Source - LSE Regulatory
RNS Number : 7039Z
AVEVA Group PLC
25 May 2021
 

AVEVA GROUP PLC

 

RESULTS FOR THE YEAR ENDED 31 MARCH 2021

 

Strong second half performance following a Covid-affected first half

Strategic position further enhanced following acquisition of OSIsoft

 

AVEVA Group plc ('AVEVA' or 'the Group') announces its preliminary results for the year ended 31 March 2021.

 

On 19 March 2021, the Group announced the completion of the acquisition of OSIsoft, LLC ('OSIsoft) enhancing AVEVA's ability to accelerate the digital transformation of the industrial world.

 

The statutory results1 reflect 12 months of trading for standalone AVEVA and 13 days of trading for OSIsoft since the acquisition. To provide a better understanding of the combined trading performance and to improve transparency, non-statutory results are also shown for the combined Group on a pro forma 12-month basis2; and summary results are shown for the AVEVA and OSIsoft business on a 12-month standalone basis.

 

We believe that the pro forma results for the combined Group give the most insight both into the historic performance of the Group as it is structured today and the most appropriate basis from which to consider the outlook.

 

Highlights

 

Statutory results

 

·     Revenue was £820.4m (FY20: £833.8m) including £803.0m from AVEVA and £17.4m from OSIsoft.

 

·     Profit from operations was £36.6m (FY20: £95.0m).

 

·     Proposed final dividend of 23.5 pence, representing a small increase versus the prior year after adjusting for the rights issue bonus factor.

 

Combined AVEVA Group on a 12-month pro forma basis (unaudited)

 

·     On an organic constant currency basis3 pro forma revenue for the combined Group grew 2.2%, with both the standalone AVEVA business and OSIsoft delivering double digit revenue growth in the second half of the financial year.

 

·     Pro forma constant currency Annualised Recurring Revenue (ARR)4 increased 8.6% to £704.8m (FY20: £648.9m).

 

·     Pro forma revenue reduced by 1.4% to £1,196.1m (FY20: £1,213.2m) and adjusted5 EBIT grew 8.1% to £354.7m (FY20: £328.1m), representing a margin of 29.7% (FY20: 27.0%).

 

·     The standalone AVEVA business was resilient, achieving revenue growth of 0.2% on an organic constant currency basis, while increasing recurring revenue as a percentage of total revenue to 67.9% (FY20: 62.2%) and adjusted EBIT margin to 27.1% (FY20: 26.0%).

 

·     The standalone OSIsoft business performed well, strengthening its growth as the year progressed to achieve full year revenue growth of 6.6% on an organic constant currency basis, while increasing recurring revenue as a percentage of total revenue to 64.8% (FY20: 59.2%) and adjusted EBIT margin to 34.8% (FY20: 29.3%).

 

·     The business environment has improved in most major markets following the disruption caused by Covid-19 in the first half of FY20 and the board is confident in the outlook for AVEVA in FY22.

 

 

Chief Executive Officer, Peter Herweck said:

 

"The last year has been transformational for AVEVA. The Group reacted quickly to the Covid crisis, so that despite a challenging first half, the second half saw double-digit revenue growth. At the same time, our transition to Subscription continues at pace.

 

The acquisition of OSIsoft has established AVEVA as a clear global leader in operational industrial software, further enhancing our ability to lead the digital transformation of the industrial world, with a more diversified customer base, supporting their energy transition and sustainability journeys.

 

Initial customer feedback on the combination of AVEVA and OSIsoft has been extremely positive and I look forward to capturing the significant value opportunity over the coming years. Although early in the financial year, trading has started well for the enlarged AVEVA Group and it is performing in-line with our expectations."

 

 

Summary results

 

Year ended 31 March

2021

2020

Change

 

Combined AVEVA Group on a 12-month pro forma basis (unaudited)

Revenue

£1,196.1m

£1,213.2m

(1.4)%

AVEVA

£803.0m

£833.8m

(3.7)%

OSIsoft

£393.1m

£379.4m

3.6%

Annualised recurring revenue

£704.8m

£648.9m

8.6%

Adjusted EBIT

£354.7m

£328.1m

8.1%

AVEVA

£218.0m

£216.8m

0.6%

OSIsoft

£136.7m

£111.3m

22.8%

Profit before tax

£50.6m

£19.0m

166.3%

Adjusted profit before tax

£338.7m

£299.0m

13.3%

Adjusted diluted earnings per share

105.3p

94.1p

11.9%

 

 

AVEVA Group plc statutory results

Revenue

£820.4m

£833.8m

(1.6)%

Profit from operations

£36.6m

£95.0m

(61.5)%

Adjusted EBIT

£226.4m

£216.8m

4.4%

Diluted earnings per share 7

11.27p

34.60p

(67.4)%

Adjusted diluted earnings per share

81.31p

86.75p

(6.3)%

 

Notes

 

1 Statutory results include the results for the standalone AVEVA Group for the 12 months to 31 March 2021 and results for OSIsoft since the acquisition date, compared to the results of the standalone AVEVA business only for FY20.

 

2 FY21 combined Group pro forma results include results for both AVEVA and OSIsoft for the 12 months to 31 March 2021, as if the acquisition of OSIsoft and the associated financing had occurred at the start of FY20.

 

3 Organic constant currency revenue excludes a currency translation reduction of £31.2 million; and adjusts for the disposals of Wonderware Italy, Germany and Scandinavia.

 

4 The annualised value of recurring revenue streams including Maintenance, Subscription and Cloud contracts.

 

5 Adjusted metrics are calculated before amortisation of intangible assets (excluding other software), share-based payments, gain/loss on fair value of forward foreign exchange contracts and exceptional items. Adjusted Earnings Per Share also includes the tax effects of these adjustments.

 

6 Recurring revenue is defined as subscription revenue plus maintenance revenue.

 

7 Basic and diluted EPS figures for the standalone AVEVA in comparative periods have been restated and adjusted for a bonus factor of 0.8 to reflect the bonus element of the November 2020 rights issue.

 

 

Enquiries:

 

AVEVA Group plc

Matt Springett, Head of Investor Relations Tel: 07789 818 684

 

FTI Consulting LLP

Edward Bridges / Dwight Burden Tel: 0203 727 1017

 

 

Conference call details

 

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

 

Conference calls dial in details:

 

UK: 020 3936 2999

USA: 1 646 664 1960

All other locations: +44 203 936 2999

 

Conference call code: 848591

 

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

 

 

 

Chairman's Statement

 

Overview

 

The last year was one of strong progress for AVEVA, despite the challenges posed by the Covid-19 pandemic. The Group adapted swiftly to the new operating environment, with the business demonstrating resilience. Although the first half of the financial year was significantly impacted by disruption, business improved in the second half as our customers and employees got used to new ways of working.

 

We continued to invest in AVEVA's future growth increasing our investment in core areas of Research & Development, such as Cloud and Artificial Intelligence, while completing the acquisition of OSIsoft, a global leader in real-time industrial data software and services.

 

We are proposing a final dividend of 23.5 pence per share, which represents a small increase after adjusting for the bonus factor in relation to the rights issue.

 

Strategic developments

 

Three years after the combination of heritage AVEVA and the Schneider Electric industrial software business created a global leader in industrial software, AVEVA acquired OSIsoft, further enhancing the Group's ability to accelerate the digital transformation of the industrial world, as a leading independent, hardware-agnostic software company. I would like to extend a warm welcome from the Board to all our new colleagues who have joined the Group from OSIsoft.

 

Combining the complementary product offerings of AVEVA and OSIsoft, which brings together industrial software applications with the market-leading industrial data platform, will enable AVEVA to broaden and deepen its relationships with customers, while further diversifying the Group's end markets and developing its ability to assist customers on their energy transition journeys. This is expected to result in substantial revenue synergies, in addition to £20 million of cost synergies.

 

We continue to align all aspects of our business to ESG best practice, creating products that meet the current and future needs of our customers whilst ensuring that we are encouraging an organisational ethos that embraces diversity and inclusion, such that AVEVA remains a great place to work and an employer of choice in a highly competitive marketplace.

 

Board developments

 

As I covered in my Statement last year, Emmanuel Babeau resigned as a Non-Executive Director, Vice Chairman of the Board and member of the Remuneration Committee effective 30 April 2020. Emmanuel was replaced by Olivier Blum as a Non-Executive Director and member of the Remuneration Committee. Peter Herweck assumed the role of Vice Chairman on the same date.

 

Peter Herweck stepped up to become AVEVA's CEO on 1 May 2021. He is very familiar with AVEVA's business having served on AVEVA's Board since 2018 and was instrumental in the creation of the AVEVA Group as it is now structured. Peter played a key role in both bringing together AVEVA and the Schneider Electric industrial software business and more recently AVEVA and OSIsoft.

 

Craig Hayman stepped down as CEO on 1 May and will retire from the Board following our AGM in July. During his three-year tenure, Craig has overseen the successful integration of the Schneider Electric industrial software business, the progress of the Group to a FTSE100 position, and the completion of the acquisition of OSIsoft. The Board would like to thank Craig for his service as CEO and wish him all the best for the future.

 

Summary

 

The Board would also like to thank all our employees for their hard work and flexibility over the last year, particularly given the additional challenges arising from the Covid crisis. We also thank our customers, shareholders and other stakeholders for their continued support, and we look forward to a successful future together.

 

 

Philip Aiken AM

Chairman

25 May 2021

 

 

 

Chief Executive's review

 

Summary

 

AVEVA made strong operational and strategic progress during the financial year, making good headway on our subscription transition journey and completing the acquisition of OSIsoft.

 

During the first half of the year, revenue for the standalone AVEVA Group was impacted by the disruptions of the Covid-19 pandemic, although performance improved significantly during the second half, resulting in broadly flat year-on-year revenue on an organic constant currency basis.

 

The OSIsoft business experienced a similar pattern to the financial year, with a strong second half leading to 6.6% growth in organic constant currency revenue. This resulted in combined Group pro forma revenue growing by 2.2% on the same basis. Although this is well below longer-term trends, it was an acceptable outcome given the global challenges faced during the period. Cost control measures, together with saving on expenditure such as travel due to the Covid restrictions, led to an improvement in overall Group adjusted EBIT of 8.1% to £354.7 million (FY20: £328.1 million) and adjusted EBIT margin to 29.7% (FY20: 27.0%) on a pro forma basis.

 

The standalone AVEVA business increased recurring revenue as a percentage of total revenue to 67.9% (FY20: 62.2%). This was ahead of the Group's medium-term target of 60%. AVEVA remains committed to its subscription transition journey. With the standalone AVEVA target exceeded and the addition of OSIsoft to the Group, AVEVA is formulating new Subscription transition targets and will disclose increased targets at the forthcoming Capital Markets Day on 1 July.

 

Operating during the Covid-19 pandemic

 

AVEVA adapted quickly to a new way of working, with a focus on the safety and wellbeing of employees.

 

From a demand generation perspective, we made substantial investments in digital marketing, for example by hosting virtual AVEVA World Digital conferences. In the context of the experiences since the beginning of the Covid-19 pandemic, the Group has undertaken a 'Dynamic Work' project and will retain many of the efficiency and productivity gains achieved into the longer-term, for example with less travel and more flexible working practices.

 

Acquisition of OSIsoft

 

On 25 August 2020, AVEVA announced that it had reached agreement to acquire OSIsoft at an enterprise value of $5.0 billion. OSIsoft is a global leader in real-time industrial data software. Through OSIsoft's PI System, customers draw insights, make better decisions, optimise operations, and drive digital transformation.

 

The acquisition completed on 19 March 2021. This followed a successful rights issue and the securing of a $900 million term loan in order to part finance the purchase, and the receipt of regulatory approvals.

 

AVEVA is now the clear global leader in operational industrial software, with Engineering software representing around one-third of Group revenue and operational software two-thirds.

 

OSIsoft performed well during the year ended 31 March 2021, achieving 6.6% growth on a constant currency basis. As with standalone AVEVA, OSIsoft experienced more difficult trading conditions in the first half of the year, followed by a recovery in the second half. Revenue growth in the second half was 10.6%, up from 2.0% in the first half on an organic constant currency basis. On an end market basis, growth was driven by a strong performance in OSIsoft's largest market, Power. Chemicals and Pharma & Life Sciences also saw strong growth, while Energy saw a moderate decline.

 

AVEVA expects substantial revenue synergies from areas including cross selling, expanding OSIsoft's global reach and developing and launching new combined products. In addition to this, pre-tax cost synergies are expected of not less than £20 million per annum on a run rate basis by the end of FY23.

 

AVEVA has appointed a Senior Vice President to lead the integration function, reporting to the Deputy CEO and CFO. The integration of OSIsoft has begun, with a management structure for the combined Group having been implemented. The next stage of integration is to begin the implementation of value capture opportunities. These include both revenue and cost synergies.

 

Of these, the revenue synergy opportunity is the largest. OSIsoft's global market-leading data platform provides an unrivalled base from which to run and integrate industrial software applications and discussions with key customers have been very positive, showing demand for integrated products. An example of this is AVEVA's plan to integrate Predictive Analytics with OSIsoft's capabilities and bring a combined offer to Power customers. In terms of cost synergies, work to remove duplicate overhead costs, systems and processes has begun. For example, AVEVA has a programme to consolidate offices in 17 locations where there is overlap.

 

Trading and market trends

 

AVEVA and OSIsoft were run separately during the financial year, with the acquisition completing shortly before the year end. Notwithstanding this, both businesses experienced similar market trends during the year and so the commentary below relates to the wider Group. We have reported this on a pro forma basis, which is unaudited.

 

The industries that AVEVA serves are making ever-greater use of technology to reduce both capital and operating costs in the context of competitive pressures to increase efficiency, output, flexibility and improve overall sustainability. This is being enabled by ongoing technological mega trends that are driving the digitalisation of the industrial world, notably the industrial internet of things, Cloud, data visualisation and AI.

 

This is driving long-term growth in demand for industrial software. AVEVA is optimally placed to help its customers digitalise, due to its end-to-end product portfolio, which runs from simulation through design and construction and into operations and now also includes OSIsoft's rich industrial data layer.

 

AVEVA primarily serves process, batch and hybrid industries. These industries provide staple requirements for basic consumption, such as Energy, Food, and Transport. As such, they have some level of resilience to Covid disruption. Notwithstanding this, the Group experienced tough trading conditions in the first half of the financial year across most markets. This was primarily due to general disruption and uncertainty impacting the speed of customers' decision making.

 

AVEVA's largest end market is Energy at around 35% of pro forma revenue, which includes upstream, mid-stream and downstream Oil & Gas and the emerging renewable energy sector. Power is AVEVA's second largest market at around 15% of revenue, while Packaged Goods (such as Food & Beverage and Pharma) and Chemicals both account for around 10% of revenue. Other end markets include Metals & Mining, Marine and Infrastructure.

 

Energy was particularly challenged due to the extreme volatility in oil prices. Other large markets have been more resilient, including Power, Food & Beverage, Packaged Goods and Pharma. The shipbuilding market has continued to experience depressed trading conditions.

 

Standalone AVEVA Cloud

 

Demand for Cloud products was good with overall SaaS and customer-hosted Cloud sales increasing strongly. In line with AVEVA's 'Cloud First' focus, several key products were launched on AVEVA Connect, the Group's Cloud platform. These included AVEVA Unified Engineering, providing key engineering products such as E3D, Engineering and Simulation in a single Cloud environment; AVEVA Unified Supply Chain; AVEVA Insight Guided and Advanced Analytics; and AVEVA Asset Information Management. The number of customers using AVEVA Connect increased substantially.

 

Standalone AVEVA business unit performance

 

During the year, AVEVA was organised into four business units: Engineering, Monitoring & Control, Asset Performance Management and Planning & Operations.

 

Following the year end, this structure has been simplified, with AVEVA's business being organised into two areas, Engineering and Operations. Engineering contains products that are focused on the capital expenditure lifecycle of industrial assets and Operations contains products that are focused on the operating lifecycle of these assets. The new Operations business unit consists of the software that was previously in Monitoring & Control, Asset Performance Management, Planning & Operations and OSIsoft.

 

In terms of the performance of the former business units, Engineering consists of simulation, design and project execution software. It contributed 42% of revenue for the standalone AVEVA during the year. On an organic constant currency basis, revenue declined by 4.3%, while recurring revenue declined by 2.4%, which in the context of the difficult global capital expenditure environment was robust, helped by our ability to help customers mitigate risk in capital project execution and use engineering information management in operations.

 

AVEVA's strength across both engineering and operational software, and the associated benefits to customers of using AVEVA as a supplier for both, led to an increase in orders from owner operators managing engineering information as the core of their digitalisation strategies to build the Digital Twin within their existing plant facilities. We saw significant wins from Shell and BHP Group.

 

From our EPC customers, we saw significant contract wins from Wood, Worley and Petrofac. Although the Covid crisis had an impact on planned capital projects being postponed, we saw demand shift from 3D design software to project execution software, as AVEVA continues to drive digital transformation with these customers.

 

In terms of end markets, there was a reduction in orders from Oil & Gas and Marine, but assisted by the energy transition, we saw an increase in orders from the Power end market with significant contract wins, for example from EDF. 

 

Monitoring & Control represented 32% of total revenue for the standalone AVEVA. On an organic constant currency basis, revenue grew by 6.4%, while recurring revenue increased by 28.5%. Customers continued to focus on operations efficiency, remote operations and collaboration. Enterprise visibility and performance management are being realised by AVEVA's Unified Operations Center solutions. Transition to AVEVA's Flex Subscription offer continued successfully. In terms of end markets, AVEVA saw strength in mid-stream Oil & Gas with a number of key wins including from SoCalGas, and in other sectors AVEVA achieved significant order wins from customers including BHP Group.

 

Asset Performance Management represented 14% of total revenue for the standalone AVEVA. On an organic constant currency basis, revenue declined by 2.1% while recurring revenue increased by 15.0%. This was due to lower sales of perpetual licences and services as part of AVEVA's Subscription transition, with strong growth in Subscription. AVEVA won its first mining customer in APM and continued a substantial global roll-out with an Energy major.

 

Planning & Operations represented 12% of total revenue for the standalone AVEVA. On an organic constant currency basis, revenue grew by 2.9% while recurring revenue increased by 20.3%. Growth was supported by sales of Supply Chain planning solutions to help customers in the Energy sector operate efficiently in the context of the disrupted market. AVEVA also saw growth in the Food & Beverage and Metals & Mining sectors for Manufacturing Execution software.

 

Standalone AVEVA regional performance

 

EMEA revenue was £328.4 million, representing a small increase on the previous year (FY20: £327.1 million). On an organic constant currency basis, sales grew 5.4%. In the first half of the year we saw our customers respond to the challenges of remote working with the successful conclusion of new business based on AVEVA Connect Cloud supporting access to AVEVA's solutions. As the second half saw customers adopt to new ways of working, AVEVA saw material new contract extensions in the Food & Beverage, Marine, and Energy sectors, with notable new customer wins addressing renewable energy and carbon capture.

 

Sales growth was helped by the renewal of large Global Account contracts in the second half; reflecting AVEVA's long standing strategic engagements with the world's largest EPC contractors and new wins with global Super Majors. In addition, EMEA won a new commitment with our largest and longest standing customer in nuclear power generation, which lays the foundation of the next 20 years of strategic engagement.

 

Americas revenue was £255.8 million, representing a decline of 8.4% on the previous year (FY20: £279.2 million). On an organic constant currency basis, sales declined 3.7%, with significant reductions in perpetual licences and services partly offset by good growth in subscription and Cloud sales. Trading conditions were challenging due to the depressed economy and difficult conditions in the Oil & Gas sector in particular.

 

Asia Pacific revenue was £218.8 million, representing a 3.8% decline on the previous year (FY20: £227.5 million). On an organic constant currency basis, sales declined 2.4% against a very tough comparative in the previous year, which included a large Global Accounts contract. AVEVA delivered strong double-digit growth during the second half of the year, following a difficult first half due to the Covid pandemic.

 

The Group delivered successfully on an end market diversification strategy, with Chemicals and Metal & Mining delivering very strong performance while Oil & Gas has been under pressure and the Marine market was challenging. AVEVA grew its business in South Korea and Japan, while performance in China was broadly flat due to the strong pandemic influence at the beginning of the year and with strong recovery in the second half. Due to a reduction in capital expenditure, Engineering revenue declined as anticipated, however Operations solutions showed strong growth, particularly in the area of Asset Performance and Planning & Operations.

 

Environmental, Social and Governance

 

Many of AVEVA's customers are focused on sustainability, as they transition to business models that are aligned with objectives such as carbon reduction and circularity.

 

The Group's software supports the development of industries such as clean power generation. In more mature industries it increases energy efficiency, helps reduce waste and boosts circularity throughout engineering and operations to maximise sustainable performance.

 

During the year, the remote deployment of AVEVA Unified Operations Centre enabled Saudi Aramco to monitor emissions and optimise energy usage; while Neste, the world's leading producer of renewable diesel and sustainable aviation fuel, used AVEVA's Unified Supply Chain to drive collaboration between its remote teams, boosting efficiency. Several of AVEVA's EPC customers used AVEVATM Unified Engineering to help pioneer hydrogen production designs while other engineering companies use our software for onshore windfarms.

 

The acquisition of OSIsoft has significantly strengthened AVEVA's position in the power generation, transmission and distribution end markets, where software is essential to help power networks cope with intermittent supply from wind and solar.

 

AVEVA has accelerated investment in the area of sustainability and hosts a sustainability Customer Advisory Board, with members including global market leaders across the process, batch and hybrid industries.

 

In addition to the strong contribution that AVEVA is making to sustainability through its products, the Group also invested in other areas of ESG during the year. For example, AVEVA recruited a Head of Diversity & Inclusion (D&I) and has run global D&I training and is implementing a five-year D&I strategy.

 

Outlook

 

The ongoing digitalisation of the industrial world continues to drive demand for AVEVA's software. Notwithstanding the continued uncertainties in relation to Covid, trading conditions have largely normalised in our major markets following the global disruption at the start of the crisis. Organic currency neutral growth rates for the AVEVA and OSIsoft business are expected to be similar to their long-term trends in the current financial year. As such, the outlook for AVEVA remains in line with the Board's expectations. AVEVA will update its long-term targets to include the acquisition of OSIsoft at its upcoming Capital Markets Day on 1 July.

 

 

Peter Herweck

Chief Executive Officer

25 May 2021

 

 

 

Finance review

 

Overview

 

On 25 August 2020, AVEVA announced that it had reached agreement to acquire OSIsoft at an enterprise value of $5.0 billion. The transaction subsequently completed on 19 March 2021 and therefore the FY21 statutory results include 13 days of OSIsoft's performance up to 31 March 2021. The finance review begins with a commentary of those statutory results.

 

The finance review then covers the unaudited standalone results of AVEVA and OSIsoft for FY21 and FY20, and also what the combined Group would look like on an unaudited pro forma basis for the same period as if AVEVA had owned OSIsoft from 1 April 2019. This is to show the underlying performance of both AVEVA and OSIsoft, and to provide a view of how the combined business now looks.

 

Statutory results for the year ended 31 March 2021

 

The statutory results for the year ended 31 March 2021 include 12 months of AVEVA trading and OSIsoft trading since the date of its acquisition (19 March 2021) compared with the FY20 results for standalone AVEVA only. OSIsoft contributed £17.4 million of revenue and £8.4 million of adjusted EBIT for the 13 days to 31 March 2021.

 

The statutory results are summarised below:

 

£m

 

Reported

 

 

change

 

FY21

FY20

 

 

 

 

 

Revenue

820.4

833.8

(1.6)%

 

 

 

 

Cost of sales*

(180.5)

(190.1)

(5.0)%

 

 

 

 

Gross profit

639.9

643.7

(0.6)%

 

 

 

 

Operating expenses*

(413.5)

(426.9)

(3.1)%

 

 

 

 

Adjusted EBIT

226.4

216.8

4.4%

 

 

 

 

Net interest and other income

(2.4)

(3.0)

(20.0)%

 

 

 

 

Adjusted PBT

224.0

213.8

4.8%

Normalised adjustments

(189.8)

(121.8)

55.8%

Reported PBT

34.2

92.0

(62.8)%

* Cost of sales and operating expenses adjusted to exclude amortisation of intangible assets (excluding other software), share-based payments, gain/loss on forward foreign exchange contracts and exceptional items.

 

On a statutory basis, revenue for the period was £820.4 million which was 1.6% lower compared with the previous year (FY20: £833.8 million). This change was due to tougher trading conditions due to the Covid crisis and FX translation, partly offset by the inclusion of OSIsoft for 13 days of the year.

 

Subscription revenue, which includes rental contracts, token contracts and Cloud contracts, grew 13.5% to £359.7 million (FY20: £316.8 million), primarily due to the growth set out in the standalone AVEVA commentary below, which grew by 11.4%.

 

Maintenance revenue reduced by 2.0% to £197.7 million (FY20: £201.7 million), due to foreign exchange translation and some conversion of Maintenance contracts to Subscription.

 

Perpetual licences reduced 21.0% year-on-year to £141.6 million (FY20: £179.3 million), due to the tough business environment and some impact from the transition of customer purchases into subscription licence models.

 

Services revenue reduced by 10.7% to £121.4 million (FY20: £136.0 million). As part of our planned strategy as set out in the standalone AVEVA commentary below.

 

The Group made a profit before tax of £34.2 million (FY20: £92.0 million) and on an adjusted basis, driven by the acquisition and integration costs incurred in the year. The Group made an adjusted profit before tax of £224.0 million (FY20: £213.8 million). 

 

Basic earnings per share was 11.35p (FY20: 34.78p) and diluted earnings per share was 11.27p (FY20: 34.60p).

 

Cash generated from operating activities before tax was £91.2 million, compared to £161.4 million in the previous year. This reflects the cash paid out in respect of exceptional items of £63.2 million (FY20: £28.8 million and the effect of multi-year contracts and resulting working capital movements on contract assets.

 

The statutory tax charge for the year ended 31 March 2021 was £9.4 million (FY20: £22.2 million). The effective rate of 27.5% (FY20: 24.1%) is in line with the US corporation tax rate of 23.7%. The tax rate was most affected by US alternative minimum tax and reduced benefits from intellectual property tax incentives, both of which are calculated on statutory profits.

 

Dividends

 

The Directors propose to pay a final dividend of 23.5 pence per share. After adjustment to reflect the bonus element of the Rights Issue, this represents an increase of 1% versus the FY20 final dividend. The final dividend will be payable on 4 August 2021 to shareholders on the register on 9 July 2021.

 

Terms and financing of the acquisition of OSIsoft, debt and capital structure

 

The acquisition of OSIsoft was at an enterprise value of $5.0 billion, on a cash-free and debt-free basis, assuming a normal level of working capital and subject to customary completion adjustments. Completion accounts are in the process of being drawn up and any final adjustments to the purchase price will be made in the first half of FY22.

 

AVEVA funded the $5,086.5 million (£3,831.4 million) consideration via a rights issue raising approximately $3,734.3 million (£2,806.9 million), the issue of 13.7 million consideration shares to the majority selling shareholder worth $648.4 million (£465.7 million) and $703.8 million (£558.8 million) from existing cash and new debt facilities including a $900 million term loan from Schneider Electric.

 

The rights issue and the issue of consideration shares resulted in an additional 139.4m AVEVA shares being issued. This resulted in total shares in issue at 31 March 2021 of 301.2 million (FY20: 161.5 million) ordinary shares of 3.56 pence each.

 

The $900.0 million debt facility was entered into on 9 October 2020 with Schneider Electric SE and was subsequently assigned to another Schneider entity. The debt is repayable over a three-year term, and bears interest at LIBOR plus a margin. The initial margin was 1.30% but varies dependent upon the net leverage ratio. The term loan was drawn down on 19 March 2021 when the acquisition completed and expires on 19 March 2024. The balance as at 31 March 2021 was £654.0 million (2020: nil).

 

Balance sheet

 

Cash and treasury deposits were £286.9 million (FY20: £114.6 million) at 31 March 2021. A proportion of this cash was committed to pay transaction related costs and after payment of these costs net cash and treasury deposits were £217.1 million on 16 May 2021. There will be additional payments to the vendors of OSIsoft as part of the completion accounts mechanism during the first half of FY22.

 

Non-current assets were £5.8 billion (31 March 2020: £2.0 billion), reflecting goodwill and intangible assets that arose from the combination with the Schneider Electric industrial software business and the OSIsoft acquisition. Goodwill and intangible assets increased to £5.6 billion (FY20: £1.8 billion) as a result of the acquisition.

 

Trade and other receivables were £317.0 million (31 March 2020: £242.2 million). Contract assets increased to £215.6 million from £142.4 million at 31 March 2020, due to the upfront revenue recognition on multi-year contracts signed in the year.

 

Contract liabilities were £239.7 million (31 March 2020: £177.0 million), reflecting the increased size of the Group.

 

Pro forma results for the year ended 31 March 2021 (unaudited)

 

We now present the pro forma result for the year. OSIsoft was a transformational acquisition which helped AVEVA on its journey to become the global leader in industrial software, further enhancing the Group's ability to lead the digital transformation of the industrial world. The OSIsoft business has a strong financial profile with a track record of delivering strong growth, profitability and cash conversion, which will enhance AVEVA's profile.

 

The acquisition has created a larger business with pro forma FY21 revenue of £1,196.1 million, versus AVEVA's standalone FY21 revenue of £803.0 million. The largest proportion of this revenue now relates to software used for the operation of industrial assets at around two thirds, with engineering making up the remaining one third.

 

£m

FY21

FY20

Change

 

unaudited

unaudited

 

Revenue

1,196.1

1,213.2

(1.4)%

Cost of sales

(229.1)

(249.9)

(8.3)%

Gross profit

967.0

963.3

0.4%

Operating expenses

(612.3)

(635.2)

(3.6)%

Adjusted EBIT

354.7

328.1

8.1%

Net interest

(16.0)

(29.1)

(45.0)%

Adjusted profit before tax

338.7

299.0

13.3%

Tax charge

(20.1)

(15.3)

(31.4)%

Adjusted profit after tax

318.6

283.7

12.3%

 

 

 

 

 

 

 

 

Adjusted diluted EPS (pence)

105.3

94.1

11.9%

Gross margin

80.8%

79.4%

140bps

Adjusted EBIT margin

29.7%

27.0%

270bps

Tax charge

5.9%

5.1%

80bps

 

 

Combined Group pro forma revenue (unaudited)

 

Revenue for the combined Group was £1,196.1 million, representing a reduction of 1.4% (FY20: £1,213.2 million). Organic constant currency revenue grew 2.2%, adjusted for a currency translation headwind of £31.2 million and the disposals of Wonderware Italy, Germany and Scandinavia in the prior year.

 

As previously announced, the Board believes that there is an opportunity to generate significant revenue synergies over the medium term through the combination of AVEVA and OSIsoft. These include cross-selling AVEVA's portfolio into the OSIsoft customer base, expansion of OSIsoft's global reach in Asia Pacific and EMEA through AVEVA's global footprint and enhancing AVEVA's Digital Twin offering through the combination of engineering and operations data.

 

Recurring revenue for the combined Group grew 7.7% to £800.2 million (FY20: £743.0 million) representing 66.9% (FY20: 61.2%) of overall revenue. This was driven by strong growth in subscription of 17.4% with maintenance flat compared with FY20. Perpetual licence revenue fell by 16.8% principally as a result of the tougher business environment and the business model transition in standalone AVEVA.  AVEVA intends to continue with its strategy of increasing the combined Group's overall levels of recurring through subscription revenue.

 

The revenue mix for the combined Group is shown below:

 

£m

FY21

FY20

Reported change

Organic constant currency change

% of FY21 total

 

 

 

 

 

 

Subscription

387.4

330.1

17.4%

19.8%

32.4%

Maintenance

412.8

412.9

0.0%

4.0%

34.5%

Total recurring revenue

800.2

743.0

7.7%

11.0%

66.9%

Perpetual licences

271.2

326.0

(16.8)%

(12.2)%

22.7%

Services

124.7

144.2

(13.5)%

(11.3)%

10.4%

Total

1,196.1

1,213.2

(1.4%)

2.2%

100%

 

Combined Group pro forma adjusted EBIT (unaudited)

 

Adjusted EBIT increased by 8.1% to £354.7 million (FY20: £328.1 million), reflecting cost control and cost savings relating to global Covid related restrictions. This resulted in an adjusted EBIT margin of 29.7% (FY20: 27.0%).

 

The year-on-year margin improvement resulted from some Covid-19 related cost reductions and an element of these is expected to return as the restrictions in certain countries are eased, for example in the areas of travel and customer events.

 

As announced as part of the acquisition, pre-tax cash cost synergies are expected of not less than £20 million per annum on a run rate basis by the end of the second full financial year following completion, which is year ending 31 March 2023.

 

Combined Group pro forma net interest charge (unaudited)

 

The combined pro forma assumes that the $900 million term loan was drawn down on 1 April 2019 and therefore a full year's interest is charged in each year. Total pro forma net interest would have been £16.0 million (FY20: £29.1 million). The year-on-year reduction was due to lower LIBOR rates in FY21.

 

Combined Group pro forma earnings per share (unaudited)

 

Pro forma diluted adjusted EPS increased by 11.9% to 105.3 pence (FY20: 94.1 pence) primarily as a result of the higher adjusted EBIT.

 

Standalone AVEVA revenue (unaudited)

 

Revenue for the year on an organic constant currency basis grew by 0.2%. On a reported basis, revenue declined by 3.7% to £803.0 million (FY20: £833.8 million). Following a challenging first half, AVEVA saw second half revenue of £470.4 million (FY20: £441.9 million) which was a growth of 6.5% in reported terms or 10.6% in organic constant currency terms driven by strong contract renewals in Q3.

 

Revenue by type is set out below:

 

£m

FY21

% of total

FY20

% of total

Change

Organic constant currency

 

 

 

 

 

 

 

Subscription

353.0

44.0%

316.8

38.0%

11.4%

13.5%

Maintenance

192.3

23.9%

201.7

24.2%

(4.7)%

0.5%

Total recurring revenue

545.3

67.9%

518.5

62.2%

5.2%

8.5%

Perpetual licences

136.5

17.0%

179.3

21.5%

(23.9)%

(17.9)%

Services

121.2

15.1%

136.0

16.3%

(10.9)%

(8.7)%

Total

803.0

100%

833.8

100.0%

(3.7)%

0.2%

 

Recurring revenue

 

Growing recurring revenue, both as a proportion of overall revenue and in absolute terms, remains a key focus for AVEVA. Total recurring revenue increased by 5.2% to £545.3m (FY20: £518.5m). On an organic constant currency basis, the increase was 8.5%.

 

Subscriptions revenue, which includes rental contracts, token contracts and Cloud contracts, grew 11.4% to £353.0 million (FY20: £316.8 million) or 13.5% on an organic constant currency basis. The second half saw strong growth in Subscriptions following the large contract renewals in the third quarter. Going forward, AVEVA expects considerable growth in Cloud orders, which are recognised rateably over the term of the contract. This will impact the amount of revenue recognised within a year on new Subscription contracts, but does create backlog for future years.

 

Maintenance revenue was resilient, reducing by 4.7% to £192.3 million (FY20: £201.7 million), largely due to foreign exchange translation (organic constant currency was an increase of 0.5%) and some conversion of Maintenance contracts to Subscription.

 

Perpetual licences

 

Perpetual licences reduced 23.9% year-on-year to £136.5 million (FY20: £179.3 million), or 17.9% on an organic constant currency basis, due to the tough business environment and some impact from the transition of customer purchases into Subscription licence models.

 

Services

 

As planned, services revenue reduced by 10.9% to £121.2 million (FY20: £136.0 million), or 8.7% on an organic constant currency basis. Services are sold alongside software licences to ensure efficient deployment and to generate value faster for customers. This planned reduction was driven by AVEVA's focus on increasing the proportion of higher gross margin software as part of its overall revenue mix in the longer term, while still undertaking services that support long-term growth, particularly in newer areas of the business such as Asset Performance Management and Digital Twin projects.

 

Standalone AVEVA adjusted EBIT and cost management (unaudited)

 

Adjusted EBIT increased 0.6% to £218.0 million (FY20: £216.8 million). The adjusted EBIT margin increased to 27.1% (FY20: 26.0%) due to tight cost control and savings archived due to the Covid pandemic. Some of these costs are expected to come back in FY22 as restrictions on travel are gradually lifted.

 

AVEVA continued to invest in strategic areas such as Cloud, Artificial Intelligence and digital marketing, whilst significantly reducing costs elsewhere.

 

Total adjusted costs were £585.0 million (FY20: £617.0 million), a decrease of 5.2% over the previous year and a decrease of 3.4% on a constant currency basis.

 

An analysis of total expenses is summarised below:

 

£m

Cost of sales

R&D

Selling and distribution

Admin

Net impairment loss from financial assets

Other income

Total

Statutory

179.8

179.3

222.9

189.7

3.4

(5.5)

769.6

Amortisation ex other software

-

(63.9)

(26.6)

-

-

-

(90.5)

Share-based payments

-

-

-

(16.3)

-

-

(16.3)

Gain on FX contracts

-

-

-

0.7

-

-

0.7

Exceptional items

(0.8)

(0.3)

(4.6)

(78.3)

-

5.5

(78.5)

Adjusted costs

179.0

115.1

191.7

95.8

3.4

-

585.0

 

 

 

 

 

 

 

 

FY20

190.1

120.7

209.1

89.5

7.6

 

617.0

Change

(5.8)%

(4.6)%

(8.3)%

7.0%

(55.3)%

 

(5.2)%

Constant currency

(4.1)%

(3.1)%

(6.2)%

8.6%

(55.3)%

 

(3.4)%

 

Cost of sales decreased by 5.8% to £179.0 million (FY20: £190.1 million). This was driven by a significant reduction in the cost of delivering services and customer support, including reduced travel costs, partially offset by significantly higher Cloud hosting costs.

 

Research & Development costs were £115.1 million (FY20: £120.7 million), representing a decrease of 4.6% with tight cost control being partly offset by investment in areas including Cloud and AI.

 

Selling and distribution expenses were £191.7 million (FY20: £209.1 million), an 8.3% decrease versus the prior year. This was primarily due to lower Sales costs, relating largely to reduced travel costs, partly offset by an increase in investment in Marketing and in particular, digital marketing.

 

Administrative expenses were £95.8 million (FY20: £89.5 million) representing an increase of 7.0%. This was primarily due to investment in the IT function to support the larger Group as the transitional services with Schneider Electric were exited, together with some expansion of the Finance function.

 

Net impairment loss from financial assets represents the impairment of accounts receivable and contract assets during the year of £3.4 million (FY20: £7.6 million).

 

Standalone AVEVA normalised and exceptional items (unaudited)

 

The normalised and exceptional items below have been excluded in presenting the standalone AVEVA's adjusted results. Although OSIsoft did incur transaction costs relating to the acquisition, these are not included in these results because the pro forma for OSIsoft presents results on an adjusted basis.

 

£m

FY21

FY20

Acquisition costs

44.4

0.8

Integration activities

37.3

28.2

Restructuring costs

2.3

1.7

Other income

(5.5)

(11.9)

Total exceptional items

78.5

18.8

 

 

 

Amortisation (excl. other software)

90.5

90.6

Share-based payments

16.3

12.0

(Gain)/loss on FX contracts

(0.7)

0.4

Total normalised items

106.1

103.0

 

Acquisition and integration activities principally related to acquisition costs associated with OSIsoft and the tail-end of integration activities related to the Schneider Electric industrial software business, such as IT costs related to the exit of the Transitional Service Agreement, including the new ERP system implementation. Other income relates to reimbursement of capital expenditure on integration activities from Schneider Electric.

 

Amortisation relates to the amortisation of the fair valued heritage AVEVA intangible assets under acquisition accounting, following the combination with the Schneider Electric industrial software business.

 

Standalone AVEVA operating cash flow (unaudited)

 

Cash generated from operating activities before tax and exceptional items was £173.3 million, compared to £190.2 million in the previous year, resulting in conversion of adjusted EBIT to operating cash flow of 79% (FY20: 88%). This reflects the effect of multi-year contracts and particularly those contracts where customers pay in annual instalments, but revenue is recognised earlier under IFRS 15.

 

Net cash paid out in respect of exceptional items was £63.2 million (FY20: £23.3 million).

 

Standalone OSIsoft performance (unaudited)

 

Revenue

 

Revenue increased 6.6% on an organic constant currency basis. On a reported basis, revenue increased by 3.6% to £393.1 million (FY20: £379.4 million). Similarly to AVEVA, OSIsoft had a weaker first half of the year due to the disruption caused by Covid with revenue growth of 2.0% and a stronger second half with organic constant currency growth of 10.6%.

 

Revenue by type is set out below:

 

£m

FY21

% of total

FY20

% of total

Change

Organic constant currency

 

 

 

 

 

 

 

Subscription

34.4

8.7%

13.3

3.5%

158.6%

169.2%

Maintenance

220.5

56.1%

211.2

55.7%

4.4%

7.3%

Total recurring revenue

254.9

64.8%

224.5

59.2%

13.5%

16.9%

Perpetual licences

134.8

34.3%

146.7

38.7%

(8.1)%

(5.6)%

Services

3.4

0.9%

8.2

2.1%

(58.5)%

(57.3)%

Total

393.1

100.0%

379.4

100.0%

3.6%

6.6%

 

Recurring revenue

 

Recurring revenue increased from £224.5 million to £254.9 million representing 64.8% (FY20: 59.2%) of total revenue.

 

Maintenance revenue increased by 4.4% to £220.5 million (FY20: £211.2 million), largely due to new revenue resulting from new perpetual licence sales and a high retention rate among existing accounts.

 

Subscriptions revenue grew 158.6% to £34.4 million (FY20: £13.3 million). This was due to broad based growth and assisted by a larger multi-year contract signed at the end of the financial year.

 

Perpetual licences

 

Perpetual licences decreased 8.1% year-on-year to £134.8 million (FY20: £146.7 million), due to disruption caused by the pandemic and in particular weakness in the Oil & Gas sector.

 

Services

 

Services revenue reduced by 58.5% to £3.4 million (FY20: £8.2million), due to a sharp decline in on-site training and field service orders driven by customer responses to the conditions of the pandemic.

 

Standalone OSIsoft adjusted EBIT and cost management (unaudited)

 

Adjusted EBIT increased 22.8% to £136.7 million (FY20: £111.3 million). The adjusted EBIT margin increased to 34.8% (FY20: 29.3%) due to a combination of the revenue growth and savings archived due to the Covid pandemic.

 

Total adjusted costs were £256.4 million (FY20: £268.1 million), a decrease of 4.4% over the previous year and a decrease of 1.6% on a constant currency basis.

 

An analysis of total expenses is summarised below:

 

£m

Cost of sales

R&D

Selling and distribution

Admin.

Net impairment loss from financial assets

Total

 

 

 

 

 

 

 

Adjusted costs

50.1

53.4

86.4

66.3

0.2

256.4

 

 

 

 

 

 

 

FY20

59.8

51.2

93.4

64.4

(0.7)

268.1

Change

(16.2)%

4.3%

(7.5)%

3.0%

-

(4.4)%

Constant currency

(13.9)%

7.2%

(4.8)%

5.9%

-

(1.6)%

 

Cost of sales decreased by 16.2% to £50.1 million (FY20: £59.8 million). This was driven by a reduction in travel by customer success functions in reaction to conditions of the pandemic.

 

Research & Development costs were £53.4 million (FY20: £51.2 million), representing an increase of 4.3% due to an increased investment in Cloud development.

 

Selling and distribution expenses were £86.4 million (FY20: £93.4 million), a 7.5% decrease versus the prior year. This was due to cancellation of on-site marketing and sales events such as user conferences, executive summits and trade events, as well as a steep reduction in travel related expenses. Both decreased as a result of conditions caused by the pandemic. This decrease was partly offset by additional investment in sales capabilities.

 

Administrative expenses were £66.3 million (FY20: £64.4 million) representing an increase of 3.0%. This was due to increased professional fees relating to the sale process and additional investment in business IT and software, such as Azure and Salesforce.

 

Net impairment loss from financial assets represents the impairment of accounts receivable and contract assets during the year of £0.2 million (FY20: income of £0.7 million).

 

Taxation (unaudited)

 

The pro forma tax charge on adjusted profit before tax was £20.3 million (FY20: £15.3 million), which equates to an effective tax rate of 5.9% (FY20: 5.1%). This tax charge factors in the benefit of UK and US tax incentives on intellectual property and the tax step-up relating the acquisition of OSIsoft.

 

The announced increase in UK corporation tax is expected to have a minimal impact on the adjusted tax rate because of the continued benefit of intellectual property tax incentives and the increased proportion of Group profits earned in the US following the OSIsoft acquisition.

 

Combined Group pro forma Annualised Recurring Revenue (ARR) (unaudited)

 

In order to make it easier to track the performance of AVEVA's recurring revenue progression, the Group is introducing a new metric, Annualised Recurring Revenue (ARR). ARR is a non-GAAP measure.

 

ARR removes distortions caused by applying the revenue recognition accounting standard by annualising the revenue associated with contracts at a point in time. For example, an on-premise Subscription contract would have a large element of the contract recognised upfront, whereas a Cloud Subscription contract is recognised rateably over the lifetime of the contract. ARR removes the differences in this revenue recognition treatment to make it easier to track underlying value progression.

 

On 31 March 2021, ARR for the combined AVEVA Group was £704.8 million. This represented a 12 month increase of 8.6% on a constant currency basis (31 March 2020: £648.9 million). This Group total consisted of £453.8 million of ARR for the standalone AVEVA Group (FY20: £420.9 million) and £251.0 million of ARR for OSIsoft (FY20: £228.0 million).

 

 

James Kidd

Deputy CEO & CFO

25 May 2021

 

 

 

Review of principal risks and uncertainties  

 

Approach to risk management 

 

The Board of Directors has overall responsibility for risk management at AVEVA. The CEO also chairs the Executive Risk Committee, which comprises the Executive team, the Chief Information Officer (CIO), SVP Integration, the Head of Integration & Transformation and the Head of Internal Audit & Risk. The Committee meets formally each quarter with a clear risk-management agenda. In addition, senior leaders across the business actively monitor and manage risk as a core part of operational management.

 

Key changes in the year

 

OSIsoft integration - We have added a new principal risk regarding the acquisition and integration of the OSIsoft business. The acquisition is transformational and represents significant financial and operational commitments by the Board to our stakeholders, as part of a major strategic initiative executed with a risk-tolerant appetite. As such, we are keeping the principal risk and key project risks continually under review. These will be part of standing business for the Executive Risk Committee and the Board for the year ahead.

 

Covid-19 pandemic, remote working and operational resilience - The Covid-19 pandemic remains a significant global issue. By continuing to create high levels of uncertainty across the world, it makes it difficult to reach clear risk management judgements. In light of our proven ability to operate remotely over the last year, the Board has decided to remove the dedicated Extended Period of Remote Working principal risk that we reported in March 2020. The principal Global Economic Disruption & Declining GDPs risk remains, however. The Board also considers that the pandemic continues to impact the existing principal risks relating to Talent, Cloud, Competitors, Cyclical markets and Customer cyber attack.

 

Strategic Risks 

Risk

Mitigation

Talent Acquisition & Retention

At AVEVA, we are heavily reliant on the people we employ. If we are unable to attract or retain the niche skills and experience we need to drive the business forward, creating innovation and growth, this could materially impact the success of our business.

 

The technology sector is increasingly competitive when seeking talent. The AVEVA brand must therefore remain attractive, particularly for in-demand skills such as developers, technical sales, services, consultants and leadership.

 

Impacts from the continuing Covid-19 pandemic have increased this risk. There are now further challenges involved in protecting, retaining and acquiring talent during an extended period of disruption, particularly when continued remote-working requirements and government restrictions are in place. Employee wellbeing becomes an increasing priority.

 

This risk will grow further with the OSIsoft acquisition and the additional complexity this brings to factors including talent bench, retention of key individuals, competitive compensation and clear career-development paths. The success of the integration will depend significantly upon the enlarged organisation's ability to engage and retain critical talent from both heritage organisations through the integration.

 

We recruited a new Chief People Officer in January 2021 whose responsibilities include the continued development of Talent risk mitigation initiatives.

 

Mitigating activities include building our in-house talent acquisition expertise, partnerships with universities, our employee referral programme, evolving our learning culture, embedding Diversity & Inclusion practices, investing in our talent management systems, succession planning, technical and non-technical training schemes, and compensation benchmarking. We will also use these actions to manage Talent risk for the incoming OSIsoft business.

 

We have responded to increased Talent risk caused by the Covid-19 pandemic with multiple additional mitigations; these include virtual interview rooms and on-boarding, to support new hires and investing significantly in wellbeing initiatives to support our employees. Throughout the period of disruption, our leadership has continually supported and communicated with employees, enabling them and providing the tools to work remotely as effectively as possible while staying connected with colleagues and customers. Our HR and Executive Leadership teams are continually reviewing the best approaches.

 

To support these mitigations, we also operate a comprehensive employee-engagement programme. Detailed reporting on it is frequently reviewed and discussed by the CEO and senior leadership.

 

We continually endeavour to ensure that employees are appropriately recognised for their contributions to AVEVA's success. There is an annual Group-wide salary review that rewards strong performance and ensures salaries remain competitive. Both short and long-term incentives along with commission schemes are deployed to reward individual achievement appropriately.

Subscription

Our continued strategic move towards a subscription-based licence model is designed to offer customers improved flexibility when addressing their software needs; it also creates improved recurring revenue and cash flow generation for our business.

 

Customers may be reluctant to move to a subscription model or they may transition at a slower pace than anticipated. This is more likely during and following the Covid-19 pandemic. The level and pace of adoption of a subscription model are also likely to vary by customer, industry and product area. In addition, we might experience internal challenges in presenting customers with an effective subscription value offering.

 

Should any of these areas of risk be realised, we might fail to achieve expected key milestones for the subscription model.

We are keen to gain the benefits of the wider adoption of subscription-based licensing and to bring our customers the benefits of this model. The Engineering business unit has had a subscription offering for many years and we will use our experience to develop subscription offerings for the other business units. We have successfully trialled the subscription model with our Monitoring & Control business unit and have also introduced subscription offerings into Asset Performance Management and Planning & Operations.

 

We have launched additional operational and transformational - yet highly complementary - initiatives to further strengthen the success of the subscription programme. Examples include investments into master data management, pricing and enterprise information management.

 

Management continually reviews progress and refines the model where necessary, and continues to offer traditional licensing models as further mitigation.

Cloud

We are committed to providing market-leading, value-adding, reliable and secure Cloud services to our customers. We therefore invest continually in this fundamental strategic initiative.

 

The global disruption and remote working caused by the Covid-19 pandemic has accelerated industry shifts to the Cloud. This has in turn accelerated internal development, changing the dynamic of this risk. In addition, security is also a critical concern when providing Cloud services to customers, posing significant risk which we must manage effectively.

 

If these risks are not managed well, they both threaten our ability to realise anticipated returns from Cloud initiatives and pose the threat of harmful reputational damage.

 

Within the last year, we announced the appointment of both a Chief Cloud Officer and a Cloud Senior Vice President. They are collectively responsible for driving our Cloud portfolio and go-to-market strategy.

 

To support the growing Cloud demand and make sure AVEVA Cloud has the capability to scale and act fast on steadily changing market dynamics, we launched a multi-year transformation programme touching all angles of our business.

 

Consequently, we are investing significantly into Cloud products and operations across all business units and functions. Incentive models across the Company have changed to support the focus on Cloud sales and the recognition of our new Cloud subscription business.

 

Together with OSIsoft, we have a strong position in Cloud, AI and data, which are the main drivers of the digital transformation our customers are undergoing.

 

To protect our customers and offer best in class availability and security, we have established rigorous test and continuity routines before any product can be launched.

Industrial digitalisation strategy

If our strategy to capitalise on the opportunities of digital transformation were ultimately to fail or not provide the expected levels of return, it could lead to increased costs, reputational damage or lost market positions.

 

The move towards digitalisation has accelerated within the last 12 months where customers have understood and accepted the need to transform. However, continued Capex and Opex constraints dampen this acceleration. Subsequently, there is no net change expected in this risk level for our business over the next 12 months.

We mitigate this risk through the careful management of the right digital transformation strategy. We also have a dedicated Sales and Consulting team in place, as well as targeted marketing campaigns, continued portfolio rationalisation and case prioritisation.

Sustainability

The increasing international focus on sustainability, and growing stakeholder expectations relating to how companies manage Environmental, Social and Governance (ESG) issues, are exposing AVEVA to increased risk in a number of areas.

 

The penalties of failure to meet generally accepted standards on material ESG issues or the expectations of customers, partners, employees, investors or any other stakeholders can be serious. They can adversely impact a company's reputation, putting sales growth at risk, undermining efforts to hire and retain top talent, and complicating the ability to build partnerships and attract outside investment.

 

Many of our customers are transitioning to business models aligned with long-term sustainability objectives, including managing climate risk through decarbonisation and circularity strategies. Some customers that have not taken such action have experienced reduced financial investment and economic loss, impacting their ability to buy AVEVA solutions. To protect our business against any resulting reductions in revenue or loss of market share, it is part of our climate risk and resilience strategy to invest in product-focused sustainability and industry diversification.

We have established a dedicated sustainability team, led by a Director of Sustainability, which is responsible for working cross-functionally to develop a strategic ESG framework with measurable goals. As a first step, we have now completed a robust ESG materiality assessment, and are working to prioritise issues and set targets.

 

In August 2020, we held a 'Sustainability Jam' for employees, enabling them to come together virtually to propose and discuss sustainability ideas relating to our products and operations. We also launched a Sustainability Customer Advisory Board in November. This brings together sustainability leaders from across the energy, power, utilities, chemicals, food & beverage and consumer packaged goods (CPG) sectors for cross-industry dialogue on sustainability priorities.

 

To better understand and address our climate-related risk, we are currently conducting a detailed review of our greenhouse gas reporting processes and baseline data. We will also complete a Task Force on Climate-related Financial Disclosures (TCFD) gap assessment in FY22.

OSIsoft integration

The acquisition of OSIsoft involves the integration of two businesses that have previously operated independently. There are specific areas of risk which could lead to financial and/or reputational impacts, or threaten the anticipated revenue and cost-synergy benefits of the acquisition. These include the challenges of consolidating organisations, systems and facilities and the potential disruption to our current businesses. Integrations of this scale raise the risks of unplanned talent attrition, reduced morale and engagement, increased by the complexity of integrating two successful cultures to ensure continued focus on delivering and improving our customer and partner value. These challenges also risk our transformation to Cloud and a subscription-based licence model and our ability to realise revenue and cost synergies from the enlarged Group.

We are proactively addressing these risks by building on our capability from the previous combination between heritage AVEVA and SES.  We have supplemented this by recruiting an experienced SVP of Integration and establishing a programme and governance to drive the right decisions focused on value; value to customers and partners in the form of accelerating combined technology capabilities, value for our talent in the form of a larger, more exciting organisation and value for our shareholders through detailed planning to deliver on revenue and cost synergies.

 

As part of this decision focused programme, we have established cross organisation workstreams between all major and enabling functions impacted by the integration. We have designed and deployed talent retention programmes, including a culture integration programme that will drive a combined culture to bring our people together in a way that targets growth. Our Product and Portfolio teams are working together to accelerate our ambitions for Cloud to support a subscription-based revenue model.

 

We have supported all of these programmes with a comprehensive communications plan, allowing us to be transparent and flexible in adjusting our programme quickly based on feedback from customers, partners and our people.

 

External Risks

Risk

Mitigation

Competitors

We operate in highly competitive markets. Other technology companies could acquire, merge or move into our market space to compete with our offering, creating a material threat. Existing competitors could respond more quickly to market demands and trends, resulting in reduced market share and missed growth opportunities for us. The industry in which we operate is characterised to varying degrees by rapid technological change, evolving industry standards, evolving business models and consolidations.

 

Risks are increased by the continued uncertainty in the marketplace caused by the Covid-19 pandemic. It is likely that changing competitor strategies or industry consolidations could have a negative impact on us. This is due to increased pricing pressure, cost increases, the loss of market share due to competitor collaboration and a consequent reduction in our ability to integrate solutions.

We carefully monitor customer requirements, trends and other suppliers operating within our chosen markets. We invest in innovation and strive to offer superior products to meet market trends.

The acquisition of OSIsoft will further mitigate this risk. Integrating and aligning the product portfolios of both organisations will provide us with a distinct competitive advantage and market position.

We also now have a dedicated Cloud business, supporting our portfolio with integrated Cloud-based solutions, which has made significant progress in the last year.

Other areas of specific mitigation include the ability to leverage our relationship with Schneider Electric, attractive proposals for additional complementary products for existing customers and the flexibility to meet changing market demands and competitive forces.

Dependency on cyclical markets

We materially derive our revenue from customers operating in markets which are mainly cyclical in nature, such as Oil & Gas and Marine. As and when those markets reach downturn stages, customers may have less funding available for capital projects or additional operational commitments, including the purchase of our software products. Significant end market downturns could therefore materially impact our revenues and profits.

 

The global disruption caused by the Covid-19 pandemic has led to volatility in oil markets and consequently to companies in our customer base. A longer period of volatility further increases the risk of revenue impacts. Several oil companies have already announced reductions in capital expenditure, particularly in relation to upstream projects. These are due to the sharp fall in oil consumption in late 2020 and the oversupply of crude oil during April and May 2020.

 

We believe there is a slight decrease in this risk for our business over the next 12 months given the dilution effect of cyclical markets dependency created by the OSIsoft acquisition and continued pre-existing initiatives to expand into non-cyclical markets.

Because our products bring customers Capex certainty and Opex reduction, they deliver meaningful efficiency gains during periods of downturn.

 

Our extensive global presence also provides mitigation against over-reliance on key geographic markets.

 

We derive over half of our revenue from customers operating in non-cyclical markets such as Food & Beverages, Utilities and Infrastructure markets (such as airports and smart cities). The integration of OSIsoft will further reduce this risk due to the further dilution provided by the OSIsoft customer base.

 

Our strategic move towards a subscription-based licensing model further mitigates this risk, because it can offer customers greater flexibility over their expenditure. There is also the opportunity for further leveraging Schneider Electric relationships into non-cyclical markets.

 

AVEVA Products Implicated in Industrial Accidents or Customer Cyber-Attack

Our software products are complex. New products or enhancements may contain undetected errors, failures, performance problems or other defects. Such occurrences may impact our strong reputation with our customers and/or create financial implications.

 

This risk reflects our portfolio of products, their functionality and increasing threats in the external cyber environment. While there is no change currently in the threat level since last year, the risk may grow during the year ahead following the successful acquisition of the OSIsoft business. This would reflect our larger product portfolio, the associated complexity and our increased size.

Our products are extensively tested prior to commercial launch. A robust Security Development Lifecycle is also a key component of our overall software-development process. In addition, we have created formal and collaborative relationships with third-party security researchers and security organisations to proactively ensure our software is as safe and secure as is reasonable. Dependent upon successful acquisition, we will extend these existing mitigations to the OSIsoft business as part of our integration activities.

Cyber-Attack

Threats within the global cyber environment continue to grow. We are reliant on our IT systems, and should we be specifically targeted by a cyber attack or impacted by a global cyber incident, impacts could include:

 

-  suspension of some operations;

-  regulatory breaches and fines;

-  reputational damage;

-  loss of customer and employee information; and

-  loss of customer or other stakeholder confidence.

 

The risk remains increased partly due to higher cyber threats associated with remote working because of the Covid-19 pandemic. There is also a closer focus on our organisation, due to the acquisition of the OSIsoft business.

We have a low tolerance to this risk. We have in place multiple layers of cyber-security threat defences, including access control, encryption, firewalls and more. We use these security measures to detect and prevent cyber attacks. To the greatest possible extent, we also use them to mitigate the impact of any successful attacks.

 

External penetration testing is also conducted across our critical corporate and online services.

 

Further steps have also been taken to increase security measures while our workforce is operating remotely. These will now permanently remain in place.

Regulatory compliance

We are required to comply with international and local laws in each of the jurisdictions in which we operate. If one or more of our employees or anyone acting on our behalf commit or are alleged to have committed a violation of law, we could face substantial investigative, defence and/or remediation costs. We could also be exposed to severe financial penalties and reputational damage.

 

This applies to several specific regulatory risk areas, including:

 

-  trade compliance (including sanctions and export control);

-  data protection and privacy (including GDPR);

-  anti-trust;

-  anti-bribery and corruption, covering corporate gifts and hospitality;

-  failure to prevent facilitation of tax evasion;

-  anti-money laundering;

-  related party transactions; and

-  insider dealing and market abuse regulations.

 

This risk may grow during the year due to the acquisition of the OSIsoft business, as a result of the inherent risk associated with the acquisition of a business with 27 offices across 18 countries.

We use compliance policies and guidance materials plus clear communications and training platforms for all employees and external partners.

 

Local management is supported by local professional advisers. Further oversight is maintained by the corporate legal and finance functions, which regularly receive support from external advisers, in particular with regard to risk assessment, which is periodically carried out on key areas of exposure to compliance risk.

 

We have dedicated compliance resources, including software and people, within our organisation to enhance the management and monitoring of this principal risk.

 

We carry out due diligence on all contractual counterparties, whether suppliers, customers, advisers, consultants, intermediaries or counterparties to corporate transactions.

 

We conduct periodic, risk-based monitoring in relation to matters relating to compliance risk.

Global Economic Disruption and Declining GDPs

Because of the Covid-19 pandemic, like many global companies we now operate in an international environment where there is continued economic disruption and declining GDPs. This could have many impacts, including significantly decreased demand for our products and services, unexpected disruptions in the industries we serve or limited access to funding.

 

Affected customers may seek to minimise their expenditure by seeking to terminate subscriptions or licence arrangements. They may also seek to renegotiate or delay previously agreed payment dates. Customers may also be more cautious and take more time to make purchase decisions.

 

Although we expect stability in certain geographical markets, we also anticipate continued disruption in other geographies over the next 12 months and in Asia Pacific specifically. Overall, we see no change in risk level.

We remain in a strong cash and financial position. Our leadership continues to review this and is prepared to take mitigating steps as and when considered necessary. Recent examples include employee pay and recruitment freezes and cuts to discretionary spending.

 

Further, our products deliver Capex certainty and Opex reduction. They therefore deliver meaningful efficiency in periods of economic and trading disruption.

 

Operational Risks

Risk

Mitigation

Internal IT Systems (Suitability & Continuity)

We rely on our many IT systems to sustain our day-to-day operations and to meet our customers' expectations. If these systems fail to operate effectively and efficiently, this could result in reputational damage, negative employee engagement and/or poor customer experiences.

 

This remains a high risk for us, reflecting the range of legacy systems in our IT estate. It also reflects the ongoing significant initiatives that are in place to consolidate, improve, create competitive advantage and maintain business as usual processes. These include the continued implementation of a new Group-wide ERP system. This is further complicated by the IT estate that we have inherited with the OSIsoft acquisition. These initiatives are subject to delays and other operational challenges caused by the continuing Covid-19 pandemic.

 

We also outsource certain IT-related functions to third parties who are responsible for maintaining their own network-security, disaster-recovery and systems-management procedures. If these third parties fail to manage their IT systems and related software applications effectively, this could have a severe impact on us.

We have appointed an experienced Chief Information Officer (CIO) and a Chief Information Security Officer (CISO) to lead and drive our various IT initiatives. These include our new ERP implementation project, which is designed to provide and support industry best-practice processes. This includes respective governance frameworks and support from expert external advisers and integration specialists.

 

We also have in place network-security, disaster-recovery and systems-management measures.

 

Disruptive Risks

Risk

Mitigation

Disruptive Technologies

Competitors could develop new and unforeseen technology, software or business models which threaten our value offering. If these became significantly commercially viable, they could have material impacts on our profits and prospects.

 

There is no change in the threat level for this principal risk from the previous year, reflecting the continued potential threats from disruptive forces that seek to capitalise on the fast-evolving digitisation of industry trends.

We largely mitigate this threat through our own leading innovation initiatives and continued position at the forefront of technological advances. This is one of our core strategic strengths.

 

In addition, we continually scan the disruptive technology environment to ensure we are well informed and well placed to respond to any emerging material threats.

 

 

 

Consolidated income statement

for the year ended 31 March 2021

 

 

Notes

2021

£m

2020

£m

Revenue

3,4

820.4

833.8

Cost of sales

 

(181.3)

(190.7)

Gross profit

 

639.1

643.1

Operating expenses

 

 

 

Research & Development costs

 

(184.5)

(184.6)

Selling and administrative expenses

5

(419.8)

(367.8)

Net impairment loss on financial assets

 

(3.7)

(7.6)

Other income

 

5.5

11.9

Total operating expenses

 

(602.5)

(548.1)

Profit from operations

 

36.6

95.0

Finance revenue

 

0.6

0.3

Finance expense

 

(3.0)

(3.3)

Profit before tax from continuing operations

 

34.2

92.0

Income tax expense

7(a)

(9.4)

(22.2)

Profit for the year attributable to equity holders of the parent

 

24.8

69.8

 

Profit from operations

 

36.6

95.0

Amortisation of intangibles (excluding other software)

 

95.7

90.6

Share-based payments

 

16.3

12.0

(Gain)/loss on fair value of forward foreign exchange contracts

 

(0.7)

0.4

Exceptional items

6

78.5

18.8

Adjusted EBIT

 

226.4

216.8

 

Earnings per share (pence)

 

 

 

- basic

9

11.35

34.78

- diluted

9

11.27

34.60

 

All activities relate to continuing activities.

 

The accompanying notes are an integral part of this Consolidated income statement.

 

 

 

Consolidated statement of comprehensive income

for the year ended 31 March 2021

 

 

Notes

2021

£m

2020

£m

Profit for the year

 

24.8

69.8

Items that may be reclassified to profit or loss in subsequent periods:

 

 

 

Exchange gain arising on translation of foreign operations

 

20.7

4.2

Total of items that may be reclassified to profit or loss in subsequent periods

 

20.7

4.2

Items that will not be reclassified to profit or loss in subsequent periods:

 

 

 

Remeasurement (loss)/gain on defined benefit plans

 

(2.5)

6.2

Deferred tax effect

7(a)

0.5

(1.2)

Total of items that will not be reclassified to profit or loss in subsequent periods

 

(2.0)

5.0

Total comprehensive income for the year, net of tax

 

43.5

79.0

 

The accompanying notes are an integral part of this Consolidated statement of comprehensive income.

 

 

 

Consolidated balance sheet

31 March 2021

 

 

Notes

2021

£m

2020

£m

Non-current assets

 

 

 

Goodwill

 

3,904.1

1,295.7

Other intangible assets

 

1,662.3

514.8

Property, plant and equipment

 

48.5

27.6

Right-of-use assets

 

111.9

79.5

Deferred tax assets

 

21.4

19.1

Trade and other receivables

11

19.4

4.4

Customer acquisition costs

 

0.3

-

Investments

 

0.4

-

Retirement benefit surplus

 

13.1

14.9

 

 

5,781.4

1,956.0

Current assets

 

 

 

Trade and other receivables

11

317.0

242.2

Contract assets

3

215.6

142.4

Treasury deposits

12

0.3

0.1

Cash and cash equivalents

12

286.6

114.5

Restricted cash

12

7.3

-

Financial assets

 

0.7

-

Current tax assets

 

18.9

20.2

 

 

846.4

519.4

Total assets

 

6,627.8

2,475.4

Equity

 

 

 

Issued share capital

 

10.7

5.7

Share premium

 

3,842.1

574.5

Other reserves

 

1,209.6

1,180.3

Retained earnings

 

130.3

181.2

Total equity

 

5,192.7

1,941.7

Current liabilities

 

 

 

Trade and other payables

13

271.3

149.5

Contract liabilities

3

239.7

177.0

Lease liabilities

 

22.9

16.6

Financial liabilities

 

-

0.4

Current tax liabilities

 

45.6

5.5

 

 

579.5

349.0

Non-current liabilities

 

 

 

Loans and borrowings

 

654.0

-

Lease liabilities

 

88.9

53.3

Deferred tax liabilities

 

82.0

119.9

Other liabilities

13

18.2

0.7

Retirement benefit obligations

 

12.5

10.8

 

 

855.6

184.7

Total equity and liabilities

 

6,627.8

2,475.4

 

The accompanying notes are an integral part of this Consolidated balance sheet.

 

 

 

Consolidated statement of changes in shareholders' equity

31 March 2021

 

 

 

 

 

Other reserves

 

 

 

 

 

 

Share

capital

£m

Share premium £m

Merger reserve
£m

Cumulative translation adjustments £m

Capital redemption reserve

£m

Reverse acquisition reserve

£m

Treasury shares

£m

Total other reserves £m

Retained earnings

£m

Total

equity

£m

 

At 31 March 2019

5.7

574.5

615.6

101.7

452.5

(9.4)

1,178.8

165.5

1,924.5

 

Profit for the year

-

-

-

-

-

-

-

-

69.8

69.8

 

Other comprehensive income

-

-

-

4.2

-

-

-

4.2

5.0

9.2

 

Total comprehensive income

-

-

-

-

-

-

4.2

74.8

79.0

 

Share-based payments

-

-

-

-

-

-

-

-

12.0

12.0

 

Tax arising on share options

-

-

-

-

-

-

-

-

1.0

1.0

 

Investment in own shares

-

-

-

-

-

-

(3.1)

(3.1)

-

(3.1)

 

Cost of employee benefit trust shares issued to employees

-

-

-

-

-

-

0.4

0.4

(0.4)

-

 

Equity dividends

-

-

-

-

-

-

-

-

(71.7)

(71.7)

 

At 31 March 2020

5.7

574.5

615.6

22.6

101.7

452.5

(12.1)

1,180.3

181.2

1,941.7

 

Profit for the year

-

-

-

-

-

-

-

-

24.8

24.8

 

Other comprehensive income

-

-

-

20.7

-

-

-

20.7

(2.0)

18.7

 

Total comprehensive income

-

-

-

20.7

-

-

-

20.7

22.8

43.5

 

Issue of new shares

0.5

465.2

-

-

-

-

-

-

-

465.7

 

Rights issue

4.5

2,831.0

-

-

-

-

-

-

-

2,835.5

 

Transaction costs relating to issue of share capital

-

(28.6)

-

-

-

-

-

-

-

(28.6)

 

Share-based payments

-

-

-

-

-

-

-

-

16.3

16.3

 

Tax arising on share options

-

-

-

-

-

-

-

-

2.1

2.1

 

Investment in own shares

-

-

-

-

-

-

(1.1)

(1.1)

-

(1.1)

 

Cost of employee benefit trust shares issued to employees

-

-

-

-

-

-

9.7

9.7

(9.7)

-

 

Equity dividends

-

-

-

-

-

-

-

-

(82.4)

(82.4)

 

At 31 March 2021

10.7

3,842.1

615.6

43.3

101.7

452.5

(3.5)

1,209.6

130.3

5,192.7

 

 

The accompanying notes are an integral part of this Consolidated statement of changes in shareholders' equity.

 

 

 

Consolidated cash flow statement

for the year ended 31 March 2021

 

 

Notes

2021

£m

2020

£m

Cash flows from operating activities

 

 

 

Profit for the year

 

24.8

69.8

Income tax expense

7(a)

9.4

22.2

Net finance expense

 

2.4

3.0

Amortisation of intangible assets

 

96.3

91.7

Depreciation of property, plant and equipment and right-of-use assets

 

28.2

24.4

Loss on disposal of property, plant and equipment

 

1.0

0.7

Gain on disposal of pension scheme

 

(0.3)

(0.4)

Gain on disposal of subsidiaries

 

-

(7.7)

Share-based payments

 

16.3

12.0

Difference between pension contributions paid and amounts charged to operating profit

 

0.3

(1.2)

Research & Development expenditure tax credit

 

(3.1)

(2.3)

Changes in working capital:

 

 

 

Trade and other receivables

 

(4.8)

(12.2)

Contract assets

 

(70.8)

(43.8)

Customer acquisition costs

 

(0.3)

-

Trade and other payables

 

5.5

(5.8)

Contract liabilities

 

(13.0)

10.7

Changes to fair value of forward foreign exchange contracts

 

(0.7)

0.3

Cash generated from operating activities before tax

 

91.2

161.4

Income taxes paid

 

(32.8)

(39.3)

Net cash generated from operating activities

 

58.4

122.1

Cash flows from investing activities

 

 

 

Purchase of property, plant and equipment

 

(10.9)

(18.5)

Purchase of intangible assets

 

(0.5)

(0.6)

Payment on disposal of pension scheme

 

(0.3)

(2.0)

Acquisition subsidiaries, net of cash acquired

 

(3,029.5)

(25.1)

Restricted cash from acquisition of business - held in escrow

 

(7.3)

-

Net payment for forward contracts under hedge accounting

 

(74.2)

-

Proceeds from sale of subsidiaries, net of cash

 

-

5.5

(Purchase)/Sale of treasury deposits

 

(0.2)

0.5

Interest received

 

0.5

0.3

Net cash flows used in investing activities

 

(3,122.4)

(39.9)

Cash flows from financing activities

 

 

 

Interest paid

 

(2.8)

(3.3)

Purchase of own shares

 

(1.1)

(3.1)

Proceeds from borrowings, net of fees incurred

 

645.6

-

Payment of principal element of lease liability

 

(18.5)

(15.5)

Proceeds from rights issue

 

2,835.5

-

Transaction costs on issue of shares

 

(28.6)

-

Payment of facility arrangement fees

 

(2.0)

-

Dividends paid to shareholders of the parent

8

(82.4)

(71.7)

Net cash flows used in financing activities

 

3,345.7

(93.6)

Net increase/(decrease) in cash and cash equivalents

 

281.7

(11.4)

Net foreign exchange difference

 

(109.6)

(1.3)

Opening cash and cash equivalents

12

114.5

127.2

Closing cash and cash equivalents

12

286.6

114.5

The accompanying notes are an integral part of this Consolidated cash flow statement.

 

 

 

1    Basis of preparation

 

The Consolidated Financial Statements of the Group have been prepared in accordance with International Accounting Standards (IASs) in conformity with the requirements of the Companies Act 2006 and in accordance with International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The financial information has been prepared on the basis of all applicable IFRSs, including all IASs, Standing Interpretations Committee (SIC) interpretations and International Financial Reporting Interpretations Committee (IFRIC) interpretations issued by the International Accounting Standards Board (IASB) that are applicable to the financial period.

 

The preliminary announcement covers the period from 1 April 2020 to 31 March 2021 and was approved by the Board on 25 May 2021. It is presented in Pounds Sterling (£) and all values are rounded to the nearest £0.1m except when otherwise indicated.

 

The financial information contained in this preliminary announcement of audited results does not constitute the Group's statutory accounts for the years ended 31 March 2021 or 31 March 2020. The accounts for the year ended 31 March 2020 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 March 2021 have been reported on by the Company's auditors; the report on these accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain any statement under section 498(2) or (3) of the Companies Act 2006 or equivalent preceding legislation.

 

The statutory accounts for the year ended 31 March 2021 are expected to be posted to shareholders in due course and will be delivered to the Registrar of Companies after they have been laid before the shareholders in a general meeting on 7 July 2021. Copies will be available from the registered office of the Company, High Cross, Madingley Road, Cambridge CB3 0HB and can be accessed on the AVEVA website, www.aveva.com. The registered number of AVEVA Group plc is 2937296.

 

The Group presents the non-GAAP performance measure 'adjusted earnings before interest and tax (EBIT)' on the face of the Consolidated Income Statement. Adjusted EBIT is not defined by IFRSs and therefore may not be directly comparable with the adjusted EBIT measures of other companies.

 

The business is managed and measured on a day-to-day basis using adjusted results. To arrive at adjusted results, certain adjustments are made for normalised and exceptional items that are individually significant and which could, if included, distort the understanding of the performance for the year and the comparability between periods.

 

Normalised items: These are recurring items which management considers to have a distorting effect on the underlying results of the Group. These items relate to amortisation of intangible assets (excluding other software), share-based payment charges and fair value adjustments on financial derivatives. Other types of recurring items may arise; however, no others were identified in either the current or prior year. Recurring items are adjusted each year irrespective of materiality to ensure consistent treatment.

 

Exceptional items: These are items which are non-recurring and are identified by virtue of either their size or their nature. These items can include, but are not restricted to, the costs of significant restructuring exercises, fees associated with business combinations and costs incurred in integrating acquired companies.

 

In adopting the going concern basis for preparing the financial statements, the Directors have considered the business activities and the Group's principal risks and uncertainties in the context of the current operating environment. This includes possible ongoing impacts of the global Covid-19 pandemic on the Group and reviews of liquidity and covenant forecasts.

 

The Group's business planning cycle has taken account of potential ongoing impacts of Covid-19 to create a base case going concern model, reflecting the current business disruption, economic conditions and the resulting impact on customers and their ability to continue operating effectively during the ongoing period of remote working.

 

The Directors have considered sensitivities in respect of potential downside scenarios over the base case going concern model and the mitigating actions available in concluding that the Group is able to continue in operation for a period of at least sixteen months from the date of approving the financial statements to 30th September 2022.

 

The specific scenarios modelled are:

 

Scenario 1: A 'stress test' scenario reducing base model revenue by circa 10% across the five-year forecast period.

 

Scenario 2: A further scenario was created to model circumstances required to breach AVEVA's credit facilities. This scenario assumes severe cash collection delays and does not include any mitigating actions that the Group would take. It is overall considered very unlikely.

 

Under the base case scenario, there is no expected requirement to draw down on the RCF across the going concern period. Under the downside scenarios, the Group would utilise the RCF, but within the current liquidity levels available.

 

Throughout both of the downside scenarios, the Group continues to have liquidity headroom on existing facilities and against the RCF financial covenants during the period under assessment. Should a more extreme downside scenario occur, additional mitigating actions could be taken such as the cancellation or deferral of dividend payments and reductions in other discretionary operating costs. The financial statements for the year ended 31 March 2021 have therefore been prepared under the going concern basis of accounting.

 

 

2    Accounting policies

 

The preliminary statement has been prepared on a consistent basis with the accounting policies set out in the last published financial statements for the year ended 31 March 2020. New standards and interpretations which came into force during the year did not have a significant impact on the Group's financial statements.

 

 

3    Revenue

 

An analysis of the Group's revenue is as follows

 

Year ended 31 March 2021

 

Services transferred at a point in time

£m

Services transferred over time £m

Total

£m

Subscription

 

 

236.1

123.6

359.7

Maintenance

 

 

-

197.7

197.7

Perpetual licences

 

 

141.6

-

141.6

Services

 

 

-

121.4

121.4

 

 

 

377.7

442.7

820.4

 

Year ended 31 March 2020

 

Services transferred at a point in time

£m

Services transferred over time £m

Total

£m

Subscription

 

 

228.7

88.1

316.8

Maintenance

 

 

-

201.7

201.7

Perpetual licences

 

 

179.3

-

179.3

Services

 

 

-

136.0

136.0

 

 

 

408.0

425.8

833.8

 

Contract balances are as below:

 

2021

£m

2020

£m

2019

£m

Trade receivables (non-current)

0.7

2.0

-

Trade receivables (current)

245.3

181.2

174.9

Contract assets

215.6

142.4

100.5

Contract liabilities

239.7

177.0

174.6

 

Contract assets have increased year-on-year predominantly due to the recognition of a number of multi-year subscription licences, resulting in the cumulative revenue recognised for these contracts being greater than the cumulative amounts invoiced. Contract assets are stated net of a provision of £7.7 million (2020: £5.4 million). The provision has increased year-on-year due to forward-looking considerations in light of Covid-19.

 

Trade receivables and contract liabilities have also increased year-on-year, primarily as a result of the acquisition of OSIsoft.

 

Revenue for the year ended 31 March 2021 includes £159.3 million (2020: £157.1 million) which was included in contract liabilities at the beginning of the year. Revenue of £3.1 million recognised in the year ended 31 March 2021 related to performance obligations satisfied in previous years (2020: £3.1 million).

 

The transaction price allocated to the remaining performance obligations (unsatisfied or partially unsatisfied) as at 31 March is as follows:

 

2021

£m

2020

£m

Within one year

425.8

323.8

More than one year

232.1

178.0

 

 

4    Segment information

 

The Executive Leadership Team (ELT) monitors and appraises the business based on the performance of three geographic regions: Americas; Asia Pacific; and Europe, Middle East and Africa (EMEA). These three regions are the basis of the Group's primary operating segments reported in the financial statements. Performance is evaluated based on regional contribution using the same accounting policies as adopted for the Group's financial statements. There is no inter-segment revenue. Corporate costs include centralised functions such as Executive Management, Information Management, Finance and Legal. Balance sheet information is not included in the information provided to the ELT.

 

 

Year ended 31 March 2021

 

Americas

Asia Pacific

EMEA

Corporate

Total

 

£m

£m

£m

£m

£m

Revenue

 

 

 

 

 

Subscription

94.6

95.5

169.6

-

359.7

Maintenance

84.3

46.7

66.7

-

197.7

Perpetual licences

42.1

47.4

52.1

-

141.6

Services

44.4

31.7

45.3

-

121.4

Regional revenue total

265.4

221.3

333.7

-

820.4

Cost of sales

(50.0)

(19.8)

(39.9)

(70.8)

(180.5)

Selling and administrative expenses

(64.4)

(40.7)

(68.0)

(120.3)

(293.4)

Net impairment loss on financial assets

(1.0)

(1.8)

(0.9)

-

(3.7)

Regional contribution

150.0

159.0

224.9

(191.1)

342.8

Research & Development costs

 

 

 

 

(116.4)

Adjusted EBIT

 

 

 

 

226.4

Exceptional items, other normalised adjustments1 and net interest

 

 

 

 

(192.2)

Profit before tax

 

 

 

 

34.2

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

 

 

 

Year ended 31 March 2020

 

Americas

Asia Pacific

EMEA

Corporate

Total

 

£m

£m

£m

£m

£m

Revenue

 

 

 

 

 

Subscription

81.2

95.6

140.0

-

316.8

Maintenance

85.9

47.9

67.9

-

201.7

Perpetual licences

57.6

52.1

69.6

-

179.3

Services

54.5

31.9

49.6

-

136.0

Regional revenue total

279.2

227.5

327.1

-

833.8

Cost of sales

(49.9)

(27.3)

(34.6)

(78.3)

(190.1)

Selling and administrative expenses

(69.4)

(44.7)

(72.5)

(112.0)

(298.6)

Net impairment loss on financial assets

(4.1)

(0.8)

(2.7)

-

(7.6)

Regional contribution

155.8

154.7

217.3

(190.3)

337.5

Research & Development costs

 

 

 

 

(120.7)

Adjusted EBIT

 

 

 

 

216.8

Exceptional items, other normalised adjustments1 and net interest

 

 

 

 

(124.8)

Profit before tax

 

 

 

 

92.0

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

 

 

5    Selling and administrative expenses

 

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

 

2021

£m

2020

£m

Selling and distribution expenses

226.8

240.1

Administrative expenses

193.0

127.7

 

419.8

367.8

 

 

6    Exceptional items

 

 

2021

£m

2020
£m

Acquisition costs

44.4

0.8

Integration activities

37.3

28.2

Restructuring costs

2.3

1.7

Other income

(5.5)

(11.9)

 

78.5

18.8

 

The total cash net outflow during the year as a result of exceptional items was £63.2 million (2020: £23.3 million).

 

a)   Acquisition costs

Acquisition costs in the year ended 31 March 2021 relate to adviser fees incurred in the acquisition of OSIsoft, LLC. In addition, fees incurred as a direct result of raising debt (£2.9 million) and equity (£28.6 million) have been offset against the carrying value of the associated financial liability and share premium respectively.

 

Acquisition costs in the year ended 31 March 2020 related to the acquisition of AssetPlus, and the trade and assets of MESEnter Co. Ltd.

 

b)   Integration activities

Integration costs of £31.2 million (2020: £28.2 million) were incurred relating to the integration of heritage AVEVA and the Schneider Electric industrial software business (SES). This principally related to consultancy fees paid to advisers, and the costs of additional temporary resources required for the integration. Key activities included work undertaken to exit the Transitional Service Agreements (TSA) provided by Schneider Electric, and costs incurred in the continued build and UK rollout of a new harmonised global ERP system.

 

Services covered by the TSA relating to integration activities ceased in the year, and no further costs of this nature are expected. Future costs of integrating heritage AVEVA and SES will primarily relate to the global roll out of the new ERP system, which is expected to last until 2024.

 

To 31 March 2021 the Group expensed £6.1 million (2020: nil) relating to the integration of OSIsoft, LLC. It is expected that these costs will substantially increase and continue in future years.  

 

c)   Restructuring costs

Restructuring costs related to severance payments in a number of locations across the Group. The costs incurred for the year ended 31 March 2021 have been a continuation of the restructuring programme started following the merger of heritage AVEVA and SES, which is now complete. Further costs are expected to continue into the year ended 31 March 2022, arising from the integration of OSIsoft, LLC.

 

d)   Other income

Other income contains £5.2 million (2020: £3.8 million) received from Schneider Electric in reimbursement for capital expenditure incurred as part of the Group's migration activities covered by TSAs following the Combination.

 

Prior year also included a £7.7 million gain on sale of three wholly owned distributor businesses.

 

e)   Income statement impact

Exceptional items were included in the Consolidated income statement as follows:

 

2021

£m

2020
£m

Cost of sales

0.8

0.6

Research & Development costs

0.3

0.4

Selling and distribution expenses

4.6

3.9

Administrative expenses

78.3

25.8

Other income

(5.5)

(11.9)

 

78.5

18.8

 

 

7    Income tax expense

 

a)   Tax on profit

The major components of income tax expense are as follows:

 

2021

£m

2020
£m

Tax charged in Consolidated income statement

 

 

Current tax

 

 

UK corporation tax

-

11.1

Foreign tax

41.9

26.3

Adjustments in respect of prior periods

(1.9)

(9.6)

 

40.0

27.8

Deferred tax

 

 

Origination and reversal of temporary differences

(29.3)

(9.9)

Adjustments in respect of prior periods

(1.3)

4.3

 

(30.6)

(5.6)

Total income tax expense reported in Consolidated income statement

9.4

22.2

 

 

 

2021

£m

2020
£m

Tax relating to items charged directly to Consolidated statement of comprehensive income

 

 

Deferred tax on actuarial remeasurements on retirement benefits

(0.5)

1.2

Tax (credit)/charge reported in Consolidated statement of comprehensive income

(0.5)

1.2

 

b)   Reconciliation of the total tax charge

The differences between the total tax charge shown above and the amount calculated by applying the standard rate of US (2020: US) corporation tax to the profit before tax are as follows:

 

2021

£m

2020
£m

Tax on Group profit before tax at standard US (2020:US) corporation tax rate of 24% (2020: 24%)1

8.2

22.1

Effects of:

 

 

- expenses not deductible for tax purposes

8.8

2.0

- non-deductible acquisition costs

3.0

 

- Research & Development incentives

(5.3)

(5.8)

- UK rate change impact on deferred tax

-

8.9

- irrecoverable withholding tax

-

1.2

- movement on unprovided deferred tax balances

(1.9)

(1.1)

- differing tax rates

(0.2)

0.2

- adjustments in respect of prior years

(3.2)

(5.3)

Income tax expense reported in Consolidated income statement

9.4

22.2

1 Reconciliation is performed starting from the standard US corporation tax rate as US taxable profits are greater than any other individual country.

 

The Group's effective tax rate for the year was 27.5% (2020: 24.1%). The Group's effective tax rate for the year before exceptional items was 21.7% (2020: 24.2%). The Group's effective tax rate before exceptional and other normalised adjustments was 21.2% (2020: 18.1%).

 

At the balance sheet date, the UK government had announced that it would increase the main rate of corporation tax to 25% from 1 April 2023. This change had not been substantively enacted at the balance sheet date and is consequently not included in these financial statements. The effect of this proposed tax rate increase would be to increase the deferred tax liability by £17.8 million consisting of a debit to the income statement of £17.0 million and a debit to other comprehensive income of £0.8 million.   

 

 

8    Dividends paid and proposed on equity shares

 

The following dividends were declared, paid and proposed in relation to the legal entity AVEVA Group plc:

 

2021

£m

2020
£m

Declared and paid during the year1

 

 

Interim 2020/21 dividend paid of 12.4 pence (2019/20: 12.4 pence) per ordinary share

35.6

25.0

Final 2019/20 dividend paid of 23.3 pence (2018/19: 23.3 pence) per ordinary share

46.8

46.7

 

82.4

71.7

Proposed for approval by shareholders at the Annual General Meeting

 

 

Final proposed dividend 2020/21 of 23.5 pence (2019/20: 23.3 pence) per ordinary share

70.7

46.8

1Dividends per share for comparative periods have been restated and adjusted for a bonus factor of 0.80, to reflect the bonus element of the November 2020 rights issue. Previously stated interim dividend per share totals for both 2020/21 and 2019/20 were 15.5 pence per share, and final dividend per share for both 2019/20 and 2018/19 were 29.0 pence per share.

 

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 7 July 2021 and has not been included as a liability in these financial statements. If approved at the Annual General Meeting, the final dividend will be paid on 4 August 2021 to shareholders on the register at the close of business on 9 July 2021.

 

 

9    Earnings per share

 

 

2021

Pence

2020 (restated)1
Pence

Earnings per share for the year:

 

 

- basic

11.35

34.78

- diluted

11.27

34.60

Adjusted earnings per share for the year

 

 

- basic

81.86

87.20

- diluted

81.31

86.75

 

 

2021

Number

2020
Number

Weighted average number of ordinary shares for basic earnings per share

218,531,149

200,758,092

Effect of dilution: employee share options

1,489,318

1,030,456

Weighted average number of ordinary shares adjusted for the effect of dilution

220,020,467

201,788,548

1 Basic and diluted EPS figures for comparative periods have been restated and adjusted for a bonus factor of 0.80 to reflect the bonus element of the November 2020 rights issue. Amounts originally stated as at 31 March 2020 were 43.35 pence basic EPS and 43.13 pence diluted EPS. Originally stated adjusted EPS were 108.70 pence basic adjusted EPS and 108.15 pence diluted adjusted EPS.

 

The calculations of basic and diluted earnings per share (EPS) are based on the net profit attributable to equity holders of the parent for the year of £24.8 million (2020: £69.8 million). Basic EPS amounts are calculated by dividing the net profit attributable to equity holders of the parent by the weighted average number of AVEVA Group plc ordinary shares outstanding during the year.

 

Diluted EPS amounts are calculated by dividing the net profit attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year as described above, plus the weighted average number of ordinary shares that would be issued on the conversion of all the potentially dilutive share options into ordinary shares.

 

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

 

2021

£m

2020
£m

Profit after tax for the year

24.8

69.8

Intangible amortisation (excluding software)

95.7

90.6

Share-based payments

16.3

12.0

(Gain)/loss on fair value of forward foreign exchange contracts

(0.7)

0.4

Exceptional items

78.5

18.8

Effect of acquisition accounting adjustments1

3.3

-

Tax effect on exceptional items

(15.1)

(4.6)

Tax effect on other normalised adjustments (excluding net finance expense)

(23.0)

(12.0)

Tax effect on acquisition accounting adjustments

(0.9)

-

Adjusted profit after tax

178.9

175.0

1Acquisition accounting adjustments relate to the revenue haircut made upon the combination with OSIsoft, LLC

 

The denominators used are the same as those detailed above for both basic and diluted EPS.

 

The adjustment made to profit after tax in calculating adjusted basic and diluted EPS has been adjusted for the tax effects of the items adjusted. The Directors believe that adjusted EPS is more representative of the underlying performance of the business.

 

 

10   Business combinations

 

Acquisition of OSIsoft, LLC

On 19 March 2021 the Group acquired 100% of the voting shares of OSIsoft, LLC, a global leader in real-time industrial operational data software and services. The OSIsoft Group's main product is the PI System, a proprietary, vendor-agnostic data management software which enables customers to capture, store, analyse and share real-time industrial sensor-based data with business systems across all operations. This acquisition will significantly enhance the Group's product offering, provide customer diversification and greater geographical market penetration, create opportunities for material revenue and cost synergies, and accelerate and improve the Group's development of new software and technology. A consideration of £3,831.4 million (US$5,086.5 million) was paid.

 

The deal was funded by £3,365.7million (US$4,438.1 million) of cash; £2,806.9 million (US$3,734.3 million) raised via a rights issue (net of expenses), and £558.8 million (US$703.8 million) from existing cash and new debt facilities. The remainder was funded by a £465.7 million (US$648.4 million) issue of 13,655,570 ordinary shares on 22 March 2021 to Estudillo Holdings Corp, a company majority owned by Dr J. Patrick Kennedy and his family, which held a 50.3% interest in OSIsoft, LLC. At 31 March 2021, £7.3 million (US$10.0 million) remained in restricted cash in relation to consideration to be paid.

 

The fair values of identifiable assets acquired and liabilities assumed at the acquisition date are:

 

Carrying value
at acquisition
£m

Provisional fair value adjustment
£m

Provisional fair value
£m

Non-current assets

 

 

 

Intangible assets

0.4

1,231.6

1,232.0

Property, plant and equipment

21.0

-

21.0

Right-of-use assets

36.2

-

36.2

Deferred tax assets

22.0

(15.8)

6.2

Trade and other receivables

2.9

-

2.9

Customer acquisition costs

10.3

(10.3)

-

Investments

0.4

-

0.4

Total non-current assets

93.2

1,205.5

1,298.7

Current assets

 

 

 

Trade and other receivables

75.6

-

75.6

Contract assets

2.4

-

2.4

Customer acquisition costs

4.0

(4.0)

-

Cash and cash equivalents

150.6

-

150.6

Financial assets

0.4

-

0.4

Total current assets

233.0

(4.0)

229.0

Current liabilities

 

 

 

Trade and other payables

(115.1)

-

(115.1)

Contract liabilities

(136.2)

60.5

(75.7)

Lease liabilities

(6.8)

-

(6.8)

Current tax liabilities

(29.9)

(8.0)

(37.9)

Total current liabilities

(288.0)

52.5

(235.5)

Non-current liabilities

 

 

 

Lease liabilities

(37.9)

-

(37.9)

Retirement benefit obligations

(0.9)

-

(0.9)

Total non-current liabilities

(38.8)

-

(38.8)

Net identifiable assets and liabilities

(0.6)

1,254.0

1,253.4

Goodwill

 

 

2,578.0

Total consideration

 

 

3,831.4

 

Goodwill of £1,303.5 million is expected to be deductible for tax purposes.

 

The main factors leading to the recognition of goodwill are the value of the assembled OSIsoft, LLC workforce and the future synergy benefits expected to arise from integrating the two combined businesses.

 

Costs incurred that are directly attributable to raising debt (£2.9 million) and equity (£28.6 million) have been offset against the corresponding financial liability and share premium respectively. All remaining transaction costs were expensed and are included within selling and administrative expenses.

 

The revenue and profit after tax included in the Consolidated Income Statement contributed by OSIsoft, LLC were £20.7 million and £10.8 million respectively, before a revenue haircut of £3.3 million. If the acquisition had occurred on 1 April 2020, the Consolidated Income Statement would have presented revenue of £1,196.1 million and profit after tax of £48.1 million (at an effective tax rate of 5.5%) before a revenue haircut of approximately £53.0 million.

 

 

11   Trade and other receivables

 

 

2021

£m

2020
£m

Current

 

 

Amounts falling due within one year:

 

 

Trade receivables

245.3

181.2

Amounts owed from related parties (note 14)

21.6

28.4

Prepayments and other receivables

50.1

32.6

 

317.0

242.2

Non-current

 

 

Trade and other receivables

19.4

4.4

 

19.4

4.4

 

 

12   Cash and cash equivalents

 

 

2021

£m

2020
£m

Cash at bank and in hand

279.7

112.8

Short-term deposits

6.9

1.7

Net cash and cash equivalents per cash flow

286.6

114.5

Treasury deposits

0.3

0.1

Restricted cash

7.3

-

 

294.2

114.6

 

Treasury deposits represent bank deposits with an original maturity of over three months and are held with a fixed rate of interest.

 

Restricted cash represents funds held in escrow in relation to the acquisition of OSIsoft, LLC.

 

Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective fixed short-term deposit rates.

 

 

13   Trade and other payables

 

 

2021

£m

2020
£m

Current

 

 

Trade payables

39.6

20.1

Amounts owed to related parties (note 14)

1.5

7.6

Social security, employee taxes and sales taxes

28.5

18.5

Accruals

176.8

99.1

Other payables

24.9

4.2

 

271.3

149.5

Non-current

 

 

Other liabilities

18.2

0.7

 

18.2

0.7

 

Trade payables are non-interest bearing and are normally settled on terms of between 30 and 60 days. Social security, employee taxes and sales taxes are non-interest bearing and are normally settled on terms of between 19 and 30 days. The Directors consider that the carrying amount of trade and other payables approximates their fair value.

 

Accruals have increased as a result of the acquisition of OSIsoft, LLC and associated transaction related costs.

 

 

14   Related party transactions

 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

 

a)   Schneider Electric Group companies

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

 

2021

£m

2020

£m

Sales of goods and services

62.2

69.1

Purchases of goods and services

(3.4)

(11.2)

Interest expense on term loan

(0.2)

-

Other non-trading transactions

13.7

13.4

 

Other non-trading transactions related to amounts received from Schneider Electric in reimbursement for expenditure incurred as part of the Company's migration from activities covered by TSAs following the Combination. Of these transactions, £8.5 million (2020: £9.6 million) related to operating expenses incurred, and £5.2 million (2020: £3.8 million) to capital expenditure.

 

On 19 March 2021, the AVEVA Group received a £646.4 million (US $900.0 million) term loan from Schneider Electric Holdings Inc to assist in the funding of the acquisition of OSIsoft, LLC. The term loan bears interest of LIBOR plus a margin and is repayable three years from the inception date on 19 March 2024.

 

During the year ended 31 March 2021, the Group paid £nil (2020: £nil) to Schneider Electric SE, the parent company of the Schneider Electric Group. All other transactions were with subsidiary companies within the Schneider Electric Group.

 

The existing TSA with Schneider Electric has an end date of 31 August 2021 for ERP-related services. Discussions are ongoing in relation to a new Services Agreement under which Schneider Electric (through SE Digital) will continue to provide ERP-related services beyond 31 August 2021 whilst the Group completes its global roll out of the new ERP system.

 

As at 31 March, Group companies held the following balances with Schneider Electric group companies:

 

2021

£m

2020

£m

Trade and other receivables

18.9

23.6

Trade and other payables

(1.5)

(7.6)

Non-trading receivables

2.7

4.8

Term loan

(654.8)

-

 

All balances held were with subsidiary companies within the Schneider Electric group.

 

b)   Transactions with other related parties

Dr J Patrick Kennedy holds 4.53% of the issued ordinary share capital of AVEVA through his 75.64% ownership of Estudillo Holdings Corp. Dr J Patrick Kennedy is also Chairman Emeritus of the Group, a board advisory position.

 

In the year ended 31 March 2021, the Group has recognised £141,000 (2020: nil) of expense payable to SLTC LLC for the use of the OSIsoft San Leandro offices. The lease is effective until 31 January 2027, with rent of US$4.0 million payable per annum. SLTC LLC is 25% owned by Dr J Patrick Kennedy.

 

In the year ended 31 March 2021, the Group has recognised £8,000 (2020: nil) of expense payable to Lit San Leandro LLC for the use of fibre optic cable. The lease is effective until 6 January 2022, with extension options to 6 January 2029. Rent of US$132,000 is payable per annum. Lit San Leandro LLC is 49% owned by Dr J Patrick Kennedy.

 

Terms and conditions of transactions with related parties

Outstanding balances at 31 March 2021 are unsecured, and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 March 2021, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2020: nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

 

 

15   Subsequent events

 

On 11 May 2021 the Group entered into an agreement whereby it agreed to sell the Acquis Software, Termis Software and Water Loss Management Software businesses together to Schneider Electric for an aggregate consideration of £2.6 million. Completion is expected to occur in or around July 2021.

 

Subsequent to the year end, the Group proposes to perform a capital reduction, reducing share premium and creating additional distributable reserves within retained earnings of approximately £1.0 billion.  The proposal is subject to approval by shareholders at the Annual General Meeting on 7 July 2021.

 

 

 

Directors

 

Philip Aiken

Chairman

 

Peter Herweck

CEO

 

James Kidd

Deputy CEO & CFO

 

Craig Hayman

Director

 

Christopher Humphrey

Senior Independent Non-Executive Director

 

Jennifer Allerton

Independent Non-Executive Director

 

Ron Mobed

Independent Non-Executive Director

 

Paula Dowdy

Independent Non-Executive Director

 

Olivier Blum

Non-Executive Director

 

 

Responsibility statement pursuant to FSA's Disclosure and Transparency Rule 4 (DTR 4)

Each Director of the Company (whose names and functions appear above) confirms that (solely for the purpose of DTR 4) to the best of his/her knowledge:

 

·       the financial information in this document, prepared in accordance with the applicable UK law and applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and result of the Company and of the Group taken as a whole; and

·       the Chairman's statement, Chief Executive's strategic review and Finance review include a fair review of the development and performance of the business and the position of the Company and Group taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

On behalf of the Board

 

 

Peter Herweck

James Kidd

CEO

Deputy CEO & CFO

 

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