18th May 2005 07:01
AVEVA Group PLC18 May 2005 18 May 2005 AVEVA Group plc RESULTS FOR THE FINANCIAL YEAR ENDED 31 March 2005 AVEVA Group plc ("AVEVA"; stock code: AVV), one of the world's leading providersof engineering data and design IT systems, today announces its audited resultsfor the year ended 31 March 2005. Highlights • Record results with increased revenue, profits before goodwill and cash • Revenues up 51% to £57.5 million (2004: £38.1 million), with recurring revenues up 42% to £32.6 million • Profit before tax, exceptional restructuring costs and goodwill £10.7 million (£6.7 million) an increase of 60% • Adjusted earnings per share of 36.7p (2004: 26.2p) • Basic earnings per share of 13.4p (2004: 22.4p) • Strong cash generation with net cash at year-end at £11.2m (2004: £8.7m) • Increased final dividend of 4.3p proposed, bringing the total dividend to 6.1p (2004: 5.8p) • Excellent growth in target sectors of oil and gas, power and marine, with notable success in the Asia Pacific region • Successful integration of marine business, Tribon. Performance and synergy benefits ahead of expectations, with full year cost savings at £3.3 million • Exciting opportunity for acceleration of VNET business with additional investment of £2m in the next twelve months and the strategic acquisition of Realitywave, Inc. for £3.2m Richard King, Chairman, commented: "AVEVA has made excellent progress this past year, achieving record levels ofturnover, profit and cash. Our continued strong performance reflects AVEVA's dominant position in growthmarkets, leading innovative technologies and an infrastructure geared towardsexpanding and maintaining relationships with blue chip customers across theglobe. We look to the future with confidence and are particularly excited by theprospects for VNET." Enquiries: AVEVA Group plc On 18th May Tel: 020 7796 4133 Richard Longdon Thereafter Tel: 01223 556 611 Paul Taylor gcg hudson sandler Tel: 020 7796 4133 Andrew Hayes Sandrine Gallien James Hill An analysts' briefing will be held at the offices of gcg hudson sandler at 29Cloth Fair, London EC1A 7NN at 9.00 am on 18 May 2005. For further information please contact Lara Meinertzhagen on 020 7796 4133 CHAIRMAN'S STATEMENT OVERVIEW AVEVA has made excellent progress this past year, achieving record levels ofturnover, profit and cash. Our continued strong performance reflects AVEVA's dominant position in growthmarkets, leading innovative technologies and an infrastructure geared towardsexpanding and maintaining relationships with blue chip customers across theglobe. During the year under review we saw a healthy increase in demand for our VANTAGEsolutions in all our major target sectors of oil and gas, power and marine. Ourmarine business (Tribon), acquired at the beginning of the year, performed aheadof plan and has benefited from a smooth integration into the enlarged group. Itssuccess has contributed to a particularly outstanding performance in the AsiaPacific region. KEY FINANCIALS Turnover for the year increased by 51% to £57.5 million (2004: £38.1 million).In terms of organic growth (excluding Tribon), turnover increased by a verycommendable 15% to £43.7 million. Recurring revenues increased by 42% to £32.6million (2004: £23 million). Recurring revenues excluding Tribon amounted to£25.7 million, an actual increase of 14% when using consistent exchange rates. Following the acquisition of Tribon in May 2004 and as highlighted at lastyear's preliminary results, an exceptional charge of £2.3 million has beenexpensed this year in order to facilitate a smooth integration of the business.I am delighted to report that the restructuring of the enlarged group hasresulted in full year savings ahead of initial expectations at £3.3 million. As a result of the acquisition, goodwill and intangible amortisation for theyear was £2.7 million (2004: £0.6 million). Profit before tax, exceptional restructuring costs and goodwill amortisationincreased by 60% to £10.7 million (2004: £6.7 million), generating adjustedearnings per share of 36.7p pence (2004: 26.2p) - an increase of 40%. AVEVA continued to be strongly cash generative with net cash as of the year-endat £11.2 million (2004: £8.7 million). DIVIDEND Following another excellent year and ongoing confidence in the outlook forAVEVA, the Board is proposing an increased final dividend of 4.3p per share(2004: 4.0p). Together with the interim dividend of 1.8p, this gives a full yeardividend of 6.1p (2004: 5.8p). Subject to final approval at the Annual General Meeting, the final dividend willbe paid on 1 August 2005 to shareholders on the register at 1 July 2005. INTERNATIONAL FINANCIAL REPORTING STANDARDS ("IFRS") Preparations continue for the introduction of the International FinancialReporting Standards that will first impact the Group's interim statement for thesix months to 30 September 2005. The Group will advise its shareholders on anychanges in advance of its half-year statement. PROSPECTS The successful integration of Tribon and the subsequent restructuring of theenlarged group, has undoubtedly enhanced AVEVA's leading position in theengineering data and IT markets. Our exposure to high growth, dynamic marketeconomies such as China and Korea, leadership in key target sectors, strong bluechip client partnerships, innovative approach and greater global scale andreach, give me confidence that we are well positioned to deliver furtherturnover and profit growth, and ultimately, shareholder value. In the currentyear the investment required to exploit the exciting opportunity within VNETwill affect profitability, however we are confident of a significant return onthis investment from the next financial year. CHIEF EXECUTIVE'S REVIEW INTRODUCTION This year has been characterised by excellent growth, record financial resultsand corporate development to further strengthen our strategic position. The acquisition of Tribon in May 2004 transformed AVEVA's presence in the fastgrowing marine market and further exposed the business to some of the world'smost dynamic economies in the Asia Pacific region. This year could prove to be equally exciting, as we increase the roll out of ourunique VANTAGE Enterprise NET ("VNET") to a wider customer base and begin toreap the benefits of bringing together Tribon technology with AVEVA's coreVANTAGE offer. DELIVERING 'A COMPLETE SOLUTION' For four decades, AVEVA has been delivering industry leading solutions to someof the world's largest full service engineering, procurement and contracting(EPCs) companies, playing a vital role in bringing engineering projects to safe,early, cost effective completion. However over the last 3 years, traditional EPCcustomers and more specifically owner operators, are increasingly demandingvendors to be able to co-ordinate multiple products and provide engineering datain a neutral format for ongoing maintenance and operations. With this in mind,we developed our VNET product. Launched in 2003, VNET now has a proven trackrecord of acceptance within our customer base and is helping improveefficiencies in some of the largest capital projects in the world. VNET and strategic acquisition of Realitywave Historically there have been integration problems in the handover of a projectfrom an EPC to an owner operator. VNET is an innovative technology applicationthat enables integration and collaboration between users of engineeringinformation through an internet based portal, regardless of its format andwithout the customer requiring to licence expensive and complex authoringapplications. The response from customers to date has been very positive. To support the development of this opportunity we have acquired Realitywave for£3.2 million. Realitywave's patented technology is a critical component of ourVNET offering. The technology allows users to efficiently access and manipulatelarge amounts of information (be it data or designs) by way of a uniquestreaming technology. This acquisition supports existing business requirementsand secures a key technology as we develop this capability. VNET is now ready for a wider customer roll out. In order to maximise theopportunity for growth, we intend to invest an additional £2 million over andabove our current commitments during the next 12 months in strengtheningsolution integrators and recruiting additional sales people. Whilst this willconstrain earnings growth in the short term, it represents a significantopportunity to accelerate profitability in future years. PERFORMANCE AND SALES We have continued to gain market share in our target sectors and acrossgeographies, particularly in the Asia Pacific region. Geographic review Asia Pacific - 35% of group revenue: £20.3 million (2004: £8.7 million) The migration of engineering design and major contracts away from moretraditional markets toward the emerging economies of the Far East has continuedagain this year. We were particularly pleased with our performance in China,Korea and Japan. AVEVA's successful penetration of Asian Pacific markets stems from theinvestment we have made in the region over the last few years and is largely aresult of three factors. Firstly, an unrivalled network of over 10 officesthroughout 9 countries including China, Japan, Korea, Malaysia and Australia.Secondly, a highly experienced and culturally astute management team led byPeter Finch. And finally, a better than planned performance from our marinebusiness, Tribon. In terms of organic growth, process (oil and gas and power) revenues continuedto strengthen. As we roll out combined AVEVA and Tribon solutions this year, weare confident that we will be able to build on our already dominant position inthe marine market in the region. Our success has been highlighted by concludingthe sale to four subsidiaries of Sinopec, China's largest producer and marketerof oil products, the country's leading supplier of major petrochemical productsand the second largest crude oil producer. EMEA - 49% of group revenue: £27.9 million (2004: £19.5 million) Organic revenues in the EMEA region were up 19% on the prior year. Although themarket in Europe is mature and our growth less pronounced than in Asia Pacific,existing customers are taking up a broader range of AVEVA products. This is inpart a response to a growing demand amongst customers, particularly in Centraland Southern Europe, to improve efficiency in engineering projects. Growth in Europe is also being driven by a demand for extra power capacity,which will in turn lead to significant additional investment in the energyinfrastructure. We are already seeing a pan European revival of nuclear power,with the first new design of a European pressurised reactor currently beingbuilt in Finland. All AVEVA products are being used extensively for the design.Similar projects elsewhere on the continent are expected this year and we hopeto benefit given our reputation for delivering safe, cost effective andefficient solutions. Our unique VNET offering also gives us a platform throughwhich to exploit more diverse opportunities as they arise. In terms of the marine industry, there is a very healthy demand for shipbuildingworldwide. Lack of capacity in the Asia Pacific region is beginning to result ina re-emergence of European shipyards. Americas - 16% of group revenue: £9.3million (2004: 9.1million*) The weakness of the US dollar impacted revenues for the year and there is anongoing pressure on large contractors to migrate projects away from the US inorder to utilise more inexpensive local resources. Despite this, our aim is tostrengthen our position in a market where we see good long-term prospects. A number of important new contracts in the oil and gas and chemical markets weresigned during the year. *at this year's exchange rates Sector Focus The enlarged group targets three main markets which contribute broadly similarproportions of revenue (oil and gas, marine and power), amounting to 85% of theoverall business. Our performance in these three markets has been very strongwith a good inflow of new business and renewal of rental contacts. Ourreputation for excellence and ability to deliver a 'complete solution' providesus with a good platform to grow our business in all three of our core markets. Power: A notable success for AVEVA has been in China in the power industries,both nuclear and fossil fuelled. We now dominate this market and work with over75% of the country's power design institutes. China's fast growing economy andthe subsequent phenomenal demand for extra power capacity, should result infurther opportunities going forward. At the year-end we signed contracts totalling US$0.3 million with the Dongfangand Harbin Boiler Companies, as well as the Shangai Boiler Works. AVEVA is noweffectively the biggest provider of engineering IT solutions to the £1bn Chineseindustrial boiler market. All three companies purchased our flagship product,VANTAGE PDMS, with Harbin Boiler Works also investing in other integrated AVEVAsolutions. Oil and Gas: Turning to the oil and gas sector, prior to the year-end we signeda US$1 million deal with four subsidiaries of the Sinopec Corporation to providea suite of VANTAGE products, including PDMS. We have seen a steady increase in confidence for long term oil and gas projectsaround the world, particularly in the Asia Pacific region, and the Sinopec dealoutlined above and our investment in globalising our products to meet thediffering needs of customers, bodes well for another excellent year. The WorldFloating Production Report published in May 2005 by energy business consultantsDouglas-Westwood, forecasts that the production of floating offshore fields willalmost double in the next five years. We believe we can take advantage of thispotential new inflow of business given that over the last ten years 80% of allnew offshore projects have relied on AVEVA solutions. Marine: The marine business (Tribon), a new market for AVEVA, has performedahead of expectations this year generating revenues of £14 million. As theChairman has already stated, the synergy benefits of bringing the two businessestogether under the AVEVA brand and its overall performance, have exceededexpectations. Tribon is the world's leading provider of marine design solutions andspecialises in hull design. Over 80% of the world's top 20 shipbuilderscurrently use Tribon and we are finding that AVEVA's existing core technology ishugely complementary to Tribon's own produce suite. This bringing together ofthe two technologies is progressing to plan and we believe it will lead toimproved functionality, and in turn, increased sales. Recurring revenues have also increased as our customers become more aware of theenhanced offer. This is demonstrated by a new contract signed in the latter halfof the year with Daewoo. In December we entered into a strategic development partnership with Hyundai,the world's largest shipbuilder. Under the partnership agreement, Hyundai hascollaborated with AVEVA in the development of the next generation of VANTAGEMarine, committing US$8 million to development costs, on top of paying annualrental fees, initially to 2011. We have been excited by the progress so far, andI am pleased to report that Hyundai have started to use AVEVA products wellbefore they originally intended. This endorsement from the world's mostinfluential shipbuilder demonstrates that our own VANTAGE technology is not onlyhighly complementary to the marine industry, but is increasingly becoming viewedas 'must have'. We are positive that this will lead to significant new businessopportunities during the course of this year. Whilst we have secured some significant new contracts in our non-core markets ofpaper and pulp, mining, food processing, chemical and pharmaceutical, thesesectors are not growing as strongly as AVEVA business in oil and gas, power andmarine. TECHNOLOGY AND PRODUCTS AVEVA has a long and proud history of providing innovative and advancedsolutions. With the acquisition of both Tribon and Realitywave, AVEVA hasextended its capability in the marine market and added patented streamingtechnology. These additions will provide a broader set of applications now andthe availability of new technology for future products. At the heart of AVEVA's VANTAGE solution suite is its proven databasetechnology, still regarded as the best in the industry. We have already proventhe value of the database in the future versions of marine products, as ourintegration of marine and process products have moved ahead much faster thanoriginally planned. Another value at the core of our technology has been ourprinciple of providing customers with an upgrade path to future productswherever possible, maintaining their investment in data and procedures. Whilstwe are committed to providing 'best in class' applications and protecting ourvaluable IPR, we also support openness in our applications and have investedheavily over the year in providing new tools for data exchange. Our unrivalled domain expertise has enabled us to combine the applicationknowledge built into our products over many years with new technologies such asMicrosoft.NET, which is appearing across the range of products deliveringwide-ranging benefits for customers. In order to introduce new technology andbring products to market faster, we have enhanced our technical skills inEastern Europe and India and we expect to grow our outsourcing capacityconsiderably over the coming years. In order to maintain our competitiveness in product development we haveintroduced 'best practice', along with the industry leading softwaremethodology, to ensure our very high degree of quality assurance. Over the last few years we have been working much more closely with partners,with this being evidenced by the joint development with AutoDesk. Recently wehave been working very closely with a number of vendors in the field of laserdata capture, an area of great interest to customers looking to captureinformation from existing plants and rebuild data models in AVEVA products. With an enlarged team and a broader product set AVEVA has all the essentials inplace to build on its competitive advantage and further strengthen its marketposition. PEOPLE AND ORGANISATION The most important factor behind both the growth this year and the thoroughlyprofessional way in which the Tribon organisation has been combined withinAVEVA, has been the people. There is a passion within the group to provide thebest solutions for our customers, to continue our product evolution usinginnovative ideas and new technologies to the best advantage for our customers'futures. We have welcomed many new staff from Tribon into the AVEVA organisation and newdomain knowledge of the marine market. I would like to thank all AVEVA staff for an excellent performance throughoutthe year. THE FUTURE Our unrivalled technology, leading competitive position, global scale and reach,focus on high growth key target sectors and planned wider roll out of our uniqueVNET product, combined with a favourable environment where our main competitoris forcing its customers into a technology refresh program, imbues me withconfidence that we will make significant progress again this year. Consolidated profit and loss accountFor the year ended 31 March 2005 2005 2005 2005 2004 Note £000 £000 £000 £000 Ongoing Acquisitions Continuing Continuing Turnover 1 43,706 13,837 57,543 38,113Cost of sales 2 (15,008) (4,071) (19,079) (12,588) Gross profit 28,698 9,766 38,464 25,525Other operating expenses (22,372) (10,297) (32,669) (19,388) Operating profit/(loss) 6,326 (531) 5,795 6,137Finance expense (net) (24) (7) (31) (28) Profit/(loss) on ordinary activities 6,302 (538) 5,764 6,109before taxation Tax on profit/(loss) on ordinary 3 (2,882) (2,199)activities Profit on ordinary activities after 2,882 3,910taxation, being profit for the financialyearDividends paid and proposed on equity 4 (1,523) (1,019)shares Profit retained profit for the year 1,359 2,891 Basic earnings per share 5 13.48p 22.63pAdjusted basic earnings per share 5 36.71p 26.20pDiluted earnings per share 5 13.41p 22.42pDividend per equity share 6.1p 5.8p Consolidated statement of total recognised gains and lossesFor the year ended 31 March 2005 2005 2004 £000 £000 Profit for the financial year 2,882 3,910Translation gain/(loss) arising on consolidation 150 (837) Total recognised gains and losses recognised since last annual report 3,032 3,073 Consolidated Balance Sheet31 March 2005 2005 2004 £000 £000Fixed assetsGoodwill 26,395 1,313Other intangible assets 1,625 1,977 Intangible assets 28,020 3,290Tangible assets 5,099 5,046 33,119 8,336Current assetsStocks - 217Debtors 27,391 18,830Cash at bank and in hand 12,114 8,713 39,505 27,760Creditors: Amounts falling due within one year (27,368) (14,150) Net current assets 12,137 13,610Total assets less current liabilities 45,256 21,946 Creditors: Amounts falling due after more than one year - (41)Provisions for liabilities and charges (1,686) (335) Net assets 43,570 21,570 Capital and reservesCalled-up share capital 2,204 1,747Share premium account 24,323 8,210Merger reserve 3,921 -Profit and loss account 13,122 11,613 Shareholders' funds - all equity 43,570 21,570 Consolidated cash flow statementFor the year ended 31 March 2005 2005 2004 £000 £000 Net cash inflow from operating activities 11,634 7,880 Returns on investments and servicing of finance (31) (28)Taxation (3,159) (2,006)Capital expenditure and financial investment (930) (1,594)Acquisitions (20,235) -Equity dividends paid (1,274) (967) Cash (outflow) / inflow before financing (13,995) 3,285Financing 16,420 832 Increase in cash in the year 2,425 4,117 NOTES: 1. TURNOVER A geographical analysis of turnover by destination is 2005 2005 2005 2004 Continuingset out below: Ongoing Acquisitions Continuing £000 £000 £000 £000 United Kingdom 5,291 285 5,576 3,458Rest of Europe, Middle East and Africa 16,627 5,742 22,369 16,073Americas 9,036 311 9,347 9,862Asia Pacific 12,752 7,499 20,251 8,720 43,706 13,837 57,543 38,113 Revenue by class: 2005 2004 £000 £000 Recurring 32,554 23,000Initial fees 18,171 10,060Other sales 6,818 5,053 2. COST OF SALES AND OTHER OPERATING EXPENSES Group operating profit for the year was £10.76m (2004 - £6.76m) beforeexceptional items of £2.29m (2004 - £nil) and goodwill and intangibleamortisation of £2.68m (2004 - £0.62m). Of the total group operating profit before exceptional items and goodwill andintangible amortisation of £10.76m, £7.37m was generated from existingoperations and £3.39m was generated from acquisitions. An analysis of cost and expenses is as follows: 2005 2005 2005 2004 Ongoing Acquisitions Continuing Continuing £000 £000 £000 £000 Cost of salesExceptional items 87 279 366Non-exceptional cost of sales 14,921 3,792 18,713 12,588 15,008 4,071 19,079 12,588 Other operating expensesSelling costs 13,944 4,390 18,334 14,367Exceptional items-selling costs 197 762 959 -Administrative costs 8,083 4,331 12,414 5,021Exceptional items-administrative costs 148 814 962 - 22,372 10,297 32,669 19,388 Exceptional costs Following the acquisition of Tribon Solutions AB (now renamed AVEVA AB) on 19May 2004, the group has undertaken a rationalisation of its operations as partof the integration of the two businesses which has involved headcountreductions, reorganisation of operations and office closures. The totalexceptional costs incurred in the year were £2,287,000 of which £366,000 isincluded in cost of sales, £959,000 is included in selling costs and £962,000 isincluded in administrative expenses. The costs include redundancy, payment inlieu of notice, holiday pay, and office rental and associated costs. 3. TAX ON PROFIT ON ORDINARY ACTIVITIES The tax charge comprises: 2005 2004 £000 £000 UK corporation tax - 945Adjustments in respect of prior periods (6) 115 (6) 1,060Foreign Tax 2,858 1,243Adjustments in respect of prior periods 518 33 Total current tax 3,370 2,336 Deferred taxOrigination and reversal of timing differences (note 18) (488) (137) Total tax on profit on ordinary activities 2,882 2,199 The differences between the total current tax shown above and the amountcalculated by applying the standard rate of UK corporation tax to the profit taxare as follows: 2005 2004 £000 £000 Tax on group profit on ordinary activities at standard UK corporation tax rate of 30% 1,729 1,833(2004 - 30%) Effects of:Expenses not deductible for tax purposes 281 86Amortisation of goodwill arising on acquisition of Tribon Solutions AB 578 -Irrecoverable withholding tax 562 -UK research & development tax credit - (125)Depreciation in excess of capital allowances 60 111Other timing differences - provided 541 - - unprovided 122 16Higher tax rates on overseas earnings 251 254Unrelieved tax losses (1,266) 13Adjustments in respect of prior years 512 148 Group current tax charge for year 3,370 2,336 The group's tax rate is higher than the UK tax rate because a significantproportion of its profits are earned overseas and are subject to higher rates oftax. This is expected to continue for the foreseeable future. In addition,goodwill amortisation of £2.3m is not tax deductible. 4. DIVIDENDS PAID AND PROPOSED ON EQUITY SHARES 2005 2004 £000 £000 Interim dividend paid of 1.8p (2004 - 1.8p) per ordinary share 396 320Final dividend proposed of 4.3p (2004 - 4.0p) per ordinary share 948 699Final dividend for 2004 in respect of additional shares issued 179 - 1,523 1,019 5. EARNINGS PER SHARE The calculations of earnings per share are based on the profit after tax for theyear of £2,882,000 (2004 - £3,910,000) and the following weighted averagenumbers of shares: 2005 2004 Number NumberFor basic earnings per share 21,387,290 17,281,707Employee share options 111,882 156,687For diluted earnings per share 21,499,172 17,438,394 Adjusted basic earnings share is calculated by adding back exceptional costs of£2,287,000 (2004 - £nil) and goodwill and intangible amortisation of £2,683,000(2004 - £619,000). The directors believe that adjusted earnings per share is a fairer presentationof the underlying performance. FINANCIAL INFORMATION The financial information contained in this preliminary announcement of auditedresults does not constitute the group's statutory accounts for the years ended31 March 2005 or 31 March 2004. The accounts for the year ended 31 March 2004have been delivered to the Registrar of Companies. The statutory accounts forthe years ended 31 March 2005 and 2004 have been reported on by the company'sauditors; the reports on these accounts were unqualified and they did notcontain any statement under section 237(2) or (3) of the Companies Act 1985. All numbers have been prepared on a consistent basis. The accounts for the year ended 31 March 2005 are expected to be posted toshareholders in due course and will be delivered to the Registrar of Companiesafter they have been laid before the shareholders in a general meeting on 15July 2005. Copies will be available from the registered office of the company,High Cross, Madingley Road, Cambridge, CB3 0HB. The registered number of AVEVAGroup plc is 2937296. For additional information, please contact your local AVEVA office. Visitwww.aveva.com for details. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AVV.L