9th Nov 2005 07:00
AVEVA Group PLC09 November 2005 9 November 2005 AVEVA Group plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 AVEVA Group plc ("AVEVA"; stock code: AVV), one of the world's leading providersof engineering data and design IT systems, today announces its unaudited resultsfor the six months ended 30 September 2005. Highlights • Strong results with significant increases in revenue, profit from operations, earnings per share and cash. • Adjusted profit from operations* increased to £5.5m (2004: £2.7m). • Adjusted earnings per share** increased by 186% to 17.26p (2004: 6.04p). Basic earnings per share were 12.58p (2004: 8.39p). • An increased interim dividend of 2.2p will be paid (2004: 1.8p), reflecting the Board's continued confidence. • Revenue up 21% to £29.0m (2004: £24.1m). • Recurring revenues up 26% to £19.1m (2004: £15.1m). • Excellent cash generation with net cash at 30 September at £17.8m (2004: £9.3m). All figures are presented under IFRS with restated comparatives. *Profit from operations after adding back amortisation of intangibles,restructuring costs and past service credit on UK defined benefit pension scheme. **Earnings per share after adding back amortisation of intangibles,restructuring costs and past service credit on UK defined benefit pension scheme. Commenting on the outlook, Chairman Richard King said: "Our strong blue chip customer list, leading technologies and exposure todynamic, fast growing regions and markets, give the Board confidence that we arewell placed to build on the momentum that has been established in the businessover the last year. We enter the second half with a healthy pipeline of new business opportunitiesand are therefore confident that we are in a strong position to achieve our fullyear objectives." Enquiries:AVEVA Group plc On 9th November Tel: 020 7796 4133 Richard Longdon, Chief Executive Thereafter Tel: 01223 556 611Paul Taylor, Finance Director Hudson Sandler Tel: 020 7796 4133Andrew HayesSandrine GallienJames Hill An analysts' briefing will be held at 250 Bishopsgate, London, EC2M 4AA at 9.30am on 9 November 2005. For further information please contact Alix Hayward on020 7796 4133. CHAIRMAN'S STATEMENT OVERVIEW AVEVA has performed extremely well in the first six months of the year,achieving record growth in revenue, profit and cash. We have outperformedacross all regions and markets where we operate. In addition, we are beginningto see acceleration in orders from some of the world's emerging economies,particularly Russia and South America. These excellent half-year results demonstrate our ability to build on ourdominant positions in high growth markets and develop our leading technologiesto meet the evolving needs of our customers. Once again, we have worked hard toachieve a better balance between first and second half revenues and thereforeexpect full year results to be less weighted to the second half than in previousyears. We have established a strong momentum across the business and enter thesecond half with an encouraging order book. FINANCIALS AND DIVIDEND All figures are presented under International Financial Reporting Standards(IFRS), with restated comparatives. For details of main adjustments please referto the announcement made on 22 September that can be found at www.aveva.com. AVEVA has once again delivered impressive sales and profit growth against thesame period last year, with revenue up 21% to £29.0 million. Recurring revenuesincreased by 26% to £19.1 million (2004: £15.1 million). Profit from operations before amortisation, restructuring costs and past servicecredit on the UK pension scheme increased to £5.5 million, generating adjustedearnings per share of 17.26p - an increase of 186% on 2004. Costs have risen in line with expectations and we anticipate that costs willincrease at a proportionate rate in the second half to support the Group'sexpansion and investment in VNET. AVEVA continues to be highly cash generative, with net cash at 30 September 2005£17.8 million (2004: £9.3 million). This has been achieved despite investingover £6.4 million in research and development in the period, and expandingfurther a global sales infrastructure. Dividend Given our strong first half performance and confidence in the prospects of thebusiness, the Board is declaring that the interim dividend per share beincreased by 22% to 2.2p (2004: 1.8p). Payment will be made on 27 January 2006to all shareholders on the register on 6 January 2006. OPERATING REVIEW This has been another period of significant growth, both geographically and inour main target markets of oil and gas, power and marine. Geographic Our successful penetration of Asia Pacific markets continues to be a key factorin the Group's performance. Revenues from the region were up 35% on the priorperiod and now represent 38% of Group revenues. This was largely a result ofongoing exposure to high growth markets such as Korea, particularly in themarine sector, with increased opportunities for new business in Japan andAustralia. In terms of EMEA, sales have been good. Growth in Europe continues to be drivenby increasing demand in the power industry and the success of European basedsuppliers of power generation plants. In addition, the demand for large scaleFloating, Production and Storage Offshore (FPSO) vessels has driven furthergrowth from our established European offshore contractor base. Revenuesincreased by 11% on the same period last year and now represent 45% of Grouprevenues. A particular highlight is that our marketing efforts in Russia overthe last two years are now starting to bear fruit, especially in the oil and gasand marine sectors. This performance has been achieved for a number of reasonsincluding a better understanding of business practices in the region andresurgence in Russia's economy. In order to better exploit these emergingopportunities, we have opened an office in Moscow in addition to the Marinesales office we have in St Petersburg. More encouragingly, for the first time in over two years, we have seen a strongrecovery in our Americas business, with revenues up 19% on the same period lastyear. Whilst this remains our smallest market, representing 17% of Grouprevenues, it is a strategically important region and one where we see goodlong-term growth prospects. We have continued to invest in the US and ourHouston headquarters has been very busy helping our many customers, either basedin or with facilities around the southern states, deal with the problems broughtabout by the terrible weather conditions in the region. Markets We have continued to strengthen our position in the three main markets of oiland gas, power and marine. We have seen a good inflow of new business andrenewal of rental contracts. In terms of the power market, we are realising good opportunities in China inboth nuclear and fossil fuelled power stations as the country seeks to addressits massive need for extra power capacity. The foundations we have built locallymeans that AVEVA suite of products has already become the system of choice. The European power industry is also now seeing significant growth, in part dueto demand from Asia, but also the resurgence of demand for nuclear power inEurope. This is translating into good repeat business for AVEVA, as well as ahealthy pipeline of future opportunities. The UK power industry, along with manyother countries, is also in a transitional period as governments look toincrease power capacity and the immediate growth opportunities look encouraging. We have continued to see a steady increase in confidence for long-term oil andgas projects around the world. The market opportunity is substantial, withforty-four £1 billion offshore developments, thirteen £1.5 billion refineries,twenty-seven £1 billion LNG plants and eleven £3.5 billion petrochemical plantsdue to built over the next ten years. We have a good track record on globalprojects with customers like BP in Angola and Shell in Nanhai, China. Ourconfidence in our ability to leverage our expertise to increase the work we dowith existing customers and indeed attract new customers was borne out in July2005, when Petrobas, the national oil company of Brazil, migrated its legacydata from four of its refineries to AVEVA's VANTAGE Plant Design 3D solution.Petrobas is using AVEVA software in eight of its refineries and is expected tointegrate the product across all fourteen in time. The marine business has performed in line with expectations during the firsthalf, achieving steady growth against strong prior year comparatives. The delivery of our first combined process and marine product "VANTAGE Marine11.6", which we have been developing through our strategic partnership withHyundai Heavy Industries, the world's leading shipbuilding company, has beenwell received by customers. We believe it will result in an increase inrecurring revenues with existing customers and provide a major driver for newcustomers to commit to VANTAGE Marine. Whilst we have secured some significant new contracts in our non-core markets ofpaper and pulp, mining, food processing, chemical and pharmaceutical, thesemarkets do not represent a material proportion of Group revenue. CONSTANT INNOVATION As a business we never stand still, constantly striving to improve our offeringto meet the changing needs of our customers. During the first half of the yearwe invested £6.4 million in research and development, and completed plannedimprovements to our core VANTAGE offering with the launch of VANTAGE ProjectResource Management (VPRM) 9.6. During the period we continued to invest in developing a suitable infrastructureto support the wider roll out of VANTAGE Enterprise Net (VNET), our uniqueinternet based technology that enables common applications to be integrated tocreate an internet-based information portal. Since the end of the lastfinancial year the dedicated VNET team has more than doubled, includingstrengthening our presence in America and Central Europe. Whilst it is stillearly days, we believe VNET has enormous potential within the engineeringcommunity, transforming AVEVA's position and relationship with large global bluechip EPCs and Owner Operators. MANAGEMENT AND BOARD Whilst there have been no changes at the plc Board level, within the operatingexecutive team we have several new appointments. Lennart Olsson, formerly thePresident of Tribon Solutions, now heads up Global Sales and Customer Serviceand Derek Middlemas is now responsible for Business Development and StrategicPlanning, whilst Matt McKinley, Executive Vice President of our Americanoperation, is making a great improvement in the region. OUTLOOK Our strong blue chip customer list, leading technologies and exposure todynamic, fast growing regions and markets, give the Board confidence that we arewell placed to build on the momentum that has been established in the businessover the last year. We enter the second half with a healthy pipeline of new business opportunitiesand are therefore confident that we are in a strong position to achieve our fullyear objectives. Richard King Chairman 8 November 2005 Independent review report to AVEVA Group plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 September 2005 which comprises the Consolidated IncomeStatement, Consolidated Statement of Recognised Income and Expenses,Consolidated Balance Sheet, Consolidated Cash Flow Statement, ConsolidatedStatement of Changes in Equity and related notes 1 to 8. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept 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 interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4'Review of interim financial information' issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof group management and applying analytical procedures to the financialinformation and underlying financial data and based thereon, assessing whetherthe accounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with UnitedKingdom Auditing Standards and therefore provides a lower level of assurancethan an audit. Accordingly, we do not express an audit opinion on the financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. Ernst & Young LLPCambridge8 November 2005 CONSOLIDATED INCOME STATEMENTFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 Notes Year ended Six months ended 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) Revenues 4 29,036 24,078 57,163 Cost of sales 5 (8,533) (6,796) (18,221) Gross Profit 20,503 17,282 38,942 Operating ExpensesAdministrative expenses 5 (3,914) (4,171) (10,799)Selling and distribution costs 5 (12,130) (9,967) (18,788) Total operating expenses (16,044) (14,138) (29,587) Profit from operations 5 4,459 3,144 9,355 Analysis of profit from operationsProfit from operations before amortisation, 5,496 2,654 10,200restructuring costs and past service creditPast service credit on defined benefit - 3,100 3,100pension schemeRestructuring costs - (1,896) (2,287)Amortisation of intangibles (1,037) (714) (1,658) Profit from operations 4,459 3,144 9,355 Finance income 50 5 70Finance expense (103) (317) (301) Profit before tax 4,406 2,832 9,124 Income tax expense 6 (1,624) (1,088) (4,011) Profit for the period attributable to equity 2,782 1,744 5,113shareholders of the parent Earnings per share (pence) 8- basic 12.58 8.39 23.91- diluted 12.48 8.37 23.78- adjusted 17.26 6.04 27.86 All activities relate to continuing activities CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSESFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 Year ended Six months ended 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 Exchange differences arising on retranslation of (39) 94 93goodwill and intangiblesDeferred tax on items recognised directly in equity 253 (177) (102)Exchange differences arising on translation of 126 21 150foreign operationsActuarial (loss)/gain on defined benefit pension (304) 500 900scheme Net income recognised directly in equity 36 438 1,041Profit for the period 2,782 1,744 5,113 Total recognised income and expenses relating to 2,818 2,182 6,154the period attributable to equity shareholders CONSOLIDATED BALANCE SHEETAS AT 30 SEPTEMBER 2005 As at Six months ended 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) Non-current assetsGoodwill 17,207 15,274 17,157Other intangible assets 14,582 13,899 15,802Property, plant and equipment 4,920 5,247 4,879Deferred tax assets 2,030 1,681 1,738 38,739 36,101 39,576 Current assetsInventories - 217 -Trade and other receivables 21,862 17,676 26,489Current tax assets 928 1,532 749Cash and cash equivalents 18,947 9,467 12,114 41,737 28,892 39,352 TOTAL ASSETS 80,476 64,993 78,928 EquityIssued share capital 2,221 2,194 2,204Share premium 25,173 27,918 24,323Other reserve 3,921 - 3,921Retained earnings 12,817 7,330 10,921 Total equity shareholders' funds 44,132 37,442 41,369 Current liabilitiesBank overdraft 1,169 108 903Finance lease liabilities 35 38 41Trade and other payables 21,198 15,715 23,410Current tax liabilities 3,271 977 2,293 25,673 16,838 26,647 Non-current liabilitiesProvisions 466 1,094 824Deferred tax liabilities 4,098 3,298 4,354Finance lease liabilities - 20 -Retirement benefit obligations 6,107 6,301 5,734 10,671 10,713 10,912 TOTAL EQUITY AND LIABILITIES 80,476 64,993 78,928 CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005 Year ended Six months ended 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 (unaudited) (unaudited) (unaudited) Cash flows from operating activitiesProfit from operations 4,459 3,144 9,355Depreciation and amortisation of tangible 1,606 1,374 3,156and intangible assetsProfit on disposal of non-current assets (51) (9) (35)Share based payments 26 8 23Pension service costs non-cash 69 (2,899) (2,928)Changes in working capital:Inventories - - 217Trade and other receivables 3,974 3,310 (4,097)Trade and other payables (1,883) (2,232) 5,087Provisions (358) 1,209 856 Cash generated from operating activities 7,842 3,905 11,634before taxIncome taxes paid (1,122) (668) (3,159) Net cash generated from operating activities 6,720 3,237 8,475 Cash flows from investing activitiesAcquisition of Tribon Solutions AB - (17,067) (17,043)Acquisition of Realitywave, Inc - - (3,192)Purchase of property, plant and equipment (527) (642) (1,080)Interest received 50 5 70Interest paid (103) (117) (101)Proceeds from disposal of property, plant 62 57 150and equipment Net cash used in investing activities (518) (17,764) (21,196) Cash flows from financing activitiesProceeds from the issue of shares 867 16,149 16,491Payment of finance lease liabilities (6) (51) (71)Dividends paid to equity holders of the parent (948) (878) (1,274) Net cash flows from financing activities (87) 15,220 15,146 Net increase in cash and cash equivalents 6,115 693 2,425Net foreign exchange difference 452 (47) 73Opening cash and cash equivalents 11,211 8,713 8,713 Closing cash and cash equivalents 17,778 9,359 11,211 CONSOLIDATED STATEMENT OF CHANGES IN EQUITYAS AT 30 SEPTEMBER 2005 Cumulative Share Share Other translation Retained Total capital premium reserve adjustments earnings equity £'000 £'000 £'000 £'000 £'000 £'000 At 1 April 2004 1,747 8,210 - - 6,018 15,975Currency translation adjustments - - - 21 - 21Retranslation of goodwill and - - - - 94 94intangiblesActuarial gain on defined benefit - - - - 500 500pension schemeDeferred tax on items recorded - - - - (177) (177)in equityNet income recognised directly - - - 21 417 438in equityProfit for the period - - - - 1,744 1,744Total recognised income and - - - 21 2,161 2,182expense for the periodIssue of share capital 447 19,708 - - - 20,155Share-based payments - - - - 8 8Equity dividends - - - - (878) (878) At 30 September 2004 2,194 27,918 - 21 7,309 37,442 At 1 April 2005 2,204 24,323 3,921 150 10,771 41,369 Currency translation adjustments - - - 126 - 126Retranslation of goodwill and - - - - (39) (39)intangiblesActuarial loss on defined benefit - - - - (304) (304)pension schemeDeferred tax on items recorded - - - - 253 253in equityNet income recognised directly - - - 126 (90) 36in equityProfit for the period - - - - 2,782 2,782Total recognised income and - - - 126 2,692 2,818expense for the periodIssue of share capital 17 850 - - - 867Share-based payments - - - - 26 26Equity dividends - - - - (948) (948) At 30 September 2005 2,221 25,173 3,921 276 12,541 44,132 NOTES 1. The interim report The Interim Report was approved by the Board on 8 November 2005. The financialinformation set out in the Interim Report is unaudited but has been reviewed bythe Auditors, Ernst & Young, and their report to the Company is set out on page8. The Interim Report will be posted to shareholders and copies will be availablefrom the registered office of AVEVA Group plc, High Cross, Madingley Road,Cambridge, CB3 0HB. 2. Accounting policies These interim financial statements are the first AVEVA has prepared underInternational Financial Reporting Standards ('IFRS') and have been prepared inaccordance with the IFRS accounting policies management expects to apply in thefinancial statements for the year ending 31 March 2006 which will be fullycompliant with IFRS. These accounting policies are consistent with thoseadopted for the restatement of the financial information for the year ended 31March 2005, which was issued on 22 September 2005. In accordance with the directive of the Council of the European Union, AVEVA hasadopted IFRS for the first time this year, having previously applied UKaccounting standards. A reconciliation of equity at 1 April 2004, being thedate of transition to IFRS, and at 31 March 2005 was provided in the IFRSrestatement document issued on 22 September 2005. Details of the restatement of 2004/05 comparative financial information,including a summary of significant accounting policies, from UK GenerallyAccepted Accounting Principles ('UK GAAP') to IFRS are posted on www.aveva.comand will be included in AVEVA's Annual Report for the year ending 31 March 2006. AVEVA has adopted all existing IFRS with the exception of IAS 34 'InterimFinancial Reporting' which is not mandatory for UK groups. AVEVA hasanticipated that the amendment to IAS 19 'Actuarial Gains and Losses, GroupPlans and Disclosure' which has yet to be formally adopted for use in the EU,will be so adopted in time to be applicable to the next annual financialstatements. No material adjustments, other than changes in presentation, have been made tothe consolidated cash flow statement on transition to IFRS. 3. Statutory group financial statements The financial information set out within this report is not AVEVA's consolidatedstatutory financial statements as defined in section 240 of the Companies Act1985. Statutory consolidated financial statements for AVEVA Group plc for theyear ended 31 March 2005 prepared in accordance with UK GAAP, on which theAuditors gave an unqualified report (which made no statement under sections 237(2) or (3) of the Companies Act 1985), have been filed with the Registrar ofCompanies. 4. Segment information Year ended Six months ended 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000Revenue by destination:United Kingdom 825 2,067 5,576Rest of Europe, Middle East and Africa 12,192 9,626 21,989Americas 5,037 4,244 9,347Asia Pacific 10,982 8,141 20,251 29,036 24,078 57,163 5. Profit from operations Group profit from operations for the six months ended 30 September 2005 was£5.50m before intangible amortisation of £1.04m. For the six months ended 30 September 2004 the Group profit from operations was£2.65m (year ended 31 March 2005: £10.20m), before restructuring costs andintangible amortisation of £2.61m (year ended 31 March 2005: £3.95m) and pastservice credit relating to the UK defined benefit pension scheme of £3.10m (yearended 31 March 2005: £3.10m). An analysis of cost of sales and operating expenses is set out below: Year ended Six months ended 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000Cost of salesRestructuring costs - 266 366Cost of sales (excluding restructuring) 8,533 6,530 17,855 8,533 6,796 18,221Other operating expensesSelling and distribution costs (excluding restructuring) 12,130 9,224 17,829Restructuring costs - 743 959 Selling and distribution costs 12,130 9,967 18,788 Administrative expenses (excluding restructuring) 3,914 3,284 9,837Restructuring costs - 887 962 Administrative expenses 3,914 4,171 10,799 Total operating expenses 16,044 14,138 29,587 Restructuring costs relate to the rationalisation and integration of TribonSolutions AB in 2004 and consist of redundancy and other employment relatedcosts, office rental and other associated expenses. 6. Income tax expense The income tax expense (including deferred taxation) for the six months ended 30September 2005 is estimated at 31% (2004: 32%) of profit before tax after addingback disallowable amortisation of intangible assets. 7. Interim ordinary dividend The proposed interim dividend of 2.2p per ordinary share will be payable on 27January 2006 to shareholders on the register on 6 January 2006. In accordancewith IFRS, no provision for the interim dividend has been made in thesefinancial statements. An analysis of dividends paid is set out below: Year ended Six months ended 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000Dividends-final 2003/4 paid at 4.0p per share - 699 699-additional final 2003/4 - 179 179-interim 2004/5 paid at 1.8p per share - - 396-final 2004/5 paid at 4.3p per share 948 - - 948 878 1,274 8. Earnings per share Year ended Six months ended 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (unaudited) Profit for the period (£'000) 2,782 1,744 5,113Adjusted profit for the period* (£'000) 3,819 1,254 5,958Ordinary shares of 10p each in issue 22,120,421 20,777,391 21,387,290Diluted ordinary shares of 10p each 22,288,828 20,823,511 21,499,172 The number of shares in the table above represent the weighted average number ofshares during the periods shown. * Profit for the period before restructuring costs, amortisation of intangiblesand past service credit on UK defined benefit pension scheme. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AVV.L