AVEVA GROUP PLC RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017 14 November 2017
This presentation may include predictions, estimates, intentions, beliefs and other statements that are or may be construed as being forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could result in actual outcomes differing materially from those projected in these statements. No statement contained herein constitutes a commitment by AVEVA to perform any particular action or to deliver any particular product or product features. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. The Company shall not be obliged to disclose any revision to these forwardlooking statements to reflect events or circumstances occurring after the date on which they are made or to reflect the occurrence of future events. 2
AGENDA H1 2018 highlights Finance review Strategic review Update on Schneider Electric Software Business Appendices 3
JAMES KIDD, CEO HIGHLIGHTS 4
AVEVA H1 2018 HIGHLIGHTS Operating performance Revenue 93.9m up 11.5%, adjusted PBT 10.3m up 13.2% Constant currency revenue up 5.9% and 16.1% growth in adjusted PBT Performance driven by sharp focus on execution and improved end market conditions Strong regional performance Strategic progress AVEVA Everything3D TM (AVEVA E3D TM ) revenue up some 50% and growth in MT3D products Strong performance in growth markets (e.g. China) The planned combination with the Schneider Electric Software Business supports all of our strategic objectives advances our vision for the adoption of the Digital Asset 5
DAVID WARD, CFO FINANCIAL REVIEW 6
AVEVA H1 2018 INCOME STATEMENT H1 2018 H1 2017 Change Constant currency Revenue 93.9m 84.3m 11.5% 5.9% Total costs ( 83.8m) ( 75.5m) 11.1% 4.4% Net interest receivable 0.2m 0.3m - - Adjusted* profit before tax 10.3m 9.1m 13.2% 16.1% Adjusted effective tax rate 23.2% 30.0% - - Adjusted* diluted EPS 12.35p 9.92p 24.5% - Solid revenue growth with good cost control and a reduced tax rate has delivered strong earnings growth 650 million of cash will be distributed to AVEVA shareholders in relation to the combination with Schneider Electric Software. As previously announced, AVEVA will therefore not pay an interim dividend in relation to H1 2018 *Adjusted profit before tax, adjusted profit margin and adjusted diluted 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 diluted earnings per share also includes the tax effects of these adjustments. 7
AVEVA H1 2018 REVENUE BREAKDOWN H1 2018 H1 2017 Change Constant currency Annual Fees 37.2m 34.7m 7.1% 1.5% Rental Licence Fees 31.7m 29.4m 7.9% 2.6% Recurring revenue 68.9m 64.1m 7.5% 2.0% Initial Licence Fees 16.1m 11.6m 38.7% 33.6% Training & Services 8.9m 8.6m 3.8% (2.4)% Total 93.9m 84.3m 11.5% 5.9% Improved performance in recurring revenue versus the prior financial year, with modest constant currency growth Strong growth in Initial Licence Fees, which will drive future Annual Fees 8
AVEVA H1 2018 COST BASE H1 2018 H1 2017 Change Constant currency Cost of sales 6.7m 6.7m 1.0% (3.7)% Research & Development 15.0m 13.2m 13.0% 8.7% Selling & distribution 43.5m 41.8m 4.2% (0.5)% Administrative 18.6m 13.8m 34.7% 19.3% Total opex 77.1m 68.8m 12.0% 5.2% Total costs* 83.8m 75.5m 11.1% 4.4% COS: Annualisation of cost saving initiatives R&D: Increased headcount in Hyderabad and wage inflation Selling & distribution: Annualisation of cost savings partly offset by inflation Admin: Impacted by investment in corporate functions, higher National Insurance costs relating to the improvement in the share price and staff bonus costs due to improved business performance *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. 9
AVEVA H1 2018 REGIONAL OVERVIEW Reinvestment in organic growth Americas Revenue 11.5m (H1 17 12.5m) EMEA Revenue 44.5m (H1 17 42.1m) Asia Pacific Revenue 37.9m (H1 17 29.7m) 10
REGIONAL OVERVIEW EMEA H1 2018 H1 2017 Change EMEA 44.5m Regional revenue 44.5m 42.1m 5.7% Regional costs 21.2m 20.4m 3.8% Regional contribution 23.3m 21.7m 7.5% Significantly improved performance The constant currency revenue change was (0.3%), representing a significant improvement in trend from H2 2017 Market conditions in EMEA were relatively stable with pockets of growth in Power, Oil & Gas and Pharmaceuticals We saw solid growth in several of our larger markets including the UK, France and Germany 11
REGIONAL OVERVIEW ASIA PACIFIC H1 2018 H1 2017 Change Asia Pacific 37.9m Regional revenue 37.9m 29.7m 27.8% Regional costs 13.7m 13.8m 0.0% Regional contribution 24.2m 15.9m 51.7% Strong growth Solid constant currency growth in recurring revenue Strong growth in Initial Licence Fees with new orders from Marine customers Good performances in Japan, China and South Korea with double digital growth Overall constant currency revenue was up 22.7% 12
REGIONAL OVERVIEW AMERICAS H1 2018 H1 2017 Change Americas 11.5m Regional revenue 11.5m 12.5m (7.8)% Regional costs 9.0m 10.1m (10.2)% Regional contribution 2.5m 2.4m 2.1% Solid progress Solid increase in recurring revenue on a constant currency basis reflecting prior year order wins and a major new EPC customer win Slight reduction in overall regional revenues due to lower Initial Licence Fees. This related to a strong prior year comparative, when the Group signed a large contract with an Owner Operator in the Power market Constant currency revenue was down 13.2%, although the full year regional outlook remains encouraging 13
AVEVA H1 2018 BALANCE SHEET AND CASHFLOW The Group has a strong balance sheet with no debt AVEVA continues to be highly cash generative Cash at 30 September 2017 up to 133.0m (March 2017 130.9 million) after dividend payments of 17.3m, losses on the translation of non-sterling cash deposits of 2.0m and exceptional cash costs relating to the planned combination with the Schneider Electric Software Business of 2.4m Cash generated from operating activities before tax was 25.3m Year-on-year performance (H1 2017 36.4m) was impacted by a larger than usual cash inflow from trade debtors in the prior period and the exceptional charges 14
AVEVA H1 2018 EXCEPTIONAL ITEMS H1 2018 H1 2017 Acquisition costs 20.0m - Restructuring costs - 2.0m Indemnified receivable claim for previous business combination - ( 1.8m) Movement in provision for sales taxes in an overseas location ( 0.5m) ( 0.1m) Net charge 19.5m 0.1m The Group incurred costs of 20.0m relating to fees paid to professional advisers, primarily for legal and financial due diligence advice concerning the proposed combination with certain software assets from Schneider Electric 15
JAMES KIDD, CEO STRATEGIC REVIEW 16
STRATEGIC REVIEW MARKET DEVELOPMENTS Oil & Gas H1 2018 revenue by end market (%) Some stabilisation in end market conditions with oil in the $50-$60 range and overall industry capex beginning to recover following two years of steep decline Oil & Gas Marine Marine Power Pockets of growth with customers investing in our technology to help drive growth in new sectors (e.g. cruise ships) and design more efficient, next generation vessels Petro Chem & Chem Other Other markets Significant growth opportunities in other capital intensive industries as the pace of digitalisation accelerates *Other includes Mining, Paper & Pulp and Pharmaceutical 17
STRATEGIC REVIEW KEY CUSTOMER DEVELOPMENTS Key new wins and contract extensions European OO (Pharmaceuticals) China Merchants Heavy Industries (Marine) DSEC Co., Ltd. (Marine) Mitsui Engineering & Shipbuilding Co., Ltd. (Marine) Xiamen Shipbuilding Industry Co., Ltd. (Marine) Zachry Holdings (Power, Energy, Chemicals, Manufacturing and Industrial) Major US industrial (Power) Major EPC (Oil & Gas) Major renewals in Oil & Gas and Power in H1 18
STRATEGIC REVIEW PROGRESS AGAINST STRATEGY AVEVA E3D: Existing customers continued to migrate and new contracts won. Contributed 16% of total revenue, up from 11% in the previous period MT3D: Constant currency sales up 3.6%. Strong performance from Schematics and Enterprise Resource Management Owner Operators: Growing recurring revenue base, particularly with OOs in the Power sector Growth markets: Strong growth in China. A good 2 performance against a tough comparative in North 0 America Broadening market exposure: Good growth in Pharma, Chemicals, Petrochemicals and Metals & Mining 16 14 12 10 8 6 4 AVEVA E3D revenue ( m) SaaS & Cloud: Strategy is to continue to be technologically ready for Cloud and SaaS delivery in line with customer demand. Products including Asset Visualisation and Information Standards Manager are now available on our Cloud platform H1 2016 H1 2017 H1 2018 19
AVEVA WORLD SUMMIT DIGITALISATION: GETTING IT RIGHT Held in Cambridge to mark 50 years since AVEVA was founded 350 executives from 33 countries came to Plant, Marine and Delivering Digital streams Presenters included: Boehringer Ingelheim, BAE Systems, GSK, Kawasaki Heavy Industries, McDermott Inc., Siemens and Southern Company Significant interest in the journey towards digitalisation across all industries PHYSICAL ASSET DIGITAL TWIN Process Design & Simulation Information Plant Design Information Maintenance Information Real Time Operations Information 20
SUMMARY & OUTLOOK Good performance in H1 Constant currency revenue up 5.9%, with strong growth in Asia Pacific and stabilisation in EMEA Improved market conditions Some pockets of growth in Marine and signs of stabilisation in Oil & Gas Sharp focus on execution and getting closer to our customers The board remains confident in its full year expectations 21
UPDATE ON SCHNEIDER ELECTRIC SOFTWARE BUSINESS 22
UPDATE ON SCHNEIDER ELECTRIC SOFTWARE BUSINESS SUMMARY OF KEY MILESTONES Timings Shareholder approval: Approved on 29 September with 99.99% of votes in favour Regulatory approvals: All filings made with no concerns raised to date Preparation for completion is on track with closure expected to be at or around the end of 2017. A further update on progress and timing will be provided in due course Return of value of 10.14 per AVEVA share Record date: Last working day prior to Completion Payment date: ASAP post completion 23
APPENDICES 24
MAJOR CURRENCIES H1 2018 VERSUS H1 2017 Currency % of H1 revenue H1 2018 Average H1 2017 Average Change EUR 1.14 1.22 (6.9)% NOK 10.66 11.38 (6.3)% RUB 75.13 89.60 (16.0)% Impact on revenue EMEA 47.4% +6.0% CNY 8.76 9.06 (3.3)% JPY 144 145 (0.5%) KRW 1,464 1,569 (6.6)% Asia Pacific 40.4% +5.1% USD 1.29 1.37 (5.7)% BRL 4.13 4.65 (11.2)% Americas 12.2% +5.3% Total 100% +5.6% 25
MAJOR CURRENCIES 1 OCT 17 VERSUS H2 2017 EMEA Asia Pacific Americas Currency 1 October 17 Spot H2 2017 Average Change EUR 1.13 1.16 (2.3)% NOK 10.61 10.43 1.7% RUB 76.83 75.51 1.7% CNY 8.82 8.51 3.6% JPY 150 138 8.2% KRW 1,520 1,433 6.2% USD 1.33 1.24 7.0% BRL 4.19 4.19 5.0% 26
MAJOR CURRENCIES 1 OCT 17 VERSUS 23 MAY 17 EMEA Asia Pacific Americas Currency 1 October 17 Spot 23 May 17 Spot Change EUR 1.13 1.16 (2.1)% NOK 10.61 10.83 (2.1)% RUB 76.83 73.07 5.1% CNY 8.82 8.94 (1.4)% JPY 150 144 3.8% KRW 1,520 1,459 4.2% USD 1.33 1.30 2.3% BRL 4.19 4.23 (0.9)% 27
DEFINITION OF TERMS Item Definition Item Definition Initial Licence Fee Initial Licence Fee (ILF) - users are charged an initial licence fee per seat together with an obligatory annual fee. AEC Architecture, engineering and construction Annual Fee Rental licence Tokens Revenue recognition Revenue by geography Recurring revenue Adjusted PBT Charged 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. An 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. The 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. 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. The sales force is organised into three geographic regions. Revenue is allocated based on where the contracting entity of the customer is based. AVEVA's Global Accounts often choose to purchase software in one geography for use in another. Annual fees plus rental fees. Profit 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. EPC OO MT3D ERM AVEVA E3D AVEVA IE&D Engineering, Procurement & Construction company Owner-operator company More than 3D: refers to the software applications in the AVEVA portfolio that sit outside of the core 3D platforms, PDMS, AVEVA E3D and AVEVA Marine. This includes AVEVA NET Enterprise Resource Management AVEVA Everything3D, the next generation 3D design platform from AVEVA. Integrated Engineering & Design portfolio that enables highly productive and collaborative working across multiple engineering and design disciplines. Constant currency The period s reported result restated to reflect the previous year s average exchange rates, for the purpose of a constant currency comparison. Adjusted EPS Adjusted 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. 28
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