Interim Results

18 November 2013

AVEVA GROUP PLC

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

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 2013.

Commenting on the outlook, Chief Executive Richard Longdon said:

"AVEVA remains well positioned with broad exposure to multiple growth markets and high recurring revenues. We have clearly demonstrated our technology leadership putting significant distance between us and the competition, and we are excited about the opportunities for our new Cloud and Mobile solutions in particular. The pipeline for the ES division remains substantial, and we remain confident of the long-term potential in this business. The strong momentum in our EDS business along with the improvement in overall profitability achieved in H1, give us confidence that the Group will deliver the Board's expectations for the full year."

Enquiries:

AVEVA Group plc

Richard Longdon, Chief Executive

James Kidd, Chief Financial Officer

Derek Brown, Head of Investor Relations & M&A

On 18 November 2013 Tel: 020 7796 4133

Thereafter Tel: 01223 556611 or 01223 556683

Hudson Sandler

Andrew Hayes / Wendy Baker /Alex Brennan Tel: 020 7796 4133

An analysts' briefing will be held at Goldman Sachs, Peterborough Court, 133 Fleet Street, London, EC4A 2BB at 9.30 am on 18 November 2013.

The analyst presentation will be audio-webcast live on the morning of the event for registered participants. The audio-webcast will be also accessible via the AVEVA website following the presentation. You can register online in advance of the audio-webcast online at http://investors.aveva.com/ 

For further information please contact Anna Qazi on 020 7796 4133 or on [email protected].

Chief Executive's Review

Overview

We are pleased with a good performance during the first half of the financial year with further progress made against the Group's business objectives. During the period we saw revenue growth of 11% driven primarily by the Oil & Gas market and a 13% increase in adjusted profit before tax (reported profit before tax growth of 6%). In particular we saw a strong performance from the Asia Pacific region, with revenue up 22% over the prior year and encouraging progress in North America. Our customers continue to be attracted by our rental model with rental fees up 14% in the period, compared to the 11% expansion in initial licence fees. This continues to drive our recurring revenue which grew by 13% during the first half reflecting the strength of our business model. Recurring revenue represents 70% of total revenue.

The Engineering & Design Systems (EDS) division saw strong growth with revenue up 12% in the first half driven by further growth in demand from Engineering Procurement and Construction (EPC) customers. The response to AVEVA Everything 3D™ (AVEVA E3D™) from evaluation customers over the course of this year, and in particular at our recent AVEVA World Summit in Boston, Massachusetts, continues to be very positive and we remain confident of the opportunities this product will generate going forward.

In Enterprise Solutions (ES) we continue to make good progress with the major Owner Operators and EPCs, although revenue growth of 5% over the prior year was slower than expected. This was principally due to two customer-specific external factors, as well as the unpredictability that the longer sales cycles, a characteristic of this business, bring. However, given the growing pipeline we remain positive about the opportunities for ES in the medium to long-term.

The Group continued to be highly cash generative in the first half, with cash generated from operating activities before tax of £30.2 million compared to £22.9 million for the same period in the previous year, an increase of 32%. The Group had £95.8 million of cash and no debt at the period end, which was after the payments of a special and final dividend totalling £113 million.

Engineering & Design Systems

We saw further progress in the EDS business, which constitutes 88% of total group revenue, with 12% revenue growth in the first half of the financial year. The increasing scale, complexity of projects, and an ever increasing focus on safety in the Oil & Gas industry continues to drive strong demand for our Plant design tools, particularly in the offshore market where we signed a number of significant licence deals. We continued to see the backlogs of the major engineering contractors grow and a number of our key EPC customers maintained or expanded their deployments of AVEVA design software during the first half.

In Power, we are aggressively pursuing the market in China and India, where there is expected to be strong demand over time for new-build nuclear construction. In addition, the ageing infrastructure in developed Western economies also provides an opportunity for replacement and lifecycle extensions and we were encouraged to see the announcement of a new nuclear power generation facility at Hinkley Point in the UK as evidence of that. As anticipated, sales of our marine software to conventional shipbuilders were flat during the first half due to the market remaining depressed.

We now have more than 30 customers using the new software platform AVEVA E3D™ and the cumulative monthly revenue, although still small, is building in line with expectations. In addition, we were pleased to see Siemens (Power EPC division), amongst other early adopters, present an enthusiastic assessment of their experiences evaluating AVEVA E3D™ at the recent AVEVA World Summit in Boston, Massachusetts. In particular they outlined their intention to adopt E3D™ for all new projects from the end of 2014. The second half of this financial year will also see a number of AVEVA User Group meetings and we expect the momentum for AVEVA E3D™ to continue to build as a result.

We continue to focus on expanding our design footprint within our existing customer base, as manifested by continued strong growth in sales of the AVEVA Integrated Engineering & Design (AVEVA IE&D) product portfolio. A recent example of this was a competitive win at MAN Diesel & Turbo who successfully standardised AVEVA IE&D across its power plant business unit. Bocad, our structural steel detailing business that we acquired in May 2012, continued to perform satisfactorily in the first half and we have had success in converting competitor accounts as well as achieving improved pricing for annual fees in the installed base.

Enterprise Solutions

Whilst we saw continued progress with both our Owner Operator and EPC customers during the first half of the financial year, the ES division delivered a weaker than expected result with revenue growth of 5% compared to a year ago.

The reasons for this are twofold. Firstly, there were two customer-specific external factors impacting revenue in the first half. A major Latin American shipyard customer ran into serious financial difficulties and a major Oil & Gas operator abandoned its plan to roll-out an enterprise-wide information management solution. Secondly, and as previously stated, the Owner Operator market for information management solutions is still evolving and sales cycles are long and hard to predict when measured over the short term and before recurring revenue is built up. As a result, and with the full impact of the above-mentioned customer-specific factors coming through in H2, we now expect Enterprise Solutions to deliver revenue for the full financial year broadly in line with last year.

The pipeline and market opportunity for the Enterprise Solutions division remain strong, and we reached significant milestones on a number of existing and new projects with strategic Owner Operator and EPC customers during the first half, including the BP NOTIME project in Norway, Chevron Gorgon, Shell Carmon Creek, Conoco Phillips CNSO and ADMA-OPCO.

We have continued to build on our strategy of working with partners to assist in co-marketing and solution delivery. Cap Gemini's adoption of AVEVA NET as the digital information hub for its iALM solution is of strategic importance and the initial focus is on the UK Nuclear New Build project where iALM has been selected.

We remain confident that the Enterprise Solutions business will continue to make good progress in this emerging sector, as we address customer demand for integrated information management.

Geographic performance

The highlight from a regional perspective was the Asia Pacific region, which achieved revenue of £42.3 million, up 22% in the first half of the fiscal year (2012 - £34.7 million). One of the key drivers of growth within the region was South Korea, where we saw the continued trend of major shipyards purchasing licences for offshore Oil & Gas projects. We performed satisfactorily in China, although the revenue remains second half weighted due to the spending patterns within state owned entities.

We were also encouraged by our performance in the Americas. We achieved 9% growth in the first half with revenue of £17.8 million (2012 - £16.3 million). This was driven by encouraging progress in North America whilst Latin America was flat compared to the same period last year. We have yet to see signs of a measurable and sustained improvement in Brazil, despite initial positive signs in the first quarter with offshore and onshore contract wins. The economic and political backdrop continues to impact overall demand in Brazil and whilst the long-term opportunity is significant, timing remains uncertain.

We are putting significant focus into our North American business and have already seen encouraging early signs in the first half, with some new customer wins and expansion within existing customers with our schematic products and with AVEVA NET. Oil & Gas has been the main driver for North America with offshore projects, as well as increased activity in petrochemical and LNG export projects resulting from shale discoveries, underpinning the growth in the region.

The reported revenue from EMEA showed an increase of 4% to £48.4 million in the first half (2012 - £46.6 million). We saw good performances in Central Europe and the UK but experienced tougher market conditions in the Middle East and Russia during the first half. The EMEA result was also impacted by Enterprise Solutions, which resides principally within EMEA from a revenue-reporting standpoint.

Research & Development

Innovation and technology leadership lies at the heart of AVEVA, and we continued to deliver new solutions and to invest in an exciting roadmap of new products during the first half. At the recent AVEVA World Summit, customers were particularly enthusiastic about our new mobile application, AVEVA E3D Insight™, which puts live design data into the hands of project managers using mobile devices on site in fabrication and construction. Developed in collaboration with Microsoft, the product maximises project efficiency by providing authorised users with direct access to the live AVEVA E3D™ design model, regardless of their location.

Looking forward, we see the AVEVA E3D™ platform as a facilitator for our strategic development into both Mobile applications and Cloud-based collaboration. These technologies potentially hold the key to facilitate dramatic cost savings and efficiencies for our customers through improving project execution and minimising waste.

We are continuing with our strategy of strengthening our Research & Development capabilities through the establishment of a new Research & Development centre in Hyderabad, India where we have been able to recruit high quality engineers.

Summary and Outlook

We are pleased to have achieved continued good revenue and profit growth in the first half of the financial year. The Group remains well positioned to extend its leadership position through continued innovation, technology leadership and a global platform.

The momentum within Engineering & Design Systems remains strong, driven by long-term secular trends within global energy markets, as well as the broadening of our design application product footprint within our customer base. Regionally, we have been encouraged to see the excellent growth in Asia Pacific during the period and solid growth in the Americas.

The slower than anticipated growth from Enterprise Solutions in the first half will lead to a lower than expected revenue outcome for that division for the full financial year, with revenue now expected to be broadly in line with that achieved last year. Beyond the year end, the outlook for Enterprise Solutions remains positive, with expected growth in demand for integrated information management driven by efficiency, safety and compliance from both our Owner Operator and EPC customers. Our confidence in the long-term opportunity is underpinned by a substantial and growing pipeline of opportunities.

The response at the recent AVEVA World Summit to our new flagship platform, AVEVA E3D™, supports our view that this product has the capability to generate significant business going forward, both from existing customer migrations, but also, more importantly, from market share gains.

Therefore, as we enter the second half of the financial year, the Group is well positioned to deliver against the Board's expectations for the full year.

Richard Longdon

Chief Executive18 November 2013

Finance review

Summary

AVEVA continued to perform well during the first half and has delivered double-digit growth in all three of our top key performance indicators of revenue, recurring revenue and adjusted profit before tax. The Group is continuing to benefit from the underlying strength in the Oil & Gas market and through its strong relationships with the Group's major EPC customers has translated this into further sustainable growth in recurring revenue - up 13% from one year ago.

Adjusted profit before tax increased 13% to £32.3 million (2012 - £28.6 million) and on a reported basis, profit before tax increased by 6% to £27.3 million (2012 - £25.8 million).

Revenue

Total revenue increased by 11% to £108.5 million (2012 - £97.6 million) during the first half.

The Group's recurring revenue continued to grow, up 13% or £8.5 million to £75.6 million (2012 - £67.1 million) and now represents 70% (2012 - 69%) of total revenue. As we have stated previously, a number of our customers prefer the flexibility that our rental models offer and as a result we saw sales of rental licences continue to grow, up 14% (2012 - 17%) during the period, outperforming the growth in initial licence fees.

As a global business, AVEVA is exposed to fluctuations in foreign currency exchange rates. During the first half reported revenue benefitted by a £2.3 million positive net variance versus the comparative six months in 2012, mainly caused by GBP weakening against Euro and Korean Won offset partly by GBP strengthening against Japanese Yen. Underlying revenue, on a constant currency basis, was £106.2 million, an increase of 9% on the same period in the previous year.

We saw particularly strong growth in Asia Pacific, up 22% (2012 - 21%), and Americas delivered solid growth of 9% (2012 - 6%), although due to the tougher market conditions and the impact in Enterprise Solutions highlighted in the Chief Executive's review, EMEA revenue grew by 4% (2012 - 13%).

Total revenue from end user markets remained in line with previous periods with Oil & Gas accounting for approximately 45 - 50%, Marine 20 - 25%, Power 15% and Other, consisting of Mining, Petrochemical, Chemical and Paper Pulp 10 - 20%.

Segment performance

The performance of our primary segments is set out below:

Engineering & Design Systems (EDS)

Revenue from Engineering & Design Systems was £95.7 million, up 12% on the previous year. The increase in rental licence fees is seen particularly strongly in EDS where the EPCs have a strong preference for this model, up 15% to £45.7 million. The Group benefitted particularly from increased licence usage for our 3D design software, PDMS, but also is achieving success in expanding our footprint by selling additional licences for other complementary products such as engineering, electrical and instrumentation.

Segment costs for EDS increased by 14% to £23.8 million as a result of continuing investment in the development of new products, notably AVEVA E3D Insight™, and the development and evolution of our existing products. During the first six months of this year, we delivered a significant upgrade to AVEVA PDMS™ and full integration of AVEVA Bocad software with AVEVA's range of 3D design tools, including AVEVA E3D™. We also continued to hire technical sales specialists to support our sales teams in selling our wider portfolio of schematic software and Bocad.

EDS delivered a segment contribution of £71.9 million (2012 - £64.6 million), up 11% on the previous year.

Enterprise Solutions (ES)

Our Enterprise Solutions segment's revenue grew by 5% to £12.8 million (2012 - £12.2 million). While this segment continued to grow, this rate of growth was disappointing. However, we remain confident that this does not reflect the strong pipeline of sale opportunities and longer-term growth potential for the ES business. This is particularly the case given that the dip in growth rate for the first half of the year is partly explained by the two customer specific factors described in the Chief Executive's review. The phasing of revenue also partly reflects the second half weighting of some of our customers' rental licence renewals. The backlog in Enterprise Solutions at 30 September 2013 was £11.4 million from £14.7 million at 31 March 2013 also reflecting in part the same two customer issues that arose in the first half.

Enterprise Solutions costs were £14.4 million compared to £14.0 million in the same period last year, an increase of 3%. We continue to focus on managing the business capture and service delivery costs to best align with the global nature of our existing projects and pipeline of opportunities. We are also continuing with our strategy to strengthen Research & Development with the establishment of a Research & Development function and service delivery and support team in Hyderabad, India.

Enterprise Solutions incurred a segment loss of £1.6 million compared to £1.8 million in the previous year.

Shared operating costs

Shared selling and distribution expenses increased to £27.2 million (2012 - £25.7 million) due to further investments in our sales and support organisation particularly in North America, India and throughout Asia Pacific together with office expansions in a number of locations.

Other shared operating expenses increased by 22% to £11.1 million (2012 - £9.1 million) because of foreign exchange losses, investment in information technology and other corporate costs.

Exceptional items

Exceptional items totalled £2.2 million during the first half (2012 - £0.7 million). Of this cost, £1.1 million was in respect of redundancy costs relating to the Bocad organisation. A charge of £0.1 million (2012 - £0.7 million) was also incurred in respect of the final phase of the Bocad acquisition and integration for which we do not expect any further costs in the second half. The Group also has provided £1.0 million against a potential underpaid sales tax liability together with any related interest for late payment in respect of sales at one of the Group's subsidiary companies.

Profit before tax

Adjusted profit before tax for the six months ended 30 September 2013 was £32.3 million (2012 - £28.6 million), an increase of 13%. The adjusted profit margin was 29.8% compared to 29.3% for the same period last year. Typically our first half margin is lower than the full year margin as a result of our revenue being more heavily weighted to the second half.

Reported profit before tax was £27.3 million (2012 - £25.8 million).

Taxation

The effective tax rate for the first half was 27.6% (2012 - 29%) which is higher than the underlying UK tax rate of 23% because of profits earned in higher tax jurisdictions and non-deductible expenses.

Dividends and share consolidation

During the first half the Company paid a special dividend of 147 pence per share totalling £100 million, which was also accompanied by a share consolidation of 15 new ordinary shares for every 16 ordinary shares held. This reduced the number of shares in issue at the time of the share consolidation from 68,115,648 shares to 63,858,420 ordinary shares and also amended the nominal value of the shares to 3 5/9p pence each. At 30 September 2013, the Group had 63,870,765 shares of 3 5/9p each in issue (30 September 2012 - 68,073,931 shares of 3.33p each).

Also during the first half the Company paid a final dividend in respect of 2012/13 of 19.5 pence per share at a cost of £13.3 million.

The Board is declaring an interim dividend of 5 pence per share (2012 - 4.5 pence per share), an increase of 11%. The dividend will be payable on 3 February 2014 to shareholders on the register on 3 January 2014.

Earnings per share

Basic earnings per share were 29.64 pence (2012 - 27.03 pence), an increase of 10% and diluted earnings per share were 29.59 pence (2012 - 26.95 pence). Adjusted basic earnings per share were 35.23 pence, an increase of 17% over the same period in 2012/13 (2012 - 30.19 pence).

Earnings per share growth benefited by approximately 2% as a result of the share consolidation in the first half.

Balance sheet and cash flows

AVEVA continues to maintain a strong balance sheet. Net assets at 30 September 2013 were £156.8 million compared to £251.6 million at 31 March 2013, following the special and final dividend payments of £113 million during the first half.

Gross trade receivables at 30 September 2013 were £58.7 million (2012 - £54.4 million). The bad debt provision at 30 September 2013 remained consistent with the previous year end provision at £4.7 million (31 March 2013 - £4.8 million).

Deferred revenue at 30 September 2013 was £30.4 million compared to £31.2 million at 30 September 2012 mainly because of movements in foreign exchange rates used to revalue foreign currency denominated balances.

Net cash (including treasury deposits) at 30 September 2013 was £95.8 million, a decrease of £94.6 million from 31 March 2013, principally as a result of the special dividend as noted above. During the first half £113.3 million was paid out in dividends (2012 - £11.5 million) and £6.7 million in corporation tax payments (2012 - £9.4 million). Total cash and treasury deposits held in the UK represented 74% of the total balance held (2012 - 76%). The Group continues to have no debt.

The Group showed strong cash generation in the first half of the year resulting from continued focus on collections from customers. Cash generated from operating activities before tax was £30.2 million compared to £22.9 million for the same period in the previous year, an increase of 32%. Cash conversion, measured by cash generated from operating activities before tax as a percentage of profit from operations, was 112% compared to 91% in the previous period.

Risks and uncertainties

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 2013. Further details are included in note 4.

James Kidd

Chief Financial Officer18 November 2013

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 2013 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 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 2013 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

18 November 2013

Consolidated income statement

for the six months ended 30 September 2013

* Restated for the impact of IAS19 (revised), see note 2.

Consolidated statement of comprehensive income

for the six months ended 30 September 2013

* Restated for the impact of IAS19 (revised), see note 2.

Consolidated balance sheet

30 September 2013

Consolidated statement of changes in shareholders' equity

30 September 2013

* Restated for the impact of IAS 19 (revised), see note 2.

Consolidated cash flow statement

for the six months ended 30 September 2013

* Restated for the impact of IAS19 (revised), see note 2.

Notes to the interim report

1 The interim report

The interim report was approved by the Board on 18 November 2013. The financial information 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 posted to shareholders in due course and copies will be available from the registered office of AVEVA Group plc, High Cross, Madingley Road, Cambridge CB3 0HB and on 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 2013 has been prepared in accordance with IAS 34 Interim Financial Reporting and the disclosure requirements of the Listing Rules.

The Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated statement of changes in shareholders' equity and affected notes have been restated for the six months ended 30 September 2012 and the year ended 31 March 2013, to reflect changes in the way in which returns on scheme assets are recognised in accordance with IAS 19 Employee Benefits (revised). The effect of this has been to reduce the element of finance revenue associated with retirement benefit obligations by £267,000 in the six months ended 30 September 2013, by £76,000 in the six months ended 30 September 2012 and by £152,000 in the year ended 31 March 2013. The results of the Group for prior periods have been restated for this change in accounting policy. There was no impact on the disclosed defined benefit pension obligation at either period end.

The amendments to IAS 1 introduce a grouping of items presented in Other Comprehensive Income (OCI). Items that could be reclassified (or recycled) to profit or loss at a future point in time are now presented separately from items that will never be reclassified. The amendment affected presentation only and had no impact on the Group's financial position or performance.

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 2013.

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 2013.

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 2013 have been extracted from the Consolidated statutory financial statements for AVEVA Group plc for the year ended 31 March 2013 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 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 profitable. At 30 September 2013, the Group had bank and cash and treasury deposits of £95.8 million (31 March 2013 - £166.4 million), after having paid a special dividend to shareholders during the six month period of £100 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 has continued to be successful in the period, but 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 primary risk and uncertainty related to the Group's performance for the remainder of the year is the challengingmacroeconomic 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 2013. These include:

· dependency on key markets;

· competition;

· Enterprise Solutions;

· identification and successful integration of acquisitions;

· protection of the Group's intellectual property rights;

· research and 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 26 and 27 of the 2013 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 Chief Executive's 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.

Services consist of consultancy and training fees.

6 Segment information

The Group is organised into two lines of business, being Engineering & Design and Enterprise Solutions, which are considered to be the two reportable segments for the Group. The products of each of the lines of business are taken to market by a shared sales force that is itself organised into three geographical sales divisions: Asia Pacific; Americas; and Europe, Middle East and Africa (EMEA).

The Executive Board monitors the operating results of the lines of business for the purposes of making decisions about performance assessment and resource allocation. Performance is evaluated based on adjusted profit 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.

* Restated for the impact of IAS19 (revised), see note 2.

# Normalised adjustments include amortisation of intangible assets (excluding other software), share-based payments and gains/losses on fair value of forward foreign exchange contracts.

* Restated for the impact of IAS19 (revised), see note 2.

# Normalised adjustments include amortisation of intangible assets (excluding other software), share-based payments and gains/losses on fair value of forward foreign exchange contracts.

Analysis of revenue by geographical location

7 Exceptional items

During the period the Group incurred exceptional costs of £2.2 million related to acquisition and integration costs of £0.1 million, exceptional restructuring costs of £1.1 million and a provision for underpaid sales taxes in an overseas location of £1.0 million.

The restructuring costs relate to rationalisation of the Group's resources and principally relates to Bocad.

The Group has provided for a potential underpaid sales tax liability, mostly 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.

8 Income tax expense

The current year income tax expense for the six months ended 30 September 2013 is estimated at 27.6% (2012 - 29.0%) of profit before tax. The total tax charge of £7.5 million (2012 - £7.5 million) is made up of UK tax of £4.6 million (2012 - £4.8 million) and overseas tax of £2.9 million (2012 - £2.7 million).

At the balance sheet date the UK government had enacted a 2% reduction in the main rate of UK corporation tax from 23% to 21% from 1 April 2014 and a further 1% reduction to 20% from 1 April 2015. The impact of these changes on the deferred tax balances of the Group is included in the tax charge.

During the period legislation was enacted to allow UK companies to elect for the Research and Development Expenditure Credit (RDEC) on qualifying expenditure incurred since 1 April 2013, instead of the existing super-deduction rules. These interim statements assume that the election will be made and therefore the RDEC is recorded as income included in profit before tax, netted against Research and Development expenses. In previous periods there was a reduction in the income tax expense.

9 Ordinary dividends

The proposed interim dividend of 5.0 pence per ordinary share will be payable on 3 February 2014 to shareholders on the register on 3 January 2014. 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:

10 Earnings per share

* Restated for the impact of IAS19 (revised), see note 2.

The calculation of earnings per share is based on the profit after tax for the six months ended 30 September 2013 of £19.8 million and the following weighted average number of shares:

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

* Restated for the impact of IAS19 (revised), see note 2.

11 Cash and cash equivalents and treasury deposits

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

12 Trade and other receivables

Current

Non-current

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

13 Trade and other payables

14 Financial instruments 

Financial instruments that 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 2013 the fair value of the financial asset in respect of foreign exchange contracts was £574,000 (31 March 2013 - liability of £574,000 and at 30 September 2012 - £334,000 asset).

15 Retirement benefit obligations

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

16 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 2013 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

Richard Longdon James Kidd

Chief Executive Chief Financial Officer

18 November 2013