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AVEVA Group plc
Results for the six months ended30th September 2014
Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
This presentation may include predictions, estimates, intentions, beliefsand other statements that are or may be construed as being forward-looking. While these forward-looking statements represent our currentjudgment on what the future holds, they are subject to risks anduncertainties that could result in actual outcomes differing materially fromthose projected in these statements. No statement contained hereinconstitutes a commitment by AVEVA to perform any particular action or todeliver any particular product or product features. Readers are cautionednot to place undue reliance on these forward-looking statements, whichreflect our opinions only as of the date of this presentation. The Companyshall not be obliged to disclose any revision to these forward-lookingstatements to reflect events or circumstances occurring after the date onwhich they are made or to reflect the occurrence of future events.
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Strategic highlights
H1’15 result in line with mid-September guidance
– Significant deals signed during the period, acceleration in AVEVA
Everything 3D™ (AVEVA E3D)
– The benefits of ‘One AVEVA’ starting to show in new deals
– Solid revenue outlook from Global Accounts over next five years
– Thorough review of planned investment to yield efficiencies
– Anticipate result in line with Board’s expectations for full year
AVEVA continues to lead through innovation
– Record attendance at recent AVEVA World Summit in Berlin
– Demonstration of AVEVA E3D in the Cloud and new laser modelling
capabilities
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CFO reviewJames Kidd
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Sept2014
Sept2013
Change
Total revenue £85.9m £108.5m 21%
Constant currency revenue £92.3m £108.5m 15%
Adjusted* profit before tax £17.1m £32.3m 47%
Adjusted* basic EPS 20.50p 35.23p 42%
Adjusted* profit before tax margin 19.9% 29.8%
Interim dividend per share 5.5p 5.0p
Net cash £116.4m £95.8m 22%
Operating cash flow before tax £22.5m £30.2m 25%
Financial highlights
* Adjusted profit before tax, adjusted profit margin and adjusted basic earnings per share are calculated before amortisation of intangible assets (excluding other software), share-based payments, gain/loss on the fair value of forward foreign exchange contracts and exceptional items. In addition, adjusted basic earnings per share also includes the tax effects of these adjustments.
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Sept 2014£m
Sept 2013£m
Change
Total revenue 85.9 108.5 21%
Cost of sales (7.5) (8.4)
Research and Development costs (15.6) (18.7) 17%
Selling and distribution expenses (40.5) (44.2) 8%
Administrative expenses (8.4) (10.2) 18%
Net interest receivable 0.3 0.4
Normalised items 2.9 4.9
Adjusted* profit before tax 17.1 32.3 47%
Reported profit before tax 14.2 27.3 48%
Income tax (3.5) (7.5)
Profit after tax 10.7 19.8 46%
Adjusted* profit margin 19.9% 29.8%
Adjusted* basic EPS (pence) 20.50p 35.23p 42%
Summary income statement (statutory)
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Summary balance sheet
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Sept 2014£m
Sept 2013£m
Non-current assets 69.5 77.1
Accounts receivable (net of provision £6.0m (2013 - £4.7m)) 46.0 54.0
Other receivables 7.5 8.0
Net cash and deposits 116.4 95.8
Total assets 239.4 234.9
Other liabilities 24.6 34.4
Deferred revenue 30.9 30.4
Pension liabilities 12.7 13.3
Shareholders’ equity 171.2 156.8
Total shareholders’ equity and liabilities 239.4 234.9
Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Revenue by category
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Annual fees grew by 12% in H1
Recurring revenue 72% (2013 - 70%)
ILF – growth in China, weaker in other parts of Asia Pacific
£ millionH1 2014/15
Reported
H1 2014/15Constant Currency
H1 2013/14Reported
Constant currencychange
Annual fees 29.7 31.8 28.4 12%
Rental licence fees 32.1 34.4 47.2 (27%)
Recurring revenue 61.8 66.2 75.6 (12%)
Initial licence fees 14.6 15.8 21.6 (27%)
Services 9.5 10.3 11.3 (9%)
Total 85.9 92.3 108.5 (15%)
Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Rental licence fees
Rental licence fees were approx. £13 million down v H1 2013/14 on a constant currency basis
Impacted by specific factors
– Phasing of key rental contracts which are due to renew in H2 – worth £7.0 million
– Brazil – contracts worth £2.5 million not renewed due to lack of new projects
– Asia Pacific – ‘top-up’ rentals worth £3.5 million not renewed due to lower demand
Rentals will be more H2 weighted in FY15
Demand for rental remains resilient and is supported by EPC backlogs
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Global performance
Mixed performance across region
Good levels of AVEVA E3D sales
EMEA
£43.7m
(2013 - £48.4m)
Asia Pacific
£29.8m(2013 - £42.3m)
Rental fees
Initial fees
Annual fees
Training & services
Brazilian customers impacted by lack of new projects
North America saw lower levels of offshore O&G projects
Strong growth in China and India
Lower demand in South Korea and South East Asia
Americas
£12.4m(2013 - £17.8m)
£13.7m*
£46.6m*
£32.0m*
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* Revenue on a constant currency basis
Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Opex
H1 2014/15Reported
H1 2014/15Constant Currency
H1 2013/14Reported
Constant currencychange
Research & Development 15.6 16.2 18.7 (13%)
Selling & distribution 40.5 43.4 44.1 (2%)
Administrative expenses 8.4 9.3 10.2 (9%)
Total costs 64.5 68.9 73.0 (6%)
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£ million
R&D benefit from further expansion in India
Continue to invest in sales function in growth areas
Admin costs lower due to forex gains and other costs
Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Cost base
Direct action taken to manage cost base – c. £10 million saving in H2 vs plan
– £4 million deferred recruitment, £3 million discretionary spend, £3 million bonus and commission
FX also expected to have 4% impact on the cost base
No slow down in investment in key areas e.g. Cloud R&D, sales and pre-sales technical
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Sept 2014£m
Sept 2013£m
Change
Revenue 74.2 95.7 22%
Constant currency revenue 79.6 95.7 17%
Annual fees 26.8 25.5
Rental licence fees 31.3 45.7
Recurring revenue 58.1 71.2 18%
Initial licence fees 12.5 19.9
Services 3.6 4.6
Total revenue 74.2 95.7 22%
Operating costs (22.4) (23.8) 6%
Contribution 51.8 71.9 28%
Engineering & Design Systems
Rental licences impacted by specific factors
Cost efficiencies from Indian R&D
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Enterprise Solutions
Sept 2014£m
Sept 2013£m
Change
Revenue 11.7 12.8 9%
Constant currency revenue 12.7 12.8 1%
Annual fees 2.9 2.8
Rental licence fees 0.9 1.5
Recurring revenue 3.8 4.3 12%
Initial licence fees 2.1 1.7
Services 5.8 6.8
Total revenue 11.7 12.8 9%
Operating costs (13.3) (14.4)
Contribution (1.6) (1.6) -
Backlog £11.6 million v £10.7 million 31 March 2014
Maintaining tight control over cost base
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Movement in net cash position
Operating cash flow £22.5 million (2013 - £30.2 million)
Net cash balance £116.4 million at 30 Sept 2014 (31 March 2014 - £117.5 million)
Cash conversion 156% (2013 – 112%)
0
20
40
60
80
100
120
140
160
180
31-Mar-14 Cash from operations Tax Cap Ex Dividend 30-Sep-14
117.5
22.5 (7.9)(1.7) (14.0)
116.4
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CEO reviewRichard Longdon
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Strategic overview
Current industry trends
Global accounts
AVEVA E3D and AVEVA NET™
Customer examples
AVEVA World Summit 2014 feedback
AVEVA E3D in the Cloud
Outlook
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Oil & Gas
Long term outlook remains strong, but short term slower global growth and oversupply is affecting E&P spend
– IOCs delaying high-breakeven projects, reducing headcount and focusing on capital discipline
– Under the right conditions, the many recent deepwater discoveries will require more complex units for processing and extraction
– Plenty of activity within the LNG sector with a strong pipeline of investment
– Downstream refining and petrochem also attractive markets, particularly in the US
– A mixed environment for the EPCs, our customers
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Power
Consistent growth as world energy demand increases and existing infrastructure ages
– Global energy consumption continues to accelerate despite stagnant global GDP*
– Strong growth in renewables, now 22% of the global mix
– Last year global nuclear power output grew for the first time since 2010*
– China and India are expected to have built c.40% of the world’s new capacity by 2035ƚ
– Ageing western infrastructure driving the need for decommissioning and replacement
* BP Statistical Review of World Energy, June 2014ƚ International Energy Agency, World Energy Outlook 2013
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Marine
The ‘new normal’ – expect the market to remain flat considering the world economy
– The outlook for global GDP is key, as it remains a fundamental driver of the Marine industry
– Order books for conventional shipbuilding have started to recover for the first time since 2008
– Offshore order book down c.30% this year, with pain particularly evident in South Korea
– $1.4 trillion investment required to finance the shipping industry 2014-2023*
– Prospect of a major pick up in demand for LNG carriers, fleet expected to increase 60% by 2020
* Clarksons Research, Dynamic Growth in the Energy Competition (3 October 2014) estimates that LNG trade could reach 1 billion tonnes in the 2030s, from 244 million in 2013
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Global Accounts
Multi-year agreements provide visibility and revenue upside
– Expansion of product footprint to include AVEVA Integrated Engineering & Design solutions (AVEVA IE&D) and AVEVA NET
As a result of these new agreements, we have identified an incremental revenue opportunity of more than £30 million over the next 5 years*
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* Based on a phased uptake of AVEVA E3D over 5 years and average usage profile executed against the new contract pricing structure
Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
AVEVA E3D
Good momentum maintained in AVEVA E3D during H1
– Strong sales in September
– Cumulative revenue since launch now exceeds £5 million
– Increasing deal sizes
– Largest deployment at a single customer is now over 120 seats
– Noteworthy deals in H1 included those with Shell, KBR, Atkins and Hitachi GE
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Selected customer examples
Atkins
– AVEVA E3D and AVEVA Laser Modeller™ to support lean construction processes
KBR
– AVEVA E3D for major capital projects
Keypro Ingeneria S.A.
– Migrated to AVEVA E3D from AVEVA PDMS™
NGLTech
– AVEVA E3D to reduce risk and minimise project costs
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
AVEVA NET
Steady progress, increasing usage among EPCs and OOs
– Since period end significant deal with a major North American OO, combining both EDS tools and AVEVA NET
– Also, our first contract with a pure play Canadian oil sands producer
– RAO-Engineering, Russia’s 2nd
largest OO, for AVEVA NET and AVEVA IE&D
– Follow-on deal with Lundin for AVEVA NET and Digital Information Hub for the Digital Asset
16th October: Global alliance agreement signed with Capgemini, covering all asset-intensive industries
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
In total there were 16 customer case study presentations from leading EPCs, OOs and shipbuilders, sharing the advantage of the digital asset approach to their operations
AVEVA World Summit 2014
This year’s Summit in Berlin saw a record attendance
– Over 300 delegates from 36 countries
– Over 75% of delegates from C-Level and department / project management
– Around 20% from Owner Operators
– Key presentations from AMEC, Jacobs, Foster Wheeler and Shell
– Strong positive response to the digital asset theme, and new asset visualisation technology
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Berlin – reaction to E3D in the Cloud
A secure solution which
accommodates the
complexity of
engineering project IT
An open and
customisable solution
Cost-effective flexibility
for customers
Since the Berlin demo,
we have expanded the
beta release
programme to more
key customers
“Using Amazon AppStream, the setup took just minutes and the performance was not noticeably different from that of a desktop AVEVA E3D session… there was so much interest that the team held an impromptu provisioning session during lunch on day 2 of the Summit.” – Schnitger Corp., 22 October 2014
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Outlook
Customer feedback suggests overall market growth in H2, although it is a mixed picture
– Uncertain global economic backdrop with regional difficulties in Brazil, South Korea and Russia over the medium term
We remain focused on long term growth
– Innovation is a key driver of the business in uncertain markets
– The core of the business remains resilient
– Maximising opportunities with ‘One AVEVA’ pull-through strategy
– Leveraging increased revenue from Global Accounts via AVEVA E3D
– We are focused on the digital asset across all industry sectors
– We have confidence in the outlook and the long term growth opportunity
Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.27
Appendices
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Currency effect on revenue – H1 FY15Currency % of FY’14
revenueA: Average
rate H1 FY’15
B: Average rate H1 FY’14
Delta(A / B)
H1 FY’15 rev impact
EMEA 51% -6%
EUR 1.24 1.17 +6%
NOK 10.26 9.12 +12.5%
RUB 59.75 49.77 +20%
Asia Pacific 35% -7%
CNY 10.34 9.55 +8%
INR 100.96 91.15 +11%
JPY 172.71 152.51 +13%
KRW 1,728.42 1,728.61 -
AUD 1.80 1.62 +11%
Americas 14% -9%
USD 1.68 1.54 +9%
BRL 3.78 3.37 +12%
MXP 21.90 19.59 +12%
Total 100% -7%
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Summary cash flow
Sept 2014£m
Sept 2013£m
Net cash from operating activities 22.5 30.2
Tax paid (7.9) (6.7)
Capital expenditure (net) (1.7) (2.5)
Interest received (net) 0.4 0.6
Purchase of own shares (0.3) (0.7)
Dividends paid (14.0) (113.3)
Net decrease in cash (1.0) (92.4)
Foreign exchange movement (0.1) (2.2)
Opening cash and deposits 117.5 190.4
Closing cash and deposits 116.4 95.8
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Copyright © 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
DefinitionsItem Definition
Initial Licence FeeInitial Licence Fee (ILF) - users are charged an initial licence fee per seat together with an obligatory annual fee.
Annual FeeCharged in association with an ILF providing customer support and maintenance, which includes core updates. Users must pay the annual fee in order to maintain the right to use the software.
Rental licence modelAn alternative to the ILF plus annual fee model, there are three different types of rental licence: Monthly invoicing, contractual period (typically one year, invoiced up front) or token licensing.
Token-based licensingThe user pays for a 'basket of tokens' representing licences to use different software products over a defined period of time. The customer can draw down on these licences as required.
Revenue recognition
ILFs – recognised upfront after usual delivery and acceptance conditions are met. Annual fees –recognised ratably over the period (typically 12 months). Rental licences - an estimated licence element is recognised up front, and the remaining maintenance element is recognised ratably over the contracted period. Services are recognised on a percentage complete basis.
Revenue by geographyThe sales force is organised into three geographic regions. Revenue is allocated based on where the contracting entity of the customer is based. AVEVA's global accounts often choose to purchase software in one geography for use in another.
Recurring revenue Annual fees plus rental fees.
Adjusted PBTProfit Before Tax adjusted to exclude the effects of amortisation of intangibles (excluding software), share-based payments, gain/loss on fair value of forward foreign exchange contracts and exceptional items.
Constant currencyThe subsidiary companies’ reported result retranslated to reflect the previous year’s average exchange rates and before any gains or losses on intra-group payables or receivables.
Adjusted EPSAdjusted PBT is used to calculate the adjusted earnings per share, after an adjustment for the tax effect of the items adjusted.
Cash conversion Cash flow from operations divided by the operating profit for the period, measured as a percentage.
Enterprise Solutions backlogContracted Enterprise Solutions revenue that has not yet been recognised but which is expected to be recognised in the next 12 months. Revenue backlog also includes 12 months of annual fees.
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