Close
RNS Number : 0874O
AVEVA Group PLC
08 June 2022
 

AVEVA GROUP PLC

 

RESULTS FOR THE 12 MONTHS ENDED 31 MARCH 2022

 

AVEVA delivers solid results with ARR up 10% and revenue up 7% on an organic pro forma constant currency basis

 

AVEVA Group plc ('AVEVA' or 'the Group') announces its results for the year ended 31 March 2022.

 

Highlights

Pro forma results1

·      Annualised Recurring Revenue (ARR)2 increased 10.2% to £768.7m (FY21: £697.8m).

·      On an organic constant currency basis3 pro forma revenue for the combined Group grew 7.1% and adjusted EBIT4 grew 7.7%.

Statutory results5

·      Revenue was £1,185.3 million (FY21: £820.4 million) after the impact of the deferred revenue haircut of £50.3 million (FY21: £3.3 million), representing an increase of 44.5%. This change was primarily due to the acquisition of OSIsoft.

·      Loss from operations before tax was £6.5m (FY21: profit of £36.6m) with the loss being primarily due to the amortisation of intangible assets of £226.1m (FY21: £95.7m).

·      Diluted loss per share was 20.8 pence (FY21: EPS 11.3 pence).

·      Final dividend of 24.5 pence proposed representing an increase of 4.3% (FY21: 23.5 pence).

Integration

·      Integration of the AVEVA and OSIsoft businesses has progressed well. During the year both revenue and cost synergies were in line with the plan while strong progress was made on product integration, which will drive substantial longer-term synergies.

 

Summary results

 

Combined AVEVA Group on a pro forma basis (unaudited)

Year ended 31 March

2022

2021

Change

Organic constant currency

 

Revenue

£1,235.6m

£1,196.1m

3.3%

7.1%

Annualised recurring revenue

£768.7m

£697.8m

-

10.2%

Adjusted EBIT

£365.1m

£354.7m

2.9%

7.7%

Adjusted diluted earnings per share

99.6p

105.3p

(5.4)%

-

 

AVEVA Group plc statutory results

Year ended 31 March

2022

2021

Change

 

 

Revenue

£1,185.3m

£820.4m

44.5%


(Loss)/profit from operations

£(6.5)m

£36.6m

-


Basic (loss)/earnings per share

(20.8)p

11.4p

-


Diluted (loss)/earnings per share

(20.8)p

11.3p

-


 

 

 

Chief Executive Officer, Peter Herweck said:

 

"AVEVA delivered a solid set of results in FY22 as the business recovered following disruption caused by the Covid pandemic. During the year we made good progress with the integration of OSIsoft and have recently launched integrated products that will drive further revenue synergies. I am excited about the opportunities ahead of us as AVEVA enables the connection and digitalisation of the industrial world. We are focused on accelerating growth in Annualised Recurring Revenue and expect AVEVA's growth rate on this metric to significantly improve."

 

 

Notes

 

1 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. To provide a better understanding of the combined comparative trading performance and to improve transparency, non-statutory results are also shown for the combined Group on a pro forma basis. The Directors believe that the pro forma results give helpful insight into the performance of the Group and form a basis from which to consider the outlook.

 

Pro forma results include results for both AVEVA and OSIsoft for the 12 months to 31 March 2022 and the 12 months to 31 March 2021. In addition to this, the results have been adjusted to exclude the effect of the deferred revenue haircut under IFRS 3 (Business Combinations), which reduces statutory revenue.

 

2 ARR makes it easier to track recurring revenue progression by annualising revenue associated with subscription, cloud and Maintenance contracts. It removes timing differences caused by revenue recognition standards by annualising the revenue associated with contracts at a point in time. It is calculated on a constant currency basis.

 

3 Organic constant currency revenue and adjusted EBIT excludes a currency translation reduction of £42.5 million to revenue; and adjusts for the disposals of the Acquis Software, Termis Software and Water Loss Management Software businesses in June 2021 by removing the results of the disposals from each reporting period.

 

4 Adjusted metrics are calculated before amortisation of intangible assets, share-based payments and exceptional items. Adjusted Earnings Per Share also includes the tax effects of these adjustments. See note 1 Basis of Preparation.

 

5 Statutory results include the results for the combined AVEVA Group for the 12 months to 31 March 2022 compared to the results for AVEVA Group and 12 days of OSIsoft ownership for FY21.

 

 

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 call for analysts and investors at 9.30am BST today.

 

Conference call dial-in details:

 

UK: 020 3936 2999 / 0800 640 6441

USA: 1 855 9796 654 / 1 646 664 1960

All other locations: +44 20 3936 2999

Conference call access code: 427649

 

Slides and a webcast are available via investors.aveva.com and a replay of the call will be made available later in the day.

 

 

 

Chief Executive's review

 

Summary

 

AVEVA delivered a solid financial performance and made good progress in integrating OSIsoft, which was acquired just before the start of the financial year.

 

Pro forma organic constant currency ARR increased 10.2%, revenue grew by 7.1% and adjusted EBIT increased 7.7% on the same basis. The revenue growth was led by growth in sales of PI System products, which increased at a double-digit rate and growth from the heritage AVEVA business at a low single-digit rate.

 

Integration

 

The integration of OSIsoft progressed well, in accordance with AVEVA's plans. During the first half of the financial year, the organisational model was established and leadership roles determined.

 

R&D work on the product portfolio roadmap to achieve interoperability between products has been progressed to add greater value to customers. Key integrated products that have been launched included AVEVA Unified Operations Center with AVEVA PI System and AVEVA Predictive Analytics with PI System.

 

AVEVA is on track to achieve both cost and revenue synergies in line with its acquisition model. Pre-tax cash cost synergies are expected of not less than $30 million per annum on a run rate basis by the year ending 31 March 2023. Revenue synergies of at least $100 million per annum are expected by the year ending 31 March 2026.

 

During FY22 AVEVA achieved initial revenue synergies of £7.4 million ($10.1 million) and £10.8 million ($14.7 million) of cost synergies were realised in the year.

 

ARR and business model transition

 

ARR at 31 March 2022 for the combined AVEVA Group on a pro forma constant currency basis was £768.7 million (FY21: £697.8 million), representing a 12 month increase of 10.2%. This growth was driven by the heritage AVEVA business, which increased ARR by a double-digit rate, while OSIsoft increased ARR by a low single digit rate, ahead of its transition to a subscription-based revenue model.

 

During the year AVEVA also made progress with its subscription transition, with 11.5% growth in on-premises pro forma constant currency subscription revenue and very strong growth in SaaS contract wins, leading to 23.9% growth in SaaS revenue on a pro forma constant currency basis.

 

The PI System product is expected to increase ARR growth as it moves to the AVEVA Flex subscription model. AVEVA also expects to drive an acceleration in sales of SaaS revenue as more products become available on the cloud and salesforce incentives have been evolved to further encourage sales of these products.

 

Pro forma regional performance

 

EMEA revenue was £473.9 million representing an increase of 5.9% (FY21: £447.6 million) and was up 9.7% on an organic constant currency basis. AVEVA achieved good growth in Eastern Europe and the Middle East in particular. The war in Ukraine did not have a material impact on revenue in the financial year. Notable order wins were achieved with companies including International Maritime Industries, Saudi Aramco and Saudi Electricity Company.

 

Americas revenue was £496.5 million representing an increase of 4.8% to (FY21: £473.7 million) and was up 8.4% on an organic constant currency basis. Growth was broad based with all regions delivering a good performance across the USA, Canada and Latin America. Notable order wins were achieved with companies including TC Energy, Pembina, Southern California Gas and General Mills.

 

Asia Pacific revenue was £265.2 million, representing a decrease of 3.5% (FY21: £274.8 million) and was up 0.7% on an organic constant currency basis. AVEVA saw good growth in China and India, which was largely offset by declines in Korea and Japan due to tough comparative periods. Notable order wins were achieved with companies including Sinopec Engineering and Indian Oil Corporation.

 

 

Business highlights

 

Engineering consists of Engineering and Simulation software. In turn, Engineering software includes Engineering & Design, Project Execution and Engineering Information Management. Simulation includes Simulation & Learning and Value Chain Optimisation.

 

Engineering contributed 30.9% of pro forma revenue in the period (FY21: 35.1%). On an organic constant currency basis, revenue decreased by 5.7%. This decrease was due to a tough comparator in the prior year that included a significant amount of point-in-time revenue recognition due to several significant multi-year contracts. Underlying business performance was good, contributing to the Group's double-digit ARR growth, with a broad range of new order wins being achieved, particularly in the energy market, which is undergoing a recovery following the Covid crisis. Significant orders were won from companies including Aibel, Saipem SBM Offshore and Worley.

 

Operations consists of Asset Performance, Monitoring & Control and Information Management (PI System). In turn, Asset Performance consists of Asset Performance Management and Manufacturing Executions Systems software. Monitoring & Control includes HMI SCADA, Enterprise Visualisation and Pipeline Management software. Information Management consists of the recently acquired OSIsoft business.

 

Operations contributed 69.1% of pro forma revenue in the period (FY21: 64.9%). On an organic constant currency basis, revenue increased by 14.2%. This revenue growth was due to good performances across the business unit from Asset Performance, Monitoring & Control and in particular, Information Management. The PI System business delivered solid double-digit growth in the year, with performance significantly strengthening in Q4 as the benefits of integration began to take effect. The growth in Monitoring & Control revenue was supported by a significant contract extension and renewal with Schneider Electric, with a substantial element of point-in-time revenue recognition. Other significant orders came from companies including General Mills, PepsiCo, Nestle and Rio Tinto. 

 

Cloud

 

AVEVA made progress during FY22 growing SaaS revenue to £27.8 million representing 23.9% growth on a pro forma organic constant currency basis (FY21: £23.4 million) and orders in annual contract value terms by 89%. Key products were launched on the Group's SaaS platform, AVEVA Connect, during the year including Unified Engineering, Unified Operations Control and Unified Supply Chain. AVEVA is accelerating investment in cloud R&D during FY23 moving products to an industrial hybrid cloud architecture to maximise the opportunities for leveraging data and collaborative working.

 

 

Outlook

 

The ongoing digitalisation of the industrial world continues to drive demand for industrial software and AVEVA is very well positioned with its broad integrated software portfolio to drive sustainable growth. AVEVA's end markets have recovered from the Covid crisis and several key markets are showing positive trends, such as energy, power, shipbuilding and infrastructure.

 

As communicated in the trading update on 27 April 2022, AVEVA intends to drive an acceleration in ARR growth in FY23 to a level of 15% to 20% per annum. This growth will be underpinned by the business model transition to subscription, improving end market conditions, synergies relating to the PI System integration, and price increases. For example, contracts are beginning to be renewed early as energy markets recover; PI System will accelerate its move to subscription; the Group's cloud transition is being accelerated; and AVEVA implemented a substantial list price increase on 1 April 2022.

 

As the transition to subscription and SaaS accelerates in FY23, reported revenue will be reduced by the timing of revenue recognition but ARR will increase. The Group expects contract assets to remain broadly stable, impacting point-in-time revenue recognition as AVEVA increasingly moves towards higher ARR value contracts that have rateable revenue recognition.

 

In addition to this, revenue will be impacted by the war in Ukraine and consequential sanctions on Russia as AVEVA has ceased new business in Russia. The Group continues to support existing non-sanctioned companies where there is no legal basis to terminate contracts. Russia is a relatively small market in the context of the Group, representing around 2% of revenue in FY22. Due to the fixed nature of AVEVA's costs, the loss of revenue will largely drop through to adjusted EBIT.

 

Adjusted EBIT for FY23 will also be impacted by some additional costs. These include wage inflation due to very competitive software labour market conditions; increased travel and event costs post-Covid; together with investment in cloud R&D, cloud sales and cloud operations. Wage inflation will be more than offset by pricing over time; however, most salary increases feed through at the beginning of the financial year, while list price increases only take effect when contracts are renewed, or new business is signed. While the additional investment in cloud was planned, the Board has decided to pull this investment forward to accelerate AVEVA's transition and the impact of this acceleration in cloud will result in around £20m of additional costs in the current financial year.

 

As previously communicated in a trading update on 27 April 2022, taking all of these factors into account, revenue growth is expected to be lower in FY23 than in FY22 on an organic constant currency basis and adjusted EBIT margin is expected to reduce, before resuming growth in FY24. If current rates of FX persist, AVEVA will benefit from a significant currency translation gain on a statutory basis, due to the strength of the US dollar versus Sterling. Cash conversion is expected to significantly improve in FY23 and beyond.

 

 

Peter Herweck

Chief Executive Officer

7 June 2022

 

 

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 statutory results compare the performance of the combined AVEVA and OSIsoft business in FY22 with the standalone AVEVA business plus 12 days of OSIsoft ownership in FY21.

 

The finance review begins with a commentary of those statutory results and then covers pro forma results to show the underlying performance of the combined business.

 

Statutory results

 

On a statutory basis, revenue for the year was £1,185.3 million which was 44.5% higher compared with the previous year (FY21: £820.4 million). This change was due to the inclusion of OSIsoft in the current year and growth in the business, partly offset by negative FX translation due to the relative strengthening of Sterling, particularly in relation to the US Dollar on average during the year, given that the majority of AVEVA's sales are made in US Dollars.

 

Subscription revenue, which includes rental contracts and SaaS contracts, grew 17.9% to £424.2 million (FY21: £359.7 million), primarily due to the growth in the heritage AVEVA business Operations business unit.

 

Maintenance revenue grew by 74.6% to £345.2 million (FY21: £197.7 million), primarily due to the inclusion of OSIsoft in FY22.

 

Perpetual licences grew 107.0% to £293.1 million (FY21: £141.6 million), primarily due to the inclusion of OSIsoft in FY22 and growth in the OSIsoft business.

 

Services revenue grew 1.2% to £122.8 million (FY21: £121.4 million) relating to a focus on growing higher margin software revenue.

 

Total statutory costs increased to £1,203.9 million (FY21: £786.2 million). This increase was mainly due to the acquisition of OSIsoft and the cost of sale, operating cost and amortisation of intangible assets associated with this.

 

As a result of the acquisition the amortisation charge increased to £226.1 million (FY21: £95.7 million). While the cost of sale increased 28.2% to £232.5 million (FY21: £181.3 million), operating costs including amortisation increased 59.2% to £959.3 million (FY21: £602.5 million) and net interest increased from £2.4 million to £12.1 million.

 

Cost of sales was £232.5 million (FY21: £181.3 million) representing an increase of 28.2%. This was below the statutory increase in revenue of 44.5%, due to a lower cost of sale for the OSIsoft business, which has a lower services revenue mix.

 

Research & Development costs were £343.3 million (FY21: £184.5 million) representing an increase of 86.1%. This was due the amortisation of acquired intangible assets, an increase in the scale of the business, growth due to investment in cloud and higher employment costs.

 

Selling and distribution expenses were £345.4 million (FY21: £226.8 million) representing an increase of 52.3%. This was mainly due to the greater scale of the business and additional amortisation.

 

Administrative expenses were £246.3 million (FY21: £193.0 million) representing an increase of 27.6%. This reflected a decrease in exceptional items, which was more than offset by the increased scale of the business and underlying higher costs in IT and legal functions.

 

The Group made a loss before tax of £18.6 million (FY21: profit of £34.2 million). This was largely due to the amortisation of intangible assets relating to AVEVA's combinations with the Schneider Electric industrial software business and OSIsoft, the deferred revenue haircut and exceptional costs.

 

Basic loss per share was 20.8 pence (FY21: EPS 11.4 pence) and diluted loss per share was 20.8 pence (FY21: EPS 11.3 pence).

 

The statutory tax charge was £44.0m (FY21: £9.4 million). This was due to factors including additional taxable profits following the OSIsoft acquisition, US alternative minimum tax and an increase in the UK tax rate from 19% to 25%.

 

Operating cash flow

 

Cash generated from operating activities before tax was £197.2 million, compared to £91.2 million generated in the previous year.

 

This included cash paid in the period in relation to the acquisition of OSIsoft of £67.4 million and other exceptional items of £40.6 million (FY21: £63.2 million).

 

Cash conversion, defined as free cash flow before tax excluding acquisition costs as a proportion of adjusted profit before tax was 62.5% (FY21: 36.8%).

 

Dividends

 

The Directors propose to pay a final dividend of 24.5 pence per share (FY21: 23.5 pence). The final dividend will be payable on 5 August 2022 to shareholders on the register on 8 July 2022.

 

Balance sheet

 

On 31 March 2022, AVEVA had net debt of £405.2 million (31 March 2021: £367.4 million). Net debt is defined as loans and borrowings minus cash and cash equivalents. This reflects the $900 million term loan taken out to partly finance the acquisition of OSIsoft, together with cash of £279.3 million (31 March 2021: £286.6 million).

 

Non-current assets were £5.7 billion (31 March 2021: £5.8 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 were £5.5 billion (31 March 2021: £5.6 billion).

 

Trade and other receivables were £381.2 million (31 March 2021: £318.0 million). Contract assets increased to £302.1 million from £215.6 million at 31 March 2021. This increase included the impact of new subscription contract wins with point in time revenue recognition.

 

Contract liabilities were £328.2 million (31 March 2021: £239.7 million). This increase reflected an increase in Maintenance contract wins and the unwinding of the deferred revenue haircut, which arose from the acquisition of OSIsoft.

 

 

Pro forma results

 

The pro forma results are summarised below:

 

£m

FY22 Unaudited

FY21

Unaudited

Change

Organic constant currency






Revenue

1,235.6

1,196.1

3.3%

7.1%

Cost of sales

(232.3)

(229.1)

1.4%

4.9%

Gross profit

1,003.3

967.0

3.8%

7.7%

Operating expenses

(638.2)

(612.3)

4.2%

7.6%

Adjusted EBIT

365.1

354.7

2.9%

7.7%

Net interest

(12.1)

(16.0)

(24.4)%


Adjusted profit before tax

353.0

338.7

4.2%


Tax charge

(50.6)

(20.1)

151.7%


Adjusted profit after tax

302.4

318.6

(5.1)%







Adjusted diluted EPS (pence)

99.6

105.3

(5.4)%

-

Gross margin

81.2%

80.8%

+40bps

+40bps

Adjusted EBIT margin

29.5%

29.7%

(20)bps

+30bps

Tax charge

14.3%

5.9%

+840bps

-

 

Pro forma results include results for both AVEVA and OSIsoft for the 12 months to 31 March 2022 and the 12 months to 31 March 2021. In addition to this, the results have been adjusted to exclude the effect of the deferred revenue haircut under IFRS 3 (Business Combinations).

 

Adjusted metrics are calculated before amortisation of intangible assets, share-based payments and exceptional items. Adjusted Earnings Per Share also includes the tax effects of these adjustments.

 

 

Pro forma revenue

 

Revenue was £1,235.6 million, representing an increase of 3.3% (FY21: £1,196.1 million). Organic constant currency revenue grew 7.1%, adjusted for a currency translation headwind of £42.5 million and minor disposals in the current year.

 

The revenue mix for the combined Group is shown below:

 

£m

FY22

FY21

Reported change

Organic constant currency change

% of FY22 total

On-premises rental

396.4

364.0

8.9%

11.5%

32.1%

SaaS

27.8

23.4

18.8%

23.9%

2.2%

Total subscription revenue

424.2

387.4

9.5%

12.3%

34.3%

Maintenance

395.5

412.8

(4.2)%

0.4%

32.0%

Total recurring revenue

819.7

800.2

2.4%

6.2%

66.3%

Perpetual licences

293.1

271.2

8.1%

12.2%

23.7%

Services

122.8

124.7

(1.5)%

2.5%

10.0%

Total

1,235.6

1,196.1

3.3%

7.1%

100.0%

 

 

Subscription revenue growth was driven by sales of on-premises rental contracts within the heritage AVEVA business as the transition to a recuring revenue model continued and also subscription growth from OSIsoft, as it began its business model transition. Within subscription, SaaS revenue grew 18.8% to £27.8 million (FY21: £23.4 million) which was due to sales of cloud solutions such as Value Chain Optimisation, Asset Information Management and Unified Engineering. On an organic constant currency basis the increase was 23.9%.

 

Maintenance revenue was driven by growth associated with the OSIsoft business, which more than offset a decline at the heritage AVEVA business due to the planned subscription transition.

 

Perpetual licence increase was driven by strong growth from the heritage OSIsoft business, ahead of its move to a subscription business model.

 

Services revenue was driven by growth in the overall business, partly offset by a focus on higher margin software revenue.

 

The revenue mix for the combined Group showing point in time versus overtime revenue recognition is shown below:

 


FY22

FY21

£m

Revenue point in time

Revenue over time

Total

Revenue point in time

Revenue over time

Total


 

 

 

 



On-premises rental

280.7

115.7

396.4

259.6

104.4

364.0

SaaS

-

27.8

27.8

-

23.4

23.4

Total subscription

280.7

143.5

424.2

259.6

127.8

387.4

Maintenance

-

395.5

395.5

-

412.8

412.8

Total recurring revenue

280.7

539.0

819.7

259.6

540.6

800.2

Perpetual licences

293.1

-

293.1

271.2

-

271.2

Services

-

122.8

122.8

-

124.7

124.7

Total

573.8

661.8

1,235.6

530.8

665.3

1,196.1

 

Of the total revenue recognised in FY22, £661.8 million (FY21: £665.3 million) was recognised over time representing 53.6% of the total (FY21: 55.6%), demonstrating that AVEVA already has a significant amount of revenue which is recognised rateably. 

 

Revenue recognised at a point in time was £573.8 million (FY21: £530.8 million) representing 46.4% of total revenue (FY21: 44.4%). Of this £280.7 million (FY21: £259.6 million) related to on-premises rental subscription contracts and represented 22.7% of total revenue in the year (FY21: 21.7%), showing that this element is relatively stable year on year.

 

At 31 March 2022, the Group had a revenue backlog of £781.4 million (FY21: £657.9 million) representing remaining performance obligations which have not been met or are partially met. Of this £487.8 million (FY21: £425.8 million) will be recognisable within one year.

 

 

Pro forma costs

 

An analysis of total expenses is summarised below.

£m

Cost of sales

R&D

Selling and distribution

Admin.

Net impairment gain / loss from financial assets

Total

Adjusted costs

232.3

178.2

280.7

179.9

(0.6)

870.5








FY21

229.1

168.5

278.1

162.1

3.6

841.4

Change

1.4%

5.8%

0.9%

11.0%

(116.7)%

3.5%

Organic constant currency

4.9%

9.2%

4.2%

14.7%

(113.9)%

6.9%

 

 

Cost of sales increased largely due to the growth in the business and included higher cloud hosting and infrastructure costs.

 

Research & Development costs increased due to investment in the development of cloud products and also reflects higher employment costs, reflecting a very competitive labour market.

 

Selling and distribution expenses increased mainly due to increased sales commissions and sales employment costs.

 

Administrative expenses increased largely due to higher costs in IT and legal functions with increases in capacity being needed as the business scales.

 

Net impairment loss from financial assets represents the impairment of accounts receivable and contract assets. The reversal of provisions made during the Covid crisis in FY21, offset by the impairment of assets in Russia, led to a net positive impact in FY22.

 

Pro forma adjusted EBIT

 

Adjusted EBIT increased by 2.9% to £365.1 million (FY21: £354.7 million). This resulted in an adjusted EBIT margin of 29.5% (FY21: 29.7%), which was up +30bps on an organic constant currency basis.

 

Pro forma net interest charge

 

The combined pro forma interest charge assumes that the £685.1 million term loan was drawn down on 1 April 2020 and therefore a full year's interest is charged in each period. Total net interest was £12.1 million (FY21: £16.0 million). The year-on-year reduction was largely due to lower LIBOR rates.

 

Pro forma taxation

 

The pro forma tax charge on adjusted profit before tax was £50.6 million (FY21: £20.1 million), which equates to an effective tax rate of 14.3% (FY21: 5.9%). This tax charge factors in the benefit of UK tax incentives on intellectual property and US tax deductions for the amortisation of goodwill relating to the acquisition of OSIsoft. The year-on-year increase was due to increased US Alternative Minimum Tax and irrecoverable withholding tax. The tax rate on adjusted profit before tax is expected to remain at or below the level seen in FY22 going forward.

 

Pro forma earnings per share

 

Pro forma diluted adjusted EPS decreased by 5.4% to 99.6 pence (FY21: 105.3 pence) as a result of the higher adjusted EBIT and lower interest, being more than offset by a higher tax charge.

 

 

Normalised and exceptional items

 

The normalised and exceptional items below have been excluded in presenting the adjusted results.

 

£m

FY22

FY21

Acquisition costs relating to OSIsoft

0.8

44.4

Integration of OSIsoft

28.0

6.1

Integration of Schneider Electric industrial software business

13.5

27.6

Disposals

2.8

-

Retirement of steel fabrication business

15.4

-

Impairment of balances with Russian-based counterparties

7.3

-

Gain on disposal of pension scheme

-

(0.3)

Total exceptional items

67.8

77.8


 


Amortisation

226.1

95.7

Share-based payments

27.4

16.3

Total normalised items

253.5

112.0

 

Exceptional costs incurred in the integration of OSIsoft, primarily consisting of consultancy and adviser fees and additional temporary resources paid relating to the merging of IT systems and real estate, and rebranding. Costs are anticipated to continue until mid-calendar 2023.

 

In the year-ended 31 March 2022, Schneider Electric industrial software business integration costs primarily related to the continued build and implementation of a global ERP system and legal entity rationalisation. These costs are expected to continue until mid-calendar 2024.

 

A £14.9 million impairment of intangible assets associated with the Group's steel fabrication business (£10.9 million and £4.0 million of developed technology and customer relationships respectively) was recognised following the announcement in July 2021 of these products' retirement. Restructuring costs of £0.5 million have also been incurred.

 

As a result of the invasion of Ukraine by Russia, and the subsequent sanctions enforced by the UK and US governments, the Group fully provided against an additional £4.9 million of trade receivables, £1.0 million of amounts owed by related parties, and £1.4 million of contract assets held with entities within Russia at 31 March 2022.

 

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 and the amortisation of intangibles relating to the OSIsoft acquisition. Of the £226.1 million amortisation charge, £147.6 million relates to the intangibles acquired through the OSIsoft acquisition.

 

The increase in share-based payments reflects the increase in the size of AVEVA's business post the acquisition of OSIsoft.

 

Brian DiBenedetto

Chief Financial Officer

7 June 2022

 

 

 

Review of principal risks and uncertainties

 

Approach to risk management

We further strengthened our risk management approach and the supporting Group risk function throughout the fiscal year. The Board of Directors retains overall responsibility for the Group's risk management approach, supported by the Executive Risk Committee, which includes all Executive Directors and relevant stakeholders across the business. The Executive Risk Committee meets quarterly to oversee our principal and emerging risks, challenge the acceptability of risk exposure and monitor the adequacy of risk management and mitigation. Through this process, we avoid exceeding our risk tolerance as defined by our Group-wide risk appetite.

 

Key changes in the year

Industrial digitalisation strategy - Movement towards industrial digitalisation has accelerated within the last 24 months, and our customers understand and accept the need to evolve. With less need to convince customers to digitalise, it is less likely our strategy to capitalise on the opportunities of industrial digital transformation could fail or not provide the expected levels of return. This risk has been removed from our principal risks as the market has evolved and we do not deem this to be a material threat over the next 18 months.

 

SaaS subscription - We previously reported on separate principal risks for Cloud and Subscription. These are now combined into one risk, ultimately linked to growth of SaaS subscriptions.

 

Strategic risks

 

Risk

Mitigation

 

Talent

As a technology company, we are heavily reliant on the people we employ and we compete for the best talent globally. 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 our success.

 

The AVEVA brand must remain attractive for us to successfully attract and retain developers, technical sales staff, consultants and leadership.

 

Talent recruitment and retention challenges have increased globally in the last 12 months, caused by the pandemic and subsequent impacts including changing work-life balance requirements and employer responses (compensation packages, remote working opportunities and wellbeing). The need to retain talent during the key integration of our recent acquisition has also contributed to a continued high risk in the last 12 months.

 

 

In the past 12 months, we improved the tracking and visibility of attrition rates. We are also introducing new approaches to succession planning.

 

Additional mitigations we undertook in the last fiscal year include:

·      Building talent pipelines in niche/hard-to-hire areas;

·      Using AVEVA's connections to Schneider Electric to source talent, including talent rotation programmes;

·      Review of compensation packages in various territories;

·      Improving talent review processes;

·      Increasing in-house talent acquisition expertise;

·      Partnering with universities;

·      Leveraging employee referral programmes; and

·      Strengthening employee engagement activities.

 

We seek to ensure that employees are motivated in their work and receive regular appraisals and encouragement to develop their skills. Annually, there is a Group-wide salary review that rewards strong performance and ensures salaries remain competitive. Commission and bonus schemes help to ensure that both AVEVA's success and individual achievement are appropriately rewarded.

 

Risk

 

 

SaaS subscription

This risk encompasses all the risk elements related to our shift towards a SaaS subscription model, including product and portfolio readiness, cloud strategy and capabilities, the current structure of the organisation and ability to scale, and competition from other large platform providers and system integrators. Failure to move towards a SaaS subscription model could negatively impact recurring revenue and cash flow generation.

Mitigation

 

 

 

The shift to cloud is a core theme of our five-year business planning process, with functional strategies and investments aligned with our strategic plans.

 

We also have a multi-year business transformation programme to drive operational readiness for the shift to SaaS and grow AVEVA's user base through access to new markets and additional cloud products. Targeted investments have also been made in sales and marketing.

 

Risk

 

 

Sustainability

Increased focus on sustainability and greater stakeholder expectations for management of ESG issues creates reputational, regulatory and product related risk for AVEVA. If not well-managed, this risk could lead to:

·      loss of existing customers or failure to acquire new customers;

·      failure to maintain our ratings in sustainable investment indices and broader reputational impact, leading to loss of investment;

·      failure to attract or retain the talent and niche skills our business requires; and

·      failure to meet new ESG-related reporting regulations.

Mitigation

 

 

 

During FY22, we established a dedicated sustainability function and ESG governance structure. To inform the company's prioritisation of ESG management, target-setting, and disclosures, we conducted a robust materiality assessment.

 

A key pillar of our ESG framework is to reduce reliance on fossil fuel industries by seizing opportunities to help customers use digitalisation to thrive in a low-carbon future. To increase what we call our technology handprint, or impact, we are developing sustainability-related offerings and product features and further leveraging AVEVA's partner ecosystems. Sustainability-focused marketing and sales enablement strategies are also in place to support diversification.

 

We disclose climate-related risks and opportunities in accordance with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). In addition, our climate goals include a near term science-based target and a net-zero commitment.

 

Risk

 

 

Integration

In 2021, we acquired OSIsoft, now operated as the PI Business within AVEVA. We spent much of the last 12 months ensuring the successful integration of this acquisition.

 

The primary risks we have been addressing as we integrate the PI Business are:

·      employee turnover;

·      achievement of cost and revenue synergies;

·      integrating business processes and systems; and

·      the risk of disruptive change to core operations.

Mitigation

 

 

 

We set up and are running a comprehensive integration programme, led by our SVP of Integration. This process is overseen by an Integration Management Office Steering Committee, headed by the CEO. As part of this programme, we established cross-organisational workstreams for all major and enabling functions impacted by the integration.

 

The organisation design workstream, for example, is nearly complete, with ongoing checks on employee engagement. To drive our revenue synergies while addressing employee attrition risks, we accelerated recruitment for key revenue-driving skills in the midst of a challenging recruitment market. We also created the right sales operating model with incentives aligned to market dynamics.

 

Some projects to integrate business processes and address systems risk are ongoing, including development of campaign-to-cash processes, office consolidation, and extensive product, portfolio and R&D planning.

 

New corporate values and behaviours were communicated throughout the business, and there have been numerous employee engagement and change initiatives delivered throughout the year to counter the impact of disruptive change.

 

External risks


Risk

Mitigation

 

Competitors

We operate in highly competitive markets. Other technology companies could acquire, merge or move into AVEVA's market space to compete with our offerings, creating a material threat. Existing competitors could also respond more quickly to market demands and trends, resulting in reduced market share and missed growth opportunities. Our industry is characterised by rapid technological change, evolving industry standards, evolving business models and consolidations.

 

In an environment of continuing uncertainty, it is likely that competitor strategies may change or consolidations in our industry could negatively impact our business. Potential negative impacts include increased pricing pressure, cost increases, the loss of market share due to competitor cooperation and, consequently, a reduced 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 needs.

 

The integration of our PI Business further mitigates this risk, providing us with a distinct competitive advantage and market position.

 

Other mitigations include leveraging our relationship with Schneider Electric, attractive proposals for additional complementary products for existing customers, and flexibility to meet changing market demands and competitive forces.

 

Risk

 

 

Dependency on energy sector

Approximately a third of our revenue is derived from customers in the energy sector, particularly oil and gas companies.

 

In the event of a downturn in energy markets, customers may have less funding for capital projects or additional operational commitments, including the purchase of AVEVA's software products. Significant end-market downturns could materially impact our revenues and profits.

 

Mitigation

 

 

 

Our products deliver Capex certainty and Opex reduction, providing meaningful efficiency.

 

Our extensive global presence provides diversification and allows us to avoid over-reliance on specific geographic markets.

 

In FY22, about 33% of our revenue was attributable to customers operating in the energy sector. This represents a decrease from FY21, when 50% was attributable. This change is primarily a result of the OSIsoft acquisition.

 

AVEVA's move towards a subscription-based licensing model further mitigates this risk, as it offers customers greater flexibility over their expenditure. We also continue to leverage our relationship with Schneider Electric to expand into other sectors.

 

In the event of a downturn in the energy market, AVEVA's products act as a natural hedge for one another, with decrease in revenue from Capex likely to be offset by an increase in revenue from Opex as customers look to further optimise their operations.

 

Risk

 

 

Product security

AVEVA's products are complex and new products or enhancements may contain undetected errors, failures, performance problems or defects which may impact our strong reputation with our customers or create negative financial implications.

 

This risk reflects AVEVA's portfolio of products, their functionality and increasing threats in the external cyber environment.

 

The risk level increased during FY22, in part due to the acquisition of the PI business and related growth in our product portfolio. The risk of cyber conflict also increased as the Ukraine crisis developed.

Mitigation

 

 

 

Our products are extensively tested prior to commercial launch. In addition, AVEVA has a robust security development life cycle as a key component of our overall software development process, and we have created formal and collaborative relationships with third-party security researchers, security organisations and regulatory entities to proactively ensure our software is as safe and secure as is reasonable.

 

As part of the integration of our PI Business, we have combined security best practices from both entities, further strengthening our approach.

 

Our threat intelligence capabilities were enhanced throughout the year in response to the cyber security risk to the corporate environment, and product security teams have been able to leverage this information to improve their defences.

 

AVEVA also implemented a sabotage resistance programme across the company during FY22, increasing resistance to insider threat.

 

Risk

 

 

Cyber security

Cyber and physical threats continue to grow. We depend on our IT systems not only to run our business but also to deliver services and capabilities to customers, compounding our exposure to this risk.

 

The risk remains elevated due to higher cyber threats associated with remote working, recent developments in Ukraine, and other global or market events impacting supply chain and cloud providers.

Mitigation

 

 

 

 

To reduce our risk, we conduct continual security assessments of our digital assets. This is combined with regular external penetration testing to ensure a suitable security posture is maintained.

 

Our global security team focuses on: reducing the likelihood of regulatory sanctions and fines being levied; protecting our brand and our digital and physical assets; protecting customer and employee data; and building stakeholders' confidence in our overall security posture.

 

We measure ourself against the NIST Cyber Security Framework and the maturity of our cyber and security controls is audited by independent third-party accessors. These steps constitute a continual verification and improvement programme.

 

We are ISO27001 certified for our R&D function and continue to maintain SOC2 compliance.

 

We constantly assess and adapt our security capabilities in response to the emerging threat landscape and remain fully committed to protecting the confidentiality, integrity and availability of our infrastructure.

 

Risk

 

 

Regulatory compliance

AVEVA operates through direct and indirect sales channels and must comply with both international and local laws in each country of operation. If one or more employees acting on our behalf commit, or are alleged to have committed, a violation of law, we could face substantial costs and severe financial penalties and reputational damage. Applicable regulatory risks include geopolitical risk, trade compliance, data protection and privacy, anti-trust, anti-bribery and corruption.

 

Schneider Electric is a major re-seller for AVEVA and major shareholder. We are subject to related-party transaction obligations with respect to our relationship with Schneider Electric.

Mitigation

 

 

 

Compliance policies and guidance materials for our employees and external partners are combined with regular, targeted communications and training platforms.

 

Local management teams are supported by local professional advisors. Corporate legal and finance functions provide further oversight and regularly receive support from external advisors.

 

Dedicated compliance resources, including software and people, enhance management and monitoring of this principal risk.

 

As part of our integration of our recent acquisition of OSIsoft, work is ongoing to harmonise compliance programmes.

 

Risk

 

 

Pandemic-related economic disruption

Because of the global Covid-19 pandemic, AVEVA, like many global companies, operates in an environment with 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 that we serve or the potential for restricted access to funding.

 

Our customers may seek to minimise expenditures by terminating subscriptions or licence arrangements, or attempting to renegotiate or delay previously-agreed payment dates. Customers may also be more cautious and take more time to make purchase decisions.

 

Mitigation

 

 

 

Our business remains in a strong cash and financial position. Our leadership continues to review our financial position and is prepared to take mitigating steps as necessary.

 

As mentioned above, our products deliver Capex certainty and Opex reduction for meaningful efficiency in periods of economic and trading disruption. We are also committed to supporting our valued customers and meeting their needs.

Operational risks


Description

Mitigation

Internal IT systems (suitability and continuity)

We seek to deliver uninterrupted customer and employee services and experiences, supported by our functional IT strategy.

 

We outsource certain IT-related functions to third parties that are responsible for maintaining their own network security, disaster recovery and systems management procedures. If such third-party IT vendors fail to manage their IT systems and related software applications effectively, this could severely impact AVEVA.

 

During the fiscal year, we made significant improvements to address the legacy risk in our application and infrastructure services.

 

A key strategic programme to support mitigations is in place. It features committed investment, executive support and a global multi-phase plan.

 

For our third-party providers, we are now undertaking a more formal approach with questionnaires and assessments of capabilities before commercial commitment is finalised.

 

To ensure successful business outcomes, we engage external third-party advisors and use best practice metrics and governance.

 

Disruptive risks


Description

Mitigation

Disruptive technologies

New and unforeseen technology, software or business models threatening our value offering could be developed and become commercially viable. This would impact our profits and prospects.

 

The potential threats seeking to capitalise on digitalisation trends continue but have not increased.

 

This risk is primarily mitigated through our own innovation initiatives, and remaining at the forefront of technological advances. This is a core strategic strength of our company. In addition, we continually scan the disruptive technology environment to ensure we stay informed and well positioned to respond to any material threats.

 

 

 

Consolidated Income Statement

for the year ended 31 March 2022

 



2022

2021


Notes

£m

£m

Revenue

3,4

1,185.3

820.4

Cost of sales


(232.5)

(181.3)

Gross profit


952.8

639.1

Operating expenses


 


Research & Development costs


(343.3)

(184.5)

Selling and distribution expenses


(345.4)

(226.8)

Administrative expenses


(246.3)

(193.0)

Net impairment loss on financial assets


(6.7)

(3.7)

Other (expense)/income

5

(17.6)

5.5

Total operating expenses


(959.3)

(602.5)

(Loss)/profit from operations


(6.5)

36.6

Finance revenue


1.9

0.6

Finance expense


(14.0)

(3.0)

(Loss)/profit before tax from continuing operations


(18.6)

34.2

Income tax expense

6

(44.0)

(9.4)

(Loss)/profit for the year attributable to equity holders of the parent


(62.6)

24.8



 


(Loss)/profit from operations


(6.5)

Amortisation of intangible assets


226.1

Share-based payments


27.4

Exceptional items

5

67.8

77.8

Adjusted EBIT

1

314.8

226.4

 

 

(Loss)/earnings per share (pence)




•   basic

8

(20.78)

•   diluted

8

(20.78)

11.27

 

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 2022

 



2022

2021


Notes

£m

£m

(Loss)/profit for the year


(62.6)

24.8

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


 


Exchange gain arising on translation of foreign operations


159.1

20.7

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


159.1

20.7

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


 


Actuarial remeasurements on retirement benefits


3.4

(2.5)

Deferred tax on actuarial remeasurements on retirement benefits

6

(2.2)

0.5

Deferred tax on losses and other timing differences

6

2.9

-

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


4.1

(2.0)

Total comprehensive income for the year, net of tax


100.6

43.5

 

The accompanying notes are an integral part of this Consolidated Statement of Comprehensive Income.

 

 

 

Consolidated Balance Sheet

31 March 2022

 



2022

2021


Notes

£m

£m

Non-current assets


 


Goodwill


4,004.6

3,904.1

Other intangible assets


1,472.5

1,662.3

Property, plant and equipment


44.7

48.5

Right-of-use assets


95.1

111.9

Deferred tax assets


47.2

21.4

Trade and other receivables

10

8.4

19.4

Customer acquisition costs


6.3

0.3

Investments


0.4

0.4

Retirement benefit surplus


16.6

13.1



5,695.8

5,781.4

Current assets


 


Trade and other receivables

10

381.2

318.0

Contract assets


302.1

215.6

Cash and cash equivalents

11

279.3

286.6

Restricted cash

11

-

7.3

Current tax assets


12.1

18.9



974.7

846.4

Total assets


6,670.5

6,627.8

Equity


 


Issued share capital


10.7

10.7

Share premium


2,842.1

3,842.1

Other reserves


1,370.4

1,209.6

Retained earnings


986.0

130.3

Total equity


5,209.2

5,192.7

Current liabilities


 


Trade and other payables

12

224.0

271.3

Contract liabilities

3

328.2

239.7

Lease liabilities


22.1

22.9

Current tax liabilities


33.8

45.6



608.1

579.5

Non-current liabilities


 


Loans and borrowings


684.5

654.0

Lease liabilities


73.3

88.9

Deferred tax liabilities


71.2

82.0

Other liabilities

12

10.7

18.2

Retirement benefit obligations


13.5

12.5



853.2

855.6

Total equity and liabilities


6,670.5

6,627.8

 

 

The accompanying notes are an integral part of this Consolidated Balance Sheet.

 

 

 

Consolidated Statement of Changes in Shareholders' Equity

31 March 2022

 





Other reserves






Share capital

Share premium

Merger reserve

Cumulative translation adjustments

Capital redemption reserve

Reverse acquisition reserve

Treasury shares

Total other reserves

Retained earnings

Total equity


£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

At 1 April 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/(loss)

-

-

-

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-based payments

-

-

-

-

-

-

-

-

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

Loss for the year

-

-

-

-

-

-

-

-

(62.6)

(62.6)

Other comprehensive income

-

-

-

159.1

-

-

-

159.1

4.1

163.2

Total comprehensive income/(loss)

-

-

-

159.1

-

-

-

159.1

(58.5)

100.6

Share-based payments

-

-

-

-

-

-

-

-

27.4

27.4

Tax arising on share-based payments

-

-

-

-

-

-

-

-

(0.2)

(0.2)

Investment in own shares

-

-

-

-

-

-

(1.3)

(1.3)

-

(1.3)

Cost of employee benefit trust shares issued to employees

-

-

-

-

-

-

3.0

3.0

(3.0)

-

Equity dividends

-

-

-

-

-

-

-

-

(110.0)

(110.0)

Capital reduction

-

(1,000.0)

-

-

-

-

-

-

1,000.0

-

At 31 March 2022

10.7

2,842.1

615.6

202.4

101.7

452.5

(1.8)

1,370.4

986.0

5,209.2

 

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 2022

 



2022

2021


Notes

£m

£m

Cash flows from operating activities


 


(Loss)/profit for the year


(62.6)

24.8

Income tax expense

6

44.0

9.4

Net finance expense


12.1

2.4

Amortisation of intangible assets


226.1

96.3

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


36.6

28.2

Loss on disposal of property, plant and equipment


0.4

1.0

Impairment of intangible assets

5

14.9

-

Gain on disposal of pension scheme


-

(0.3)

Loss on disposal of subsidiaries

5,9

2.8

-

Share-based payments


27.4

16.3

Difference between pension contributions paid and amounts charged to operating profit


(0.5)

0.3

Research & Development expenditure tax credit


(2.2)

(3.1)

Changes in working capital:


 


Trade and other receivables


(53.6)

(5.5)

Contract assets


(78.3)

(70.8)

Customer acquisition costs


(5.4)

(0.3)

Trade and other payables


(45.5)

5.5

Contract liabilities


81.0

(13.0)

Cash generated from operating activities before tax


197.2

91.2

Income taxes paid


(59.8)

(32.8)

Net cash generated from operating activities


137.4

58.4

Cash flows from investing activities


 


Purchase of property, plant and equipment


(8.6)

(10.9)

Purchase of intangible assets


-

(0.5)

Payment on disposal of pension scheme


-

(0.3)

Acquisition of subsidiaries, net of cash acquired

9

-

(3,029.5)

Adjustment to consideration on completion of business combination


6.2

-

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 business, net of cash

9

1.6

-

Interest received


1.9

0.3

Net cash generated/(used) in investing activities


1.1

(3,122.4)

Cash flows from financing activities


 


Interest paid


(12.7)

(2.8)

Purchase of own shares


(1.3)

(1.1)

Proceeds from borrowings, net of fees incurred


-

645.6

Payment of principal element of lease liability


(23.3)

(18.5)

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

7

(110.0)

(82.4)

Net cash generated/(used) in financing activities


(147.3)

3,345.7

Net (decrease)/increase in cash and cash equivalents


(8.8)

281.7

Net foreign exchange difference


1.5

(109.6)

Opening cash and cash equivalents

11

286.6

114.5

Closing cash and cash equivalents

11

279.3

286.6

 

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 UK-adopted IASs. 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.

 

Except for the application of UK-adopted IASs, for which there are no material differences from IFRSs as issued by the IASB and adopted by the EU when applied to the Group, accounting policies have been applied consistently to all years presented unless otherwise stated.

 

The preliminary announcement covers the period from 1 April 2021 to 31 March 2022 and was approved by the Board on 7 June 2022. 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 2022 or 31 March 2021. The accounts for the year ended 31 March 2021 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 March 2022 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 2022 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 15 July 2022. 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 multiple non-GAAP measures. They are not defined by IFRSs and therefore may not be directly comparable with similarly titled measures of other companies. They are not intended to be a substitute for, or superior to, GAAP measures. Additional information for all non-GAAP measures, including definitions, rationale for their presentation, and reconciliations from the closest IFRS measure is provided in the Non-GAAP Measures section below.

 

The main non-GAAP presentations are adjusted and pro forma results.

 

Adjusted results

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 affect the understanding of the performance for the year and the comparability between periods.

 

Adjusted earnings before interest and tax (EBIT) is presented on the face of the Consolidated Income Statement and is reconciled to profit from operations as required to be presented under the applicable accounting standards. The Directors believe that this alternative measure of profit provides a reliable and consistent measure of the Group's underlying performance.

 

Adjusted earnings per share is calculated having adjusted profit after tax for the normalised and exceptional items, their tax effect, the deferred revenue haircut arising due to the fair valuing of OSIsoft's contract liabilities on acquisition, and the tax effect of the deferred revenue haircut.

 

Normalised items

These are recurring items which management considers could affect the underlying results of the Group.

 

These items relate to:

·      amortisation of intangible assets;

·      share-based payment charges; and

·      tax step up due to intangible assets recognised on acquisition of OSIsoft, LLC.

 

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.

 

Management considers these items to not reflect the underlying performance of the Group.

 

In the year ended 31 March 2022, the following changes have been made to the definition of normalised items:

·      inclusion of the impact of the tax step up arising on the acquisition of OSIsoft;

·      removal of the impact of fair value adjustments on financial derivatives; and

·      inclusion of the impact of amortisation of other software.

 

Further commentary and explanation of these changes is provided in the Non-GAAP Measures section below.

 

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. Exceptional items are discussed further in note 6.

 

Management considers these significant, non-recurring-items to be inherently not reflective of the future or underlying performance of the Group.

 

Pro forma results

For the year ended 31 March 2022, pro forma results are the Group's adjusted results with an additional adjustment to add back the deferred revenue haircut arising due to the fair valuing of OSIsoft's contract liabilities on acquisition. Pro forma results do not form part of the financial statements and are unaudited.

 

For the year ended 31 March 2021, pro forma results are the Group's adjusted results adjusted for the deferred revenue haircut, with the addition of pre-acquisition OSIsoft results for the period. It is assumed no synergies or trading between the groups occurred, and that the term loan used to finance the acquisition was entered into on 1 April 2020.

 

These are presented to increase year-on-year comparability, given the significant impact of the OSIsoft acquisition upon the Group's results.

 

Going concern

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 upon the Group of the global Covid-19 pandemic and economic sanctions following the Russian invasion of Ukraine, and reviews of liquidity and covenant forecasts.

 

At 31 March 2022, the Group held external debt in the form of a £685.1 million (US$ 900.0 million) term loan, due for repayment in March 2024. The Group has access to a £250.0 million Revolving Credit Facility (RCF), of which nil was drawn down at 31 March 2022. This facility is due for renewal in February 2025, with a one-year extension option subject to lender approval.

 

To support the going concern conclusion, the Group has developed several working capital financial models covering the period from the signing of the financial statements to 30 September 2023. The specific scenarios modelled are:

 

Scenario

Outcome

Base case

Based upon the Group's most recent Board approved forecasts to 31 March 2027. These are the same forecasts used in the viability statement and VIU model used for impairment testing.

 

The Group is not in breach of any financial covenants and is not required to draw down on the RCF. The Group is able to meet all forecasted obligations as they fall due.

 

Sensitised

A severe downside scenario, including reducing revenue

(10% from the base case), and introducing delays in cash collection (10% increase from the base case).

 

The Group is not in breach of any financial covenants and is not required to draw down on the RCF. The Group is able to meet all forecasted obligations as they fall due.

 

Reverse stress case

A scenario created to model the circumstances required to breach the Group's credit facilities within the going concern period. This includes reducing revenue (18% decrease from the base case) and delays in cash collection (10 day increase in debtor days from the base case).

 

This resulted in a covenant breach at the end of the going concern period. Management believes the possibility of this combination of severe downsides arising to be remote, and that there are numerous mitigating actions which could be taken to avoid a covenant breach. The impact of these mitigating actions were not considered in the scenario modelling.

 

 

Should extreme downside scenarios occur, there are several mitigating actions the Group could take to avoid covenant breaches to maintain liquidity headroom under existing debt facilities. These include cancellation or deferral of dividend payments and reductions in other discretionary spending costs.

 

The financial statements for the year ended 31 March 2022 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 2021. 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:

 


Services transferred at a point in time

Services transferred over time

Total

Year ended 31 March 2022

£m

£m

£m

On-premises rental

280.7

115.7

396.4

SaaS

-

27.8

27.8

Total subscription revenue

280.7

143.5

424.2

Maintenance

-

345.2

345.2

Perpetual licences

293.1

-

293.1

Services

-

122.8

122.8


573.8

611.5

1,185.3

 


Services transferred at a point in time

Services transferred over time

Total

Year ended 31 March 2021

£m

£m

£m

On-premises rental

236.1

100.2

336.3

SaaS

-

23.4

23.4

Total subscription revenue

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

 

Contract balances are as follows:


2022

2021

2020


£m

£m

£m

Trade receivables (non-current)

0.2

0.7

2.0

Trade receivables (current)

287.3

245.3

181.2

Contract assets

302.1

215.6

142.4

Contract liabilities

328.2

239.7

177.0

 

Contract assets have increased year-on-year predominantly due to an increase in the number and value of multi-year subscription licenses (rentals). The structure of these contracts results in the cumulative revenue recognised in the initial years being higher than the invoiced total. Contract assets are stated net of a provision of £2.0 million (2021: £7.7 million). The provision has decreased year-on-year due to the reversal of an historical forward-looking provision made due to the uncertainty caused by the onset of the Covid-19 pandemic. As there is limited evidence that Covid-19 has harmed cash collection, management believes this is no longer required. This has been offset by a provision of £1.4 million relating to contract assets with counterparties based in Russia. See note 6 for further information.

 

Trade receivables increased year-on-year as a result of revenue growth in the last quarter of the year. Contract liabilities have increased primarily due to the impact of the reduction in prior year contract liabilities caused by the revenue haircut taken on acquisition of OSIsoft, LLC.

 

Revenue for the year ended 31 March 2022 includes £215.8 million (2021: £159.3 million) which was included in contract liabilities at the beginning of the year. Revenue of £3.1 million (2021: £3.1 million) recognised in the year ended 31 March 2022 related to performance obligations satisfied in previous years.

 

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


2022

2021


£m

£m

Within one year

487.8

425.8

More than one year

293.6

232.1

 

 

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 Technology, Finance and Legal. Balance sheet information is not included in the information provided to the ELT.

 


Year ended 31 March 2022


Americas

Asia Pacific

EMEA

Corporate

Total

 


£m

£m

£m

£m

£m

 

Revenue






 

On-premises rental

134.2

81.5

180.7

-

396.4

 

SaaS

9.3

4.9

13.6

-

27.8

 

Total subscription revenue

143.5

86.4

194.3

-

424.2

 

Maintenance

170.7

58.8

115.7

-

345.2

 

Perpetual licences

105.6

84.6

102.9

-

293.1

 

Services

47.2

30.3

45.3

-

122.8

 

Regional revenue total

467.0

260.1

458.2

-

1,185.3

 

Adjusted cost of sales1

(53.6)

(22.1)

(39.9)

(116.7)

(232.3)

 

Adjusted selling and distribution expenses1

(98.2)

(51.0)

(97.3)

(34.2)

(280.7)

 

Adjusted administrative expenses1

-

-

-

(179.9)

(179.9)

 

Net impairment loss on financial assets

-

2.0

(1.4)

-

0.6

 

Regional contribution

315.2

189.0

319.6

(330.8)

493.0

 

Adjusted Research & Development costs1





(178.2)

 

Adjusted EBIT

 

 

 

 

314.8

 

Exceptional items, normalised items1 and net interest





(333.4)

 

Loss before tax

 

 

 

 

(18.6)

 

1.     Adjusted cost of sales, adjusted selling and distribution expenses, adjusted administrative expenses and adjusted Research & Development costs exclude the impact of exceptional and normalised items. Normalised items include amortisation of intangible assets and share-based payments.

 

 


Year ended 31 March 2021


Americas

Asia Pacific

EMEA

Corporate

Total


£m

£m

£m

£m

£m

Revenue






On-premises rental

84.5

90.1

161.7

-

336.3

SaaS

10.1

5.4

7.9

-

23.4

Total subscription revenue

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

Adjusted cost of sales1

(50.0)

(19.8)

(39.9)

(70.8)

(180.5)

Adjusted selling and distribution expenses1

(64.4)

(40.7)

(68.0)

(21.2)

(194.3)

Adjusted administrative expenses1

-

-

-

(97.8)

(97.8)

Net impairment loss on financial assets

(1.0)

(1.8)

(0.9)

-

(3.7)

Regional contribution

150.0

159.0

224.9

(189.8)

344.1

Adjusted Research & Development costs1





(116.4)

Adjusted EBIT

 

 

 

 

227.7

Exceptional items, normalised items1 and net interest





(193.5)

Profit before tax

 

 

 

 

34.2

1.     Adjusted cost of sales, adjusted selling and distribution expenses, adjusted administrative expenses and adjusted Research & Development costs exclude the impact of exceptional and normalised items. Normalised items include amortisation of intangible assets and share-based payments.

 

 

5.   Exceptional items


2022

2021


£m

£m

Acquisition of OSIsoft

0.8

44.4

Integration of OSIsoft and associated activities

28.0

6.1

Integration of SES and associated activities

13.5

27.6

Disposal of Acquis Software, Termis Software and Water Loss Management Software business (note 9)

2.8

-

Retirement of steel fabrication business

15.4

-

Impairment of balances with Russia-based counterparties

7.3

-

Gain on disposal of pension scheme

-

(0.3)


67.8

77.8

 

The total net cash outflow during the year as a result of exceptional items was £59.8 million (2021: £63.2 million).

 

a)   Acquisition of OSIsoft

Adviser fees incurred due to the acquisition of OSIsoft, which completed on 19 March 2021. No further cost relating to this acquisition are anticipated. This has resulted in a cash outflow of £19.2 million (2021: £26.0 million).

 

b)   Integration of OSIsoft and associated activities

Costs incurred in the integration of OSIsoft, primarily consisting of consultancy fees advisers and additional temporary resources paid relating to the merging of IT systems and real estate, and rebranding. Costs are anticipated to continue until at least the end of the year ended 31 March 2023. This has resulted in a cash outflow of £29.5 million (2021: £3.5 million).

 

c)   Integration of SES and associated activities

In the year ended 31 March 2022, costs primarily related to the continued build and implementation of a global ERP system and legal entity rationalisation. These costs are expected to continue until 2024. Costs in the years ended 31 March 2022 and 31 March 2021 included work undertaken to exit the Transitional Service Agreements (TSAs) provided by Schneider Electric which ended in August 2021. In the year ended 31 March 2021, £5.2 million was reimbursement by Schneider Electric for capital expenditure incurred as part of the Group's migration activities covered by TSAs. The associated cash outflow was £12.6 million (2021: £33.7 million).

 

d)   Retirement of steel fabrication business

A £14.9 million impairment of intangible assets associated with the Group's steel fabrication business (£10.9 million and £4.0 million of developed technology and customer relationships respectively) was recognised following the announcement in July 2021 of these products' retirement. A discounted cash flow model was used to determine the value in use over the assets' remaining life. Restructuring costs of £0.5 million have also been incurred. This has resulted in a cash outflow of £0.1 million (2021: £nil).

 

e)   Impairment of balances with Russia-based counterparties

As a result of the invasion of Ukraine by Russia, and the enforcement of subsequent international sanctions, the Group fully provided against £4.9 million of trade receivables, £1.0 million of amounts owed by related parties, and £1.4 million of contract assets held with entities within Russia at 31 March 2022. This has resulted in a cash outflow of £nil (2021: £nil).

 

f)    Income statement impact

Exceptional items were included in the Consolidated Income Statement as follows:

 


2022

2021


£m

£m

Cost of sales

0.2

0.8

Research & Development costs

0.5

0.3

Selling and distribution expenses

3.4

3.9

Administrative expenses

38.8

78.3

Net impairment loss on financial assets

7.3

-

Other expense/(income)

17.6

(5.5)


67.8

77.8

 

 

6.   Income tax expense

a)   Tax on loss

The major components of income tax expense are as follows:

 


2022

2021


£m

£m

Tax charged in Consolidated Income Statement

 


Current tax

 


•   UK corporation tax

-

-

•   Foreign tax

65.1

41.9

•   Adjustments in respect of prior periods

(0.4)

(1.9)


64.7

40.0

Deferred tax

 


•   Origination and reversal of temporary differences

(18.3)

(29.3)

•   Adjustments in respect of prior periods

(2.4)

(1.3)


(20.7)

(30.6)

Total income tax expense reported in Consolidated Income Statement

44.0

9.4

 

 


2022

2021


£m

£m

Tax relating to items charged/(credited) directly to Consolidated Statement of Comprehensive Income

 


Deferred tax on actuarial remeasurements on retirement benefits

2.2

(0.5)

Deferred tax on losses and other timing differences

(2.9)

-

Tax credit reported in Consolidated Statement of Comprehensive Income

(0.7)

(0.5)

 

b)   Reconciliation of the total tax charge

The differences between the total tax expense shown above and the amount calculated by applying the standard rate of US (2021: US) corporation tax to the profit before tax are as follows:

 


2022

2021


£m

£m

Tax on Group profit before tax at standard US (2021: US) corporation tax rate of 24% (2021: 24%)1

(4.5)

8.2

Effects of:

 


•   expenses not deductible for tax purposes

9.2

1.8

•   US alternative minimum tax

19.8

7.0

•   non-deductible acquisition costs

-

3.0

•   Research & Development incentives

(10.2)

(5.3)

•   UK rate change impact on deferred tax

13.5

-

•   irrecoverable withholding tax

13.9

-

•   movement on unprovided deferred tax balances

1.0

(1.9)

•   differing tax rates

4.1

(0.2)

•   adjustments in respect of prior years

(2.8)

(3.2)

Income tax expense reported in Consolidated Income Statement

44.0

9.4

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 (236.6)% (2021: 27.5%). The Group's effective tax rate before exceptional and other normalised adjustments was 12.4% (2021: 21.2%).

 

 

7.   Dividends paid and proposed on equity shares

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


2022

2021


£m

£m

Declared and paid during the year

 


Interim 2021/22 dividend paid of 13.0 pence (2020/21: 12.4 pence) per ordinary share

39.2

35.6

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

70.8

46.8


110.0

82.4

Proposed for approval by shareholders at the Annual General Meeting

 


Final proposed dividend 2021/22 of 24.5 pence (2020/21: 23.5 pence) per ordinary share

73.9

70.8

 

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 15 July 2022 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 5 August 2022 to shareholders on the register at the close of business on 8 July 2022.

 

 

8.   (Loss)/earnings per share


2022

2021


Pence

Pence

(Loss)/earnings per share for the year:

 


•   Basic

(20.78)

11.35

•   Diluted

(20.78)

11.27

Adjusted earnings per share for the year:

 


•   Basic

100.37

81.86

•   Diluted

99.58

81.31

 

 


2022

2021


Millions

Millions

(Loss)/earnings per share

 


Weighted average number of ordinary shares for basic earnings per share

301.30

218.50

Effect of dilution: employee share options1

-

1.50

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

301.30

220.00


 


Adjusted earnings per share

 


Weighted average number of ordinary shares for basic earnings per share

301.3

218.5

Effect of dilution: employee share options

2.4

1.5

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

303.7

220.0

1.     The effect of share options are anti-dilutive in the year ended 31 March 2022 due to the Group recognising a net loss for the period. They are therefore excluded from the diluted earnings per share calculation.

 

The calculations of basic and diluted earnings per share (EPS) are based on the net loss attributable to equity holders of the parent for the year of £62.6 million (2021: profit £24.8 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:

 


2022

2021


£m

£m

(Loss)/profit after tax for the year

(62.6)

24.8

Amortisation of intangible assets

226.1

95.7

Share-based payments

27.4

16.3

Exceptional items

67.8

77.8

Effect of acquisition accounting adjustments1

50.3

3.3

Tax effect on exceptional items

(9.5)

(15.1)

Tax effect on normalised adjustments (excluding net finance expense)

16.0

(23.0)

Tax effect on acquisition accounting adjustments1

(13.1)

(0.9)

Adjusted profit after tax

302.4

178.9

1.     Acquisition 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.

 

9.   Business combinations

a)   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 £3,825.2 million (US$5,095.1 million) was paid.

 

The deal was funded by £3,365.7 million (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. This was released in the year ended 31 March 2022 upon finalisation of the completion accounts.

 

At the end of the previous reporting period, the acquisition accounting had been provisionally determined. This has been finalised in the current year, as part of the measurement period permitted under IFRS 3. Changes to the provisionally reported fair values as set out in note 14 of the 2021 Annual Report are due to finalisation and review of the acquired balance sheet. The overall movement is not deemed material.

 

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

 


Carrying value at acquisition

Fair value adjustment

Fair value


£m

£m

£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

(3.0)

19.0

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

1,218.3

1,311.5

Current assets




Trade and other receivables

75.6

(5.5)

70.1

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

(9.5)

223.5

Current liabilities




Trade and other payables

(115.1)

(5.0)

(120.1)

Contract liabilities

(136.2)

60.5

(75.7)

Lease liabilities

(6.8)

-

(6.8)

Current tax liabilities

(29.9)

(0.5)

(30.4)

Total current liabilities

(288.0)

55.0

(233.0)

Non-current liabilities




Lease liabilities

(37.9)

-

(37.9)

Retirement benefit obligations

(0.9)

(0.4)

(1.3)

Total non-current liabilities

(38.8)

(0.4)

(39.2)

Net identifiable assets and liabilities

(0.6)

1,263.4

1,262.8

Goodwill



2,562.4

Total consideration



3,825.2

 

Goodwill of £1,358.0 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 in the year ended 31 March 2021 that were directly attributable to raising debt (£2.9 million) and equity (£28.6 million) were offset against the corresponding financial liability and share premium respectively. All remaining transaction costs were expensed and included within administrative expenses. Additional details are included within note 5.

 

From acquisition date to 31 March 2021, OSIsoft, LLC contributed revenue and profit after tax of £20.7 million and £10.8 million respectively in the Consolidated Income Statement, 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%) in the 12 months to 31 March 2021, before a revenue haircut of approximately £53.0 million.

 

b)   Disposal of Acquis Software, Termis Software and Water Loss Management Software business

On 11 May 2021 the Group entered into an agreement to sell the business and assets of Acquis Software, Termis Software and Water Loss Management Software to Schneider Electric for an aggregate consideration of £1.6 million. This transaction was made at arm's length, with the consideration set based upon independent advice and resulted in a net cash inflow of £1.6 million.

 

This completed on 30 June 2021. A loss on disposal of £2.8 million was recognised, calculated as follows:


Total


£m

Cash consideration

1.6

Gross consideration

1.6

Net assets disposed

(4.4)

Loss on disposal

(2.8)

 

Net assets disposed comprised:


Total


£m

Non-current assets


Goodwill

5.2

Other intangible assets

0.1

Total non-current assets

5.3

Current liabilities


Contract liabilities

(0.9)

Total current liabilities

(0.9)

Net assets

4.4

 

The net loss on disposal is included within other (expense)/income. Disposed goodwill of £5.2 million has been allocated to the following CGUs, based on the value of cash flows for the disposed business relative to the cash flows for the CGU overall:

·      Americas: £nil

·      Asia Pacific: £1.9 million

·      EMEA: £3.3 million

 

 

10.  Trade and other receivables


2022

2021


£m

£m

Current

 


Trade receivables

287.3

245.3

Amounts owed from related parties (note 13)

37.6

21.6

Prepayments and other receivables

56.3

51.1


381.2

318.0

Non-current

 


Trade and other receivables

8.4

19.4


8.4

19.4

 

 

11.  Cash and cash equivalents


2022

2021


£m

£m

Cash at bank and in hand

105.7

279.7

Short-term deposits

173.6

6.9

Net cash and cash equivalents per cash flow

279.3

286.6

Restricted cash

-

7.3


279.3

293.9

 

£11.6 million of cash at bank and in hand was held in Russia at 31 March 2022. Due to the introduction of international sanctions upon Russian entities, cash is likely to remain deployed within Russian operations whilst sanctions remain in force.

 

Restricted cash represented funds held in escrow in relation to the acquisition of OSIsoft, LLC. This was released during the year ended 31 March 2022 as a result of the finalisation of the completion accounts process.

 

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.

 

 

12.  Trade and other payables


2022

2021


£m

£m

Current

 


Trade payables

30.0

39.6

Amounts owed to related parties (note 13)

6.2

1.5

Social security, employee taxes and sales taxes

21.1

28.5

Accruals

148.7

176.8

Other liabilities

18.0

24.9


224.0

271.3

Non-current

 


Other liabilities

10.7

18.2


10.7

18.2

 

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 reduced year-on-year following the payment of transaction related costs associated with the acquisition of OSIsoft, LLC.

 

 

13.  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

Schneider Electric SE is the Group's majority shareholder.

 

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

 


2022

2021


£m

£m

Sales of goods and services

104.6

62.2

Purchases of goods and services

(6.8)

(3.4)

Interest expense on term loan

(8.6)

(0.2)

Other non-trading transactions

1.6

13.7

 

On 19 March 2021, the AVEVA Group received a 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.

 

Other non-trading transactions of £1.6 million (2021: £nil) comprised the sale of Acquis Software, Termis Software and Water Management Software. See note 9(b) for further details.

 

In the year ended 31 March 2021, other non-trading transactions of £13.7 million related to amounts received in reimbursement for expenditure incurred as part of the Group's migration from activities covered by Transitional Service Agreements following the combination with the Schneider Electric industrial software business. Of these transactions, £8.5 million related to operating expenses incurred, and £5.2 million to capital expenditure.

The Transitional Service Agreement with Schneider Electric ended on 31 August 2021. A new Service Agreement was entered into on 1 September 2021 under which Schneider Electric (through SE Digital) will continue to provide ERP-related support services until 31 December 2023 whilst the AVEVA Group completes its global roll out of the new ERP system.

 

As disclosed on page 91 of the Group's 2021 Annual Report, Peter Herweck has retained his Schneider Electric LTIP share options and continued to participate in his Schneider Electric pension arrangement, with the cost being met by Schneider Electric.

.

The Group did not make any payments to Schneider Electric SE, the parent company of the Schneider Electric Group (2021: £nil). All transactions were with subsidiary companies within the Schneider Electric Group.

 

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

 


2022

2021


£m

£m

Trade receivables

37.6

18.9

Trade payables

(5.8)

(1.3)

Non-trading receivables

-

2.7

Non-trading payables

(0.4)

(0.2)

Term loan1

(685.1)

(654.8)

1.     This balance represents the contractual obligation owed to Schneider Electric Group companies. The carrying value per the Consolidated Balance Sheet is stated after offsetting directly attributable costs for obtaining this financing.

 

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

 

Terms and conditions of transactions with related parties

Outstanding balances at 31 March 2022 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 2022, the Group has recorded impairment against £1.0 million of receivables relating to amounts owed by related parties situated in Russia (2021: £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. The amounts set out in the table above are stated before impairment.

 

 

b)   Transactions with other related parties

Dr J Patrick Kennedy controls 4.4% (2021: 4.5%) of the issued ordinary share capital of AVEVA Group plc through his controlling ownership of Estudillo Holdings Corp and is Chairman Emeritus of the Group, a board advisory position.

 

During the period, Group companies entered into the following transactions with Dr J Patrick Kennedy, and with companies in which Dr J Patrick Kennedy has a shareholding:


2022

2021


£m

£m

Purchase of goods and services

4.1

0.1

Chairman Emeritus salary

0.2

-

 

 

 

Non-GAAP measures

The Group presents various non-GAAP measures, which management believes provide useful information for understanding the Group's financial performance. These non-GAAP measures should be considered in addition to IFRS measures and are not intended to be either a substitute for them or superior to them.

 

As non-GAAP measures are not defined by IFRS, they may not be directly comparable with other companies who use similar measures.

 

The Group's non-GAAP measures are consistent with those presented in the 2021 Annual Report, except for:

·      Standalone AVEVA and standalone OSIsoft results are not reported. Management believes presentation of separate results is not required due to the ongoing integration of OSIsoft into the Group.

·      Normalised items have been redefined to:

include the impact of the tax step up arising on the acquisition of OSIsoft;

remove the impact of fair value adjustments on financial derivatives; and

include the impact of amortisation of other software.

·      Net cash has been redefined to:

include the US $900 million term loan drawn down on 19 March 2021; and

exclude treasury deposits.

It has consequently been renamed net debt.

·      Cash conversion has been redefined also resulting in the inclusion of free cash flow before tax as a non-GAAP measure.

 

Further information, definitions, the intent in presenting, and a reconciliation from the nearest IFRS measure are provided below.

 

Non-GAAP measure

Closest equivalent IFRS measure

Definition and purpose

Pro forma results

Group GAAP results

Pro forma results are presented to provide a year-on-year performance comparison for the Group, given the significant impact of the OSIsoft acquisition on the Group's results for the year ended 31 March 2022. Management have considered pro forma results in the day-to-day running of the business for the year ended 31 March 2022, and they have been incorporated into performance elements of employee bonus and share schemes.

 

Pro forma results do not represent the enlarged Group's actual results and do not purport to represent what the combined results would have been in comparative periods. They share the same limitations as adjusted results and present a more favourable view than GAAP measures. In addition, due to the acquisition of OSIsoft completing close to the year-end, comparatives for the year ended 31 March 2021 do not represent the legal form of the Group for the full 12 months and include results that are not attributable to the Group's shareholders.

 

Pro forma results for the year ended 31 March 2022

Pro forma results for the year ended 31 March 2022 are prepared on an adjusted basis and additionally exclude the impact of the deferred revenue haircut (see definition below).

 

Pro forma results for the year ended 31 March 2021

·      Pro forma results for the year ended 31 March 2021 have been prepared on the basis that:

·      The financial information is the combination of the consolidated financial statements of AVEVA Group plc and OSIsoft, LLC for the year to 31 March 2021.

·      No pro forma adjustments have been made to reflect synergies or cost savings that may be expected to occur as a result of the acquisition, nor have any adjustments been made to reflect the stand-alone costs expected.

·      There has been no trading between the two groups for either of the years presented.

·      The term loan was entered into on 1 April 2020, and interest accrued from that date.

 

Pro forma adjusted diluted EPS

The pro forma adjusted diluted EPS calculation assumes:

·      Rights issue shares were issued on 1 April 2020.

·      Rights issue adjustments for unexercised share options at the date of the rights issue were made at the later of 1 April 2020 and the share option award date.

·      No timing adjustments made for actual or potential share option awards to OSIsoft employees.

 

For reconciliations, see:

·      Section a below for pro forma results, pro forma constant currency results, and pro forma organic constant currency results.

Normalised items

No direct equivalent

The following changes have been made to the definition of normalised items in the year ended 31 March 2022:

·      The tax step up has been included within normalised items for the first time. This benefit accrues evenly across the financial year and, given the proximity of the completion of the OSIsoft acquisition to the year-end (such that the benefit only accrued for 13 days in the year ended 31 March 2021), it did not have a material impact in previous years. Note that this is a tax effect, and hence does not impact pre-tax measures such as adjusted EBIT or pro forma adjusted EBIT.

·      Fair value adjustments on financial derivatives have been removed from normalised items for the year ended 31 March 2022. This is due to their relative immateriality compared to the Group's results (2022: £0.3 million, 2021: £(0.7) million) and is intended to simplify the Group's normalised items.

·      Amortisation of intangible assets has been expanded to include amortisation of other software for the year ended 31 March 2022. Historically, this category has been presented as amortisation of intangible assets (excluding other software). This is due to the relative immateriality of amortisation of other software compared to the Group's results (2022: £0.2 million, 2021: £0.6 million), and is intended to simplify the Group's normalised items.

·      The tax impact of normalised items is included in the reconciliation to adjusted profit after tax in note 8 above.

 

For additional information and reconciliations, see:

·      Normalised items are included on the face of the Consolidated Income Statement in the reconciliation to adjusted EBIT.

·      Normalised items are included in the reconciliation to adjusted and pro forma results in section a below.

Net debt

No direct equivalent

Total cash, cash equivalents, overdrafts, and the carrying value of the Group's term loan. This metric was called net cash in previous years.

 

The definition of net debt has changed to:

·      include the carrying value of the Group's term loan. This term loan was drawn down on 19 March 2021 and has been included as it is a significant future obligation affecting the Group's liquidity; and

·      exclude treasury deposits, due to their relative immateriality.

 

Net debt is a measure of the strength of the Group's balance sheet.

 

See section b below for a reconciliation.

Cash conversion

No direct equivalent

Free cash flow before tax (see definition below) as a percentage of the Group's adjusted profit before tax (the Group's profit before tax excluding exceptional and normalised items). This is a financial target for the Group, which targets an average 100% cash conversion for the five-year period from the financial year ending 31 March 2022 to the financial year ending 31 March 2026. Additionally, this is included as a strategic target within the Executive Directors' bonus scheme for the year ended 31 March 2023.

 

This measures how efficiently the Group's profit are converted into cash for organic investment, M&A and returns to shareholders.

 

The definition of cash conversion has changed from that presented in the 2021 Annual Report. Previously, cash conversion was defined as cash generated from operating activities before tax as a percentage of adjusted EBIT. Management believes that use of free cash flow before tax, and inclusion of cash outflows necessary as part of the Group's day-to-day operations, provides a better indication of the Group's trading performance.

 

See section c below for a reconciliation.

Free cash flow before tax

Cash generated from operating activities before tax

Free cash flow before tax is used in determining cash conversion (see definition above). It is calculated as :

·      cash generated from operating activities before tax; plus

·      capital expenditure, lease repayments, interest paid and received, purchase of own shares; excluding

·      cash outflow on M&A related exceptional items.

 

See section c below for a reconciliation.

 

 

a)   Reconciliation to adjusted and pro forma results

31 March 2022


Statutory

Normalised items

Exceptional items

Adjusted

Revenue haircut

Pro forma

Impact of foreign exchange

Pro forma constant currency

Disposal of business

Pro forma organic constant currency


£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

Revenue

1,185.3

-

-

1,185.3

50.3

1,235.6

42.5

1,278.1

(0.7)

1,277.4

Cost of sales

(232.5)

-

0.2

(232.3)

-

(232.3)

(8.0)

(240.3)

0.9

(239.4)

Gross profit

952.8

-

0.2

953.0

50.3

1,003.3

34.5

1,037.8

0.2

1,038.0

Operating expenses

 



 


 




 

Research & Development costs

(343.3)

164.6

0.5

(178.2)

-

(178.2)

(5.7)

(183.9)

0.5

(183.4)

Selling and distribution expenses

(345.4)

61.3

3.4

(280.7)

-

(280.7)

(9.1)

(289.8)

-

(289.8)

Administrative expenses

(246.3)

27.6

38.8

(179.9)

-

(179.9)

(6.0)

(185.9)

-

(185.9)

Net impairment (loss)/gain on financial assets

(6.7)

-

7.3

0.6

-

0.6

(0.1)

0.5

-

0.5

Other expense

(17.6)

-

17.6

-

-

-

-

-

-

-

Total operating expenses

(959.3)

253.5

67.6

(638.2)

-

(638.2)

(20.9)

(659.1)

0.5

(658.6)

(Loss)/profit from operations

(6.5)

253.5

67.8

314.8

50.3

365.1

13.6

378.7

0.7

379.4

Finance revenue

1.9

-

-

1.9

-

1.9

0.1

2.0

-

2.0

Finance expense

(14.0)

-

-

(14.0)

-

(14.0)

(0.5)

(14.5)

-

(14.5)

(Loss)/profit before tax

(18.6)

253.5

67.8

302.7

50.3

353.0

13.2

366.2

0.7

366.9

 

 

31 March 2021


Statutory

Normalised items

Exceptional items

Adjusted

Revenue haircut

Pre-acquisition OSIsoft

Term loan interest

Pro forma

Disposal of business

Pro forma organic


£m

£m

£m

£m

£m

£m

£m

£m

£m

£m

Revenue

820.4

-

-

820.4

3.3

372.4

-

1,196.1

(3.9)

1,192.2

Cost of sales

(181.3)

-

0.8

(180.5)

-

(48.6)

-

(229.1)

0.9

(228.2)

Gross profit

639.1

-

0.8

639.9

3.3

323.8

-

967.0

(3.0)

964.0

Operating expenses

 



 




 


 

Research & Development costs

(184.5)

67.8

0.3

(116.4)

-

(52.1)

-

(168.5)

0.5

(168.0)

Selling and distribution expenses

(226.8)

27.9

3.9

(195.0)

-

(83.1)

-

(278.1)

-

(278.1)

Administrative expenses

(193.0)

16.3

78.3

(98.4)

-

(63.7)

-

(162.1)

-

(162.1)

Net impairment loss on financial assets

(3.7)

-

-

(3.7)

-

0.1

-

(3.6)

-

(3.6)

Other income

5.5

-

(5.5)

-

-

-

-

-

-

-

Total operating expenses

(602.5)

112.0

77.0

(413.5)

-

(198.8)

-

(612.3)

0.5

(611.8)

Profit from operations

36.6

112.0

77.8

226.4

3.3

125.0

-

354.7

(2.5)

352.2

Finance revenue

0.6

-

-

0.6

-

0.1

-

0.7

-

0.7

Finance expense

(3.0)

-

-

(3.0)

-

(0.9)

(12.8)

(16.7)

-

(16.7)

Profit before tax

34.2

112.0

77.8

224.0

3.3

124.2

(12.8)

338.7

(2.5)

336.2

 

 

b)   Net debt


2022

2021


£m

£m

Cash and cash equivalents

279.3

286.6

Loans and borrowings

(684.5)

(654.0)

Net debt

(405.2)

(367.4)

 

 

c)   Cash conversion


2022

2021


£m

£m

Net cash generated from operating activities before tax

197.2

91.2

Operating activities cash flow impact from exceptional items (M&A related)

 


·      Acquisition of OSIsoft

19.2

26.0

·      Disposal of Acquis Software, Termis Software and Water Loss Management Software business

-

-

·      OSIsoft transaction bonus1

48.2

-


264.6

117.2

Purchase of property, plant and equipment

(8.6)

(10.9)

Purchase of intangible assets

-

(0.5)

Interest received

1.9

0.3

Interest paid

(12.7)

(2.8)

Purchase of own shares

(1.3)

(1.1)

Payment of principal element of lease liability

(23.3)

(18.5)

Free cash flow before tax

220.6

83.7


 


Adjusted EBIT

314.8

226.4

Deferred revenue haircut

50.3

3.3

Finance revenue

1.9

0.6

Finance expense

(14.0)

(3.0)

Adjusted profit before tax

353.0

227.3


 


Cash conversion

62.5%

36.8%

1.     A one-off transaction bonus paid to OSIsoft employees. This was recognised in the acquired OSIsoft balance sheet. 

 

 

 

Directors

 

Philip Aiken

Chairman

 

Peter Herweck

CEO

 

James Kidd

Chief Strategy and Transformation Officer

 

Christopher Humphrey

Senior Independent Non-Executive Director

 

Jennifer Allerton

Independent Non-Executive Director

 

Olivier Blum

Non-Executive Director

 

Paula Dowdy

Independent Non-Executive Director

 

Dr. Ayesha Khanna

Independent Non-Executive Director

 

Hilary Maxson

Non-Executive Director

 

Ron Mobed

Independent Non-Executive Director

 

Anne Stevens

Independent 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

 

Philip Aiken

Peter Herweck

Chairman

CEO

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
FR UPUGAQUPPUGR