Half-year Report

AVEVA GROUP PLC

RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2019

AVEVA delivers on the Digital Twin with strong results and makes continued progress against its medium-term targets

AVEVA Group plc ('AVEVA' or 'the Group') announces its results for the six months ended 30 September 2019

Summary results

Highlights

·; Revenue grew 16.5% to £391.9m (H1 FY19: £336.5m)

·; Organic constant currency revenue4 growth of 11.9% reflected strong sales execution and benefited from early contract renewals

·; Good growth across all geographic regions with Asia Pacific showing particular strength. Each of the Business Units also grew, with particularly strong growth in Engineering

·; Recurring revenue up 42.1% to £242.5m (H1 FY19: £170.7m) representing 61.9% of total revenue (H1 FY19: 50.7%)

·; Adjusted EBIT up 66.5% to £90.6m (H1 FY19: £54.4m). Constant currency adjusted EBIT grew by 46.5%

·; Interim dividend up 10.7% to 15.5 pence per share (H1 FY19: 14.0 pence)

·; Net cash and deposits of £58.6m following payment of the final dividend and acquisition of MaxGrip (FY19: £127.8m)

·; Strong progress on product integration with the launch of AVEVA Unified Engineering and AVEVA Unified Operations Control Centre

·; Outlook remains positive

Chief Executive Officer, Craig Hayman said:

"AVEVA delivered a strong set of first half results. Recurring revenue accelerated as a proportion of overall revenue. Overall revenue grew above the industry growth rate and adjusted EBIT margins also grew significantly. We made good progress against our medium-term targets.

I'm pleased with these results and proud of the focus and execution at AVEVA that is realising our ambition and vision for the digitalisation of the industrial world. By working to understand our customers' needs, delivering innovation to accelerate their digital transformation and meticulous business execution, we are producing on all fronts and continue to recruit globally for world class talent.

Looking ahead, we see strong demand for digitalisation and industrial software within the industries we serve and remain confident in the outlook."

Notes

1 Revenue is shown on a statutory basis. In H1 FY19 revenue was also shown on a pro forma basis.

2 Recurring revenue is defined as rental and subscriptions software licence revenue plus support and maintenance revenue.

3 Adjusted Earnings Before Interest and Tax (EBIT) and adjusted earnings per share 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.

4 Organic constant currency revenue excludes the reverse acquisition accounting adjustment to deferred revenue of £6.5m in H1 FY19; a currency translation benefit of £10.8m in H1 FY20; and adjusts for the disposal of Wonderware Italy and the acquisition of MaxGrip.

Enquiries:

AVEVA Group plc

Matt Springett, Head of Investor Relations

Tel: 01223 556 676

FTI Consulting LLP

Edward Bridges / Dwight Burden / Harry Staight

Tel: 020 3727 1000

Conference call and webcast

AVEVA will host a conference call and webcast, for registered participants, at 09:30 (GMT) today.

To register for the webcast and access the presentation materials please visit: www.aveva.com/Investors

Conference calls dial in details:

Telephone: +44 (0) 207 1928 000 / +1 866 966 1396

Conference call code: 5887706

Conference call participants will be able to ask questions during the Q&A session, but those on the webcast will be in a listen only mode.

A replay of the call will be made available later in the day.

Chief Executive's review

Summary

AVEVA delivered strong first half results as the benefits of business integration and actions taken to optimise performance started to yield results. Organic constant currency revenue grew by 11.9% and constant currency adjusted EBIT increased by 46.5% versus the prior year.

The Group achieved statutory revenue growth of 16.5% to £391.9 million (H1 FY19: £336.5 million) and growth in adjusted EBIT of 66.5% to £90.6 million (H1 FY19: £54.4 million). The operating margin benefited from an improvement in gross margin, from operational leverage and underlying cost savings. At the same time, investment in sales and marketing was increased to help underpin future growth.

In addition, the Group launched AVEVA Unified Engineering, the Unified Operations Control Centre and acquired the software assets of Asset Performance Management (APM) leader MaxGrip.

Trading and markets

The industries that AVEVA serves are making increasing 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 enabling the digitalisation of the industrial world, notably the industrial internet of things, data visualisation and artificial intelligence.

This is driving 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. In addition, AVEVA has well-established market-leading positions serving the process, marine, batch and hybrid industries.

AVEVA achieved growth across all of its geographical reporting segments and Business Units during the period.

End markets

Around 40% of AVEVA's revenue comes from the Oil & Gas end market and the Group has become more diversified since the combination with the Schneider Electric industrial software business, with Marine, Chemicals & Petrochemicals, Packaged Goods (such as Food & Beverage and Pharma), Power and Metals & Mining accounting for 5% to 10% of revenue each. Other markets include Water & Wastewater, Infrastructure and Discrete Manufacturing.

Within Oil & Gas the Group's business is diversified across the capital and operational expenditure phases of the asset lifecycle, with AVEVA supplying customers in the upstream, midstream and downstream markets.

The ongoing structural growth drivers in each of our end markets are strong.

In Oil & Gas, overall end market conditions were stable, with steady capital and operating expenditure across the upstream, midstream and downstream segments. In Marine, AVEVA delivered a good performance, driven by product cycle upgrades and a large multi-year rental contract win with a shipbuilder in Asia Pacific. The Group's other end markets such as Power and Food & Beverages are largely non-cyclical and are primarily driven by structural growth as industries make increasing use of technology to drive efficiency.

Sales channel and geographical performance

AVEVA delivered growth across all geographies and saw improved execution from both direct and indirect sales channels, the latter of which represented approximately one third of total revenue.

Performance from the direct sales channel was strong, benefiting from investment and revised sales incentives.

The indirect sales channel performed well, achieving double digit growth across all regions. AVEVA invested in and simplified its partner network, including enabling Schneider Electric to process sales leads through this channel.

Growth was assisted by the sale of additional AVEVA products, particularly APM, in addition to its historical focus on Monitoring & Control. The Group also launched the AVEVA Partner Network, which will lead to the channel being able to sell the entire AVEVA portfolio, further leveraging this distribution capability.

As part of the partner network simplification, AVEVA divested a wholly owned distributor in Italy and intends to divest other wholly owned distributors in Germany and Scandinavia.

The Group achieved significant success in cross selling its wider portfolio and expanding within enterprise accounts, for example achieving major orders with customers including Worley and Suncor.

EMEA achieved 14.3% recurring revenue growth. Overall revenue increased by 4.4%, including the impact of a reduction in Initial & Perpetual Licences and Training & Services.

Americas performed well across all Business Units, although again reported revenue growth was impacted by a planned reduction in Initial & Perpetual Licences and Training & Services revenue. Overall revenue increased 7.2%.

Asia Pacific saw growth across its key markets, with strong growth in Korea, China and Australia, with particular strength in Engineering and Planning & Operations. Regional growth further benefited from a large multi-year contract with a key global account customer in Australia. Overall revenue increased 48.9%.

Business Unit performance

Engineering consists of design and simulation software and represented 42% of total revenue. Growth was strong during the period at around 20% on a constant currency basis led by strong growth in both Plant and Marine 3D. Within the revenue mix there was strong growth in rentals & subscriptions and as planned a reduction in initial & perpetual licences.

Monitoring & Control represented 32% of total revenue. Growth was low single digit on a constant currency basis, with solid growth in HMI SCADA being partly offset by lower sales in pipeline Monitoring & Control due to more selective bidding for contracts.

AVEVA Flex, the Group's new token-based rentals & subscriptions selling model for Monitoring & Control was well received by customers and this Business Unit achieved very strong growth in rentals & subscriptions revenue, albeit from a low base, together with a planned reduction in the lower margin services revenue.

Asset Performance Management represented 14% of the Group's total revenue. AVEVA's APM offering is strongly differentiated. It addresses the broadest dimensions of APM using design and engineering information, real-time and historical operational data, and maintenance execution workflows, together with model-based machine learning for predictive asset analytics.

This differentiation and a growing overall market for APM solutions resulted in double digit revenue growth for AVEVA on a constant currency basis, with particularly strong growth from AVEVA Predictive Analytics, which achieved a large order win in North America. Again, AVEVA saw strong growth in rentals & subscriptions revenue from a low base, with a planned reduction in initial & perpetual licences.

The acquisition of MaxGrip, a company that optimises asset performance with Reliability Centred Maintenance (RCM) solutions, was completed in April 2019. MaxGrip enhances AVEVA's APM offering by providing a templated approach to asset strategy optimisation and RCM software for risk-based maintenance. Additionally, MaxGrip's rich library of asset fault codes and remediations strengthens the power of AVEVA's predictive asset analytics capabilities and accelerates the deployment of artificial intelligence for prescriptive maintenance.

Since the acquisition, the focus has been on integrating the MaxGrip toolset into the overall AVEVA APM offering.

Planning & Operations represented 12% of the Group's total revenue. The Business Unit achieved mid-teens revenue growth on a constant currency basis with particularly strong growth from Planning & Scheduling and Asset Optimisation. AVEVA saw strong growth in rentals & subscriptions and a planned reduction in training & services.

Integration and product development

AVEVA made good progress and has exited around 80% of its Transitional Service Agreements with Schneider Electric. The areas left to complete include moving applications currently hosted by Schneider Electric, mostly Enterprise Resource Planning (ERP), and further real estate consolidation. The implementation of the new ERP system is progressing well, with roll-out expected during 2020. Major remaining office consolidations include Houston, Beijing, Tokyo and Sydney.

The integration of AVEVA's research and development teams has enabled key integrated products to be delivered with the launch of AVEVA Unified Engineering and Unified Operations Control Centre.

AVEVA Unified Engineering provides end-to-end integration of conceptual, front-end engineering design and detailed design into an environment that handles all process simulation and engineering (1D, 2D and 3D) from one single data hub with bi-directional information flow.

AVEVA Unified Operations Control Centre helps customers capitalise on digital technologies to transform their business by integrating and visualising operations, process, engineering, maintenance and financial data in context.

Progress against our medium-term targets

In September 2018, AVEVA outlined medium-term targets around revenue growth, increasing recurring revenue as a proportion of overall revenue and adjusted EBIT margin progression. AVEVA made excellent progress against these targets during the first half.

Medium-term revenue growth

The Group aims to grow medium-term revenue on a constant currency basis at least in line with the blended growth rate of the industrial software market.

This revenue growth target reflects AVEVA expecting to grow its underlying software business in excess of market growth rates, driven by a combination of the strength of the Group's market positions, sales execution, revenue synergies and additional value levers, including pricing and more sophisticated management of discounting.

As previously indicated, this above-market growth is expected to be partly offset in terms of reported revenue by the impact of a phased transition towards greater rentals and subscriptions revenue, together with potentially lower growth rates in services revenue.

Progress report: AVEVA delivered revenue growth of 11.9% on an organic constant currency basis, which was ahead of target. This growth was driven by strong sales execution and benefited from cross selling of our combined product portfolio to our enlarged customer base and certain multi-year contracts, including a large Engineering, Procurement and Construction (EPC) contract, for which the revenue has been partly recognised upfront.

AVEVA made substantial investments in sales and marketing to drive future growth, including further strengthening of the marketing team and expansion of the sales force.

In addition to this, further governance and sales incentive changes were put in place to manage discounting and price increases.

Medium-term adjusted EBIT margin

The Group aims to increase adjusted EBIT margins to 30%. This margin improvement is expected to be driven by a combination of revenue growth, previously announced cost savings, cost control and a focus on high margin revenue growth through pricing and revenue mix optimisation.

Progress report: AVEVA's adjusted EBIT margin increased to 23.1% (H1 FY19: 16.2%). This improvement was driven by a positive sales mix, which benefited gross margin, revenue growth driving operating leverage and underlying cost savings. AVEVA expects to make steady progress towards the medium-term adjusted EBIT margin target of 30%.

Medium-term recurring revenue

AVEVA aims to grow the proportion of recurring revenue to total revenue to over 60% in the medium term. Recurring revenue is defined as rentals & subscriptions software licence revenue, plus support and maintenance revenue. This will be driven by growing software as part of the revenue mix and by increasing the mix of rentals & subscriptions revenue as a proportion of new software revenue in a financial year.

The transition to greater levels of recurring revenue is expected to increase long-term free cash flow generation. Rentals and subscriptions offer customers benefits including greater flexibility, lower up-front costs and simplicity in pricing. These benefits are reflected in higher customer lifetime value of a rentals & subscriptions model, versus a perpetual licence model.

Progress report: AVEVA made accelerated progress during the period and recurring revenue as a proportion of overall revenue was ahead of target at 61.9% (H1 FY19: 50.7%). This overachievement was assisted by early contract renewals, including an EPC contract, and an element of upfront revenue recognition on multi-year contracts.

Sales incentive structures were modified to encourage recurring revenue growth with a focus on driving rentals & subscriptions revenue, versus initial and perpetual licences and the introduction of AVEVA Flex.

The Group has seen very strong demand for public Cloud-based solutions with both an increase in the volume of significant order wins and substantial expansions from existing Cloud customers.

AVEVA Cloud Development Operations, which was formed at the time of the combination of AVEVA and the Schneider Electric industrial software business, covers all AVEVA's Cloud offerings, and has achieved above 99.9% uptime for our customers.

Outlook

Demand for AVEVA's products is strong, driven by the ongoing digitalisation of the industrial world and stable conditions in key end markets. AVEVA's combined product offering is seeing growing industry recognition. Against this backdrop, the benefits of integration and measures taken to drive growth, improve revenue mix and increase margin are having a positive impact. The Group's order pipeline is solid and the outlook remains positive.

Craig Hayman

Chief Executive Officer

12 November 2019

Finance Review

Overview

Revenue was £391.9 million, which was up 16.5% compared to the previous half year (H1 FY19: £336.5 million) on a statutory basis. Adjusted EBIT grew 66.5% to £90.6 million (H1 FY19: £54.4 million), primarily due to the revenue growth, higher gross margin and operational leverage.

Organic constant currency revenue grew 11.9%, excluding a deferred revenue haircut of £6.5m in H1 FY19; a currency translation benefit of £10.8 million in H1 FY20; and the effects of the disposal of Wonderware Italy and the acquisition of MaxGrip.

Revenue overview

Revenue growth was driven by strong sales execution in the context of stable end market conditions and an ongoing trend towards digitalisation. Overall revenue growth benefited from an increase in the proportion of rental contracts sold on a multi-year versus one year basis compared to the same period last year and early contract renewals. Revenue from the direct salesforce in the first half was around two-thirds of total revenue and one-third was from the channel, including Schneider Electric (SE).

During the first half there was a change in mix of sales contracts through SE. There was a higher proportion of agent sales where the sale is processed by AVEVA's sales channel partners and SE receives a commission rather than distributor sales where SE is charged a transfer price by AVEVA. This resulted in a reduction of related-party revenue from SE to £31.9 million (H1 FY19: £39.2 million).

Revenue by type is set out below:

Rentals and subscriptions

Rentals and subscriptions revenue grew 83.6% to £141.0 million (H1 FY19: £76.8 million).

This growth was driven by new sales force incentives to promote sales of these contracts over initial & perpetual licences and Services. The proportion of rental & subscription revenue was also enhanced by revenue recognition on multi-year contracts, which under IFRS 15 recognises the licence revenue upfront. Overall growth was increased by a large multi-year contract renewal with a key EPC customer in Asia Pacific. This contract was renewed earlier than planned and for a higher order value, with the renewal having originally been planned for the third quarter. Excluding this benefit the proportion of recurring revenue in the first half was 60%.

Support and maintenance

Support and maintenance revenue grew by 8.1% to £101.5 million (H1 FY19: £93.9 million). On an organic constant currency basis, revenue was flat. Growth in standalone support and maintenance revenue is expected to be impacted by the transition to rentals and subscriptions revenue, and this was seen in the half year period as certain customers were successfully switched into higher annual value subscription contracts.

Initial fees and perpetuals

Initial fees and perpetual revenue reduced by 11.7% to £85.4 million (H1 FY19: £96.7 million). This reduction was driven by execution against AVEVA's strategy of moving the business model of the combined Group towards increasing recurring revenue versus perpetual licences.

Training and services

Training and services revenue reduced by 7.4% to £64.0 million (H1 FY19: £69.1 million). Services are sold alongside the software licence 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 and the implementation of the change in sales incentives at the beginning of the financial year to drive this.

To improve efficiency, the Services team have focused on higher margin projects together with initiatives to increase standard, repeatable solutions, which reduces configuration and customisation, and the use of partners where possible.

Adjusted EBIT and cost management

Together with cost control, the revenue growth delivered an increase in constant currency adjusted EBIT of 46.5% versus the prior year (excluding the £6.5 million adjustment to deferred revenue). Without adjusting for currency, EBIT grew 66.5% to £90.6 million (H1 FY19: £54.4 million).

EBIT margin is typically lower in the first half of any financial year relative to the full year given that revenue is more heavily weighted to the second half but these operational improvements increased adjusted EBIT margin to 23.1% versus 16.2% in H1 FY19 and is positive encouragement that the targeted medium-term improvement to 30% is on track.

Total normalised costs were £301.3 million (H1 FY19: £282.2 million), an increase of 6.8% over the previous year and 3.5% on a constant currency basis. This was broadly in line with AVEVA's target of inflationary cost increases due to a reduction in cost of sale and controlled operating cost increases despite incremental investment in sales, marketing and R&D.

On an underlying basis, AVEVA has been implementing a cost synergies programme through rationalisation of duplicated functions, the implementation of common systems, shared services for back office functions, real estate consolidation and enhanced R&D effectiveness. The Group targeted annualised cost synergies of approximately £25 million, which are on track to be fully implemented by the end of the current financial year.

An analysis of total expenses is summarised below:

Cost of sales decreased 0.5% to £92.3 million (H1 FY19: £92.8 million) and the gross margin improved to 76.4% (H1 FY19: 72.4%). On a constant currency basis cost of sales reduced 3.3%. The cost of sales reduction related to both a focus on both higher margin revenue and a focus on efficient delivery of services.

The cost of sales reduction was also helped by the disposal of Wonderware Italy, a wholly-owned distributor.

Research & Development costs were £60.1 million (H1 FY19: £54.2 million) representing an increase of 10.9%. On a constant currency basis R&D expenditure increased by 7.7% due to investment in product integration and new product launches, being partly offset by cost synergies.

Selling and distribution expenses were £98.3 million (H1 FY19: £89.1 million), a 10.3% increase versus the prior year. On a constant currency basis, the increase was 7.0%. The increase represents investments made during the year in Sales and in strengthening the marketing team and in customer events to showcase AVEVA's enlarged product portfolio.

Administrative expenses were £49.0 million (H1 FY19: £44.7 million) an increase of 9.6%. On a constant currency basis, the increase was 5.1%, due to wage inflation and investment in support functions.

Net impairment loss from financial assets represents the impairment of accounts receivable during the year of £1.6 million (H1 FY19: £1.4 million).

Normalised and exceptional items

The following exceptional and other normalised items have been excluded in presenting the adjusted results:

Acquisition and integration activities principally related to contractors, consultancy costs paid to advisers for integration support, functional integration, investment in new systems and deal related executive retention costs.

Restructuring costs related to severance payments for employees as part of the continuing cost synergy programme, started in FY19 following completion of the combination with the Schneider Electric industrial software business.

Amortisation mainly 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.

Taxation

The statutory tax charge was £6.0 million (H1 FY19: £0.3 million). The effective rate of tax of 25.0% differs from the US effective corporation tax rate of 23.3% mainly due to higher overseas tax rates and overseas losses in certain locations, for which no deferred tax asset has been recognised. The tax rate benefited from R&D tax incentives in the UK and the US.

The adjusted tax rate was 21.3% (H1 FY19: 21.5%) and is expected to be around 20% on a full year basis.

Earnings per share

Statutory diluted EPS was 11.13 pence (H1 FY19: (3.61) pence). Adjusted diluted basis EPS grew 65.0% to 43.31 pence (H1 FY19: 26.25 pence). Growth on prior year adjusted diluted EPS, before the effect of the deferred revenue haircut, was 46.9%.

Dividends

In line with the Board's progressive dividend policy, AVEVA intends to pay an interim dividend of 15.5 pence per share at a cost of £25.0 million (H1 FY19: 14.0 pence per share at a cost of £22.5 million). The interim dividend will be payable on 7 February 2020 to shareholders on the register on 10 January 2020.

Balance sheet and cash flow

The Group continues to maintain a strong balance sheet, with net cash and treasury deposits of £58.6 million and no long-term debt. As at 30 September non-current assets were £1,983.3 million (31 March 2019: £1,923.0 million) reflecting goodwill and intangible assets that arose from the combination with the Schneider Electric industrial software business.

In April 2019, the Group completed the acquisition of MaxGrip for consideration of £21.6 million. The transaction resulted in net assets of £10.3 million being acquired and goodwill of £11.3 million being created.

Trade and other receivables at 30 September 2019 were £204.1 million (31 March 2019: £237.9 million). Contract assets increased to £127.3 million from £100.5 million at 31 March 2019, largely due to the impact of the multi-year contracts closed in the period. Contract liabilities representing deferred revenue were £148.3 million (31 March 2019: £174.6 million) and were lower due to phasing of renewals and the switch from support and maintenance contracts, to rental and subscription.

Cash generated from operating activities before tax was £43.5 million, compared to £44.6 million in the previous year, resulting in conversion of adjusted EBIT to operating cash flow of 48.0%. This reflects the impact of multi-year contracts and particularly those contracts where customers pay in annual instalments, but revenue is recognised earlier under IFRS 15. First half cash flow was also negatively impacted by the payment of higher sales commissions and bonuses resulting from the successful close to FY19. Finally, these metrics are somewhat distorted by exceptional costs paid during the period of £17.5 million and the adoption of IFRS 16. Cash conversion is expected to improve significantly in the second half of the financial year.

James Kidd

Deputy CEO & CFO

12 November 2019

Independent review report

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 which comprise the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Consolidated statement of changes in shareholders' equity, the Consolidated cash flow statement and the related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

London

12 November 2019

Consolidated income statement

for the six months ended 30 September 2019

All activities relate to continuing activities.

Consolidated statement of comprehensive income

for the six months ended 30 September 2019

Consolidated balance sheet

30 September 2019

Consolidated statement of changes in shareholders' equity

30 September 2019

Consolidated cash flow statement

for the six months ended 30 September 2019

Notes to the Interim Report

1 The Interim Report

The Interim Report was approved by the Board on 12 November 2019. The interim condensed financial statements set out in the Interim Report are unaudited but have been reviewed by the auditor, Ernst & Young LLP, and their report to the Company is set out above.

The Interim Report will be made available to shareholders in due course from the Company's website at www.aveva.com.

2 Basis of preparation and accounting policies

The Interim Report for the six months ended 30 September 2019 has been prepared in accordance with IAS 34 Interim Financial Reporting and the disclosure requirements of the Listing Rules.

The Interim Report does not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Annual Report for the year ended 31 March 2019.

In accordance with IFRS 3, the consolidated financial information has been prepared as a reverse acquisition of AVEVA Group by the Schneider Electric industrial software business, which occurred on 1 March 2018.

The financial information set out within this report does not constitute AVEVA's Consolidated statutory financial statements as defined in Section 435 of the Companies Act 2006. The results for the year ended 31 March 2019 have been extracted from the Consolidated statutory financial statements for AVEVA Group plc for the year ended 31 March 2019 which are prepared in accordance with IFRS as adopted by the European Union, on which the auditor gave an unqualified report (which made no statement under Section 498 (2) or (3) respectively of the Companies Act 2006 and did not draw attention to any matters by way of emphasis) and have been filed with the Registrar of Companies.

The Group presents a non-GAAP performance measure on the face of the Consolidated income statement. The Directors believe that this alternative measure of profit provides a reliable and consistent measure of the Group's underlying performance. The face of the Consolidated income statement presents adjusted EBIT and reconciles this to profit from operations as required to be presented under the applicable accounting standards. Adjusted earnings per share is calculated having adjusted profit after tax for the same items and their tax effect. The term 'EBIT' is not defined under IFRS and may not be comparable with similarly titled profit measures reported by other companies. It is not intended to be a substitute for, or superior to, GAAP measures of profit.

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 important and which could, if included, distort the understanding of the performance for the year and the comparability between periods.

The Interim Report has been prepared on the basis of the accounting policies set out in the most recently published Annual Report of the Group for the year ended 31 March 2019, with the exception of the adoption of IFRS 16 Leases, as set out below.

IFRS 16 Leases - Accounting policies applied from 1 April 2019

The Group adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 April 2019. Set out below are the new accounting policies of the Group:

The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date that the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment review.

At the commencement date of the lease, the Group also recognises lease liabilities. They are measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

The Group applies the short-term lease recognition exemption to its short-term leases (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of assets that are considered of low value (i.e. below £5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

Significant judgments

The Group has an extension option for some of the leases. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g. a change in business strategy).

3 Going concern

The Group has significant financial resources. At 30 September 2019, the Group had bank, cash and treasury deposits of £78.6m (31 March 2019: £127.8m) and debt draw down of £20.0m (31 March 2019: nil). The cash generation profile of the Group in the first half of the year was significantly impacted by the 2018/19 final dividend paid and the acquisition of MaxGrip in April 2019. The Group is expected to generate significant positive cash flows in the second half of the financial year.

After making enquiries and considering the cash flow forecasts for the Group, the Directors have a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the interim financial statements.

4 Risks and uncertainties

As with any organisation, there are a number of potential risks and uncertainties which could have a material impact on the Group's long-term performance. The principal risks and uncertainties faced by the Group have not changed from those set out in the Annual Report for the year ended 31 March 2019. These are:

·; Talent Acquisition & Retention

·; Move to Subscription Model

·; Cloud Initiatives

·; Digital Transformation Agenda

·; Integration & Synergies

·; Competitors

·; Dependency on Cyclical Markets

·; AVEVA Products Implicated in Industrial Accidents or Customer Cyber-Attack

·; Cyber Attack

·; Regulatory Compliance

·; Internal Systems

·; Disruptive Technologies

These risks are described in more detail on pages 26-30 of the 2019 Annual Report. The Directors routinely monitor these risks and uncertainties and appropriate actions are taken to manage them within agreed risk appetites. Included in the Business Review is a commentary on the outlook of the Group for the remaining six months of the year.

At an executive level, risk management remains the responsibility of the Strategic Leadership Team (SLT) who report to the Board on risk matters.

5 Revenue

An analysis of the Group's revenue is as follows:

6 Segment information

The Executive Leadership Team monitors and appraises the business on a geographic basis with three operating regions: Asia Pacific; EMEA; and Americas. 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. Balance sheet information is not included in the information provided to the Executive Leadership Team.

1 Normalised adjustments include amortisation of intangible assets (excluding other software), share-based payments and movements on fair value of forward exchange contracts.

As the combination of the two businesses completed so close to the start of the financial period it was not possible to report cost data between the three regions for the period ended 30 September 2018. Neither was it possible to consistently report the combined business on any other segmental basis. Therefore, the segmental information provided has had to be limited to regional revenue only.

1 Normalised adjustments include amortisation of intangible assets (excluding other software), share-based payments and movements on fair value of forward exchange contracts.

7 Selling and administration expenses

An analysis of selling and administration expenses is set out below:

8 Exceptional items

Acquisition and integration costs incurred related principally to consultancy fees paid to advisors and the costs of additional temporary resources required for the integration of AVEVA Group plc and the Schneider Electric industrial software business. Key integration activities included work undertaken to exit the Transitional Service Arrangements provided by Schneider Electric; costs incurred in the initial design and build phases of a new harmonised global ERP system for the enlarged Group; and assistance from consultants to the Group in running programmes designed to deliver revenue and cost synergies from the Combination.

Restructuring costs related to severance payments in a number of global office locations. The costs incurred through the period ended 30 September 2019 are a continuation of the project started in the prior year, following the Combination.

The tax credit on the exceptional items of £13.3m (H1 FY19: £10.8m) is £2.5m (H1 FY19: £1.7m).

9 Income tax expense

The total tax charge for the half year ended 30 September 2019 is £6.0m (H1 FY19: £0.3m).

The effective tax rate on the profit before tax is 25.0%. The difference from the US tax rate of 23.3% is mainly due to higher overseas tax rates, overseas losses, and the benefit of UK and US tax incentives.

The tax charge on adjusted profit before tax is £19.0m (H1 FY19: £11.6m) which equates to an effective tax rate of 21.3% (H1 FY19: 21.5%).

10 Ordinary dividends

The proposed interim dividend of 15.5 pence per ordinary share will be payable on 7 February 2020, to shareholders on the register on 10 January 2020. In accordance with IFRS, no provision for the interim dividend has been made in these financial statements.

The dividends relating to the year ended 31 March 2019 were declared and paid relating to AVEVA Group plc.

An analysis of dividends paid is set out below:

11 Earnings per share

The calculation of EPS is based on the profit after tax for the six months ended 30 September 2019 of £18.0m and the following weighted average number of shares:

Details of the calculation of adjusted EPS are set out below:

12 Business combinations

Acquisition of MaxGrip

On 17 April 2019, the Group completed the acquisition of the software assets of MaxGrip, a pioneer in optimising asset performance with Reliability Centred Maintenance (RCM) solutions. The preliminary fair values of the identifiable assets and liabilities of MaxGrip as at the date of acquisition were:

The goodwill recognised is primarily attributed to the expected synergies and other benefits from combining the assets and activities of MaxGrip with those of the Group.

The consideration of £21.6m was settled in cash. The associated transaction costs of £0.3m were expensed and are included in administrative expenses.

Revenue and contributed net profit before tax from the date of acquisition are immaterial to the Group. If the acquisition had taken place at the beginning of the year, revenue and contributed net profit before tax would also be immaterial.

Disposal of Wonderware Italy

On 30 April 2019 the Group disposed of a wholly owned distributor business in Italy for £2.2m, of which £1.3m deferred consideration is recognised in other receivables at 30 September 2019.

13 Trade and other receivables

Current

Non-current

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

14 Trade and other payables

15 Related party transactions

Transactions between Group subsidiaries have been eliminated on consolidation. A list of subsidiaries can be found in the notes to the AVEVA Group plc financial statements in the 2019 Annual Report.

During the period, Group companies entered into the following transactions with Schneider Electric group companies:

As at the balance sheet date, group companies held the following balances with Schneider Electric group companies:

16 Changes in accounting policies

The Group adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 April 2019. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option ('short term leases'), and lease contracts for which the underlying asset is of low value ('low-value assets').

The Group has lease contracts for various items of property, computer equipment and motor vehicles. Before the adoption of IFRS 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. At the date of transition, no finance leases were held, and all leases were classified as operating. Leased property was not capitalised and the lease payments were recognised as rent expense in the statement of profit or loss on a straight-line basis over the lease term. Any prepaid rent and accrued rent were recognised under prepayments and accruals, respectively.

Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases that it is the lessee, except for short-term leases and leases of low-value assets. The right-of-use assets for most leases were recognised based on the carrying amount as if the standard had always been applied, apart from the use of incremental borrowing rate at the date of initial application. In some leases, the right-of-use assets were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid, accrued lease payments and onerous lease provision previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. In accordance with the modified retrospective method of adoption, the Group has restated the opening balances as at 1 April 2019. The comparative financial information in this Interim Report has not been restated.

Impact on the statement of financial position (increase/(decrease)) as at 1 April 2019:

The lease liabilities as at 1 April 2019 can be reconciled to the operating lease commitments as of 31 March 2019 as follows:

Set out below are the carrying amounts of the Group's right-of-use assets and lease liabilities and the movements during the period:

The Group recognised rent expense from short-term leases of £3.3m and leases of low-value assets of £0.1m for the six months ended 30 September 2019.

Responsibility statement of the Directors

in respect of the Interim Report

The Directors of the Company confirm that to the best of our knowledge:

·; the Interim Report has been prepared in accordance with IAS 34;

·; the Interim Report includes a fair review of the information required by DTR 4.2.7R, being an indication of the important events that have occurred during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six months of the year; and

·; the Interim Report includes a fair review of the information required by DTR 4.2.8R, being disclosure of related party transactions and changes therein since the last Annual Report.

By order of the Board