22nd May 2007 07:01
AVEVA Group PLC22 May 2007 22 May 2007 AVEVA Group plc RESULTS FOR THE FINANCIAL YEAR ENDED 31 March 2007 AVEVA Group plc ("AVEVA", stock code: AVV), one of the world's leading providersof engineering data and design IT systems, today announces its audited resultsfor the year ended 31 March 2007. Highlights • Another record year of revenue, profit and cash growth • Revenues up 44% to £94.9 million (2006: £65.9 million) • Recurring revenues up 29% at £52.7 million (2006: £40.9 million) • Adjusted profit before tax, amortisation, share-based payments and goodwill adjustment up 104% to £28.1 million (2006: £13.8 million) • Adjusted earnings per share up 96% to 31.71p (2006: 16.15p) • Profit before tax £24.7 million (2006: £11.2 million) • Basic earnings per share up 119% to 26.59p (2006: 12.14p) • Strong cash flow with net cash at the year end of £41.3 million (2006: £23.5 million) • Increased final dividend of 2.94p (2006: 1.73p) bringing the full year dividend to 4.18p (2006: 2.46p) - an increase of 70% • Investment in Research and Development increased 27% to £17.6 million (2006: £13.9 million) Nick Prest, Chairman, commented: "AVEVA's people and solutions are world class and represent a highly focused andtruly global organisation. The marine, oil and gas and power markets in whichwe operate look set to remain strong, with demand in some areas driving orderbooks to an all time high. With such momentum in the Company and the marketswhich we serve the Board believes that the outlook remains very positive." Enquiries: AVEVA Group plc On 22nd May Tel: 020 7796 4133Richard Longdon Thereafter Tel: 01223 556 611Paul Taylor Hudson Sandler Tel: 020 7796 4133Andrew HayesSandrine GallienJames White An analysts' briefing will be held at the offices of Hudson Sandler at 29 ClothFair, London EC1A 7NN at 9.30am on 22 May 2007. For further information please contact Alix Haysom on 020 7796 4133. CHAIRMAN'S STATEMENT I am delighted to announce another record year for AVEVA. We have seenunprecedented growth in revenue and profits reflecting AVEVA's position in theexpanding global markets for marine, oil and gas and power engineering. Theseresults reflect the strengths of AVEVA, providing market leading technologysolutions to our customers throughout the world. KEY FINANCIALS Our revenues grew by 44% and amounted to £94.9 million (2006: £65.9 million).Strong growth was achieved in all our major territories, where we alsomaintained a good balance between initial fees and recurring fees, which nowamount to £52.7 million (2006: £40.9 million). Profit before tax, amortisation, share-based payments and goodwill adjustmentincreased to £28.1 million (2006: £13.8 million), delivering an increase inadjusted earnings per share of 96% to 31.71p (2006: 16.15p). The investment in the AVEVA suite of products continued to be one of the highestin the industry increasing 27% to £17.6 million (2006: £13.9 million). Webelieve such levels of investment will continue to strengthen our marketposition by offering products which will drive the future productivity increasesour customers demand. The continued strength of trading has seen net cash increase to £41.3 million(2006: £23.5 million). DIVIDEND A very strong set of results and continued confidence for the future lead theBoard to propose an increased final dividend of 2.94p (2006: 1.73p). Togetherwith the interim dividend of 1.24p, this gives a full year dividend of 4.18p(2006: 2.46p), an increase of 70%. Subject to approval at the Annual General Meeting, the final dividend will bepaid on 1 August 2007 to shareholders on the register on 29 June 2007. PEOPLE During the past year we have invested heavily in people and to support this wehave appointed Hilary Wright as the Head of Global Human Resources. I would to like to take this opportunity to thank Richard Longdon, his executiveteam and all the AVEVA staff worldwide for their hard work over the past twelvemonths. I have been here just over a year, but many AVEVA staff have longservice in the Company, and the excellent results we are reporting reflectsustained planning and effort over many years. Across the Group all the employees have been committed to making AVEVA a winningorganisation and it is thanks to their dedication and professionalism that AVEVAhas scooped many of the major business awards and accolades in 2006/7. OUTLOOK AVEVA has positioned itself at the forefront of technological innovation throughthe continued development of its product range. This, combined with the closerelationships it enjoys with the ever expanding customer base, has meant thatthe Group has benefited strongly from the surge in end user markets. It is nowone of the very few technology companies whose efforts are dedicated to servingthe marine, oil and gas and power markets. Its people and solutions are worldclass and represent a highly focused and truly global organisation. The marketsin which it operates look set to remain strong, with demand in some areasdriving order books to an all time high. With such momentum in the Company andthe markets which we serve the Board believes that the outlook remains verypositive. Nick PrestChairman CHIEF EXECUTIVE'S REVIEW Last year was a milestone year for AVEVA. Our core markets are continuing toenjoy record levels of growth and we are capitalising on the differentopportunities this offers. In particular, a material number of high value dealswere concluded this year. With both plant and marine products, AVEVA has beenconsistently beating competitors by demonstrating the value and strength of itsproduct range and maximising the investment in local offices to provide best inclass support and service. The strong share price performance of the stock through the year has propelledAVEVA into the FTSE 250 and the Company has won a number of awards, most notablythe London Stock Exchange techMARK Company of the year and the PLC Company ofthe Year, in addition to a number of local business awards. These are a greattribute to all the employees that have been so dedicated to making AVEVA awinning team. REBRANDING With an increasing number of products and the greatly increased awareness of theAVEVA brand globally, we are taking this opportunity to simplify our branding aswe broaden the use of AVEVA core technology. All products will be marketedunder the AVEVA Plant and AVEVA Marine brands. Our new product branding andvery slightly changed corporate branding have been rolled out during April 2007,along with a completely redesigned and more accessible website. RESEARCH & DEVELOPMENT We are continuing to invest heavily in Research and Development to ensure thatwe retain our competitive advantage. One of the areas in which we are investingis the management of asset information. Increasingly, customers are realisingthe value of the data related to the high value assets they own and are lookingto maximise the value of such information when there is upgrade or repair workto be carried out. We are also investing in the AVEVA Net family of products. This product rangewill lead us into the growing market for Product Lifecycle Management systems.This is an emerging technology in which AVEVA are uniquely positioned to benefitfrom due to our unrivalled understanding of the complex major project executionprocesses. It is important that we maintain our close dialogue with customers, not only forthe continual progression of existing products, but also for the launch of newproducts which will elevate AVEVA's strategic value within its customer base.Through working closely with our customers we have developed a detailed productroadmap through to 2010 aimed at meeting specific demands of our customers. MAJOR INDUSTRY FOCUS The AVEVA product range is sold to owners, operators and engineering contractorsassociated with complex process plant and marine assets. Our customers areactive in Power, Oil and Gas, Marine, Paper & Pulp, Food processing, Brewing andmany process related activities. Most large scale engineering projects areunique and of such a scale that they cannot be prototyped, but employ aconcurrent design and build approach, often involving many partners across theglobe working together on a single project. AVEVA has unparalleled experienceand understanding of this complex market. The Power segment has been a core market for AVEVA over many years, though inthe last two years AVEVA has seen its market share in the power relatedindustries expand significantly as demand for increased supply globallycontinues to gather pace, with a particular emphasis on the high growth regionsof Brazil, China, India and Russia. The knowledge gained in working withcustomers across thermal and nuclear generation is a real strength and positionsAVEVA very well to capitalise on the strong market expected for some years tocome. With global shipyard activity hitting new highs during the year, AVEVA has beenable to maximise its world leading position as the number one supplier to themarine industries, by increasing product usage as existing customers grow. Oursuccess rate in winning new customers has also been first class. While winningbusiness in the booming Korean market and the strongly emerging Chinese markets,we are also revitalising sales in Europe and the Middle East. Notably, we havewon VT Shipbuilding in the UK and Dragon Offshore in the Middle East ascustomers, utilising our new capabilities for the combination of highlysophisticated hull design and outfitting technology available on a singledatabase platform. With such a high demand on yard capacity, yards worldwideare looking to increase their productivity and ability to offer a wider range ofvessel designs. Oil and Gas is the traditional strength for AVEVA, with a large number of ourcustomers active in this market globally. Increased energy commodity prices,demand growth and investment in infrastructure have led to unprecedented demandfor AVEVA tools as the primary supplier to this ever more global industry. Newbusiness has been generated by some of the large international engineeringcustomers expanding licence usage, as they maximise the use of skilled engineerson global project execution. The investment in providing a system that can beused across multiple engineering sites around the world and still provide aconsistent and high quality design gives AVEVA a distinct competitive advantage. LNG is the world's fastest growing fuel and AVEVA is very well positioned in thesupply chain, with many of its customers active in the front end of the process,marine customers active in the transportation of product in complex ships, andengineering companies active in the regasification process of the product onceit has been landed. Already AVEVA products have been used on some of thelargest facilities in the world for LNG processing and transportation. AVEVA'S GLOBAL PRESENCE AMERICAS - revenue: £13.5 million (2006: £11.1 million) The Americas region grew 22% during the year with the strongest sub-regionalgrowth in Latin America. The main driver for this increase in business hasbeen the booming oil and gas market, with all existing AVEVA customers reportingvery full order books and a strong pipeline of potential future projects. Latin America has seen 65% growth over the last year and thirty new customers.In this region we have a large Oil and Gas business, but are also very strong inthe Paper and Pulp industry. Although we already have a good market in Brazil, Chile and Mexico, carefulevaluation has shown that there are further potential growth opportunities forus in these markets. In response to this, we are planning further investment inthis region, principally through the opening of new offices. We started thisprocess this year, with the opening of a subsidiary office in Mexico City. ASIA PACIFIC - revenue: £36.9 million (2006: £23.7 million) Once again, the Asia Pacific region has produced excellent growth and nowrepresents 39% of Group revenues. During the year the team took nine ordersover £1m. In China, Josephine Zhou and her team have achieved growth of over 250% in theMarine business. This was largely driven by new customer wins and contractexpansions from our Marine customer base. Our Marine division has capitalisedon China's goal to become the world's largest supplier of new ship tonnagewithin ten years. The substantial investments in both the construction andrenovation of shipyards has seen a huge increase in business for AVEVA thisyear. Nuclear power also plays a major part in the generating mix in China and, aswell as working with China's supply partners, AVEVA will supply the design toolsfor the first new generation nuclear plant to be designed and built by Chinesecompanies. Our design tools are also being used on the new 1000Mw SuperUltracritical thermal power plants in Zouxian and on the largest coalliquefaction plant in the world. The Korea/Japan organisations have continued to expand. As well as winning newcustomers, the AVEVA Korea team has been providing on site support to a numberof established customers including Hyundai Heavy Industries, as the world'slargest shipbuilder continues to roll out the AVEVA marine design tools. We arealso working very closely with Hyundai on the development of AVEVA Marine 12 andthey currently have a number of engineers embedded in our developmentorganisation. Our contract with Hyundai has seen delivery of the first combinedTribon and AVEVA technology and AVEVA Marine 12 will follow, with full customerroll-out before the end of 2007. The successes in Korea in recent years are nowbeing emulated in Japan, with a strong upturn in business in this country. Elsewhere in the region we have been investing in new people and have taken goodorders in India, Malaysia and Indonesia across all industry sectors, with a verysignificant amount of new orders for AVEVA Net. We have aggressive plans tocontinue our growth across the Asia Pacific region and with so much new customeractivity across the region, we will also be locating some R&D activity in bothChina and Korea. CES - revenue: £22.8 million (2006: £17.0 million) The Central and Southern Europe (CES) region had an excellent year, winningforty-seven new customers with over half of these migrating from our majorcompetitor. A major opportunity is developing out of our early stage investment in theRussian market. AVEVA has been operating in Russia for over two years and nowhas a steadily growing, strong and sustainable business. We have formed asubsidiary in Russia, within which we are now growing our team, and will also beintegrating into this the marine sales and support business based in StPetersburg as a satellite office. Our progress in the complex Russian marketthis year increased considerably, with two of the region's influential powerbusinesses becoming new customers. The CES region has many companies with a long history of engineering in the keymarkets for AVEVA. These customers are supported by a number of softwaresuppliers, whose products remain influential to the success of their businesses.AVEVA secured the rights to two of these products during the year, bringingboth customer relationships and know-how. WEMEA - revenue: £21.7 million (2006: £14.2 million) Across the Western European, Middle East and Africa (WEMEA) region, with itsthree sub-regions, the focus has been on generating new marine business in allof the major industries served by AVEVA. This has been the first full year asHead of WEMEA for Martin Yeomans and it has been an outstanding year for bothgenerating new business and strengthening the team in readiness for futureyears. In the Nordic sub-region, where AVEVA has a large installed base in the Oil andGas industry, we have seen very strong demand for product throughout the yearand AVEVA has capitalised on the investments made on the West coast of Norway toget full service offices close to the customers' activities. Of particularimportance is the decision by Statoil to move all of their engineering designdata into AVEVA systems, using specially developed translators to migrate datafrom legacy systems. In conjunction with capturing the vitally important 'asbuilt' plant status using laser technology, accurate asset information can bebuilt in the AVEVA systems and used for design modification and extension. In Finland, the first new design Nuclear reactor for many years is being built.The prime contractor, AREVA, uses our complete plant product portfolio. Ourcustomer relationships and strength of product offering have positioned us wellto take advantage of the increased demand for nuclear reactors globally. PROSPECTS AVEVA has completed a landmark year of successes in 2006/7 and the business isnow operating at a higher level in every area. We are particularly focused onensuring we have the highest quality people to continue our growth and willcontinue to pursue various initiatives in the coming year to maintain our highstaff retention rate and to attract the best new talent. Our customers' order books remain at the highest levels for many years, with aconsiderable backlog in many of the industries key to the growth of AVEVA. Weplan to continue our high level of investment in Research and Development in thecoming year as we develop our existing products and bring to market our newproduct lifecycle management tools. During the last year we have made selective acquisitions to enhance our productrange and to get new products based on the AVEVA core technology to marketexpeditiously. Our healthy cash balance allows us flexibility to move quicklyahead with bolt on product acquisitions. With the proven success of Tribon nowcomplete, we are also focused on future opportunities for strategic acquisitionsand continue to seek value driven targets. We are optimistic about continued strong performance in all areas of thebusiness. FINANCIAL REVIEW AVEVA has delivered an exceptional set of financial results which reflects anestablished market position in all of our main markets where demand remains verystrong. TURNOVER Substantial increase in revenue generated across all our major regions andverticals delivered sales growth of 44% to £94.9 million (2006: £65.9 million). Recurring revenues remained an intrinsic part of the business model andincreased by 29% to £52.7 million (2006: £40.9 million). Overall this nowamounts to 56% of total revenues and whilst slightly lower as a percentage thanlast year it reflects the surge of Initial licence fee business, particularly inAsia and historical business denominated in US dollars. Initial licence fee revenues almost doubled in the year to £34.2 million (2006:£17.6 million) and much of this growth was generated within the Asian region,where local preference still drives this style of sale. In other regions,customers' long-term visibility and confidence have also resulted in sales whichmay have previously been under a rental model. Revenues generated from services continued to be driven by new product sales andincreased this year by 8% to £8.0 million (2006: £7.4 million). GROSS MARGIN, OPERATING EXPENSES AND PROFIT BEFORE TAX Operating margins improved materially and reflect the nature of the business,where a predominant amount of cost of sales relates to Research and Developmentand delivery of new sales relates to standard product. However, investment inResearch and Development remains one of the highest as proportion of sales inthe industry and increased to £17.6 million (2006: £13.9 million). Operating costs increased to £43.6 million (2006: £33.2 million) an increase of31%. Continued expansion of our global sales effort remained a key component tothis cost and included the opening of two additional sales offices in Russia andMexico. Performance based rewards were also a major factor in the increase incosts in this area. Operating costs for 2006 included a charge for reduction ingoodwill of £0.6 million in the year 2006 and in 2007 this amounted to £1.1million. IFRS now prescribes that, where the tax charge has been reduced due tothe utilisation of previously unrecognised pre-acquisition losses, the carryingvalue of goodwill should be reduced by a charge to operating expenses of thesame amount. Adjusted profit before tax was £28.1 million, an increase of 104% (2006: £13.8million), which is before amortisation of intangibles, share-based payments andadjustment to goodwill of £3.4 million (2006: £2.7 million). Staff costs remain our single biggest expenditure. Total staff headcount hasincreased from 491 in March 2006 to 582 at 31 March 2007. Total costs,including related costs, amounted to £38.3 million (2006: £29.0 million).Continued investment in this area remains in line with current growth rates andensures AVEVA, its people and technologies remain world class. TAXATION The headline tax rate is lower than the UK standard rate due to a number ofone-off credits, including the benefit of tax losses and other unrecogniseddeferred tax assets. After adjusting for these items the effective rate is 32%,which is higher than the UK standard rate and due to a proportion of the Group'sprofits being earned in overseas entities subject to higher rate of tax. EARNINGS PER SHARE Adjusted earnings per share (which is before amortisation of intangibles,share-based payments and adjustment to goodwill) was 31.71p compared with 16.15pin 2006 - an increase of 96%. Basic earnings per share was 26.59p (2006:12.14p). The directors believe that adjusted earnings per share provides a moremeaningful measurement of performance of the underlying business. DIVIDENDS The Board recommends a final dividend of 2.94p per ordinary share, resulting ina total dividend per share for the year of 4.18p (2006: 2.46p). The finaldividend will be paid on 1 August 2007 to shareholders on the register at theclose of business on 29 June 2007. The cost of dividends paid in respect of thefinancial year was £2.0 million (2006: £1.4 million). BALANCE SHEET The success of our business over recent years has helped strengthen our balancesheet, which in turn has helped us continue to invest organically to acquire keytechnologies and companies when the opportunities arise. Total assets haveincreased to £113.8 million from £89.7 million at 31 March 2007. Trade andother receivables for the same period were £36.5 million, compared with £26.9million at 31 March 2006 and reflect the proportional increase in sales year onyear. Deferred revenue increased to £15.4 million from £12.5 million at 31 March2006, a 23% increase and is after adjusting for the weakness of the dollaragainst sterling. CASH FLOWS Stronger first half trading than usual and subsequent debtor collectionsdelivered substantial cash generation in the period, with net cash up 76% to£41.3 million (2006: £23.5 million). Cash flow generated from operatingactivities before tax amounted to £26.8 million compared to £13.7 million in theprior year, demonstrating continued strong cash conversion. As our market expands our customers' demands for more complex and integratedsolutions grows. Our ability to sustain a market leading position will be drivenby continued organic investment, but there are also opportunities to make valueenhancing acquisitions. As such we believe it would be prudent to maintain astrong cash position to help support any potential acquisition opportunity. TREASURY POLICY The Group treasury policy aims to ensure that the capital held is not put atrisk and as such the treasury functions are managed under policies andprocedures approved by the Board. These policies are designed to reduce thefinancial risk arising from the Group's normal trading activities, whichprimarily relate to credit, interest, liquidity and currency risk. The Group is, and is expected to continue to be, cash positive and currentlyholds net deposits. The objective with these deposits is to maintain a balancebetween generating competitive rates and allowing accessibility. This generallymeans that no deposits are made beyond a three month commitment. However, AVEVAwill secure the provision of committed funding at a competitive cost to meet anyneeds arising in the long-term business plan. The credit facilities will besecured with the Group's principal bankers. During the year the Group had abank overdraft and revolving loan facility of £6.0 million in the UK andapproximately £2.2 million (SEK 30 million) in Sweden, which was utilised tomanage short-term fluctuations in cash before remittances from the overseasentities. The revenue of the Group is predominantly in foreign currency, withapproximately 35% in USD and 25% in Euro. The overseas entities incur costs intheir local functional currency, which acts as a partial net hedge. The Grouphas a net funding requirement in GBP, due to the majority of Research andDevelopment costs being incurred in the UK. Where applicable, revenue andexpense payments will be netted against each other, constituting a naturalhedge. Any payments which cannot be set off against each other will result inthe net currency exposure and where possible these exposures will be hedged.These hedges aim to minimise the adverse effect of exchange rate movements,without eliminating all upside potential. ACQUISITIONS During the year the Company bought a source code licence for certain softwarefrom Spescom Software Inc. for the sum of £1.0 million ($2 million). The licenceof this software will enable AVEVA to extend its lifecycle informationmanagement solutions and capitalise on the rapid success of its AVEVA NET portaland integration software, to provide complete tailored data and documentmanagement solutions to its plant and marine customers. 2007 2006 Notes £000 £000 Revenues 2,3 94,906 65,930 Cost of sales (27,269) (21,514) Gross profit 67,637 44,416 Operating expensesSelling and distribution costs (30,541) (21,742)Administrative expenses (13,061) (11,439) Total operating expenses (43,602) (33,181) Profit from operations 24,035 11,235 Finance revenue 2,297 1,498Finance expense (1,682) (1,578) Profit before tax 24,650 11,155 Analysis of profit before taxProfit before tax before share-based payments, amortisation and goodwill adjustment 28,083 13,822Share-based payments (177) -Adjustment to carrying value of goodwill in respect of utilisation of tax losses (1,136) (602)Amortisation of intangibles (excluding other software) (2,120)(2,120) (2,065) Profit before tax 24,650 11,155 Income tax expense 4 (6,844) (3,079) Profit for the year attributable to equity holders of the 17,806 8,076parent Earnings per share (pence) 5 - basic 26.59p 12.14p- diluted 26.32p 12.04p All activities relate to continuing activities. The accompanying notes are an integral part of this Consolidated incomestatement. 2007 2006 £000 £000 Tax on items recognised directly in equity 1,979 (60)Exchange differences arising on translation of foreign operations (1,872) 454Actuarial (loss)/gain on defined benefit pension schemes (2,694) 1,328 Net (loss)/income recognised directly in equity (2,587) 1,722Profit for the year 17,806 8,076 Total recognised income and expense relating to the year attributableto equity holders of the parent 15,219 9,798 The accompanying notes are an integral part of this Consolidated statement ofrecognised income and expense. 2007 2006 £000 £000Non-current assets Goodwill 15,062 16,612Other intangible assets 12,028 13,584Property, plant and equipment 4,752 4,905Deferred tax assets 3,628 2,876Other receivables 261 268 35,731 38,245 Current assetsTrade and other receivables 36,546 26,896Current tax assets 258 428Cash and cash equivalents 41,287 24,173 78,091 51,497 Total assets 113,822 89,742 EquityIssued share capital 2,245 2,225Share premium 26,381 25,353Other reserves 2,745 4,617Retained earnings 33,941 18,665 Total equity 65,312 50,860 Current liabilitiesTrade and other payables 33,259 24,192Financial liabilities 168 832Current tax liabilities 6,907 5,643 40,334 30,667 Non-current liabilitiesDeferred tax liabilities 3,105 3,795Financial liabilities 128 265Retirement benefit obligations 4,943 4,155 8,176 8,215 Total equity and liabilities 113,822 89,742 2007 2006 £000 £000 Cash flows from operating activitiesProfit for the year 17,806 8,076Income tax 6,844 3,079Net finance (revenue)/expense (615) 80Depreciation of property, plant and equipment 1,254 926 Amortisation of intangible assets 2,167 2,276(Profit)/loss on disposal of non-current assets (12) 6Share-based payments 177 84Difference between pension contributions paid and amounts recognised in income statement (1,902) (266)Adjustment to carrying value of goodwill 1,136 602Changes in working capital:Trade and other receivables (9,298) (999)Trade and other payables 9,193 807Fair value of forward contracts 7 -Provisions - (988) Cash generated from operating activities before tax 26,757 13,683Income taxes paid (4,810) (1,353) Net cash generated from operating activities 21,947 12,330 Cash flows from investing activitiesPurchase of property, plant and equipment (1,241) (1,026)Interest received 547 170Proceeds from disposal of property, plant and equipment 85 49Purchase of intangible assets (1,056) (38) Net cash used in investing activities (1,665) (845) Cash flows from financing activitiesInterest paid (43) (60)Proceeds from the issue of shares 1,048 1,051Payment of finance lease liabilities (157) (14)Proceeds from sale and leaseback - 364Dividends paid to equity holders of the parent (1,992) (1,442) Net cash flows from financing activities (1,144) (101) Net increase in cash and cash equivalents 19,138 11,384Net foreign exchange difference (1,354) 908Opening cash and cash equivalents 23,503 11,211 Closing cash and cash equivalents 41,287 23,503 1. BASIS OF PREPARATION The Group is required to prepare its consolidated financial statements inaccordance with IFRS as adopted by the European Union (EU"). For the purposesof this document the term IFRS includes International Accounting Standards ("IAS"). The preliminary announcement covers the period 1 April 2006 to 31 March 2007 andwas approved by the Board on 18 May 2007. The preliminary statement has been prepared on a consistent basis with theaccounting policies set out in the last published financial statements for theyear ended 31 March 2006. The financial information contained in this preliminary announcement of auditedresults does not constitute the Group's statutory accounts for the years ended31 March 2007 or 31 March 2006 as defined in section 240 of the Companies Act1985. The accounts for the year ended 31 March 2006 have been delivered to theRegistrar of Companies. The statutory accounts for the years ended 31 March2007 and 2006 have been reported on by the Company's auditors; the reports onthese accounts were unqualified and they did not contain any statement undersection 237(2) or (3) of the Companies Act 1985. The accounts for the year ended 31 March 2007 are expected to be posted toshareholders in due course and will be delivered to the Registrar of Companiesafter they have been laid before the shareholders in a general meeting on 12July 2007. Copies will be available from the registered office of the Company,High Cross, Madingley Road, Cambridge, CB3 0HB and can be accessed on the AVEVAWebsite, www.aveva.com. The registered number of AVEVA Group plc is 2937296. 2. REVENUE ANALYSIS An analysis of the Group's revenue is as follows: 2007 2006 £000 £000 Annual fees 17,396 15,436Rental fees 32,195 22,224Recurring services 3,060 3,215Total recurring revenues 52,651 40,875Initial licence fees 34,185 17,570Services 8,070 7,485 Total revenues 94,906 65,930Finance revenue 2,297 1,498 97,203 67,428 Services consist of consultancy and training fees. 3. SEGMENT INFORMATION For management purposes, the Group is organised on a geographical basis intofour main sales regions: Asia Pacific, Americas, Central Eastern and SouthernEurope (CES) and Western Europe, Middle East and Africa (WEMEA). Corporatefunctions and Research and Development operations are principally based in theUK and Sweden and are therefore not included in the sales regions analysis.Each of these operating regions are organised and managed separately due to thediffering local requirements in each market and therefore these are the primarysegments. The Group operates in one business segment; that of the supply ofEngineering IT Solutions that supports the creation and operation of majorcapital assets such as power plants, process plants and ships of both naval andcommercial type. Following the acquisition of Tribon in 2004, the Group has successfullycompleted the integration of the Tribon operations into the AVEVA Groupstructure, which has included merging of the intellectual property to developVantage Marine, a new product which combines the Tribon and AVEVA Technology,integration and rationalisation of its offices into the AVEVA office network andrationalisation of headcount. Geographical segmentsYear ended 31 March 2007 Asia Pacific WEMEA CES Americas Unallocated TotalIncome statement £000 £000 £000 £000 £000 £000RevenueSegment revenue 36,871 21,744 22,808 13,483 - 94,906 ResultSegment result 21,116 14,216 13,513 7,882 - 56,727 Unallocated expensesCorporate overheads (15,085) (15,085)Research and Development costs (17,607) (17,607) Profit before tax 24,035 Finance revenue 2,297Finance expense (1,682) Profit before income tax 24,650 Income tax expense (6,844)Net profit for the year 17,806 Assets and liabilitiesSegment assets 35,902 9,039 17,761 4,918 67,620Unallocated corporate assets 46,202 46,202 Consolidated total assets 113,822 Segment liabilities (13,376) (3,817) (6,303) (2,298) (25,794)Unallocated corporate liabilities (22,716) (22,716) Consolidated total liabilities (48,510) Other segment informationCapital expenditure Property, plant and equipment 503 30 120 56 532 1,241 Intangible assets - - - - 1,056 1,056Depreciation (247) (8) (109) (76) (814) (1,254)Amortisation - - - - (2,167) (2,167) Geographical segmentsYear ended 31 March 2006 Asia Pacific WEMEA CES Americas Unallocated TotalIncome statement £000 £000 £000 £000 £000 £000RevenueSegment revenue 23,675 14,205 16,996 11,054 - 65,930 ResultSegment result 14,314 9,092 9,065 6,405 - 38,876 Unallocated expensesCorporate overheads (13,692) (13,692)Research and Development costs (13,949) (13,949) Profit before tax 11,235 Finance revenue 1,498Finance expense (1,578) Profit before income tax 11,155 Income tax expense (3,079)Net profit for the year 8,076 Assets and liabilitiesSegment assets 26,029 4,352 13,965 4,214 48,560Unallocated corporate assets 41,182 41,182 Consolidated total assets 89,742 Segment liabilities (10,382) (1,710) (4,818) (1,793) (18,703)Unallocated corporate liabilities (20,179) (20,179) Consolidated total liabilities (38,882) Other segment informationCapital expenditure Property, plant and equipment 219 35 237 89 446 1,026 Intangible assets - - - - 38 38Depreciation (210) (18) (125) (71) (502) (926)Amortisation - - - - (2,276) (2,276) 4. INCOME TAX EXPENSE a) Tax on profit The major components of income tax expense for the years ended 31 March 2007 and2006 are as follows: 2007 2006 £000 £000Tax charged in income statementCurrent taxUK corporation tax 2,557 1,963Adjustments in respect of prior periods (327) (15) 2,230 1,948Foreign tax 4,729 2,902Adjustments in respect of prior periods 327 (14) Total current tax 7,286 4,836Deferred taxOrigination and reversal of temporary differences (442) (1,757) Total income tax expense reported in Consolidated income statement 6,844 3,079 Tax relating to items charged or credited directly to equity 2007 2006 £000 £000 Current taxTax benefit of share option exercises 979 - Deferred taxDeferred tax on share options 16 298Deferred tax on retranslation of intangible assets 173 40Deferred tax on actuarial gain on defined benefit pension scheme 811 (398) Tax credit/(charge) directly to equity 1,979 (60) b) Reconciliation of the total tax charge The differences between the total tax charge shown above and the amountcalculated by applying the standard rate of UK corporation tax to the profitbefore tax are as follows: 2007 2006 £000 £000Tax on Group profit before tax at standard UK corporation tax rate of 30% 7,395 3,347(2006 - 30%)Effects of:Expenses not deductible for tax purposes 951 861Movement on unprovided deferred tax balances (566) (387)Higher/(lower) tax rates on overseas earnings 352 (97)UK tax on remitted earnings 517 -Relief for losses previously not recognised (1,136) (602)Unrelieved tax losses - 64Adjustments in respect of prior years (669) (107) Income tax expense reported in the Consolidated income statement 6,844 3,079 The effective tax rate is lower than the UK standard rate due the benefit of taxlosses and other unrecognised deferred tax assets. After adjusting for theseitems the effective rate is higher than the UK standard rate due to a proportionof the Group's profit being earned in overseas entities, subject to higher ratesof tax. 5. EARNINGS PER SHARE The calculations of earnings per share from continuing operations are based onthe profit after tax for the year of £17,806,000 (2006 - 8,076,000 ) and thefollowing weighted average numbers of shares: 2007 2006 Number Number Weighted average number of ordinary shares for basic earnings per share 66,970,870 66,532,626Effect of dilution: Employee share options 687,951 532,389 Weighted average number of ordinary shares adjusted for the effect of dilution 67,658,821 67,065,015 Earnings per share for the year:Basic 26.59p 12.14pDiluted 26.32p 12.04p Adjusted earnings per share for the year:Basic 31.71p 16.15pDiluted 31.39p 16.02p Adjusted basic and adjusted diluted earnings per share is calculated based on anadjusted profit after tax of £21,239,000 (2006 - £10,743,000) obtained by addingintangible amortisation (excluding other software) of £2,120,000 (2006 -£2,065,000), share-based payments of £177,000 (2006 - £nil) and adjustment tocarrying value of goodwill of £1,136,000 (2006 - £602,000) to the profit aftertax for the year of £17,806,000 (2006 - £8,076,000). The denominators used arethe same as those detailed above for both basic and diluted earnings per share. The adjustment made to profit after tax in calculating adjusted basic anddiluted earnings per share have not been adjusted for tax in either the currentor preceding year. The Directors believe that adjusted earnings per share is a fairer presentationof the underlying performance of the business. The weighted average number of shares has been restated in prior periods toreflect the 3 for 1 share reorganisation which was approved at the AnnualGeneral Meeting on 14 July 2006. 6. DIVIDENDS PAID AND PROPOSED ON EQUITY SHARES Declared and paid during the year 2007 2006 £000 £000Interim 2006/7 dividend paid of 1.24p (2005/6 - 0.73p) per ordinary share 835 490Final 2005/6 dividend paid of 1.73p (2004/5 - 1.43p) per ordinary share 1,157 952 1,992 1,442 Proposed for approval by shareholders at the AGMFinal proposed dividend 2006/7 of 2.94p (2005/6 - 1.73p) per ordinary share 1,980 1,157 The proposed final dividend is subject to approval by shareholders at the AnnualGeneral Meeting on 12 July 2007 and has not been included as a liability inthese financial statements. If approved at the Annual General Meeting the finaldividend will be paid on 1 August 2007 to shareholders on the register at theclose of business 29 June 2007. The dividend per share amounts have been restated in prior periods to reflectthe 3 for 1 share reorganisation which was approved at the Annual GeneralMeeting on 14 July 2006. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AVV.L