AVEVA Group plc Results for the year ended 31 March 2015 19 May 2015
This presentation may include predictions, estimates, intentions, beliefs and other statements that are or may be construed as being forward-looking. While these forwardlooking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could result in actual outcomes differing materially from those projected in these statements. No statement contained herein constitutes a commitment by AVEVA to perform any particular action or to deliver any particular product or product features. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. The Company shall not be obliged to disclose any revision to these forward-looking statements to reflect events or circumstances occurring after the date on which they are made or to reflect the occurrence of future events. 2
CEO review Richard Longdon, CEO
Highlights AVEVA s business model has shown resilience Results in line with expectations against a difficult demand backdrop Organic c/c revenue of 220.4 million (FY14: 237.3 million) Adj. PBT 62.1 million (FY14: 78.3 million) Good progress against key strategic objectives Focus on sales execution One AVEVA delivering benefits Further success with our Global Accounts Strong performance from AVEVA Everything 3D (AVEVA E3D ) Broadened and deepened our partner channel Acquisition of 8over8 Limited 4
Innovation Further extended our industry leadership AVEVA E3D in the Cloud - Highly flexible and cost efficient - Seamless, secure interface AVEVA NET - Major enhancements - Improved 3D interaction, visualisation, navigation and search Visualisation - Developed with industrial input from Shell and Lundin - Convergence of design and data management New products - New products and enhancements - e.g. AVEVA ISM, AVEVA Control of Work 5
Global Accounts Maximising competitive advantage Investing in latest AVEVA technology to maximise business benefit, create efficiencies Active across a range of end markets, not just Oil & Gas Notable enhanced relationship with Aker Solutions Rental renewals remained generally robust Key deals with Jacobs Engineering, Technip, WorleyParsons, AMEC Foster Wheeler, among others 6
Partner network Broadened and deepened Global alliance with Capgemini to provide DiALM solution, based on AVEVA NET, for asset-intensive industries New partnership with EMC for an integrated software solution in capital projects and asset operations New partnership with ETAP seamless data exchange for complex Electricals 7
AVEVA E3D Strong pace of adoption continues At March 15, 230 customers and cumulative revenue > 11m since launch Catalyst for more One AVEVA solution sales Notable deals included Atkins, KBR, Tianchen, D3SCOM, and Aker Solutions Pricing is in line with plan 8
Acquisition of 8over8 Contract risk management Risk management software solution for increased project control and capital discipline for high value, complex projects Through using ProCon, customers have saved $12.4 billion in reduced cost overruns and enhanced cost recovery ProCon used on over 300 major capital projects totalling >$600 billion in capex Smart cities are also an area of potential growth over the longer term 9
End markets Update Oil & Gas Marine Power Chemical & Petrochem Other Opportunity downstream Brownfield plays to our strengths in laser modelling Investing more into our North American operations Robust long-term growth drivers Stable outlook but no signs of a sustained recovery Global GDP remains the key driver for the industry New build in developing economies China and India Replacement and life-extension elsewhere Nuclear remains a significant longterm opportunity North America a particularly active market Projects typically less complex Opportunity for further growth Metals & Mining Pulp & Paper Food processing Other process plant c.45-50% c.15-20% c.10-15% c.5-10% c.5-10% 10
Customer examples Recent success stories Upstream onshore Oil & Gas Owner Operator. Selected AVEVA s Digital Asset approach for engineering data management. Multiple products including AVEVA IE&D, AVEVA Bocad, AVEVA NET, AVEVA ERM and AVEVA LFM. Historically used home-grown system for domestic nuclear plant design, but expansion prompted the need for a commercially available design platform to meet international standards and systems. Replacing competitor technology, customer is creating Digital Assets for a large energy company in the UK. Laser scanning technology and integration with AVEVA E3D were key. The world s largest ship, Pioneering Spirit, goes into operation later this summer. Designed using AVEVA s tools. 11
Financial review James Kidd, CFO
Financial highlights FY 2015 FY 2014 Change Total revenue 208.7m 237.3m 12% Organic constant currency revenue* 220.4m 237.3m 7% Adjusted** profit before tax 62.1m 78.3m 21% Adjusted** basic EPS 74.5p 89.1p 16% Adjusted** profit before tax margin 29.8% 33.0% Final dividend per share 25.0p 22.0p 14% Net cash 103.8m 117.5m 12% Operating cash flow before tax 45.1m 70.2m 36% *Organic constant currency revenue is defined as the period s reported revenue restated to reflect the previous year s average exchange rates and excludes the revenue from 8over8. **Adjusted profit before tax, adjusted profit margin and adjusted basic earnings per share are calculated before amortisation of intangible assets (excluding other software), share-based payments, gain/loss on the fair value of forward foreign exchange contracts and exceptional items. In addition, adjusted basic earnings per share also includes the tax effects of these adjustments. 13
Summary income statement Organic 8over8 FY 2015 FY 2014 Total revenue 207.6 1.1 208.7 237.3 Cost of sales (15.2) (0.3) (15.5) (17.4) Gross profit 192.4 0.8 193.2 219.9 Operating expenses (130.0) (1.4) (131.4) (142.1) Net interest receivable 0.3-0.3 0.5 Adjusted** profit/(loss) before tax 62.7 (0.6) 62.1 78.3 Normalised items (7.2) (9.3) Reported profit before tax 54.9 69.0 Income tax (13.3) (18.0) Profit after tax 41.6 51.0 Adjusted** profit margin 29.8% 33.0% Effective tax rate 24.2% 26.1% Adjusted** basic EPS (pence) 74.5 89.1 14
Summary balance sheet March 2015 March 2014 Non-current assets 90.9 74.0 Accounts receivable (net of provision 5.6m (2014-5.2m)) 88.6 77.8 Other receivables 10.1 8.6 Net cash and deposits 103.8 117.5 Total assets 293.4 277.9 Other liabilities 41.1 47.5 Deferred revenue 48.2 36.5 Pension liabilities 14.2 8.9 Shareholders equity 189.9 185.0 Total shareholders equity and liabilities 293.4 277.9 Accounts receivable high because of back-end loaded Q4 billings Deferred revenue up due to 8over8 ( 4.5m) and the impact of maintenance deferral and multi-year contracts Pension liability valuation in UK impacted by discount rate scheme closed to future accrual from 31/3/15 15
Organic revenue by category 2014/15 Reported 2014/15 Constant currency* 2013/14 Reported Change Annual fees 60.2 64.4 57.1 13% Rental licence fees 97.2 102.2 109.9 (7%) Recurring revenue 157.4 166.6 167.0 - Initial licence fees 31.1 33.5 48.4 (31%) Services 19.1 20.3 21.9 (7%) Total 207.6 220.4 237.3 (7%) Strong growth in annual fees following ILF performance in FY14 and China catch-up benefit Initial licences impacted by lower offshore Oil & Gas activity in Asia Pacific Rental fees impacted by renewals in Asia Pacific and Latin America but resilient in H2 * Revenue on a constant currency basis is defined as the period s reported revenue restated to reflect the previous year s average exchange rates and excludes the revenue from 8over8. 16
Resilient performance in H2 FY15 2014/15 2013/14 Change Annual fees 32.6 28.7 14% Rental licence fees 67.8 62.7 8% Recurring revenue 100.4 91.4 10% Initial licence fees 17.7 26.8 (34%) Services 10.0 10.6 (6%) Total 128.1 128.8 - * Revenue is stated on an organic, constant currency basis. 17
Global performance Rental fees Americas 38.2m* (Reported 36.8m) (2014-38.4m) EMEA 112.9m* (Reported 103.5m) (2014-112.0m) Initial fees Annual fees Training & services Asia Pacific 69.3m* (Reported 67.3m) (2014-86.9m) Good level of EPC renewals in North America Impact of Oil & Gas in Brazil * Revenue is stated on an organic, constant currency basis. Global Account renewals strong, Central Europe weaker Oil & Gas in Norway/UK tough Double digit growth in China, Oil & Gas projects impact in SE Asia and South Korea 18
Organic cost base 2014/15 Reported 2014/15 Constant currency* 2013/14 Reported Change Cost of sales 15.2 16.1 17.4 (7%) Research & Development 28.1 29.3 32.9 (11%) Selling & distribution 85.3 90.3 90.4 Administrative 16.6 19.3 18.8 3% Total opex 130.0 138.9 142.1 (2%) Total costs 145.2 155.0 159.5 (3%) R&D benefited from moving headcount from outsourced model in India and cuts in discretionary spend Selling and distribution flat due to investment in sales offset by savings in commissions Admin expenses increased due to some one-off costs and investment in information systems, offset by lower bonuses * Costs are stated on a constant currency and after adjusting for amortisation of intangible assets (excluding other software), share-based payments, gain/loss on the fair value of forward foreign exchange contracts and exceptional items. Constant currency is defined as the period s reported costs restated to reflect the previous year s average exchange rates. This also excludes the costs from 8over8. 19
Cost base (2) Reduction in opex of 10m+ in H2 delivered against original plan Total costs in constant currency terms reduced by 3% v FY14 FY16 focus on efficiency and effectiveness Further action taken on costs in FY15/16 to offset cost increases Annualised saving 3m Exceptional costs 0.9m FY15, expected cost c 2.5m in FY16 Continued control over discretionary spend travel, sub-contractors etc Merger of EDS and ES will also help drive efficiencies 20
million Profit analysis Adjusted profit before tax margin 29.8% (2014 33%) Reduction in revenue offset in part by reduced costs 80 78.3 (29.7) Small loss from 8over8 in its first quarter post acquisition 70 60 12.1 (0.2) (0.6) 62.1 50 2.2 40 30 Bonuses and commissions 20 10 FY14 Adj PBT Revenue COS OPEX Net interest 8over8 FY15 Adj PBT 21
million Movement in net cash position 250 200 45.1 (14.2) 150 (2.7) (25.6) 117.5 (17.6) 100 1.3 103.8 50 0 31-Mar-14 Cash from operations Tax CAPEX Acquisitions Dividends FX/other 31-Mar-15 Cash from operations down due to phasing of billings in Q4 Acquisition of 8over8 Limited for 25.6m (net of cash on balance sheet) Cash conversion 83% (2014 102%) 22
Segmental reporting update AVEVA s segmental reporting will change for FY16 One AVEVA initiative firmly established within Sales We are seeing an acceleration in the convergence of our Engineering Design Tools and Information Management software We have recently unified our Solutions and Technology and professional services teams, to optimise R&D and delivery FY15 is the last time we will report Engineering & Design Systems and Enterprise Solutions as lines of business FY16 reporting shall include geographic segments Revenue and profitability by region Interims will contain full details and comparatives 23
Summary and outlook Richard Longdon, CEO
Outlook Capitalising on AVEVA s traditional strengths Industry-leading technology First-class customer service Drive further penetration of installed base via innovative new products Focus on efficient use of resources, balancing costs with opportunity Core fundamental drivers of our markets are unchanged, although cautious near-term outlook 25 Copyright Copyright 2015 2014 AVEVA AVEVA Solutions Solutions Limited Limited and and its its subsidiaries. All All rights reserved.
Appendices
Revenue by category Organic 8over8 2014/15 Reported 2014/15 Organic Constant Currency* 2013/14 Reported Organic Constant Currency change Annual fees 60.2 0.5 60.7 64.4 57.1 13% Rental licence fees 97.2 0.3 97.5 102.2 109.9 (7%) Recurring revenue 157.4 0.8 158.2 166.6 167.0 - Initial licence fees 31.1-31.1 33.5 48.4 (31%) Services 19.1 0.3 19.4 20.3 21.9 (7%) Total 207.6 1.1 208.7 220.4 237.3 (7%) * Organic constant currency revenue is defined as the period s reported revenue restated to reflect the previous year s average exchange rates and excludes the revenue from 8over8. 27
Cost base Organic 8over8 2014/15 Normalised 2014/15 Organic Constant Currency* 2013/14 Normalised Organic Constant Currency change Cost of sales 15.2 0.3 15.5 16.1 17.4 (7%) Research & Development 28.1 0.8 28.9 29.3 32.9 (11%) Selling & distribution 85.3 0.5 85.8 90.3 90.4 Administrative 16.6 0.1 16.7 19.3 18.8 3% Total opex 130.0 1.4 131.4 138.9 142.1 (2%) Total costs 145.2 1.7 146.9 155.0 159.5 (3%) * Organic constant currency costs are defined as the period s reported costs restated to reflect the previous year s exchange rates and excludes costs from 8over8. 28
Summary cash flow FY 2015 FY 2014 Net cash from operating activities 45.1 70.2 Tax paid Acquisitions (14.2) (18.2) (25.6) - Capital expenditure (net) (2.7) (4.9) Interest received (net) 0.7 1.1 Purchase of own shares (0.3) (0.7) Dividends paid (17.6) (116.5) Net decrease in cash (14.6) (69.0) Foreign exchange movement 0.9 (3.9) Opening cash and deposits 117.5 190.4 Closing cash and deposits 103.8 117.5 29
Engineering & Design Systems FY 2015 FY 2014 Revenue 182.7 211.5 Annual fees 54.7 51.4 Rental licence fees 92.7 105.5 Recurring revenue 147.4 156.9 Initial licence fees 27.4 45.5 Services 7.9 9.1 Total revenue 182.7 211.5 Operating costs (45.7) (48.5) Contribution 137.0 163.0 30
Enterprise Solutions Organic 8over8 FY 2015 Total FY 2014 Revenue 24.9 1.1 26.0 25.9 Annual fees 5.6 0.5 6.1 5.7 Rental licence fees 4.5 0.3 4.8 4.5 Recurring revenue 10.1 0.8 10.9 10.2 Initial licence fees 3.7-3.7 2.9 Services 11.1 0.3 11.4 12.8 Total revenue 24.9 1.1 26.0 25.9 Operating costs (25.5) (1.1) (26.6) (29.3) Contribution (0.6) - (0.6) (3.4) 31
Currency effect on revenue FY16 Currency % of FY15 revenue A: Average rate FY15 B: Spot rate 31/3/15 Delta (A / B) FY16 rev impact EMEA 50% -7% EUR 1.27 1.36 +7% NOK 10.78 11.85 +10% RUB 72.43 85.83 +18% Asia Pacific 32% 1% CNY 9.92 9.08-8% INR 98.53 92.87-6% JPY 176.76 177.48 0% KRW 1,709.88 1,641.33-4% AUD 1.84 1.92 +4% Americas 18% -2% USD 1.61 1.48-8% BRL 3.97 4.82 +21% MXP 22.09 22.60 +2% Total 100% -4-5% 32 Copyright 2014 AVEVA Solutions Limited and its subsidiaries. All rights reserved.
Definition of terms Item Initial Licence Fee Definition Initial Licence Fee (ILF) - users are charged an initial licence fee per seat together with an obligatory annual fee. Annual Fee Rental licence model Token-based licensing Revenue recognition Revenue by geography Recurring revenue Adjusted PBT Constant currency Adjusted EPS Cash conversion Backlog 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), sharebased payments, gain/loss on fair value of forward foreign exchange contracts and exceptional items. The period s reported result restated to reflect the previous year s average exchange rates, for the purpose of a constant currency comparison. Adjusted PBT is used to calculate the adjusted earnings per share, after an adjustment for the tax effect of the items adjusted. Cash flow from operations divided by the operating profit for the period, measured as a percentage. Contracted revenue that has not yet been recognised but which is expected to be recognised in the next 12 months. Revenue backlog also includes 12 months of annual fees. 33