Half Yearly Report

AVEVA GROUP PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2015

AVEVA Group plc ('AVEVA'; stock code: AVV), one of the world's leading providers of engineering data and design IT systems, today announces its interim results for the six months ended 30 September 2015.

Financials

* 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 fair value of forward foreign exchange contracts and exceptional items. In addition, adjusted basic earnings per share also include the tax effects of these adjustments.

** 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 contribution from acquisitions.

Highlights

Commenting on the outlook, Chief Executive Richard Longdon said:

"We have been pleased with the resilient performance in the first half particularly with our recurring revenue growing on an underlying basis and a general strengthening of our pipeline. The focus on sales execution is beginning to deliver benefits and we have been encouraged by gaining some early momentum in diversifying into under-penetrated industries and maximising the opportunities with our existing customers through 'One AVEVA'. This is clearly evident in the new business won in the first half of the year with new and existing customers. We are confident in our technology leadership as well as the long-term structural growth drivers that underpin the markets we serve and, in the current fiscal year, we expect to achieve a result in line with the Board's expectations."

Update on the proposed acquisition of Schneider Electric Software

N.B. Please refer to the separate release published this morning for an update on the expected timing of the proposed acquisition of the Schneider Electric software assets. 

Conference call and webcast

AVEVA management will host a conference call and audio-webcast, for registered participants, at 09:30 (BST) today. The audio-webcast will be also accessible via the AVEVA website following the presentation.

To register for the webcast and access the presentation materials please visit:

http://www.aveva.com/en/Investors.aspx.

Participants are advised to visit the website at least 15 minutes prior to the commencement of the call in order to register and, for those accessing the webcast, in order to download and install any audio software that may be required.

NB: 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 full replay facility will be made available later in the day.

Additional information can be accessed at www.aveva.com/investors or by contacting the AVEVA Investor Relations team or FTI Consulting directly.

Chief Executive's Review

Overview

The Group has delivered a solid half year performance with organic, constant currency revenue of £85.1 million broadly unchanged compared to a year ago and in line with market expectations. Despite the challenging market backdrop, particularly in the Oil & Gas segment, our recurring revenue remained stable compared to the prior year and increased by 4% on an organic, constant currency basis to £64.3 million and is now 76% of total underlying revenue. We saw some notable deals in the period and continued momentum from AVEVA E3D, where constant currency revenue almost doubled over the prior year. We were also pleased with the success we achieved in winning new customers, diversifying our end markets and broadening our solution footprint within our existing customer base, all of which combined to help us achieve this resilient result.

As expected, revenue and adjusted profit before tax were £82.0 million (2014 - £85.9 million) and £9.3 million (2014 - £17.1 million) respectively. The negative effects of currency translation were particularly marked in the first half, with an overall impact of c.8% on revenue and 31% on profit. Excluding the impact from currency translation, organic, constant currency adjusted profit before tax was £13.7 million.

Regionally, the trading environment remained mixed. Strength in EMEA was driven by an increase in solution-sales and cross-selling new products to existing customers. We saw lower levels of demand in Latin America, where Brazil remains particularly subdued as expected, and China, where the economic backdrop has been generally slower compared to a year ago. Elsewhere in Asia, sales in both South Korea and Japan were unchanged over the prior year, affected by the previously noted reduction in offshore projects in the major shipyards.

As previously anticipated, we expect to see a greater proportion of revenue fall into the second half of the current financial year than in previous years. This is due to the rephasing of some Global Account renewals to March, where customers have moved to new contracts during the past 12 months. We have continued to maintain tight control over our cost base with total costs increasing only 3% on an organic, constant currency basis in the first half. We also expect to begin to see the benefits of the recently-implemented cost efficiency measures in the second half.

AVEVA continues to maintain a strong balance sheet with net cash as at 30 September 2015 of £105.7 million.

Business performance

Our business remained resilient in the first half of the year, with modest growth in recurring revenue on an organic, constant currency basis.

Sales execution in the period was strong and we continue to focus on diversifying our sales efforts away from Oil & Gas to other industry verticals. We are starting to see the benefit of this with Oil & Gas contributing less than 40% of Group revenue in the first half compared to around 45% a year ago. As a result, we saw a higher number of individual transactions with smaller deal sizes in areas like Petrochemical, Food Processing and Power as we build bridgeheads and reference customers in these segments. It was also encouraging to see that we successfully added a significant number of new customers in the period and broadened our customer footprint through increasing the sale of products beyond our 3D design tools (for example in schematics, LFM™ and AVEVA Bocad™) and solutions sales of AVEVA Integrated Engineering & Design™ (AVEVA IE&D™). The 'One AVEVA' sales approach, our 'More than 3D' strategy and a renewed focus on account management were instrumental in helping us to achieve this.

Among the notable deals in the first half, Brodosplit Shipyard in Croatia has implemented an AVEVA Integrated Shipbuilding solution, optimising both the design of vessels and offshore assets as well as materials management and production across the entire shipyard. In addition, one of the largest Power EPCs in the Middle East has selected AVEVA IE&D, replacing a competitor's solution. We also closed an important standardisation deal with a large Russian EPC and a major water services customer commenced full migration to AVEVA E3D, having been an AVEVA PDMS™ customer for a number of years.

Within Oil & Gas, we have seen a difficult environment for our EPC customers who are exposed to offshore projects and a lack of new project awards in the first half has, as expected, resulted in some customers reducing the level of licences under their rental contracts. 

Despite this, we were successful in our Global Accounts EPC business in establishing greater usage of some of our new software solutions in onshore and downstream, as well as in the Building Information Management (BIM) and Infrastructure markets. In particular, we were encouraged to see increased adoption of AVEVA's engineering data management solutions, helping us to displace competitor products with AVEVA Engineering™, AVEVA NET™ and AVEVA Information Standards Manager™.

The AVEVA engineering data management solution-set spans all industry sectors and is currently being deployed on all major continents within four of our Global Account EPC customers. Engineering data management is a clear driving force in our 'More than 3D' campaigns. In projects such as UK infrastructure, where our unique approach to information management has been proven over many years in the process industries, AVEVA has an unrivalled proposition in the BIM space with initial 'linear asset' project deployment seeing good progress. Deployment of AVEVA E3D, with its compelling AVEVA Laser™ capability, is enabling AVEVA's Global Accounts to achieve increased productivity and successfully realise measurable efficiency gains on brownfield and revamp projects. Consequently, AVEVA E3D is fast becoming a leading solution for all brownfield engineering work, both offshore and onshore.

We expect that our engineering data management solutions will continue to develop our business-critical proposition for establishing the Digital Asset through providing multi-discipline, concurrent engineering solutions. We also expect them to help to embed AVEVA's software tools more widely across all geographic regions and industry sectors within these important customer accounts.

Elsewhere, AVEVA Bocad has been deployed at AKER Kvaerner Verdal, in a deal that saw us replace a competitor's structural steel detailing solution. This deployment of AVEVA Bocad will provide unrivalled integration between the customer's existing AVEVA 3D design environment and its fabrication and production systems.

Providing further evidence of our determination to move into new industry segments, we were pleased to deliver an integrated design and workflow management solution, as the first stage of an eventual standardisation strategy, to one of the largest global suppliers of technology into the food processing industry, where AVEVA software tools will now be deployed to develop and design production plants for the dairy, beverage, brewery, food, pharmaceutical and chemical processing markets.

Our Fabricators business has delivered strong growth during the first half. This business, which now incorporates AVEVA Bocad and the recently acquired FabTrol™, offers an end-to-end solution for steel detailing and steel fabrication management, production control and shipping. The performance in Fabricators was driven by strong demand in South East Asia, which more than offset the slower market conditions in the Middle East.

The FabTrol acquisition, completed in June 2015, has begun to raise awareness of AVEVA Bocad in the North American market and, with recently upgraded functionality and a major new release planned for 2016, we expect our business to benefit during the second half and beyond.

We were encouraged to see a number of new customers adopt AVEVA NET to meet their information management requirements. These included a global chemical company, a major nuclear fusion research facility in France and two major South Korean EPCs. AVEVA NET has also gone into production at a major Norwegian integrated oil major, which includes the first deployment of the AVEVA Activity Visualisation Platform™ (AVEVA AVP™). This is an example of a customer choosing to use the 3D model as the portal for navigation as they access data held in AVEVA NET, a trend which we expect to drive further convergence of these technologies.

AVEVA World Summit 2015

In October 2015, we hosted our annual customer event, the AVEVA World Summit, in Dubai. With over 330 delegates from 45 countries, we heard from customers from across the world's process, plant, power and marine industries as they shared their project and operational experiences, explaining how AVEVA technology is helping them to address technical and strategic business challenges.

Among the key themes of the Summit this year was Decision Support, and in support of this we unveiled our new asset visualisation product, AVEVA Engage™, and we showcased the powerful Design in Context capabilities of the latest release of AVEVA E3D. Other key areas of focus were the refinements we have made to our hybrid Cloud strategy, where we demonstrated AVEVA Experience™, an on-demand Cloud-based AVEVA E3D training environment, and a further evolution of our vision for the Digital Asset, where customers were able to familiarise themselves with our latest laser modelling technologies based around the concept of the Trusted Living Pointcloud™.

We heard from our first AVEVA Engage customer, where this leading-edge, large format touchscreen technology is enabling the many engineering disciplines involved in review team meetings at NNB GenCo to have a full 'hands on' experience as they view the 3D model. Other participants in the early access programme include Shell and Lundin, who have been instrumental in helping us to develop a solution that will meet their needs.

EMC, one of AVEVA's key strategic partners, presented their vision of connected decision-making and its importance to ensure safe, efficient and compliant projects and operations.

The EPC and Owner Operator customers who attended are clearly focused on deriving competitive and strategic benefits from AVEVA's industry-leading software tools as they seek to optimise the performance of their assets, extending their useful lifecycles via brownfield engineering and revamp projects. As a result they are particularly interested in the laser-modelling capabilities contained in AVEVA E3D, as well as our Integrated Engineering & Design solutions.

Dividends

The Board is declaring an interim dividend of 6.0 pence per share (2014 - 5.5 pence per share), an increase of 9%. The dividend will be payable on 29 January 2016, to shareholders on the register on 4 January 2016.

Market outlook and summary

Our EPC customers have reacted to the slowdown in upstream Oil & Gas capex through downsizing and adapting to current activity levels which have stabilised. In response, we have proactively repositioned our efforts to focus on:

I am pleased to be able to report that we expanded our presence in the brownfield revamp and modification area, particularly onshore and downstream, as Owner Operators seek to get the most out of their existing assets through extending their operating life and maximising their efficiency. This has enabled us to widen the usage of AVEVA's solutions among our global EPC customer base. AVEVA led the way into laser modelling and have continued to invest and, as a result, we have the best technology available, recently enhanced through the launch of HyperBubble™ and the Trusted Living Pointcloud.

The challenging environment in Oil & Gas led us to reposition our sales focus and we are pleased to have been able to deliver some early successes as we seek to build our presence in new markets, for example chemicals and food processing, as well as growing our penetration into onshore and downstream Oil & Gas.

A key indicator of our success is the level of new business we were able to win in the first half of the financial year, both with new customers, often in new or under-penetrated industries, and upselling new products to existing customers. This has been given real impetus by our 'One AVEVA' strategy and we expect this trend to continue, as we seek to diversify our end markets and increase the breadth of adoption of AVEVA's entire product suite with all our customers.

We also continue to position our business for the significant growth we see over the long term in developing markets, for example in India and China where we have a particular focus on the Power market opportunity.

In conclusion, we saw a resilient performance in the first half of the year and our recurring revenue grew on a constant currency basis. We continue to pursue our ambition to be technology leaders within our industry, we have a strong balance sheet and we are confident of the long-term structural growth drivers that underpin the markets we serve. In the current fiscal year we expect to achieve a result in line with the Board's expectations.

Richard Longdon

Chief Executive Officer

10 November 2015

Finance Review

Summary

The first half performance in 2015/16 has demonstrated that the business continues to remain resilient despite the difficult market conditions. Overall, we have seen a broadly flat organic revenue performance on a constant currency basis and pleasingly, recurring revenue has grown 4% in the first half reflecting the strength of the business model. Adjusted profit before tax in the first half has been impacted by foreign exchange and phasing of costs. The business continues to be highly cash generative with cash generated from operating activities before tax increasing by 37% to £30.9 million and continues to maintain a strong balance sheet with cash of £105.7 million and no debt.

The results for the half year are summarised as follows:

* Operating expenses and adjusted profit/(loss) before tax 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.

** Organic constant currency is defined as the period's reported results restated to reflect the previous year's average exchange rates and excludes the contribution from acquisitions.

Total revenue for the half year was £82.0 million which was down 5% compared to the first half in 2014/15 (2014 - £85.9 million). Included in the results is £3.3 million of revenue from the recent acquisitions of 8over8 Limited and FabTrol Systems Inc. The business has continued to be negatively impacted by foreign exchange translation in the first half. Organic revenue on a constant currency basis was £85.1 million, which was down 1% compared to 2014/15. Organic, reported revenue was £6.4 million lower (8%) due to adverse movements in rates, most notably the Euro and Russian rouble.

As expected and stated at the preliminary results and the July Q1 trading statement, adjusted profit before tax was impacted by the increased cost base due to wage inflation and the impact of recruitment in 2014/15 offset by the savings from the cost reduction programme implemented earlier this year, resulting in an adjusted profit before tax of £9.3 million (2014 - £17.1 million). On a constant currency basis, the adjusted profit before tax was £13.7 million. On a reported basis, there was a loss before tax of £0.8 million (2014 - profit of £14.2 million) principally due to the exceptional professional fees incurred relating to the proposed acquisition of the Schneider Electric software assets.

Revenue

Organic, constant currency revenue by category

The Group's recurring revenue, which consists of annual fees and rental licence fees, grew by 4% to £64.3 million (2014 - £61.8 million) and represented 76% of revenue (2014 - 72%).

Annual fees grew by 6% to £31.4 million (2014 - £29.7 million) following on from the initial licence sales in 2014/15 and some price increases that we have been able to secure.

Rental licence fee revenue grew by 2% to £32.9 million (2014 - £32.1 million). We have continued to see rental fees overall remain stable. This is pleasing given the difficult market conditions within the offshore Oil & Gas market. In the first half we did see some instances of customers reducing the number of licences/tokens due to the lower levels of activity. In addition, we also had the effect of three customers in 2014/15 whose contract renewal date moved from the first half to the second half. Despite these headwinds, rental licences grew during the first half because of sales into new customers in other end markets and upselling more of the schematics, laser scanning and AVEVA Bocad products into the installed base and new customers.

Initial licence fee revenue fell by 18% to £11.9 million (2014 - £14.6 million). This reflects the difficult market conditions particularly in specific geographies exposed to Oil & Gas and shipbuilding.

Training and services revenue was down 6% at £8.9 million (2014 - £9.5 million) due to fewer implementation projects.

Segment performance

An analysis of revenue by geography is set out below:

EMEA

On an organic, constant currency basis, revenue was up 6% to £46.3 million (2014 - £43.7 million). EMEA was impacted most significantly by foreign exchange translation as a result of the weakness of the Euro and Russian rouble resulting in reported revenue being down 6%.

EMEA produced a robust performance in the first half with annual fees increasing by 2%, rental fees increasing by 14% and initial licence fees were flat on a constant currency basis. Generally conditions in Oil & Gas were difficult in the first half, particularly for those customers who are more exposed to offshore projects. Central and Northern Europe performed well with growth coming from selling more of our non-3D products as well as sales of AVEVA E3D to both existing and new customers.

Americas

In the Americas, organic constant currency revenue was down 13% with revenue of £10.8 million (2014 - £12.4 million). Conditions in Latin America have not improved in the first half and the Brazilian market continues to be difficult resulting in lower level of renewals on some rental contracts due to the reduced activity levels. In North America, the business performed well with good growth in rental licences from Owner Operators.

Asia Pacific

Organic constant currency revenue in Asia Pacific was down 6% on a constant currency basis, with revenue of £28.0 million (2014 − £29.8 million). The performance in China was impacted by the general economic slowdown in the country. The other territories were broadly flat in Asia Pacific with annual fees and rental fees holding up well although initial licences declined due to the slowdown in Oil & Gas projects and continued subdued conditions in shipbuilding.

Acquisitions

In January 2015, we completed the acquisition of 8over8 Limited, the contract risk management software business used to increase project control and capital discipline. Whilst the recurring revenue for 8over8 has remained strong in the first half, the lack of new capital projects within Oil & Gas has impacted demand for new licences of the ProCon software. We remain focused on selling ProCon into other capital intensive industries where it is equally relevant.

In June 2015, we completed the acquisition of FabTrol Systems Inc for £3.6 million. The business is based in North America and provides fabrication management software to the steel fabrication industry. It has a well-established market position with 1,400 customers globally with a particularly strong installed base in North America which will give us the opportunity to cross-sell Bocad software into.

The acquisitions contributed £3.3 million of revenue during the first half with £0.7 million from Asia Pacific, £0.9 million from EMEA and £1.7m from the Americas. The acquisitions incurred costs of £3.4 million in the period split £0.5 million for cost of sales, £1.3 million for Research & Development, £1.4 million selling and distribution and £0.2 million administrative expenses. The acquisitions consequently incurred an adjusted loss before tax of £0.1 million in the period.

Cost analysis

An analysis of organic operating expenses on a normalised basis is set out below:

The allocation of costs between selling and distribution costs and administrative expenses has been amended during the first half and the income statements of prior periods have been restated accordingly. There has been no impact on profit from operations. Further details are contained in note 2.

Research & Development costs fell by 11% on an organic, constant currency basis partly due to the benefit of the restructuring that was undertaken in the first half, savings from utilising our in-house facility in Hyderabad for more projects and savings from lower discretionary costs such as travel. The Group continues to focus on Research & Development and the recent releases of AVEVA Engage and the new version of AVEVA E3D demonstrate the value that is being created for the Group.

Selling and distribution expenses increased by 5% on an organic, constant currency basis. This was principally due to higher sales commissions and bonuses compared to the previous year and the effect of recruitment completed in the second half of 2014/15 offset by lower travel costs.

Administrative expenses increased by 24% on a constant currency basis because of continued investment in our information systems and higher costs of national insurance on share options offset by lower depreciation and travel costs. Administrative expenses reported in 2014 included a foreign exchange gain of approximately £1.5 million.

Exceptional items

During the first half, the Group incurred exceptional costs of £7.0 million (2014 - £0.4 million), relating to acquisition costs of £4.6 million (2014 - £nil), exceptional restructuring costs of £2.1 million (2014 - £nil) and a provision for interest on underpaid sales taxes in an overseas location of £0.3 million (2014 - £0.4 million).

The acquisition costs relate to fees paid or accrued to professional advisers for legal and due diligence services in connection with the proposed acquisition of the Schneider Electric software assets and of FabTrol. In the prior year the costs relate to the acquisition of 8over8 and were all incurred in the second half of the year.

The exceptional restructuring costs incurred relate to the redundancy and related costs in connection with the rationalisation of offices and reduction in employees in specific areas of the business as announced in our preliminary results in May 2015.

The Group has provided for a potential underpaid sales tax liability, in respect of prior periods, related to the local sales of one of the Group's subsidiary companies. The provision includes an estimate of the underpaid tax as well as related interest for late payment, the latter being treated as an exceptional item.

Profit before tax

Adjusted profit before tax for the six months ended 30 September 2015 was £9.3 million (2014 - £17.1 million), a decrease of 46%. This resulted in an adjusted profit margin of 11% on a reported basis compared to 20% for 2013/14. On an organic, constant currency basis, the adjusted profit before tax was £13.7 million, a decrease of 20% and representing an adjusted profit margin of 16%.

Reported loss before tax (after exceptional items of £7.0 million (2014 - £0.4 million) and other normalised adjustments) was £0.8 million (2014 - profit of £14.2 million).

Taxation

The total tax charge for the half year was £1.8 million (2014 - £3.5 million). The tax charge on an adjusted profit before tax for the six months ended 30 September 2015 was £2.9 million which equates to an effective tax rate of 31.0% (six months ended 30 September 2014 - 23.3%). The Group expects the tax rate on adjusted profit before tax for the full year to be between 23% and 25% (year ended 31 March 2015 - 23.4%).

Dividends and earnings per share

The Board is declaring an interim dividend of 6.0 pence per share (2014 - 5.5 pence per share), an increase of 9%. The dividend will be payable on 29 January 2016, to shareholders on the register on 4 January 2016.

During the first half, the Company paid a final dividend in respect of 2014/15 of 25.0 pence per share (2013/14 - 22.0 pence) at a cost of £16.0 million (2014 - £14.0 million).

Adjusted basic earnings per share were 10.06 pence (2014 - 20.50 pence). Basic loss per share was 3.99 pence (2014 - basic earnings per share of 16.75 pence) and diluted loss per share was 3.99 pence (2014 - diluted earnings per share 16.70 pence).

Balance sheet and cash flows

AVEVA continues to maintain a strong balance sheet and has no debt. Net assets at 30 September 2015 were £174.1 million compared to £171.2 million at 30 September 2014.

Non-current assets

Non-current assets increased to £90.5 million (2014 - £69.5 million) mainly due to the goodwill and intangible assets acquired as part of the acquisitions of 8over8 and FabTrol.

Working capital

Gross trade receivables at 30 September 2015 were £46.6 million (2014 - £51.9 million) which includes trade receivables of £1.6 million related to 8over8 and FabTrol. The bad debt provision at 30 September 2015 was £6.0 million compared to £6.0 million at 30 September 2014.

Deferred income at 30 September 2015 was £35.1 million compared to £30.9 million at 30 September 2014. This includes £4.4 million related to 8over8 and FabTrol.

Trade payables and other liabilities were £27.0 million compared to £19.9 million at 30 September 2014. The increase was principally due to the accrual for professional fees in relation to the acquisition of the Schneider software assets, deferred consideration for 8over8 and FabTrol and increased trade payables and other tax accruals.

Cash generation

Net cash (including treasury deposits) at 30 September 2015 was £105.7 million compared to £103.8 million at 31 March 2015. Cash generated from operating activities before tax increased by 37% to £30.9 million (2014 - £22.5 million). The Group showed strong cash generation in the first half of the year principally as a result of the payments received from customers in respect of invoices raised in the final quarter of 2014/15.

Pensions

On an accounting basis, the Group's pension liabilities decreased from £14.2 million at 31 March 2015 to £8.0 million at 30 September 2015. The decrease was principally due to the reduction in the UK defined benefit scheme of £5.8 million to £5.5 million (31 March 2015 - £11.3 million) driven by an increase in government gilt and corporate bond yields, leading to a corresponding increase in the discount rate used to value the long-term liabilities.

Equity

At 30 September 2015, the Company had 63,958,813 ordinary shares of 3 5/9p each in issue (30 September 2014 - 63,943,778 shares).

Principal risk and uncertainties

The principal risks and uncertainties faced by the Group are detailed in note 4 to the Interim Report.

James Kidd

Chief Financial Officer

10 November 2015

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 2015 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 18. 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 and Ireland) 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 2015 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

Cambridge

10 November 2015

Consolidated income statement

for the six months ended 30 September 2015

* Restated for a reclassification of expenses, as explained in note 2.

Consolidated statement of comprehensive income

for the six months ended 30 September 2015

Consolidated balance sheet

30 September 2015

Consolidated statement of changes in shareholders' equity

30 September 2015

Consolidated cash flow statement

for the six months ended 30 September 2015

Notes to the Interim Report

1 The Interim Report

The Interim Report was approved by the Board on 10 November 2015. The interim condensed financial statements set out in the Interim Report is unaudited but has 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 2015 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 Report and should be read in conjunction with the Annual Report for the year ended 31 March 2015.

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 2015 have been extracted from the Consolidated statutory financial statements for AVEVA Group plc for the year ended 31 March 2015 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.

From 1 April 2015, the EDS and ES lines of business were merged and the Executive Board now monitor and appraise the business based on the performance of three geographic regions: Asia Pacific; Americas; and Europe, Middle East and Africa (EMEA). These three regions are now 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. There is no inter-segment revenue. Balance sheet information is not included in the information provided to the Executive Board. Support functions such as head office departments are controlled and monitored centrally.

Disclosure for the year ended 31 March 2015 and six months ended 30 September 2014 has been restated to reflect the new organisational structure.

Also from 1 April 2015, the allocation of costs between selling and distribution expenses and administrative expenses has been amended and the income statements of prior periods have been restated accordingly. Previously, all costs related to the sales offices were included in selling and distribution expenses including the local finance, HR and IT costs to reflect the total cost of the regional sales operation. In line with industry practice, the presentation has been updated to allocate the costs by function to selling and distribution costs and administrative expenses respectively. Comparatives have been restated accordingly resulting in an increase of £2.7 million to administrative expenses and a corresponding decrease to selling and distribution costs in the six months to 30 September 2014 and an increase of £7.5 million to administrative expenses and a corresponding decrease to selling and distribution costs in the year ended 31 March 2015. There has been no impact on profit from operations. Similarly, and also in line with industry practice, selling and distribution expenses and administrative expenses have been combined on the face of the Consolidated income statement with the split of these expenses now provided in a note - see note 7. The Directors believe that the revised Income statement presentation more appropriately and consistently reflects the nature of the Group's operations.

In all other respects 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 2015.

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 profit before tax and reconciles this to profit before tax 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 adjusted profit 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.

3 Going concern

As disclosed in the most recent Annual Report, the Group continues to have significant financial resources and continues to be cash generative. At 30 September 2015, the Group had bank, cash and treasury deposits of £105.7 million (31 March 2015 - £103.8 million) and no debt.

Therefore, 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

AVEVA, as with any organisation, continues to face a number of potential risks and uncertainties which could have a material impact on the Group's long-term performance.

The primary risk and uncertainty related to the Group's performance for the remainder of the year is the challenging macro-economic environment, which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results.

The other 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 2015. These include:

· dependency on key markets;

· competition;

· professional services;

· identification and successful integration of acquisitions;

· protection of the Group's intellectual property rights;

· Research & Development;

· risks associated with widespread international operations;

· recruitment and retention of employees; and

· foreign exchange risk.

These risks are described in more detail on pages 22 and 23 of the 2015 Annual Report. The Directors routinely monitor all of these risks and uncertainties and appropriate actions are taken where possible to mitigate these risks. Included in the Business Review is a commentary on the outlook of the Group for the remaining six months of the year.

5 Revenue

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

The operations of the Group are not subject to significant seasonality, but the timing of customer contract renewals can be significant to the phasing of revenue between six-month periods. Typically there are more renewals in the second half of any financial year.

Training and services consist of consultancy, implementation services and training fees.

Included within revenue for the six months ended 30 September 2015, are annual fees of £481,000, initial licence fees of £210,000 and services of £32,000 related to the acquisition of FabTrol, and annual fees of £1,111,000, rental licence fees of £735,000 and services of £681,000 related to the acquisition of 8over8 Limited (for the prior year the revenues from the date of acquisition, January 2015, were annual fees of £534,000, rental licence fees £296,000 and services of £321,000).

6 Segment information

From 1 April 2015, the Group was reorganised so as to place greater emphasis on regional performance. The Group is now organised into three geographical segments: Asia Pacific; Americas; and Europe, Middle East and Africa (EMEA). Each segment is determined by the location of the Group's operations and is organised and managed separately due to the differing local requirements in each market.

The Executive Board monitors the operating results of the Regions for the purposes of making decisions about performance assessment and resource allocation. Performance is evaluated based on regional contribution using the same accounting policies as adopted for the Group's financial statements. There is no inter-segment revenue. Balance sheet information is not included in the information provided to the Executive Board. Support functions such as head office departments are controlled and monitored centrally.

Disclosure for the year ended 31 March 2015 and six months ended 30 September 2014 have been restated to reflect the new organisational structure.

Included within revenue for the six months ended 30 September 2015 are the following, related to the acquisitions of FabTrol and 8over8 Limited: Asia Pacific £634,000, EMEA £904,000 and Americas £1,712,000. The prior year revenues include the following 8over8 revenues from the date of acquisition, January 2015: Asia Pacific £332,000, EMEA £338,000 and Americas £481,000.

7 Selling and administrative expenses

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

* Restated for a reclassification of expenses, as explained in note 2.

8 Exceptional items

During the period the Group incurred exceptional costs of £7.0 million, relating to acquisition and integration activities of £4.6 million, exceptional restructuring costs of £2.1 million and a provision for interest on underpaid sales taxes in an overseas location of £0.3 million.

The acquisition and integration expenses of the period relate to fees paid to professional advisers primarily for legal and due diligence advice related to the acquisition of FabTrol Systems Inc. and the proposed acquisition of certain software assets from Schneider Electric. The costs incurred during the year to March 2015 of £0.4 million related to the acquisition of 8over8 Limited.

Exceptional restructuring costs of £2.1 million were incurred during the period and relate to redundancy and other related costs in connection with the rationalisation of offices and reduction in headcount in specific areas of the business. This was the continuation and conclusion of a restructuring plan which commenced just prior to the end of the 2014/15 financial year. Costs incurred during the year to March 2015 were £0.8 million.

The Group has provided for a potential underpaid sales tax liability in respect of prior periods, related to the local sales of one of the Group's subsidiary companies. The provision includes an estimate of the underpaid tax as well as related interest for late payment, the latter being included as an exceptional item.

9 Income tax expense

The total tax charge for the half year of £1.8m (2014 - £3.5m) is made up of UK tax of £0.2m (2014 - £1.8m) and overseas tax of £1.6m (2014 - £1.7m).

The tax charge on adjusted profit before tax for the half year ended 30 September 2015 is £2.9m which equates to an effective tax rate of 31.0% (half year ended 30 September 2014 - 23.3%). The Group expects the tax rate on adjusted profit before tax for the full year to be between 23% and 25% (year ended 31 March 2015 - 23.4%).

The UK government has announced that it will reduce the main rate of corporation tax by 1% to 19% from 1 April 2017 and by another 1% to 18% from 1 April 2020. These changes had not been substantively enacted at the balance sheet date and consequently are not included in these financial statements. The effect of these proposed reductions would be immaterial to the UK net deferred tax liability.

10 Ordinary dividends

The proposed interim dividend of 6.0 pence per ordinary share will be payable on 29 January 2016, to shareholders on the register on 4 January 2016. In accordance with IFRS, no provision for the interim dividend has been made in these financial statements.

An analysis of dividends paid is set out below:

11 Earnings per share

The calculation of earnings per share is based on the loss after tax for the six months ended 30 September 2015 of £2,553,000 and the following weighted average number of shares:

Details of the calculation of adjusted earnings per share are set out below:

12 Cash and cash equivalents and treasury deposits

Treasury deposits represent bank deposits with an original maturity of greater than three months.

13 Trade and other receivables

Current

Non-current

Non-current other receivables consist of rental deposits for operating leases.

14 Trade and other payables

15 Financial instruments

Financial instruments which are recognised at fair value subsequent to initial recognition are grouped into Levels 1 to 3 based on the degree to which the fair value is observable. The three levels are defined as follows:

· Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

· Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

· Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Group's financial assets include forward foreign exchange contracts which were measured at Level 2 fair value subsequent to initial recognition and were calculated as the present value of the estimated cash flows based on spot and forward exchange rates. There were no transfers between levels during the periods disclosed. At 30 September 2015 the fair value of the financial liability in respect of foreign exchange contracts was £266,000 (31 March 2015 - liability of £432,000 and at 30 September 2014 - £92,000 asset).

16 Retirement benefit obligations

The movement on the provision for retirement benefit obligations during the period was as follows:

The discount rate used to value the liabilities of the UK defined benefit pension scheme at 30 September was 3.6% (March 2015 - 3.1%, September 2014 - 3.8%).

17 Business combinations

On 22 June 2015, the Group acquired 100% of the issued share capital of FabTrol Systems Inc., a software business headquartered in Eugene, Oregon, U.S.A with operations in North America and the United Kingdom. FabTrol provides fabrication management software to the steel fabrication industry. The acquisition consideration was £3.6m, £3.1m net of cash acquired. £0.5m of the gross consideration was deferred and is payable in equal instalments on the first and second year anniversary of the acquisition. The provisional fair value of the opening balance sheet at the date of acquisition amounted to £0.8m, including an intangible asset of developed technology of £1.2m; customer relationships of £0.8m; deferred tax liability on intangible assets of £0.8m and underlying net liabilities of £0.4m, which resulted in goodwill of £2.8m.

On 5 January 2015, the Group acquired 100% of the issued share capital of 8over8 Limited headquartered in Northern Ireland. The acquisition consideration was cash of £26.9 million. Details of the fair values of the net assets acquired and goodwill was set out in detail in the 2015 Annual Report.

Acquisition costs (including due diligence and professional fees) and integration costs have been included in the Consolidated income statement.

18 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 2015 Annual Report.

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