schneider Electric were exited, together
with some expansion of the Finance function.
Net impairment loss from financial assets represents the
impairment of accounts receivable and contract assets during the
year of GBP3.4 million (FY20: GBP7.6 million).
Standalone AVEVA normalised and exceptional items
(unaudited)
The normalised and exceptional items below have been excluded in
presenting the standalone AVEVA's adjusted results. Although
OSIsoft did incur transaction costs relating to the acquisition,
these are not included in these results because the pro forma for
OSIsoft presents results on an adjusted basis.
GBPm FY21 FY20
Acquisition costs 44.4 0.8
Integration activities 37.3 28.2
Restructuring costs 2.3 1.7
Other income (5.5) (11.9)
Total exceptional items 78.5 18.8
----------------------------- ------ -------
Amortisation (excl. other
software) 90.5 90.6
Share-based payments 16.3 12.0
(Gain)/loss on FX contracts (0.7) 0.4
----------------------------- ------ -------
Total normalised items 106.1 103.0
----------------------------- ------ -------
Acquisition and integration activities principally related to
acquisition costs associated with OSIsoft and the tail-end of
integration activities related to the Schneider Electric industrial
software business, such as IT costs related to the exit of the
Transitional Service Agreement, including the new ERP system
implementation. Other income relates to reimbursement of capital
expenditure on integration activities from Schneider Electric.
Amortisation relates to the amortisation of the fair valued
heritage AVEVA intangible assets under acquisition accounting,
following the combination with the Schneider Electric industrial
software business.
Standalone AVEVA operating cash flow (unaudited)
Cash generated from operating activities before tax and
exceptional items was GBP173.3 million, compared to GBP190.2
million in the previous year, resulting in conversion of adjusted
EBIT to operating cash flow of 79% (FY20: 88%). This reflects the
effect of multi-year contracts and particularly those contracts
where customers pay in annual instalments, but revenue is
recognised earlier under IFRS 15.
Net cash paid out in respect of exceptional items was GBP63.2
million (FY20: GBP23.3 million).
Standalone OSIsoft performance (unaudited)
Revenue
Revenue increased 6.6% on an organic constant currency basis. On
a reported basis, revenue increased by 3.6% to GBP393.1 million
(FY20: GBP379.4 million). Similarly to AVEVA, OSIsoft had a weaker
first half of the year due to the disruption caused by Covid with
revenue growth of 2.0% and a stronger second half with organic
constant currency growth of 10.6%.
Revenue by type is set out below:
Organic
constant
GBPm FY21 % of total FY20 % of total Change currency
Subscription 34.4 8.7% 13.3 3.5% 158.6% 169.2%
Maintenance 220.5 56.1% 211.2 55.7% 4.4% 7.3%
Total recurring
revenue 254.9 64.8% 224.5 59.2% 13.5% 16.9%
Perpetual licences 134.8 34.3% 146.7 38.7% (8.1)% (5.6)%
Services 3.4 0.9% 8.2 2.1% (58.5)% (57.3)%
-------------------- ------ ----------- ------ ----------- -------- ----------
Total 393.1 100.0% 379.4 100.0% 3.6% 6.6%
Recurring revenue
Recurring revenue increased from GBP224.5 million to GBP254.9
million representing 64.8% (FY20: 59.2%) of total revenue.
Maintenance revenue increased by 4.4% to GBP220.5 million (FY20:
GBP211.2 million), largely due to new revenue resulting from new
perpetual licence sales and a high retention rate among existing
accounts.
Subscriptions revenue grew 158.6% to GBP34.4 million (FY20:
GBP13.3 million). This was due to broad based growth and assisted
by a larger multi-year contract signed at the end of the financial
year.
Perpetual licences
Perpetual licences decreased 8.1% year-on-year to GBP134.8
million (FY20: GBP146.7 million), due to disruption caused by the
pandemic and in particular weakness in the Oil & Gas
sector.
Services
Services revenue reduced by 58.5% to GBP3.4 million (FY20:
GBP8.2million), due to a sharp decline in on-site training and
field service orders driven by customer responses to the conditions
of the pandemic.
Standalone OSIsoft adjusted EBIT and cost management
(unaudited)
Adjusted EBIT increased 22.8% to GBP136.7 million (FY20:
GBP111.3 million). The adjusted EBIT margin increased to 34.8%
(FY20: 29.3%) due to a combination of the revenue growth and
savings archived due to the Covid pandemic.
Total adjusted costs were GBP256.4 million (FY20: GBP268.1
million), a decrease of 4.4% over the previous year and a decrease
of 1.6% on a constant currency basis.
An analysis of total expenses is summarised below:
Net impairment
loss from
Cost of Selling financial
GBPm sales R&D and distribution Admin. assets Total
Adjusted costs 50.1 53.4 86.4 66.3 0.2 256.4
FY20 59.8 51.2 93.4 64.4 (0.7) 268.1
(16.2
Change )% 4.3% (7.5)% 3.0% - (4.4)%
Constant currency ( 13.9)% 7.2% (4.8)% 5.9% - (1.6)%
Cost of sales decreased by 16.2% to GBP50.1 million (FY20:
GBP59.8 million). This was driven by a reduction in travel by
customer success functions in reaction to conditions of the
pandemic.
Research & Development costs were GBP53.4 million (FY20:
GBP51.2 million), representing an increase of 4.3% due to an
increased investment in Cloud development.
Selling and distribution expenses were GBP86.4 million (FY20:
GBP93.4 million), a 7.5% decrease versus the prior year. This was
due to cancellation of on-site marketing and sales events such as
user conferences, executive summits and trade events, as well as a
steep reduction in travel related expenses. Both decreased as a
result of conditions caused by the pandemic. This decrease was
partly offset by additional investment in sales capabilities.
Administrative expenses were GBP66.3 million (FY20: GBP64.4
million) representing an increase of 3.0%. This was due to
increased professional fees relating to the sale process and
additional investment in business IT and software, such as Azure
and Salesforce.
Net impairment loss from financial assets represents the
impairment of accounts receivable and contract assets during the
year of GBP0.2 million (FY20: income of GBP0.7 million).
Taxation (unaudited)
The pro forma tax charge on adjusted profit before tax was
GBP20.3 million (FY20: GBP15.3 million), which equates to an
effective tax rate of 5.9% (FY20: 5.1%). This tax charge factors in
the benefit of UK and US tax incentives on intellectual property
and the tax step-up relating the acquisition of OSIsoft.
The announced increase in UK corporation tax is expected to have
a minimal impact on the adjusted tax rate because of the continued
benefit of intellectual property tax incentives and the increased
proportion of Group profits earned in the US following the OSIsoft
acquisition.
Combined Group pro forma Annualised Recurring Revenue (ARR)
(unaudited)
In order to make it easier to track the performance of AVEVA's
recurring revenue progression, the Group is introducing a new
metric, Annualised Recurring Revenue (ARR). ARR is a non-GAAP
measure.
ARR removes distortions caused by applying the revenue
recognition accounting standard by annualising the revenue
associated with contracts at a point in time. For example, an
on-premise Subscription contract would have a large element of the
contract recognised upfront, whereas a Cloud Subscription contract
is recognised rateably over the lifetime of the contract. ARR
removes the differences in this revenue recognition treatment to
make it easier to track underlying value progression.
On 31 March 2021, ARR for the combined AVEVA Group was GBP704.8
million. This represented a 12 month increase of 8.6% on a constant
currency basis (31 March 2020: GBP648.9 million). This Group total
consisted of GBP453.8 million of ARR for the standalone AVEVA Group
(FY20: GBP420.9 million) and GBP251.0 million of ARR for OSIsoft
(FY20: GBP228.0 million).
James Kidd
Deputy CEO & CFO
25 May 2021
Review of principal risks and uncertainties
Approach to risk management
The Board of Directors has overall responsibility for risk
management at AVEVA. The CEO also chairs the Executive Risk
Committee, which comprises the Executive team, the Chief
Information Officer (CIO), SVP Integration, the Head of Integration
& Transformation and the Head of Internal Audit & Risk. The
Committee meets formally each quarter with a clear risk-management
agenda. In addition, senior leaders across the business actively
monitor and manage risk as a core part of operational
management.
Key changes in the year
OSIsoft integration - We have added a new principal risk
regarding the acquisition and integration of the OSIsoft business.
The acquisition is transformational and represents significant
financial and operational commitments by the Board to our
stakeholders, as part of a major strategic initiative executed with
a risk-tolerant appetite. As such, we are keeping the principal
risk and key project risks continually under review. These will be
part of standing business for the Executive Risk Committee and the
Board for the year ahead.
Covid-19 pandemic, remote working and operational resilience -
The Covid-19 pandemic remains a significant global issue. By
continuing to create high levels of uncertainty across the world,
it makes it difficult to reach clear risk management judgements. In
light of our proven ability to operate remotely over the last year,
the Board has decided to remove the dedicated Extended Period of
Remote Working principal risk that we reported in March 2020. The
principal Global Economic Disruption & Declining GDPs risk
remains, however. The Board also considers that the pandemic
continues to impact the existing principal risks relating to
Talent, Cloud, Competitors, Cyclical markets and Customer cyber
attack.
Strategic Risks
Risk Mitigation
Talent Acquisition & Retention We recruited a new Chief People
At AVEVA, we are heavily reliant Officer in January 2021 whose
on the people we employ. If responsibilities include the
we are unable to attract or continued development of Talent
retain the niche skills and risk mitigation initiatives.
experience we need to drive Mitigating activities include
the business forward, creating building our in-house talent
innovation and growth, this acquisition expertise, partnerships
could materially impact the with universities, our employee
success of our business. referral programme, evolving
The technology sector is increasingly our learning culture, embedding
competitive when seeking talent. Diversity & Inclusion practices,
The AVEVA brand must therefore investing in our talent management
remain attractive, particularly systems, succession planning,
for in-demand skills such as technical and non-technical
developers, technical sales, training schemes, and compensation
services, consultants and leadership. benchmarking. We will also use
Impacts from the continuing these actions to manage Talent
Covid-19 pandemic have increased risk for the incoming OSIsoft
this risk. There are now further business.
challenges involved in protecting, We have responded to increased
retaining and acquiring talent Talent risk caused by the Covid-19
during an extended period of pandemic with multiple additional
disruption, particularly when mitigations; these include virtual
continued remote-working requirements interview rooms and on-boarding,
and government restrictions to support new hires and investing
are in place. Employee wellbeing significantly in wellbeing initiatives
becomes an increasing priority. to support our employees. Throughout
This risk will grow further the period of disruption, our
with the OSIsoft acquisition leadership has continually supported
and the additional complexity and communicated with employees,
this brings to factors including enabling them and providing
talent bench, retention of key the tools to work remotely as
individuals, competitive compensation effectively as possible while
and clear career-development staying connected with colleagues
paths. The success of the integration and customers. Our HR and Executive
will depend significantly upon Leadership teams are continually
the enlarged organisation's reviewing the best approaches.
ability to engage and retain
critical talent from both heritage To support these mitigations,
organisations through the integration. we also operate a comprehensive
employee-engagement programme.
Detailed reporting on it is
frequently reviewed and discussed
by the CEO and senior leadership.
We continually endeavour to
ensure that employees are appropriately
recognised for their contributions
to AVEVA's success. There is
an annual Group-wide salary
review that rewards strong performance
and ensures salaries remain
competitive. Both short and
long-term incentives along with
commission schemes are deployed
to reward individual achievement
appropriately.
Subscription We are keen to gain the benefits
Our continued strategic move of the wider adoption of subscription-based
towards a subscription-based licensing and to bring our customers
licence model is designed to the benefits of this model.
offer customers improved flexibility The Engineering business unit
when addressing their software has had a subscription offering
needs; it also creates improved for many years and we will use
recurring revenue and cash flow our experience to develop subscription
generation for our business. offerings for the other business
Customers may be reluctant to units. We have successfully
move to a subscription model trialled the subscription model
or they may transition at a with our Monitoring & Control
slower pace than anticipated. business unit and have also
This is more likely during and introduced subscription offerings
following the Covid-19 pandemic. into Asset Performance Management
The level and pace of adoption and Planning & Operations.
of a subscription model are We have launched additional
also likely to vary by customer, operational and transformational
industry and product area. In - yet highly complementary -
addition, we might experience initiatives to further strengthen
internal challenges in presenting the success of the subscription
customers with an effective programme. Examples include
subscription value offering. investments into master data
Should any of these areas of management, pricing and enterprise
risk be realised, we might fail information management.
to achieve expected key milestones Management continually reviews
for the subscription model. progress and refines the model
where necessary, and continues
to offer traditional licensing
models as further mitigation.
Cloud Within the last year, we announced
We are committed to providing the appointment of both a Chief
market-leading, value-adding, Cloud Officer and a Cloud Senior
reliable and secure Cloud services Vice President. They are collectively
to our customers. We therefore responsible for driving our
invest continually in this fundamental Cloud portfolio and go-to-market
strategic initiative. strategy.
The global disruption and remote To support the growing Cloud
working caused by the Covid-19 demand and make sure AVEVA Cloud
pandemic has accelerated industry has the capability to scale
shifts to the Cloud. This has and act fast on steadily changing
in turn accelerated internal market dynamics, we launched
development, changing the dynamic a multi-year transformation
of this risk. In addition, security programme touching all angles
is also a critical concern when of our business.
providing Cloud services to Consequently, we are investing
customers, posing significant significantly into Cloud products
risk which we must manage effectively. and operations across all business
If these risks are not managed units and functions. Incentive
well, they both threaten our models across the Company have
ability to realise anticipated changed to support the focus
returns from Cloud initiatives on Cloud sales and the recognition
and pose the threat of harmful of our new Cloud subscription
reputational damage. business.
Together with OSIsoft, we have
a strong position in Cloud,
AI and data, which are the main
drivers of the digital transformation
our customers are undergoing.
To protect our customers and
offer best in class availability
and security, we have established
rigorous test and continuity
routines before any product
can be launched.
Industrial digitalisation strategy We mitigate this risk through
If our strategy to capitalise the careful management of the
on the opportunities of digital right digital transformation
transformation were ultimately strategy. We also have a dedicated
to fail or not provide the expected Sales and Consulting team in
levels of return, it could lead place, as well as targeted marketing
to increased costs, reputational campaigns, continued portfolio
damage or lost market positions. rationalisation and case prioritisation.
The move towards digitalisation
has accelerated within the last
12 months where customers have
understood and accepted the
need to transform. However,
continued Capex and Opex constraints
dampen this acceleration. Subsequently,
there is no net change expected
in this risk level for our business
over the next 12 months.
Sustainability We have established a dedicated
The increasing international sustainability team, led by
focus on sustainability, and a Director of Sustainability,
growing stakeholder expectations which is responsible for working
relating to how companies manage cross-functionally to develop
Environmental, Social and Governance a strategic ESG framework with
(ESG) issues, are exposing AVEVA measurable goals. As a first
to increased risk in a number step, we have now completed
of areas. a robust ESG materiality assessment,
and are working to prioritise
The penalties of failure to issues and set targets.
meet generally accepted standards In August 2020, we held a 'Sustainability
on material ESG issues or the Jam' for employees, enabling
expectations of customers, partners, them to come together virtually
employees, investors or any to propose and discuss sustainability
other stakeholders can be serious. ideas relating to our products
They can adversely impact a and operations. We also launched
company's reputation, putting a Sustainability Customer Advisory
sales growth at risk, undermining Board in November. This brings
efforts to hire and retain top together sustainability leaders
talent, and complicating the from across the energy, power,
ability to build partnerships utilities, chemicals, food &
and attract outside investment. beverage and consumer packaged
goods (CPG) sectors for cross-industry
Many of our customers are transitioning dialogue on sustainability priorities.
to business models aligned with To better understand and address
long-term sustainability objectives, our climate-related risk, we
including managing climate risk are currently conducting a detailed
through decarbonisation and review of our greenhouse gas
circularity strategies. Some reporting processes and baseline
customers that have not taken data. We will also complete
such action have experienced a Task Force on Climate-related
reduced financial investment Financial Disclosures (TCFD)
and economic loss, impacting gap assessment in FY22.
their ability to buy AVEVA solutions.
To protect our business against
any resulting reductions in
revenue or loss of market share,
it is part of our climate risk
and resilience strategy to invest
in product-focused sustainability
and industry diversification.
OSIsoft integration We are proactively addressing
The acquisition of OSIsoft involves these risks by building on our
the integration of two businesses capability from the previous
that have previously operated combination between heritage
independently. There are specific AVEVA and SES. We have supplemented
areas of risk which could lead this by recruiting an experienced
to financial and/or reputational SVP of Integration and establishing
impacts, or threaten the anticipated a programme and governance to
revenue and cost-synergy benefits drive the right decisions focused
of the acquisition. These include on value; value to customers
the challenges of consolidating and partners in the form of
organisations, systems and facilities accelerating combined technology
and the potential disruption capabilities, value for our
to our current businesses. Integrations talent in the form of a larger,
of this scale raise the risks more exciting organisation and
of unplanned talent attrition, value for our shareholders through
reduced morale and engagement, detailed planning to deliver
increased by the complexity on revenue and cost synergies.
of integrating two successful As part of this decision focused
cultures to ensure continued programme, we have established
focus on delivering and improving cross organisation workstreams
our customer and partner value. between all major and enabling
These challenges also risk our functions impacted by the integration.
transformation to Cloud and We have designed and deployed
a subscription-based licence talent retention programmes,
model and our ability to realise including a culture integration
revenue and cost synergies from programme that will drive a
the enlarged Group. combined culture to bring our
people together in a way that
targets growth. Our Product
and Portfolio teams are working
together to accelerate our ambitions
for Cloud to support a subscription-based
revenue model.
We have supported all of these
programmes with a comprehensive
communications plan, allowing
us to be transparent and flexible
in adjusting our programme quickly
based on feedback from customers,
partners and our people.
========================================= =============================================
External Risks
Risk Mitigation
Competitors We carefully monitor customer requirements,
We operate in highly competitive trends and other suppliers operating
markets. Other technology companies within our chosen markets. We invest
could acquire, merge or move into in innovation and strive to offer
our market space to compete with superior products to meet market
our offering, creating a material trends.
threat. Existing competitors could The acquisition of OSIsoft will
respond more quickly to market demands further mitigate this risk. Integrating
and trends, resulting in reduced and aligning the product portfolios
market share and missed growth opportunities of both organisations will provide
for us. The industry in which we us with a distinct competitive advantage
operate is characterised to varying and market position.
degrees by rapid technological change, We also now have a dedicated Cloud
evolving industry standards, evolving business, supporting our portfolio
business models and consolidations. with integrated Cloud-based solutions,
Risks are increased by the continued which has made significant progress
uncertainty in the marketplace caused in the last year.
by the Covid-19 pandemic. It is Other areas of specific mitigation
likely that changing competitor include the ability to leverage
strategies or industry consolidations our relationship with Schneider
could have a negative impact on Electric, attractive proposals for
us. This is due to increased pricing additional complementary products
pressure, cost increases, the loss for existing customers and the flexibility
of market share due to competitor to meet changing market demands
collaboration and a consequent reduction and competitive forces.
in our ability to integrate solutions.
Dependency on cyclical markets Because our products bring customers
We materially derive our revenue Capex certainty and Opex reduction,
from customers operating in markets they deliver meaningful efficiency
which are mainly cyclical in nature, gains during periods of downturn.
such as Oil & Gas and Marine. As Our extensive global presence also
and when those markets reach downturn provides mitigation against over-reliance
stages, customers may have less on key geographic markets.
funding available for capital projects We derive over half of our revenue
or additional operational commitments, from customers operating in non-cyclical
including the purchase of our software markets such as Food & Beverages,
products. Significant end market Utilities and Infrastructure markets
downturns could therefore materially (such as airports and smart cities).
impact our revenues and profits. The integration of OSIsoft will
The global disruption caused by further reduce this risk due to
the Covid-19 pandemic has led to the further dilution provided by
volatility in oil markets and consequently the OSIsoft customer base.
to companies in our customer base. Our strategic move towards a subscription-based
A longer period of volatility further licensing model further mitigates
increases the risk of revenue impacts. this risk, because it can offer
Several oil companies have already customers greater flexibility over
announced reductions in capital their expenditure. There is also
expenditure, particularly in relation the opportunity for further leveraging
to upstream projects. These are Schneider Electric relationships
due to the sharp fall in oil consumption into non-cyclical markets.
in late 2020 and the oversupply
of crude oil during April and May
2020.
We believe there is a slight decrease
in this risk for our business over
the next 12 months given the dilution
effect of cyclical markets dependency
created by the OSIsoft acquisition
and continued pre-existing initiatives
to expand into non-cyclical markets.
AVEVA Products Implicated in Industrial Our products are extensively tested
Accidents or Customer Cyber-Attack prior to commercial launch. A robust
Our software products are complex. Security Development Lifecycle is
New products or enhancements may also a key component of our overall
contain undetected errors, failures, software-development process. In
performance problems or other defects. addition, we have created formal
Such occurrences may impact our and collaborative relationships
strong reputation with our customers with third-party security researchers
and/or create financial implications. and security organisations to proactively
This risk reflects our portfolio ensure our software is as safe and
of products, their functionality secure as is reasonable. Dependent
and increasing threats in the external upon successful acquisition, we
cyber environment. While there is will extend these existing mitigations
no change currently in the threat to the OSIsoft business as part
level since last year, the risk of our integration activities.
may grow during the year ahead following
the successful acquisition of the
OSIsoft business. This would reflect
our larger product portfolio, the
associated complexity and our increased
size.
Cyber-Attack We have a low tolerance to this
Threats within the global cyber risk. We have in place multiple
environment continue to grow. We layers of cyber-security threat
are reliant on our IT systems, and defences, including access control,
should we be specifically targeted encryption, firewalls and more.
by a cyber attack or impacted by We use these security measures to
a global cyber incident, impacts detect and prevent cyber attacks.
could include: To the greatest possible extent,
we also use them to mitigate the
* suspension of some operations; impact of any successful attacks.
External penetration testing is
also conducted across our critical
* regulatory breaches and fines; corporate and online services.
Further steps have also been taken
to increase security measures while
* reputational damage; our workforce is operating remotely.
These will now permanently remain
in place.
* loss of customer and employee information; and
* loss of customer or other stakeholder confidence.
The risk remains increased partly
due to higher cyber threats associated
with remote working because of the
Covid-19 pandemic. There is also
a closer focus on our organisation,
due to the acquisition of the OSIsoft
business.
Regulatory compliance We use compliance policies and guidance
We are required to comply with international materials plus clear communications
and local laws in each of the jurisdictions and training platforms for all employees
in which we operate. If one or more and external partners.
of our employees or anyone acting Local management is supported by
on our behalf commit or are alleged local professional advisers. Further
to have committed a violation of oversight is maintained by the corporate
law, we could face substantial investigative, legal and finance functions, which
defence and/or remediation costs. regularly receive support from external
We could also be exposed to severe advisers, in particular with regard
financial penalties and reputational to risk assessment, which is periodically
damage. carried out on key areas of exposure
This applies to several specific to compliance risk.
regulatory risk areas, including: We have dedicated compliance resources,
including software and people, within
* trade compliance (including sanctions and export our organisation to enhance the
control); management and monitoring of this
principal risk.
We carry out due diligence on all
* data protection and privacy (including GDPR); contractual counterparties, whether
suppliers, customers, advisers,
consultants, intermediaries or counterparties
* anti-trust; to corporate transactions.
We conduct periodic, risk-based
monitoring in relation to matters
* anti-bribery and corruption, covering corporate gifts relating to compliance risk.
and hospitality;
* failure to prevent facilitation of tax evasion;
* anti-money laundering;
* related party transactions; and
* insider dealing and market abuse regulations.
This risk may grow during the year
due to the acquisition of the OSIsoft
business, as a result of the inherent
risk associated with the acquisition
of a business with 27 offices across
18 countries.
Global Economic Disruption and Declining We remain in a strong cash and financial
GDPs position. Our leadership continues
Because of the Covid-19 pandemic, to review this and is prepared to
like many global companies we now take mitigating steps as and when
operate in an international environment considered necessary. Recent examples
where there is continued economic include employee pay and recruitment
disruption and declining GDPs. This freezes and cuts to discretionary
could have many impacts, including spending.
significantly decreased demand for Further, our products deliver Capex
our products and services, unexpected certainty and Opex reduction. They
disruptions in the industries we therefore deliver meaningful efficiency
serve or limited access to funding. in periods of economic and trading
Affected customers may seek to minimise disruption.
their expenditure by seeking to
terminate subscriptions or licence
arrangements. They may also seek
to renegotiate or delay previously
agreed payment dates. Customers
may also be more cautious and take
more time to make purchase decisions.
Although we expect stability in
certain geographical markets, we
also anticipate continued disruption
in other geographies over the next
12 months and in Asia Pacific specifically.
Overall, we see no change in risk
level.
============================================================= =================================================
Operational Risks
Risk Mitigation
Internal IT Systems (Suitability We have appointed an experienced
& Continuity) Chief Information Officer (CIO)
We rely on our many IT systems to and a Chief Information Security
sustain our day-to-day operations Officer (CISO) to lead and drive
and to meet our customers' expectations. our various IT initiatives. These
If these systems fail to operate include our new ERP implementation
effectively and efficiently, this project, which is designed to provide
could result in reputational damage, and support industry best-practice
negative employee engagement and/or processes. This includes respective
poor customer experiences. governance frameworks and support
from expert external advisers and
This remains a high risk for us, integration specialists.
reflecting the range of legacy systems
in our IT estate. It also reflects We also have in place network-security,
the ongoing significant initiatives disaster-recovery and systems-management
that are in place to consolidate, measures.
improve, create competitive advantage
and maintain business as usual processes.
These include the continued implementation
of a new Group-wide ERP system.
This is further complicated by the
IT estate that we have inherited
with the OSIsoft acquisition. These
initiatives are subject to delays
and other operational challenges
caused by the continuing Covid-19
pandemic.
We also outsource certain IT-related
functions to third parties who are
responsible for maintaining their
own network-security, disaster-recovery
and systems-management procedures.
If these third parties fail to manage
their IT systems and related software
applications effectively, this could
have a severe impact on us.
============================================ ==========================================
Disruptive Risks
Risk Mitigation
Disruptive Technologies We largely mitigate this threat
Competitors could develop new through our own leading innovation
and unforeseen technology, software initiatives and continued position
or business models which threaten at the forefront of technological
our value offering. If these advances. This is one of our
became significantly commercially core strategic strengths.
viable, they could have material
impacts on our profits and prospects. In addition, we continually
scan the disruptive technology
There is no change in the threat environment to ensure we are
level for this principal risk well informed and well placed
from the previous year, reflecting to respond to any emerging material
the continued potential threats threats.
from disruptive forces that
seek to capitalise on the fast-evolving
digitisation of industry trends.
========================================= =====================================
Consolidated income statement
for the year ended 31 March 2021
2021 2020
Notes GBPm GBPm
---------------------------------------------------- ------ -------- --------
Revenue 3,4 820.4 833.8
Cost of sales (181.3) (190.7)
---------------------------------------------------- ------ -------- --------
Gross profit 639.1 643.1
Operating expenses
Research & Development costs (184.5) (184.6)
Selling and administrative expenses 5 (419.8) (367.8)
Net impairment loss on financial assets (3.7) (7.6)
Other income 5.5 11.9
-------- --------
Total operating expenses (602.5) (548.1)
---------------------------------------------------- ------ -------- --------
Profit from operations 36.6 95.0
Finance revenue 0.6 0.3
Finance expense (3.0) (3.3)
---------------------------------------------------- ------ -------- --------
Profit before tax from continuing operations 34.2 92.0
Income tax expense 7(a) (9.4) (22.2)
---------------------------------------------------- ------ -------- --------
Profit for the year attributable to equity holders
of the parent 24.8 69.8
---------------------------------------------------- ------ -------- --------
Profit from operations 36.6 95.0
Amortisation of intangibles (excluding other software) 95.7 90.6
Share-based payments 16.3 12.0
(Gain)/loss on fair value of forward foreign exchange
contracts (0.7) 0.4
Exceptional items 6 78.5 18.8
Adjusted EBIT 226.4 216.8
------
Earnings per share (pence)
- basic 9 11.35 34.78
- diluted 9 11.27 34.60
---------------------------- ------ ------
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 2021
2021 2020
Notes GBPm GBPm
---------------------------------------------------- ------ ------ ------
Profit for the year 24.8 69.8
Items that may be reclassified to profit or loss
in subsequent periods:
Exchange gain arising on translation of foreign
operations 20.7 4.2
---------------------------------------------------- ------ ------ ------
Total of items that may be reclassified to profit
or loss in subsequent periods 20.7 4.2
---------------------------------------------------- ------ ------ ------
Items that will not be reclassified to profit
or loss in subsequent periods:
Remeasurement (loss)/gain on defined benefit plans (2.5) 6.2
Deferred tax effect 7(a) 0.5 (1.2)
---------------------------------------------------- ------ ------ ------
Total of items that will not be reclassified to
profit or loss in subsequent periods (2.0) 5.0
---------------------------------------------------- ------ ------ ------
Total comprehensive income for the year, net of
tax 43.5 79.0
---------------------------------------------------- ------ ------ ------
The accompanying notes are an integral part of this Consolidated
statement of comprehensive income.
Consolidated balance sheet
31 March 2021
2021 2020
Notes GBPm GBPm
-------------------------------- ------ -------- --------
Non-current assets
Goodwill 3,904.1 1,295.7
Other intangible assets 1,662.3 514.8
Property, plant and equipment 48.5 27.6
Right-of-use assets 111.9 79.5
Deferred tax assets 21.4 19.1
Trade and other receivables 11 19.4 4.4
Customer acquisition costs 0.3 -
Investments 0.4 -
Retirement benefit surplus 13.1 14.9
5,781.4 1,956.0
-------------------------------- ------ -------- --------
Current assets
Trade and other receivables 11 317.0 242.2
Contract assets 3 215.6 142.4
Treasury deposits 12 0.3 0.1
Cash and cash equivalents 12 286.6 114.5
Restricted cash 12 7.3 -
Financial assets 0.7 -
Current tax assets 18.9 20.2
-------------------------------- ------ -------- --------
846.4 519.4
-------------------------------- ------ -------- --------
Total assets 6,627.8 2,475.4
-------------------------------- ------ -------- --------
Equity
Issued share capital 10.7 5.7
Share premium 3,842.1 574.5
Other reserves 1,209.6 1,180.3
Retained earnings 130.3 181.2
-------------------------------- ------ -------- --------
Total equity 5,192.7 1,941.7
-------------------------------- ------ -------- --------
Current liabilities
Trade and other payables 13 271.3 149.5
Contract liabilities 3 239.7 177.0
Lease liabilities 22.9 16.6
Financial liabilities - 0.4
Current tax liabilities 45.6 5.5
-------------------------------- ------ -------- --------
579.5 349.0
-------------------------------- ------ -------- --------
Non-current liabilities
Loans and borrowings 654.0 -
Lease liabilities 88.9 53.3
Deferred tax liabilities 82.0 119.9
Other liabilities 13 18.2 0.7
Retirement benefit obligations 12.5 10.8
-------------------------------- ------ -------- --------
855.6 184.7
-------------------------------- ------ -------- --------
Total equity and liabilities 6,627.8 2,475.4
-------------------------------- ------ -------- --------
The accompanying notes are an integral part of this Consolidated
balance sheet.
Consolidated statement of changes in shareholders' equity
31 March 2021
Other reserves
-------------- ------- ------- ------- ------------------------------------ -------- -------- -------- -------
Cumulative Capital Reverse Total
Share Share Merger translation redemption acquisition Treasury other Retained Total
capital premium reserve adjustments reserve reserve shares reserves earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ------- ------- ------- ----------- ---------- ----------- -------- -------- -------- -------
At 31 March
2019 5.7 574.5 615.6 18.4 101.7 452.5 (9.4) 1,178.8 165.5 1,924.5
Profit for the
year - - - - - - - - 69.8 69.8
Other
comprehensive
income - - - 4.2 - - - 4.2 5.0 9.2
-------------- ------- ------- ------- ----------- ---------- ----------- -------- -------- -------- -------
Total
comprehensive
income - - - 4.2 - - - 4.2 74.8 79.0
Share-based
payments - - - - - - - - 12.0 12.0
Tax arising on
share options - - - - - - - - 1.0 1.0
Investment in
own
shares - - - - - - (3.1) (3.1) - (3.1)
Cost of
employee
benefit trust
shares
issued to
employees - - - - - - 0.4 0.4 (0.4) -
Equity
dividends - - - - - - - - (71.7) (71.7)
-------------- ------- ------- ------- ----------- ---------- ----------- -------- -------- -------- -------
At 31 March
2020 5.7 574.5 615.6 22.6 101.7 452.5 (12.1) 1,180.3 181.2 1,941.7
Profit for the
year - - - - - - - - 24.8 24.8
Other
comprehensive
income - - - 20.7 - - - 20.7 (2.0) 18.7
-------------- ------- ------- ------- ----------- ---------- ----------- -------- -------- -------- -------
Total
comprehensive
income - - - 20.7 - - - 20.7 22.8 43.5
Issue of new
shares 0.5 465.2 - - - - - - - 465.7
Rights issue 4.5 2,831.0 - - - - - - - 2,835.5
Transaction
costs
relating to
issue
of share
capital - (28.6) - - - - - - - (28.6)
Share-based
payments - - - - - - - - 16.3 16.3
Tax arising on
share options - - - - - - - - 2.1 2.1
Investment in
own
shares - - - - - - (1.1) (1.1) - (1.1)
Cost of
employee
benefit trust
shares
issued to
employees - - - - - - 9.7 9.7 (9.7) -
Equity
dividends - - - - - - - - (82.4) (82.4)
-------------- ------- ------- ------- ----------- ---------- ----------- -------- -------- -------- -------
At 31 March
2021 10.7 3,842.1 615.6 43.3 101.7 452.5 (3.5) 1,209.6 130.3 5,192.7
-------------- ------- ------- ------- ----------- ---------- ----------- -------- -------- -------- -------
The accompanying notes are an integral part of this Consolidated
statement of changes in shareholders' equity.
Consolidated cash flow statement
for the year ended 31 March 2021
2021 2020
Notes GBPm GBPm
---------------------------------------------------------- ------ ---------- -------
Cash flows from operating activities
Profit for the year 24.8 69.8
Income tax expense 7(a) 9.4 22.2
Net finance expense 2.4 3.0
Amortisation of intangible assets 96.3 91.7
Depreciation of property, plant and equipment and
right-of-use assets 28.2 24.4
Loss on disposal of property, plant and equipment 1.0 0.7
Gain on disposal of pension scheme (0.3) (0.4)
Gain on disposal of subsidiaries - (7.7)
Share-based payments 16.3 12.0
Difference between pension contributions paid and
amounts charged to operating profit 0.3 (1.2)
Research & Development expenditure tax credit (3.1) (2.3)
Changes in working capital:
Trade and other receivables (4.8) (12.2)
Contract assets (70.8) (43.8)
Customer acquisition costs (0.3) -
Trade and other payables 5.5 (5.8)
Contract liabilities (13.0) 10.7
Changes to fair value of forward foreign exchange
contracts (0.7) 0.3
---------------------------------------------------------- ------ ---------- -------
Cash generated from operating activities before
tax 91.2 161.4
Income taxes paid (32.8) (39.3)
---------------------------------------------------------- ------ ---------- -------
Net cash generated from operating activities 58.4 122.1
---------------------------------------------------------- ------ ---------- -------
Cash flows from investing activities
Purchase of property, plant and equipment (10.9) (18.5)
Purchase of intangible assets (0.5) (0.6)
Payment on disposal of pension scheme (0.3) (2.0)
Acquisition subsidiaries, net of cash acquired (3,029.5) (25.1)
Restricted cash from acquisition of business -
held in escrow (7.3) -
Net payment for forward contracts under hedge accounting (74.2) -
Proceeds from sale of subsidiaries, net of cash - 5.5
(Purchase)/Sale of treasury deposits (0.2) 0.5
Interest received 0.5 0.3
---------------------------------------------------------- ------ ---------- -------
Net cash flows used in investing activities (3,122.4) (39.9)
---------------------------------------------------------- ------ ---------- -------
Cash flows from financing activities
Interest paid (2.8) (3.3)
Purchase of own shares (1.1) (3.1)
Proceeds from borrowings, net of fees incurred 645.6 -
Payment of principal element of lease liability (18.5) (15.5)
Proceeds from rights issue 2,835.5 -
Transaction costs on issue of shares (28.6) -
Payment of facility arrangement fees (2.0) -
Dividends paid to shareholders of the parent 8 (82.4) (71.7)
---------------------------------------------------------- ------ ---------- -------
Net cash flows used in financing activities 3,345.7 (93.6)
---------------------------------------------------------- ------ ---------- -------
Net increase/(decrease) in cash and cash equivalents 281.7 (11.4)
Net foreign exchange difference (109.6) (1.3)
Opening cash and cash equivalents 12 114.5 127.2
---------------------------------------------------------- ------ ---------- -------
Closing cash and cash equivalents 12 286.6 114.5
---------------------------------------------------------- ------ ---------- -------
The accompanying notes are an integral part of this Consolidated
cash flow statement.
1 Basis of preparation
The Consolidated Financial Statements of the Group have been
prepared in accordance with International Accounting Standards
(IASs) in conformity with the requirements of the Companies Act
2006 and in accordance with International Financial Reporting
Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union. The financial information has
been prepared on the basis of all applicable IFRSs, including all
IASs, Standing Interpretations Committee (SIC) interpretations and
International Financial Reporting Interpretations Committee (IFRIC)
interpretations issued by the International Accounting Standards
Board (IASB) that are applicable to the financial period.
The preliminary announcement covers the period from 1 April 2020
to 31 March 2021 and was approved by the Board on 25 May 2021. It
is presented in Pounds Sterling (GBP) and all values are rounded to
the nearest GBP0.1m except when otherwise indicated.
The financial information contained in this preliminary
announcement of audited results does not constitute the Group's
statutory accounts for the years ended 31 March 2021 or 31 March
2020. The accounts for the year ended 31 March 2020 have been
delivered to the Registrar of Companies. The statutory accounts for
the year ended 31 March 2021 have been reported on by the Company's
auditors; the report on these accounts was unqualified, did not
draw attention to any matters by way of emphasis and did not
contain any statement under section 498(2) or (3) of the Companies
Act 2006 or equivalent preceding legislation.
The statutory accounts for the year ended 31 March 2021 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 2021. 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 the non-GAAP performance measure 'adjusted
earnings before interest and tax (EBIT)' on the face of the
Consolidated Income Statement. Adjusted EBIT is not defined by
IFRSs and therefore may not be directly comparable with the
adjusted EBIT measures of other companies.
The business is managed and measured on a day-to-day basis using
adjusted results. To arrive at adjusted results, certain
adjustments are made for normalised and exceptional items that are
individually significant and which could, if included, distort the
understanding of the performance for the year and the comparability
between periods.
Normalised items: These are recurring items which management
considers to have a distorting effect on the underlying results of
the Group. These items relate to amortisation of intangible assets
(excluding other software), share-based payment charges and fair
value adjustments on financial derivatives. Other types of
recurring items may arise; however, no others were identified in
either the current or prior year. Recurring items are adjusted each
year irrespective of materiality to ensure consistent
treatment.
Exceptional items: These are items which are non-recurring and
are identified by virtue of either their size or their nature.
These items can include, but are not restricted to, the costs of
significant restructuring exercises, fees associated with business
combinations and costs incurred in integrating acquired
companies.
In adopting the going concern basis for preparing the financial
statements, the Directors have considered the business activities
and the Group's principal risks and uncertainties in the context of
the current operating environment. This includes possible ongoing
impacts of the global Covid-19 pandemic on the Group and reviews of
liquidity and covenant forecasts.
The Group's business planning cycle has taken account of
potential ongoing impacts of Covid-19 to create a base case going
concern model, reflecting the current business disruption, economic
conditions and the resulting impact on customers and their ability
to continue operating effectively during the ongoing period of
remote working.
The Directors have considered sensitivities in respect of
potential downside scenarios over the base case going concern model
and the mitigating actions available in concluding that the Group
is able to continue in operation for a period of at least sixteen
months from the date of approving the financial statements to 30th
September 2022.
The specific scenarios modelled are:
Scenario 1: A 'stress test' scenario reducing base model revenue
by circa 10% across the five-year forecast period.
Scenario 2: A further scenario was created to model
circumstances required to breach AVEVA's credit facilities. This
scenario assumes severe cash collection delays and does not include
any mitigating actions that the Group would take. It is overall
considered very unlikely.
Under the base case scenario, there is no expected requirement
to draw down on the RCF across the going concern period. Under the
downside scenarios, the Group would utilise the RCF, but within the
current liquidity levels available.
Throughout both of the downside scenarios, the Group continues
to have liquidity headroom on existing facilities and against the
RCF financial covenants during the period under assessment. Should
a more extreme downside scenario occur, additional mitigating
actions could be taken such as the cancellation or deferral of
dividend payments and reductions in other discretionary operating
costs. The financial statements for the year ended 31 March 2021
have therefore been prepared under the going concern basis of
accounting.
2 Accounting policies
The preliminary statement has been prepared on a consistent
basis with the accounting policies set out in the last published
financial statements for the year ended 31 March 2020. 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
Services
transferred Services
at a transferred
point over
in time time Total
Year ended 31 March 2021 GBPm GBPm GBPm
-------------------------- ---- ------------- ------------- ------
Subscription 236.1 123.6 359.7
Maintenance - 197.7 197.7
Perpetual licences 141.6 - 141.6
Services - 121.4 121.4
-------------------------------- ------------- ------------- ------
377.7 442.7 820.4
------------------------------ ------------- ------------- ------
Services
transferred Services
at a transferred
point over
in time time Total
Year ended 31 March 2020 GBPm GBPm GBPm
-------------------------- ---- ------------- ------------- ------
Subscription 228.7 88.1 316.8
Maintenance - 201.7 201.7
Perpetual licences 179.3 - 179.3
Services - 136.0 136.0
-------------------------------- ------------- ------------- ------
408.0 425.8 833.8
------------------------------ ------------- ------------- ------
Contract balances are as below:
2021 2020 2019
GBPm GBPm GBPm
--------------------------------- ------ ------ ------
Trade receivables (non-current) 0.7 2.0 -
Trade receivables (current) 245.3 181.2 174.9
Contract assets 215.6 142.4 100.5
Contract liabilities 239.7 177.0 174.6
--------------------------------- ------ ------ ------
Contract assets have increased year-on-year predominantly due to
the recognition of a number of multi-year subscription licences,
resulting in the cumulative revenue recognised for these contracts
being greater than the cumulative amounts invoiced. Contract assets
are stated net of a provision of GBP7.7 million (2020: GBP5.4
million). The provision has increased year-on-year due to
forward-looking considerations in light of Covid-19.
Trade receivables and contract liabilities have also increased
year-on-year, primarily as a result of the acquisition of
OSIsoft.
Revenue for the year ended 31 March 2021 includes GBP159.3
million (2020: GBP157.1 million) which was included in contract
liabilities at the beginning of the year. Revenue of GBP3.1 million
recognised in the year ended 31 March 2021 related to performance
obligations satisfied in previous years (2020: GBP3.1 million).
The transaction price allocated to the remaining performance
obligations (unsatisfied or partially unsatisfied) as at 31 March
is as follows:
2021 2020
GBPm GBPm
-------------------- ------ ------
Within one year 425.8 323.8
More than one year 232.1 178.0
-------------------- ------ ------
4 Segment information
The Executive Leadership Team (ELT) monitors and appraises the
business based on the performance of three geographic regions:
Americas; Asia Pacific; and Europe, Middle East and Africa (EMEA).
These three regions are the basis of the Group's primary operating
segments reported in the financial statements. Performance is
evaluated based on regional contribution using the same accounting
policies as adopted for the Group's financial statements. There is
no inter-segment revenue. Corporate costs include centralised
functions such as Executive Management, Information Management,
Finance and Legal. Balance sheet information is not included in the
information provided to the ELT.
Year ended 31 March 2021
--------------------------------------------
Americas Asia Pacific EMEA Corporate Total
GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- ------------- ------- ---------- --------
Revenue
Subscription 94.6 95.5 169.6 - 359.7
Maintenance 84.3 46.7 66.7 - 197.7
Perpetual licences 42.1 47.4 52.1 - 141.6
Services 44.4 31.7 45.3 - 121.4
---------------------------- --------- ------------- ------- ---------- --------
Regional revenue total 265.4 221.3 333.7 - 820.4
Cost of sales (50.0) (19.8) (39.9) (70.8) (180.5)
Selling and administrative
expenses (64.4) (40.7) (68.0) (120.3) (293.4)
Net impairment loss on
financial assets (1.0) (1.8) (0.9) - (3.7)
Regional contribution 150.0 159.0 224.9 (191.1) 342.8
Research & Development
costs (116.4)
---------------------------- --------- ------------- ------- ---------- --------
Adjusted EBIT 226.4
---------------------------- --------- ------------- ------- ---------- --------
Exceptional items, other
normalised adjustments(1)
and net interest (192.2)
---------------------------- --------- ------------- ------- ---------- --------
Profit before tax 34.2
---------------------------- --------- ------------- ------- ---------- --------
(1) Normalised adjustments include amortisation of intangible
assets (excluding other software), share-based payments, and
movements on fair value of forward exchange contracts.
Year ended 31 March 2020
--------------------------------------------
Americas Asia Pacific EMEA Corporate Total
GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- ------------- ------- ---------- --------
Revenue
Subscription 81.2 95.6 140.0 - 316.8
Maintenance 85.9 47.9 67.9 - 201.7
Perpetual licences 57.6 52.1 69.6 - 179.3
Services 54.5 31.9 49.6 - 136.0
---------------------------- --------- ------------- ------- ---------- --------
Regional revenue total 279.2 227.5 327.1 - 833.8
Cost of sales (49.9) (27.3) (34.6) (78.3) (190.1)
Selling and administrative
expenses (69.4) (44.7) (72.5) (112.0) (298.6)
Net impairment loss on
financial assets (4.1) (0.8) (2.7) - (7.6)
---------------------------- --------- ------------- ------- ---------- --------
Regional contribution 155.8 154.7 217.3 (190.3) 337.5
Research & Development
costs (120.7)
---------------------------- --------- ------------- ------- ---------- --------
Adjusted EBIT 216.8
---------------------------- --------- ------------- ------- ---------- --------
Exceptional items, other
normalised adjustments(1)
and net interest (124.8)
---------------------------- --------- ------------- ------- ---------- --------
Profit before tax 92.0
---------------------------- --------- ------------- ------- ---------- --------
(1) Normalised adjustments include amortisation of intangible
assets (excluding other software), share-based payments, and
movements on fair value of forward exchange contracts.
5 Selling and administrative expenses
An analysis of selling and administrative expenses is set out
below:
2021 2020
GBPm GBPm
----------------------------------- ------ ------
Selling and distribution expenses 226.8 240.1
Administrative expenses 193.0 127.7
----------------------------------- ------ ------
419.8 367.8
----------------------------------- ------ ------
6 Exceptional items
2021 2020
GBPm GBPm
------------------------ ------ -------
Acquisition costs 44.4 0.8
Integration activities 37.3 28.2
Restructuring costs 2.3 1.7
Other income (5.5) (11.9)
78.5 18.8
------------------------ ------ -------
The total cash net outflow during the year as a result of
exceptional items was GBP63.2 million (2020: GBP23.3 million).
a) Acquisition costs
Acquisition costs in the year ended 31 March 2021 relate to
adviser fees incurred in the acquisition of OSIsoft, LLC. In
addition, f ees incurred as a direct result of raising debt (GBP2.9
million) and equity (GBP28.6 million) have been offset against the
carrying value of the associated financial liability and share
premium respectively.
Acquisition costs in the year ended 31 March 2020 related to the
acquisition of AssetPlus, and the trade and assets of MESEnter Co.
Ltd.
b) Integration activities
Integration costs of GBP31. 2 million (2020: GBP28.2 million)
were incurred relating to the integration of heritage AVEVA and the
Schneider Electric industrial software business (SES). This
principally related to consultancy fees paid to advisers, and the
costs of additional temporary resources required for the
integration. Key activities included work undertaken to exit the
Transitional Service Agreements (TSA) provided by Schneider
Electric, and costs incurred in the continued build and UK rollout
of a new harmonised global ERP system.
Services covered by the TSA relating to integration activities
ceased in the year, and no further costs of this nature are
expected. Future costs of integrating heritage AVEVA and SES will
primarily relate to the global roll out of the new ERP system,
which is expected to last until 2024.
To 31 March 2021 the Group expensed GBP6.1 million (2020: nil)
relating to the integration of OSIsoft, LLC. It is expected that
these costs will substantially increase and continue in future
years.
c) Restructuring costs
Restructuring costs related to severance payments in a number of
locations across the Group. The costs incurred for the year ended
31 March 2021 have been a continuation of the restructuring
programme started following the merger of heritage AVEVA and SES,
which is now complete. Further costs are expected to continue into
the year ended 31 March 2022, arising from the integration of
OSIsoft, LLC.
d) Other income
Other income contains GBP5.2 million (2020: GBP3.8 million)
received from Schneider Electric in reimbursement for capital
expenditure incurred as part of the Group's migration activities
covered by TSAs following the Combination.
Prior year also included a GBP7.7 million gain on sale of three
wholly owned distributor businesses.
e) Income statement impact
Exceptional items were included in the Consolidated income
statement as follows:
2021 2020
GBPm GBPm
----------------------------------- ------ -------
Cost of sales 0.8 0.6
Research & Development costs 0.3 0.4
Selling and distribution expenses 4.6 3.9
Administrative expenses 78.3 25.8
Other income (5.5) (11.9)
78.5 18.8
----------------------------------- ------ -------
7 Income tax expense
a) Tax on profit
The major components of income tax expense are as follows:
2021 2020
GBPm GBPm
---------------------------------------------------------- ------- ------
Tax charged in Consolidated income statement
Current tax
UK corporation tax - 11.1
Foreign tax 41.9 26.3
Adjustments in respect of prior periods (1.9) (9.6)
---------------------------------------------------------- ------- ------
40.0 27.8
---------------------------------------------------------- ------- ------
Deferred tax
Origination and reversal of temporary differences (29.3) (9.9)
Adjustments in respect of prior periods (1.3) 4.3
---------------------------------------------------------- ------- ------
(30.6) (5.6)
---------------------------------------------------------- ------- ------
Total income tax expense reported in Consolidated income
statement 9.4 22.2
---------------------------------------------------------- ------- ------
2021 2020
GBPm GBPm
-------------------------------------------------------- ------ ------
Tax relating to items charged directly to Consolidated
statement of comprehensive income
Deferred tax on actuarial remeasurements on retirement
benefits (0.5) 1.2
-------------------------------------------------------- ------ ------
Tax (credit)/charge reported in Consolidated statement
of comprehensive income (0.5) 1.2
-------------------------------------------------------- ------ ------
b) Reconciliation of the total tax charge
The differences between the total tax charge shown above and the
amount calculated by applying the standard rate of US (2020: US)
corporation tax to the profit before tax are as follows:
2021 2020
GBPm GBPm
--------------------------------------------------------- ------ ------
Tax on Group profit before tax at standard US (2020:US)
corporation tax rate of 24% (2020: 24%)(1) 8.2 22.1
Effects of:
- expenses not deductible for tax purposes 8.8 2.0
- non-deductible acquisition costs 3.0
- Research & Development incentives (5.3) (5.8)
- UK rate change impact on deferred tax - 8.9
- irrecoverable withholding tax - 1.2
- movement on unprovided deferred tax balances (1.9) (1.1)
- differing tax rates (0.2) 0.2
- adjustments in respect of prior years (3.2) (5.3)
--------------------------------------------------------- ------ ------
Income tax expense reported in Consolidated income
statement 9.4 22.2
--------------------------------------------------------- ------ ------
(1) Reconciliation is performed starting from the standard US
corporation tax rate as US taxable profits are greater than any
other individual country.
The Group's effective tax rate for the year was 27.5% (2020:
24.1%). The Group's effective tax rate for the year before
exceptional items was 21.7% (2020: 24.2%). The Group's effective
tax rate before exceptional and other normalised adjustments was
21.2% (2020: 18.1%).
At the balance sheet date, the UK government had announced that
it would increase the main rate of corporation tax to 25% from 1
April 2023. This change had not been substantively enacted at the
balance sheet date and is consequently not included in these
financial statements. The effect of this proposed tax rate increase
would be to increase the deferred tax liability by GBP17.8 million
consisting of a debit to the income statement of GBP17.0 million
and a debit to other comprehensive income of GBP0.8 million.
8 Dividends paid and proposed on equity shares
The following dividends were declared, paid and proposed in
relation to the legal entity AVEVA Group plc:
2021 2020
GBPm GBPm
--------------------------------------------------------- ------ ------
Declared and paid during the year(1)
Interim 2020/21 dividend paid of 12.4 pence (2019/20:
12.4 pence) per ordinary share 35.6 25.0
Final 2019/20 dividend paid of 23.3 pence (2018/19:
23.3 pence) per ordinary share 46.8 46.7
--------------------------------------------------------- ------ ------
82.4 71.7
--------------------------------------------------------- ------ ------
Proposed for approval by shareholders at the Annual
General Meeting
--------------------------------------------------------- ------ ------
Final proposed dividend 2020/21 of 23.5 pence (2019/20:
23.3 pence) per ordinary share 70.7 46.8
--------------------------------------------------------- ------ ------
(1) Dividends per share for comparative periods have been
restated and adjusted for a bonus factor of 0.80, to reflect the
bonus element of the November 2020 rights issue. Previously stated
interim dividend per share totals for both 2020/21 and 2019/20 were
15.5 pence per share, and final dividend per share for both 2019/20
and 2018/19 were 29.0 pence per share.
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting on 7 July 2021 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 2021 to shareholders on the register at the close
of business on 9 July 2021.
9 Earnings per share
2020 (restated)
2021 (1)
Pence Pence
------------------------------------------ ------- ----------------
Earnings per share for the year:
- basic 11.35 34.78
- diluted 11.27 34.60
Adjusted earnings per share for the year
- basic 81.86 87.20
- diluted 81.31 86.75
------------------------------------------ ------- ----------------
2021 2020
Number Number
----------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares for
basic earnings per share 218,531,149 200,758,092
Effect of dilution: employee share options 1,489,318 1,030,456
----------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares adjusted
for the effect of dilution 220,020,467 201,788,548
----------------------------------------------------- ------------ ------------
(1) Basic and diluted EPS figures for comparative periods have
been restated and adjusted for a bonus factor of 0.80 to reflect
the bonus element of the November 2020 rights issue. Amounts
originally stated as at 31 March 2020 were 43.35 pence basic EPS
and 43.13 pence diluted EPS. Originally stated adjusted EPS were
108.70 pence basic adjusted EPS and 108.15 pence diluted adjusted
EPS.
The calculations of basic and diluted earnings per share (EPS)
are based on the net profit attributable to equity holders of the
parent for the year of GBP24.8 million (2020: GBP69.8 million).
Basic EPS amounts are calculated by dividing the net profit
attributable to equity holders of the parent by the weighted
average number of AVEVA Group plc ordinary shares outstanding
during the year.
Diluted EPS amounts are calculated by dividing the net profit
attributable to equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year as
described above, plus the weighted average number of ordinary
shares that would be issued on the conversion of all the
potentially dilutive share options into ordinary shares.
Details of the calculation of adjusted EPS are set out
below:
2021 2020
GBPm GBPm
------------------------------------------------------- ------- -------
Profit after tax for the year 24.8 69.8
Intangible amortisation (excluding software) 95.7 90.6
Share-based payments 16.3 12.0
(Gain)/loss on fair value of forward foreign exchange
contracts (0.7) 0.4
Exceptional items 78.5 18.8
Effect of acquisition accounting adjustments(1) 3.3 -
Tax effect on exceptional items (15.1) (4.6)
Tax effect on other normalised adjustments (excluding
net finance expense) (23.0) (12.0)
Tax effect on acquisition accounting adjustments (0.9) -
Adjusted profit after tax 178.9 175.0
------------------------------------------------------- ------- -------
(1) Acquisition accounting adjustments relate to the revenue
haircut made upon the combination with OSIsoft, LLC
The denominators used are the same as those detailed above for
both basic and diluted EPS.
The adjustment made to profit after tax in calculating adjusted
basic and diluted EPS has been adjusted for the tax effects of the
items adjusted. The Directors believe that adjusted EPS is more
representative of the underlying performance of the business.
10 Business combinations
Acquisition of OSIsoft, LLC
On 19 March 2021 the Group acquired 100% of the voting shares of
OSIsoft, LLC, a global leader in real-time industrial operational
data software and services. The OSIsoft Group's main product is the
PI System, a proprietary, vendor-agnostic data management software
which enables customers to capture, store, analyse and share
real-time industrial sensor-based data with business systems across
all operations. This acquisition will significantly enhance the
Group's product offering, provide customer diversification and
greater geographical market penetration, create opportunities for
material revenue and cost synergies, and accelerate and improve the
Group's development of new software and technology. A consideration
of GBP3,831.4 million (US$5,086.5 million) was paid.
The deal was funded by GBP3,365.7million (US$4,438.1 million) of
cash; GBP2,806.9 million (US$3,734.3 million) raised via a rights
issue (net of expenses), and GBP558.8 million (US$703.8 million)
from existing cash and new debt facilities. The remainder was
funded by a GBP465.7 million (US$648.4 million) issue of 13,655,570
ordinary shares on 22 March 2021 to Estudillo Holdings Corp, a
company majority owned by Dr J. Patrick Kennedy and his family,
which held a 50.3% interest in OSIsoft, LLC. At 31 March 2021,
GBP7.3 million (US$10.0 million) remained in restricted cash in
relation to consideration to be paid.
The fair values of identifiable assets acquired and liabilities
assumed at the acquisition date are:
Carrying Provisional
value fair value Provisional
at acquisition adjustment fair value
GBPm GBPm GBPm
----------------------------------------- ---------------- ------------ ------------
Non-current assets
Intangible assets 0.4 1,231.6 1,232.0
Property, plant and equipment 21.0 - 21.0
Right-of-use assets 36.2 - 36.2
Deferred tax assets 22.0 (15.8) 6.2
Trade and other receivables 2.9 - 2.9
Customer acquisition costs 10.3 (10.3) -
Investments 0.4 - 0.4
Total non-current assets 93.2 1,205.5 1,298.7
----------------------------------------- ---------------- ------------ ------------
Current assets
Trade and other receivables 75.6 - 75.6
Contract assets 2.4 - 2.4
Customer acquisition costs 4.0 (4.0) -
Cash and cash equivalents 150.6 - 150.6
Financial assets 0.4 - 0.4
Total current assets 233.0 (4.0) 229.0
----------------------------------------- ---------------- ------------ ------------
Current liabilities
Trade and other payables (115.1) - (115.1)
Contract liabilities (136.2) 60.5 (75.7)
Lease liabilities (6.8) - (6.8)
Current tax liabilities (29.9) (8.0) (37.9)
Total current liabilities (288.0) 52.5 (235.5)
----------------------------------------- ---------------- ------------ ------------
Non-current liabilities
Lease liabilities (37.9) - (37.9)
Retirement benefit obligations (0.9) - (0.9)
Total non-current liabilities (38.8) - (38.8)
----------------------------------------- ---------------- ------------ ------------
Net identifiable assets and liabilities (0.6) 1,254.0 1,253.4
Goodwill 2,578.0
----------------------------------------- ---------------- ------------ ------------
Total consideration 3,831.4
----------------------------------------- ---------------- ------------ ------------
Goodwill of GBP1,303.5 million is expected to be deductible for
tax purposes.
The main factors leading to the recognition of goodwill are the
value of the assembled OSIsoft, LLC workforce and the future
synergy benefits expected to arise from integrating the two
combined businesses.
Costs incurred that are directly attributable to raising debt
(GBP2.9 million) and equity (GBP28.6 million) have been offset
against the corresponding financial liability and share premium
respectively. All remaining transaction costs were expensed and are
included within selling and administrative expenses.
The revenue and profit after tax included in the Consolidated
Income Statement contributed by OSIsoft, LLC were GBP20.7 million
and GBP10.8 million respectively, before a revenue haircut of
GBP3.3 million. If the acquisition had occurred on 1 April 2020,
the Consolidated Income Statement would have presented revenue of
GBP1,196.1 million and profit after tax of GBP48.1 million (at an
effective tax rate of 5.5%) before a revenue haircut of
approximately GBP53.0 million.
11 Trade and other receivables
2021 2020
GBPm GBPm
--------------------------------------------- ------ ------
Current
Amounts falling due within one year:
Trade receivables 245.3 181.2
Amounts owed from related parties (note 14) 21.6 28.4
Prepayments and other receivables 50.1 32.6
--------------------------------------------- ------ ------
317.0 242.2
--------------------------------------------- ------ ------
Non-current
Trade and other receivables 19.4 4.4
--------------------------------------------- ------ ------
19.4 4.4
--------------------------------------------- ------ ------
12 Cash and cash equivalents
2021 2020
GBPm GBPm
--------------------------------------------- ------ ------
Cash at bank and in hand 279.7 112.8
Short-term deposits 6.9 1.7
--------------------------------------------- ------ ------
Net cash and cash equivalents per cash flow 286.6 114.5
Treasury deposits 0.3 0.1
Restricted cash 7.3 -
--------------------------------------------- ------ ------
294.2 114.6
--------------------------------------------- ------ ------
Treasury deposits represent bank deposits with an original
maturity of over three months and are held with a fixed rate of
interest.
Restricted cash represents funds held in escrow in relation to
the acquisition of OSIsoft, LLC.
Short-term deposits are made for varying periods of between one
day and three months, depending on the immediate cash requirements
of the Group, and earn interest at the respective fixed short-term
deposit rates.
13 Trade and other payables
2021 2020
GBPm GBPm
------------------------------------------------- ------ ------
Current
Trade payables 39.6 20.1
Amounts owed to related parties (note 14) 1.5 7.6
Social security, employee taxes and sales taxes 28.5 18.5
Accruals 176.8 99.1
Other payables 24.9 4.2
------------------------------------------------- ------ ------
271.3 149.5
------------------------------------------------- ------ ------
Non-current
Other liabilities 18.2 0.7
------------------------------------------------- ------ ------
18.2 0.7
------------------------------------------------- ------ ------
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.
Accruals have increased as a result of the acquisition of
OSIsoft, LLC and associated transaction related costs.
14 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
a) Schneider Electric Group companies
During the year, Group companies entered into the following
transactions with Schneider Electric group companies:
2021 2020
GBPm GBPm
--------------------------------- ------ -------
Sales of goods and services 62.2 69.1
Purchases of goods and services (3.4) (11.2)
Interest expense on term loan (0.2) -
Other non-trading transactions 13.7 13.4
--------------------------------- ------ -------
Other non-trading transactions related to amounts received from
Schneider Electric in reimbursement for expenditure incurred as
part of the Company's migration from activities covered by TSAs
following the Combination. Of these transactions, GBP8.5 million
(2020: GBP9.6 million) related to operating expenses incurred, and
GBP5.2 million (2020: GBP3.8 million) to capital expenditure.
On 19 March 2021, the AVEVA Group received a GBP646.4 million
(US $900.0 million) term loan from Schneider Electric Holdings Inc
to assist in the funding of the acquisition of OSIsoft, LLC. The
term loan bears interest of LIBOR plus a margin and is repayable
three years from the inception date on 19 March 2024.
During the year ended 31 March 2021, the Group paid GBPnil
(2020: GBPnil) to Schneider Electric SE, the parent company of the
Schneider Electric Group. All other transactions were with
subsidiary companies within the Schneider Electric Group.
The existing TSA with Schneider Electric has an end date of 31
August 2021 for ERP-related services. Discussions are ongoing in
relation to a new Services Agreement under which Schneider Electric
(through SE Digital) will continue to provide ERP-related services
beyond 31 August 2021 whilst the Group completes its global roll
out of the new ERP system.
As at 31 March, Group companies held the following balances with
Schneider Electric group companies:
2021 2020
GBPm GBPm
----------------------------- -------- ------
Trade and other receivables 18.9 23.6
Trade and other payables (1.5) (7.6)
Non-trading receivables 2.7 4.8
Term loan (654.8) -
----------------------------- -------- ------
All balances held were with subsidiary companies within the
Schneider Electric group.
b) Transactions with other related parties
Dr J Patrick Kennedy holds 4.53% of the issued ordinary share
capital of AVEVA through his 75.64% ownership of Estudillo Holdings
Corp. Dr J Patrick Kennedy is also Chairman Emeritus of the Group,
a board advisory position.
In the year ended 31 March 2021, the Group has recognised
GBP141,000 (2020: nil) of expense payable to SLTC LLC for the use
of the OSIsoft San Leandro offices. The lease is effective until 31
January 2027, with rent of US$4.0 million payable per annum. SLTC
LLC is 25% owned by Dr J Patrick Kennedy.
In the year ended 31 March 2021, the Group has recognised
GBP8,000 (2020: nil) of expense payable to Lit San Leandro LLC for
the use of fibre optic cable. The lease is effective until 6
January 2022, with extension options to 6 January 2029. Rent of
US$132,000 is payable per annum. Lit San Leandro LLC is 49% owned
by Dr J Patrick Kennedy.
Terms and conditions of transactions with related parties
Outstanding balances at 31 March 2021 are unsecured, and
settlement occurs in cash. There have been no guarantees provided
or received for any related party receivables or payables. For the
year ended 31 March 2021, the Group has not recorded any impairment
of receivables relating to amounts owed by related parties (2020:
nil). This assessment is undertaken each financial year through
examining the financial position of the related party and the
market in which the related party operates.
15 Subsequent events
On 11 May 2021 the Group entered into an agreement whereby it
agreed to sell the Acquis Software, Termis Software and Water Loss
Management Software businesses together to Schneider Electric for
an aggregate consideration of GBP2.6 million. Completion is
expected to occur in or around July 2021.
Subsequent to the year end, the Group proposes to perform a
capital reduction, reducing share premium and creating additional
distributable reserves within retained earnings of approximately
GBP1.0 billion. The proposal is subject to approval by shareholders
at the Annual General Meeting on 7 July 2021.
Directors
Philip Aiken
Chairman
Peter Herweck
CEO
James Kidd
Deputy CEO & CFO
Craig Hayman
Director
Christopher Humphrey
Senior Independent Non-Executive Director
Jennifer Allerton
Independent Non-Executive Director
Ron Mobed
Independent Non-Executive Director
Paula Dowdy
Independent Non-Executive Director
Olivier Blum
Non-Executive Director
Responsibility statement pursuant to FSA's Disclosure and
Transparency Rule 4 (DTR 4)
Each Director of the Company (whose names and functions appear
above) confirms that (solely for the purpose of DTR 4) to the best
of his/her knowledge:
-- the financial information in this document, prepared in
accordance with the applicable UK law and applicable accounting
standards, give a true and fair view of the assets, liabilities,
financial position and result of the Company and of the Group taken
as a whole; and
-- the Chairman's statement, Chief Executive's strategic review
and Finance review include a fair review of the development and
performance of the business and the position of the Company and
Group taken as a whole, together with a description of the
principal risks and uncertainties that they face.
On behalf of the Board
Peter Herweck James Kidd
CEO Deputy CEO & CFO
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR PPUACAUPGUCA
(END) Dow Jones Newswires
May 25, 2021 02:00 ET (06:00 GMT)
Aveva (LSE:AVV)
Historical Stock Chart
From Mar 2024 to Apr 2024
Aveva (LSE:AVV)
Historical Stock Chart
From Apr 2023 to Apr 2024
