We are leading the digitalisation of industry - Aveva...In Marine, AVEVA delivered a good performance, driven by product cycle upgrades and a large multi-year rental contract win with

We are leading the digitalisation

of industr y

AVEVA Group plc Interim Report 2019

AVEVA creates industrial software that inspires people to shape the future

AVEVA is a global leader in engineering and industrial software, driving digital transformation throughout capital-intensive industries. From water and energy to food and infrastructure, our solutions span Engineering, Asset Performance, Monitoring and Control, Planning and Scheduling, and Operations.

We believe that digital transformation is driven by human insight, and our software is at work turning opportunities into business value for over 16,000 customers across the globe.

Our customers are supported by the world’s largest industrial software ecosystem, including 4,200 partners and 5,700 certified developers. We work alongside our customers to harness the power of our ecosystem to deliver solutions across the asset and operations lifecycle.

To find out more, please visit our website: www.aveva.com

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01Strategic Report

HIGHLIGHTS

AVEVA delivers on the Digital Twin with strong results and makes continued progress against medium-term targets

£391.9MRevenue1

Up 16.5% (H1 FY19: £336.5m)

£242.5MRecurring revenue2

Up 42.1% (H1 FY19: £170.7m)

£58.6MNet cash and depositsDown 54.1% (H1 FY19: £127.8m)

£90.6MAdjusted EBIT 3Up 66.5% (H1 FY19: £54.4m)

43.31PAdjusted3 diluted EPSUp 65.0% (H1 FY19: 26.25p)

11.13PDiluted EPSUp 14.74p (H1 FY19: (3.61)p)

15.5PInterim dividendUp 10.7% (H1 FY19: 14.0p)

£24.0MProfit/(loss) before taxUp £29.5m (H1 FY19: £(5.5)m)

23.1%Adjusted EBIT margin+690bps (H1 FY19: 16.2%)

1 Revenue is shown on a statutory basis. In H1 FY19 revenue was also shown on a pro forma basis.2 Recurring revenue is defined as rental and subscriptions software licence revenue plus support and

maintenance revenue.3 Adjusted Earnings Before Interest and Tax (EBIT) and adjusted earnings per share (EPS) are calculated before

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

4 Organic constant currency revenue excludes the reverse acquisition accounting adjustment to deferred revenue of £6.5m in H1 FY19; a currency translation benefit of £10.8m in H1 FY20; and adjusts for the disposal of Wonderware Italy and the acquisition of MaxGrip.

• Revenue grew 16.5% to £391.9m (H1 FY19: £336.5m)• Organic constant currency revenue4 growth of 11.9% reflected strong sales

execution and benefited from early contract renewals• Good growth across all geographic regions with Asia Pacific showing

particular strength. Each of the Business Units also grew, with particularly strong growth in Engineering

• Recurring revenue up 42.1% to £242.5m (H1 FY19: £170.7m) representing 61.9% of total revenue (H1 FY19: 50.7%)

• Adjusted EBIT up 66.5% to £90.6m (H1 FY19: £54.4m). Constant currency adjusted EBIT grew by 46.5%

• Net cash and deposits of £58.6m following payment of the final dividend and acquisition of MaxGrip (FY19: £127.8m)

• Strong progress on product integration with the launch of AVEVA Unified Engineering and AVEVA Unified Operations Control Centre

• Outlook remains positive

CONTENTS Strategic Report01 Highlights02 Chief Executive’s Strategic Review08 Finance Review

14 Financial Statements14 Independent Review Report15 Consolidated Income Statement16 Consolidated Statement of

Comprehensive Income17 Consolidated Balance Sheet18 Consolidated Statement of

Changes in Shareholders’ Equity19 Consolidated Cash Flow Statement20 Notes to the Interim Report28 Responsibility Statement of

the Directors

02 AVEVA Group plc Interim Report 2019

CHIEF EXECUTIVE’S STRATEGIC REVIEW

Empowering our customers

AVEVA delivered a strong set of first half results. Recurring revenue accelerated as a proportion of overall revenue. Overall revenue grew above the industry growth rate and adjusted EBIT margins also grew significantly. We made good progress against our medium-term targets.

“We see strong demand for digitalisation and industrial

software within the industries we serve and

remain confident in the outlook.”

Craig HaymanChief Executive Officer

03Strategic Report

Monitor andControl

AssetPerformance

EngineerProcure

Construct

Operate andOptimise

Plan andSchedule

Delivering digitalisationof industr yOur portfolio covers the entire asset and operations lifecycle

Industrial DigitalisationImprove time, cost

and efficiency of capital projects

Predict operating health and take actions to ensure

reliability and safety

Streamline operations via seamless and

scalable enterprise-wide

visibility

Maximise profitability by digitising procurement, planning

and scheduling processes

Optimise decision making through digitising and automating operating processes


CHIEF EXECUTIVE’S STRATEGIC REVIEW CONTINUED

Strong results and continued progress on our strategic priorities

SummaryAVEVA delivered strong first half results as the benefits of business integration and actions taken to optimise performance started to yield results. Organic constant currency revenue grew by 11.9% and constant currency adjusted EBIT increased by 46.5% versus the prior year.

The Group achieved statutory revenue growth of 16.5% to £391.9 million (H1 FY19: £336.5 million) and growth in adjusted EBIT of 66.5% to £90.6 million (H1 FY19: £54.4 million). The operating margin benefited from an improvement in gross margin, from operational leverage and underlying cost savings. At the same time, investment in sales and marketing was increased to help underpin future growth.

In addition, the Group launched AVEVA Unified Engineering, the Unified Operations Control Centre and acquired the software assets of Asset Performance Management (APM) leader MaxGrip.

Trading and marketsThe industries that AVEVA serves are making increasing use of technology to reduce both capital and operating costs in the context of competitive pressures to increase efficiency, output, flexibility and improve overall sustainability. This is being enabled by ongoing technological mega trends that are enabling the digitalisation of the industrial world, notably the industrial internet of things, data visualisation and artificial intelligence.

This is driving growth in demand for industrial software. AVEVA is optimally placed to help its customers digitalise, due to its end-to-end product portfolio, which runs from simulation through design and construction and into operations. In addition, AVEVA has well-established market-leading positions serving the process, marine, batch and hybrid industries.

AVEVA achieved growth across all of its geographical reporting segments and Business Units during the period.

End marketsAround 40% of AVEVA’s revenue comes from the Oil & Gas end market and the Group has become more diversified since the combination with the Schneider Electric industrial software business, with Marine, Chemicals & Petrochemicals, Packaged Goods (such as Food & Beverage and Pharma), Power and Metals & Mining accounting for 5% to 10% of revenue each. Other markets include Water & Wastewater, Infrastructure and Discrete Manufacturing.

Within Oil & Gas the Group’s business is diversified across the capital and operational expenditure phases of the asset lifecycle, with AVEVA supplying customers in the upstream, midstream and downstream markets.

The ongoing structural growth drivers in each of our end markets are strong.

In Oil & Gas, overall end market conditions were stable, with steady capital and operating expenditure across the upstream, midstream and downstream segments. In Marine, AVEVA delivered a good performance, driven by product cycle upgrades and a large multi-year rental contract win with a shipbuilder in Asia Pacific. The Group’s other end markets such as Power and Food & Beverages are largely non-cyclical and are primarily driven by structural growth as industries make increasing use of technology to drive efficiency.

Sales channel and geographical performanceAVEVA delivered growth across all geographies and saw improved execution from both direct and indirect sales channels, the latter of which represented approximately one third of total revenue.

Performance from the direct sales channel was strong, benefiting from investment and revised sales incentives.

The indirect sales channel performed well, achieving double digit growth across all regions. AVEVA invested in and simplified its partner network, including enabling Schneider Electric to process sales leads through this channel.

11.9%Organic constant currency revenue growth

23.1%Adjusted EBIT margin

61.9%Recurring revenue, as a percentage of total revenue

“AVEVA has made excellent progress against our medium-term targets

during the first half.”

05Strategic Report

Growth was assisted by the sale of additional AVEVA products, particularly APM, in addition to its historical focus on Monitoring & Control. The Group also launched the AVEVA Partner Network, which will lead to the channel being able to sell the entire AVEVA portfolio, further leveraging this distribution capability.

As part of the partner network simplification, AVEVA divested a wholly owned distributor in Italy and intends to divest other wholly owned distributors in Germany and Scandinavia.

The Group achieved significant success in cross-selling its wider portfolio and expanding within enterprise accounts, for example achieving major orders with customers including Worley and Suncor.

EMEA achieved 14.3% recurring revenue growth. Overall revenue increased by 4.4%, including the impact of a reduction in initial & perpetual licences and training & services.

Americas performed well across all Business Units, although again reported revenue growth was impacted by a planned reduction in initial & perpetual licences and training & services revenue. Overall revenue increased 7.2%.

Asia Pacific saw growth across its key markets, with strong growth in Korea, China and Australia, with particular strength in Engineering and Planning & Operations. Regional growth further benefited from a large multi-year contract with a key global account customer in Australia. Overall revenue increased 48.9%.

Business Unit performanceEngineering consists of design and simulation software and represented 42% of total revenue. Growth was strong during the period at around 20% on a constant currency basis led by strong growth in both Plant and Marine 3D. Within the revenue mix there was strong growth in rentals & subscriptions and as planned, a reduction in initial & perpetual licences.

Monitoring & Control represented 32% of total revenue. Growth was low single digit on a constant currency basis, with solid growth in HMI SCADA being partly offset by lower sales in pipeline Monitoring & Control due to more selective bidding for contracts.

AVEVA Flex, the Group’s new token- based rentals & subscriptions selling model for Monitoring & Control was well received by customers and this Business Unit achieved very strong growth in rentals & subscriptions revenue, albeit from a low base, together with a planned reduction in the lower margin services revenue.

Asset Performance Management represented 14% of the Group’s total revenue. AVEVA’s APM offering is strongly differentiated. It addresses the broadest dimensions of APM using design and engineering information, real-time and historical operational data, and maintenance execution workflows, together with model-based machine learning for predictive asset analytics.

This differentiation and a growing overall market for APM solutions resulted in double digit revenue growth for AVEVA on a constant currency basis, with particularly strong growth from AVEVA Predictive Analytics, which achieved a large order win in North America. Again, AVEVA saw strong growth in rentals & subscriptions revenue from a low base, with a planned reduction in initial & perpetual licences.

The acquisition of MaxGrip, a company that optimises asset performance with Reliability Centred Maintenance (RCM) solutions, was completed in April 2019. MaxGrip enhances AVEVA’s APM offering by providing a templated approach to asset strategy optimisation and RCM software for risk-based maintenance. Additionally, MaxGrip’s rich library of asset fault codes and remediations strengthens the power of AVEVA’s predictive asset analytics capabilities and accelerates the deployment of artificial intelligence for prescriptive maintenance.

Since the acquisition, the focus has been on integrating the MaxGrip tool set into the overall AVEVA APM offering.

Planning & Operations represented 12% of the Group’s total revenue. The Business Unit achieved mid-teens revenue growth on a constant currency basis with particularly strong growth from Planning & Scheduling and Asset Optimisation. AVEVA saw strong growth in rentals & subscriptions and a planned reduction in training & services.

Integration and product developmentAVEVA made good progress and has exited around 80% of its Transitional Service Agreements with Schneider Electric. The areas left to complete include moving applications currently hosted by Schneider Electric, mostly Enterprise Resource Planning (ERP), and further real estate consolidation. The implementation of the new ERP system is progressing well, with roll-out expected during 2020. Major remaining office consolidations include Houston, Beijing, Tokyo and Sydney.

The integration of AVEVA’s research and development teams has enabled key integrated products to be delivered with the launch of AVEVA Unified Engineering and Unified Operations Control Centre.

AVEVA Unified Engineering provides end-to-end integration of conceptual, front-end engineering design and detailed design into an environment that handles all process simulation and engineering (1D, 2D and 3D) from one single data hub with bi-directional information flow.

AVEVA Unified Operations Control Centre helps customers capitalise on digital technologies to transform their business by integrating and visualising operations, process, engineering, maintenance and financial data in context.

Progress against our medium-term targetsIn September 2018, AVEVA outlined medium-term targets around revenue growth, increasing recurring revenue as a proportion of overall revenue and adjusted EBIT margin progression.

AVEVA made excellent progress against these targets during the first half.


Medium-term revenue growth The Group aims to grow medium-term revenue on a constant currency basis at least in line with the blended growth rate of the industrial software market.

This revenue growth target reflects AVEVA expecting to grow its underlying software business in excess of market growth rates, driven by a combination of the strength of the Group’s market positions, sales execution, revenue synergies and additional value levers, including pricing and more sophisticated management of discounting.

As previously indicated, this above-market growth is expected to be partly offset in terms of reported revenue by the impact of a phased transition towards greater rentals and subscriptions revenue, together with potentially lower growth rates in services revenue.

Progress report: AVEVA delivered revenue growth of 11.9% on an organic constant currency basis, which was ahead of target. This growth was driven by strong sales execution and benefited from cross selling of our combined product portfolio to our enlarged customer base and certain multi-year contracts, including a large Engineering, Procurement and Construction (EPC) contract, for which the revenue has been partly recognised upfront.

AVEVA made substantial investments in sales and marketing to drive future growth, including further strengthening of the marketing team and expansion of the sales force.

In addition to this, further governance and sales incentive changes were put in place to manage discounting and price increases.

Medium-term adjusted EBIT marginThe Group aims to increase adjusted EBIT margins to 30%. This margin improvement is expected to be driven by a combination of revenue growth, previously announced cost savings, cost control and a focus on high margin revenue growth through pricing and revenue mix optimisation.

Progress report: AVEVA’s adjusted EBIT margin increased to 23.1% (H1 FY19: 16.2%). This improvement was driven by a positive sales mix, which benefited gross margin, revenue growth driving operating leverage and underlying cost savings. AVEVA expects to make steady progress towards the medium-term adjusted EBIT margin target of 30%.

Medium-term recurring revenueAVEVA aims to grow the proportion of recurring revenue to total revenue to over 60% in the medium term. Recurring revenue is defined as rentals & subscriptions software licence revenue, plus support and maintenance revenue. This will be driven by growing software as part of the revenue mix and by increasing the mix of rental and subscriptions revenue as a proportion of new software revenue in a financial year. The transition to greater levels of recurring revenue is expected to increase long-term free cash flow generation. Rentals & subscriptions offer customers benefits including greater flexibility, lower up-front costs and simplicity in pricing. These benefits are reflected in higher customer lifetime value of a rentals & subscriptions model, versus a perpetual licence model.

Progress report: AVEVA made accelerated progress during the period and recurring revenue as a proportion of overall revenue was ahead of target at 61.9% (H1 FY19: 50.7%). This over achievement was assisted by early contract renewals, including an EPC contract, and an element of upfront revenue recognition on multi-year contracts.

CHIEF EXECUTIVE’S STRATEGIC REVIEW CONTINUED

Sales incentive structures were modified to encourage recurring revenue growth with a focus on driving rentals & subscriptions revenue, versus initial and perpetual licences and the introduction of AVEVA Flex.

The Group has seen very strong demand for public Cloud-based solutions with both an increase in the volume of significant order wins and substantial expansions from existing Cloud customers.

AVEVA Cloud Development Operations, which was formed at the time of the combination of AVEVA and the Schneider Electric industrial software business, covers all AVEVA’s Cloud offerings, and has achieved above 99.9% uptime for our customers.

Outlook Demand for AVEVA’s products is strong, driven by the ongoing digitalisation of the industrial world and stable conditions in key end markets. AVEVA’s combined product offering is seeing growing industry recognition. Against this backdrop, the benefits of integration and measures taken to drive growth, improve revenue mix and increase margin are having a positive impact. The Group’s order pipeline is solid and the outlook remains positive.

Craig HaymanChief Executive Officer12 November 2019

07Strategic Report


FINANCE REVIEW

Good progress against all key targets

Revenue growth was driven by strong sales execution in the context of stable end market conditions and an ongoing trend towards digitalisation.

“Together with cost control, the revenue growth drove a

strong increase in EBIT.”

James KiddDeputy CEO & CFO

09Strategic Report

83.6%Rentals and subscriptions growth

15.5PInterim dividend

£58.6MNet cash

Improving recurring revenue and increasing profitability


FINANCE REVIEW CONTINUED

OverviewRevenue was £391.9 million, which was up 16.5% compared to the previous half year (H1 FY19: £336.5 million) on a statutory basis. Adjusted EBIT grew 66.5% to £90.6 million (H1 FY19: £54.4 million), primarily due to the revenue growth, higher gross margin and operational leverage.

Six months ended 30 SeptemberH1 FY20

£mH1 FY19

£m Change

Revenue 391.9 336.5 16.5%Cost of sales (92.3) (92.8) (0.5)%

Gross profit 299.6 243.7 22.9%Operating expenses (209.0) (189.3) 10.4%

Adjusted EBIT 90.6 54.4 66.5%Net interest (1.5) (0.3) –

Adjusted profit before tax 89.1 54.1 64.7%Tax charge (19.0) (11.7) 62.4%

Adjusted profit after tax 70.1 42.4 65.3%

Adjusted diluted EPS (pence) 43.31 26.25 65.0%Gross margin 76.4% 72.4% 400bpsAdjusted EBIT margin 23.1% 16.2% 690bpsTax charge 21.3% 21.5% –

Organic constant currency revenue grew 11.9%, excluding a deferred revenue haircut of £6.5m in H1 FY19; a currency translation benefit of £10.8 million in H1 FY20; and the effects of the disposal of Wonderware Italy and the acquisition of MaxGrip.

Revenue overviewRevenue growth was driven by strong sales execution in the context of stable end market conditions and an ongoing trend towards digitalisation. Overall revenue growth benefited from an increase in the proportion of rental contracts sold on a multi-year versus one year basis compared to the same period last year and early contract renewals.

Revenue from the direct salesforce in the first half was around two-thirds of total revenue and one-third was from the channel, including Schneider Electric (SE).

During the first half there was a change in mix of sales contracts through SE. There was a higher proportion of agent sales where the sale is processed by AVEVA’s sales channel partners and SE receives a commission rather than distributor sales where SE is charged a transfer price by AVEVA. This resulted in a reduction of related-party revenue from SE to £31.9 million (H1 FY19: £39.2 million).

Revenue by type is set out below:

£m H1 FY20 % of total H1 FY19 % of total Change

Organic constant currency

Rentals and subscriptions 141.0 36.0% 76.8 22.8% 83.6% 76.7%Support and maintenance 101.5 25.9% 93.9 27.9% 8.1% (0.3)%

Total recurring revenue 242.5 61.9% 170.7 50.7% 42.1% 33.6%Initial fees and perpetuals 85.4 21.8% 96.7 28.7% (11.7)% (13.3)%Training and services 64.0 16.3% 69.1 20.6% (7.4)% (9.5)%

Total 391.9 100.0% 336.5 100.0% 16.5% 11.9%

Rentals and subscriptions Rentals and subscriptions revenue grew 83.6% to £141.0 million (H1 FY19: £76.8 million).

This growth was driven by new sales force incentives to promote sales of these contracts over initial & perpetual licences and Services. The proportion of rental & subscription revenue was also enhanced by revenue recognition on multi-year contracts, which under IFRS 15 recognises the licence revenue upfront. Overall growth was increased by a large multi-year contract renewal with a key EPC customer in Asia Pacific. This contract was renewed earlier than planned and for a higher order value, with the renewal having originally been planned for the third quarter. Excluding this benefit the proportion of recurring revenue in the first half was 60%.

Support and maintenance Support and maintenance revenue grew by 8.1% to £101.5 million (H1 FY19: £93.9 million). On an organic constant currency basis, revenue was flat. Growth in standalone support and maintenance revenue is expected to be impacted by the transition to rentals & subscriptions revenue, and this was seen in the half year period as certain customers were successfully switched into higher annual value subscription contracts.

Initial fees and perpetuals Initial fees and perpetual revenue reduced by 11.7% to £85.4 million (H1 FY19: £96.7 million). This reduction was driven by execution against AVEVA’s strategy of moving the business model of the combined Group towards increasing recurring revenue versus perpetual licences.

Training and services Training and services revenue reduced by 7.4% to £64.0 million (H1 FY19: £69.1 million). Services are sold alongside the software licence to ensure efficient deployment and to generate value faster for customers. This planned reduction was driven by AVEVA’s focus on increasing the proportion of higher gross margin software as part of its overall revenue mix and the implementation of the change in sales incentives at the beginning of the financial year to drive this.

11Strategic Report

To improve efficiency, the Services team have focused on higher margin projects together with initiatives to increase standard, repeatable solutions, which reduces configuration and customisation, and the use of partners where possible.

Adjusted EBIT and cost managementTogether with cost control, the revenue growth delivered an increase in constant currency adjusted EBIT of 46.5% versus the prior year (excluding the £6.5 million adjustment to deferred revenue). Without adjusting for currency, EBIT grew 66.5% to £90.6 million (H1 FY19: £54.4 million).

EBIT margin is typically lower in the first half of any financial year relative to the full year given that revenue is more heavily weighted to the second half but these operational improvements increased adjusted EBIT margin to 23.1% versus 16.2% in H1 FY19 and is positive encouragement that the targeted medium-term improvement to 30% is on track.

Total normalised costs were £301.3 million (H1 FY19: £282.2 million), an increase of 6.8% over the previous year and 3.5% on a constant currency basis. This was broadly in line with AVEVA’s target of inflationary cost increases due to a reduction in cost of sale and controlled operating cost increases despite incremental investment in sales, marketing and R&D.

On an underlying basis, AVEVA has been implementing a cost synergies programme through rationalisation of duplicated functions, the implementation of common systems, shared services for back office functions, real estate consolidation and enhanced R&D effectiveness. The Group targeted annualised cost synergies of approximately £25 million, which are on track to be fully implemented by the end of the current financial year.

Normalised and exceptional itemsThe following exceptional and other normalised items have been excluded in presenting the adjusted results:

Six months ended 30 September

£m 2019 2018

Acquisition and integration activities 12.5 7.8Restructuring costs 1.0 3.0Profit from the sale of a business (0.2) –

Total exceptional items 13.3 10.8Amortisation (excl. other software) 45.3 43.8Share-based payments 6.4 4.3Loss on FX contracts 0.1 0.7

Total normalised items

51.8 48.8

Acquisition and integration activities principally related to contractors, consultancy costs paid to advisers for integration support, functional integration, investment in new systems and deal related executive retention costs.

Restructuring costs related to severance payments for employees as part of the continuing cost synergy programme, started in FY19 following completion of the combination with Schneider Electric industrial software business.

Amortisation mainly 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.

TaxationThe statutory tax charge was £6.0 million (H1 FY19: £0.3 million). The effective rate of tax of 25.0% differs from the US effective corporation tax rate of 23.3% mainly due to higher overseas tax rates and overseas losses in certain locations, for which no deferred tax asset has been recognised. The tax rate benefited from R&D tax incentives in the UK and the US.

The adjusted tax rate was 21.3% (H1 FY19: 21.5%) and is expected to be around 20% on a full year basis.

An analysis of total expenses is summarised below:

£m Cost of sales R&DSelling and distribution

Admin. expenses

Net impairment

loss from financial

assets Total

Statutory 92.5 92.0 113.1 67.2 1.6 366.4Amortisation – (31.7) (13.6) – – (45.3)Share-based payments – – – (6.4) – (6.4)Loss on FX contracts – – – (0.1) – (0.1)Exceptional items (0.2) (0.2) (1.2) (11.7) – (13.3)

Normalised costs 92.3 60.1 98.3 49.0 1.6 301.3

H1 FY19 92.8 54.2 89.1 44.7 1.4 282.2Change (0.5)% 10.9% 10.3% 9.6% 14.3% 6.8%Constant currency (3.3)% 7.7% 7.0% 5.1% 14.3% 3.5%

Cost of sales decreased 0.5% to £92.3 million (H1 FY19: £92.8 million) and the gross margin improved to 76.4% (H1 FY19: 72.4%). On a constant currency basis cost of sales reduced 3.3%. The cost of sales reduction related to both a focus on both higher margin revenue and a focus on efficient delivery of services.

The cost of sales reduction was also helped by the disposal of Wonderware Italy, a wholly-owned distributor.

Research & Development costs were £60.1 million (H1 FY19: £54.2 million) representing an increase of 10.9%. On a constant currency basis R&D expenditure increased by 7.7% due to investment in product integration and new product launches, being partly offset by cost synergies.

Selling and distribution expenses were £98.3 million (H1 FY19: £89.1 million), a 10.3% increase versus the prior year. On a constant currency basis, the increase was 7.0%. The increase represents investments made during the year in Sales and in strengthening the marketing team and in customer events to showcase AVEVA’s enlarged product portfolio.

Administrative expenses were £49.0 million (H1 FY19: £44.7 million) an increase of 9.6%. On a constant currency basis, the increase was 5.1%, due to wage inflation and investment in support functions.

Net impairment loss from financial assets represents the impairment of accounts receivable during the year of £1.6 million (H1 FY19: £1.4 million).


FINANCE REVIEW CONTINUED

Earnings per share Statutory diluted EPS was 11.13 pence (H1 FY19: (3.61) pence). Adjusted diluted EPS grew 65.0% to 43.31 pence (H1 FY19: 26.25 pence). Growth on prior year adjusted diluted EPS, before the effect of the deferred revenue haircut, was 46.9%.

DividendsIn line with the Board’s progressive dividend policy, AVEVA intends to pay an interim dividend of 15.5 pence per share at a cost of £25.0 million (H1 FY19: 14.0 pence per share at a cost of £22.5 million). The interim dividend will be payable on 7 February 2020 to shareholders on the register on 10 January 2020.

Balance sheet and cash flowThe Group continues to maintain a strong balance sheet, with net cash and treasury deposits of £58.6 million and no long-term debt. As at 30 September non-current assets were £1,983.3 million (31 March 2019: £1,923.0 million) reflecting goodwill and intangible assets that arose from the combination with the Schneider Electric industrial software business.

In April 2019, the Group completed the acquisition of MaxGrip for consideration of £21.6 million. The transaction resulted in net assets of £10.3 million being acquired and goodwill of £11.3 million being created.

Trade and other receivables at 30 September 2019 were £204.1 million (31 March 2019: £237.9 million). Contract assets increased to £127.3 million from £100.5 million at 31 March 2019, largely due to the impact of the multi-year contracts closed in the period. Contract liabilities representing deferred revenue were £148.3 million (31 March 2019: £174.6 million) and were lower due to phasing of renewals and the switch from support and maintenance contracts, to rental and subscription.

Cash generated from operating activities before tax was £43.5 million, compared to £44.6 million in the previous year, resulting in conversion of adjusted EBIT to operating cash flow of 48.0%. This reflects the impact of multi-year contracts and particularly those contracts where customers pay in annual instalments, but revenue is recognised earlier under IFRS 15. First half cash flow was also negatively impacted by the payment of higher sales commissions and bonuses resulting from the successful close to FY19. Finally, these metrics are somewhat distorted by exceptional costs paid during the period of £17.5 million and the adoption of IFRS 16. Cash conversion is expected to improve significantly in the second half of the financial year.

James Kidd Deputy CEO & CFO12 November 2019

13Strategic Report


INDEPENDENT REVIEW REPORT

IntroductionWe have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 which comprise the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated balance sheet, the Consolidated statement of changes in shareholders’ equity, the Consolidated cash flow statement and the related notes 1 to 16. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

Directors’ responsibilitiesThe half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union.

Our responsibilityOur responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of reviewWe conducted our review in accordance with International Standard on Review Engagements (UK) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

Ernst & Young LLPLondon12 November 2019

15Financial Statements

Notes

Six months ended 30 September Year ended 31 March

2019£m

2019£m

(unaudited)

2018£m

(unaudited)

Revenue 5 391.9 336.5 766.6Cost of sales (92.5) (95.0) (193.2)

Gross profit 299.4 241.5 573.4Operating expensesResearch & Development costs (92.0) (84.4) (178.0)Selling and administration expenses 7 (180.3) (160.9) (341.9)Net impairment loss on financial assets (1.6) (1.4) (6.3)

Total operating expenses (273.9) (246.7) (526.2)

Profit/(Loss) from operations 25.5 (5.2) 47.2Finance revenue 0.1 0.1 0.2Finance expense (1.6) (0.4) (0.7)

Profit/(Loss) before tax 24.0 (5.5) 46.7Income tax expense 9 (6.0) (0.3) (12.9)

Profit/(Loss) for the period attributable to equity holders of the parent 18.0 (5.8) 33.8

Profit/(Loss) from operations 25.5 (5.2) 47.2Amortisation of intangibles (excluding other software) 45.3 43.8 88.1Share-based payments 6.4 4.3 11.2Losses on fair value of forward foreign exchange contracts 0.1 0.7 0.5Exceptional items 8 13.3 10.8 28.9

Adjusted EBIT 90.6 54.4 175.9

Earnings/(Loss) per share (pence) 11– basic 11.19 (3.61) 20.97– diluted 11.13 (3.61) 20.90

All activities relate to continuing activities.

CONSOLIDATED INCOME STATEMENTfor the six months ended 30 September 2019


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the six months ended 30 September 2019


2019£m

2019£m

(unaudited)

2018£m

(unaudited)

Profit/(Loss) for the period 18.0 (5.8) 33.8Items that may be reclassified to profit or loss in subsequent periods:Exchange gain arising on translation of foreign operations 8.6 11.3 8.4

Total of items that may be reclassified to profit or loss in subsequent periods: 8.6 11.3 8.4

Items that will not be reclassified to profit or loss in subsequent periods:Remeasurement gain/(loss) on defined benefit plans 0.8 0.8 (0.5)Deferred tax effect (0.1) (0.3) (0.4)

Total of items that will not be reclassified to profit or loss in subsequent periods 0.7 0.5 (0.9)

Total comprehensive income for the period, net of tax 27.3 6.0 41.3


CONSOLIDATED BALANCE SHEET30 September 2019

Notes

As at 30 September

2019£m

(unaudited)

As at 30 September

2018£m

(unaudited)

As at 31 March

2019£m

Non-current assetsGoodwill 1,298.8 1,291.4 1,285.3Other intangible assets 558.7 638.5 599.5Property, plant and equipment 20.4 14.9 17.1Right-of-use assets 16 81.0 – –Deferred tax assets 12.3 8.4 11.8Other receivables 13 3.5 1.2 2.2Retirement benefit surplus 8.6 7.8 7.1

1,983.3 1,962.2 1,923.0

Current assetsInventories 0.6 0.9 0.8Trade and other receivables 13 204.1 196.2 237.9Contract assets 127.3 77.9 100.5Treasury deposits – 0.2 0.6Cash and cash equivalents 78.6 93.5 127.2Current tax assets 17.7 11.1 10.8

428.3 379.8 477.8

Total assets 2,411.6 2,342.0 2,400.8

EquityIssued share capital 5.7 5.7 5.7Share premium 574.5 574.5 574.5Other reserves 1,184.7 1,186.5 1,178.8Retained earnings 143.5 142.2 165.5

Total equity 1,908.4 1,908.9 1,924.5

Current liabilitiesTrade and other payables 14 134.2 145.5 156.8Contract liabilities 148.3 128.6 174.6Loans and borrowings 20.0 11.9 –Lease liabilities 16 17.3 – –Financial liabilities 0.6 0.2 0.1Provisions 1.2 – 1.9Current tax liabilities 4.4 14.7 12.8

326.0 300.9 346.2

Non-current liabilitiesLease liabilities 16 53.0 – –Deferred tax liabilities 109.2 120.0 111.3Other liabilities 0.8 0.2 3.1Provisions 1.1 – 2.6Retirement benefit obligations 13.1 12.0 13.1

177.2 132.2 130.1

Total equity and liabilities 2,411.6 2,342.0 2,400.8


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY30 September 2019

Other reserves

Share capital

£m

Share premium

£m

Merger reserve

£m

Cumulative translation

adjustments £m

Capital contribution

reserve £m

Capital redemption

reserve £m

Reverse acquisition

reserve £m

Treasury shares

£m

Total other reserve

£m

Retained earnings

£m

Total equity

£m

At 1 April 2018 5.7 574.5 615.6 9.9 – 101.7 452.5 (0.3) 1,179.4 195.1 1,954.7Loss for the period – – – – – – – – – (5.8) (5.8)Other comprehensive income – – – 11.3 – – – – 11.3 0.5 11.8

Total comprehensive income – – – 11.3 – – – – 11.3 (5.3) 6.0Share-based payments – – – – – – – – – 4.3 4.3Tax arising on share options – – – – – – – – – 0.6 0.6Investment in own shares – – – – – – – (4.4) (4.4) – (4.4)Cost of employee benefit trust

shares issued to employees – – – – – – – 0.2 0.2 (0.2) –Transactions with

Schneider Electric – – – – – – – – – (8.8) (8.8)Equity dividends – – – – – – – – – (43.5) (43.5)

At 30 September 2018 5.7 574.5 615.6 21.2 – 101.7 452.5 (4.5) 1,186.5 142.2 1,908.9Profit for the period – – – – – – – – – 39.6 39.6Other comprehensive income – – – (2.9) – – – – (2.9) (1.4) (4.3)

Total comprehensive income – – – (2.9) – – – – (2.9) 38.2 35.3Share-based payments – – – – – – – – – 6.9 6.9Tax arising on share options – – – – – – – – – 0.6 0.6Investment in own shares – – – – – – – (4.9) (4.9) – (4.9)Capital contribution – – – – 0.1 – – – 0.1 – 0.1Equity dividends – – – – – – – – – (22.4) (22.4)

At 31 March 2019 5.7 574.5 615.6 18.3 0.1 101.7 452.5 (9.4) 1,178.8 165.5 1,924.5Profit for the period – – – – – – – – – 18.0 18.0Other comprehensive income – – – 8.6 – – – – 8.6 0.7 9.3

Total comprehensive income – – – 8.6 – – – – 8.6 18.7 27.3Share-based payments – – – – – – – – – 6.4 6.4Investment in own shares – – – – – – – (3.1) (3.1) – (3.1)Cost of employee benefit trust

shares issued to employees – – – – – – – 0.4 0.4 (0.4) –Equity dividends – – – – – – – – – (46.7) (46.7)

At 30 September 2019 5.7 574.5 615.6 26.9 0.1 101.7 452.5 (12.1) 1,184.7 143.5 1,908.4



2019£m

(audited)

2019£m

(unaudited)

2018£m

(unaudited)

Cash flows from operating activitiesProfit/(Loss) for the period 18.0 (5.8) 33.8Income tax expense 6.0 0.3 12.9Net finance expense 1.5 0.3 0.5Amortisation of intangible assets 46.1 44.6 88.8Depreciation of property, plant and equipment, and right of use assets 10.1 3.2 5.4Loss on disposal of property, plant and equipment 0.1 – 0.1Gain on disposal of subsidiary (0.2) – –Share-based payments 6.4 4.3 11.2Difference between pension contributions paid and amounts charged to operating profit (0.1) (0.3) 0.1Research & Development expenditure tax credit (1.2) (0.8) (2.0)Changes in working capital:Trade and other receivables 6.6 13.8 (51.4)Trade and other payables (50.3) (15.7) 69.2Changes to fair value of forward foreign exchange contracts 0.5 0.7 0.5

Cash generated from operating activities before tax 43.5 44.6 169.1Income taxes paid (27.6) (8.6) (32.4)

Net cash generated from operating activities 15.9 36.0 136.7

Cash flows from investing activitiesPurchase of property, plant and equipment (7.1) (3.5) (7.4)Purchase of intangible assets (0.1) (0.1) (0.2)Acquisition of a subsidiary, net of cash acquired (22.2) – –Proceeds from sale of subsidiaries, net of cash (1.5) – –Consideration paid on completion of business combination – – (19.4)Sale/(Purchase) of treasury deposits 0.6 – (0.4)Interest received 0.1 0.1 0.2

Net cash flows used in investing activities (30.2) (3.5) (27.2)

Cash flows from financing activitiesInterest paid (0.3) (0.4) (0.7)Proceeds from/(repayment of) borrowings 20.0 1.9 (10.0)Payment of lease liabilities (7.7) – –Purchase of own shares (3.1) (4.4) (9.3)Dividends paid to equity holders of the parent (46.7) (43.5) (66.0)

Net cash flows used in financing activities (37.8) (46.4) (86.0)

Net (decrease)/increase in cash and cash equivalents (52.1) (13.9) 23.5Net foreign exchange difference 3.5 1.8 (1.9)Opening cash and cash equivalents 127.2 105.6 105.6

Closing cash and cash equivalents 78.6 93.5 127.2

CONSOLIDATED CASH FLOW STATEMENTfor the six months ended 30 September 2019


1 The Interim ReportThe Interim Report was approved by the Board on 12 November 2019. The interim condensed financial statements set out in the Interim Report are unaudited but have been reviewed by the auditor, Ernst & Young LLP, and their report to the Company is set out on page 14.

The Interim Report will be made available to shareholders in due course from the Company’s website at www.aveva.com.

2 Basis of preparation and accounting policiesThe Interim Report for the six months ended 30 September 2019 has been prepared in accordance with IAS 34 Interim Financial Reporting and the disclosure requirements of the Listing Rules.

The Interim Report does not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Annual Report for the year ended 31 March 2019.

In accordance with IFRS 3, the consolidated financial information has been prepared as a reverse acquisition of AVEVA Group by the Schneider Electric industrial software business, which occurred on 1 March 2018.

The financial information set out within this report does not constitute AVEVA’s Consolidated statutory financial statements as defined in Section 435 of the Companies Act 2006. The results for the year ended 31 March 2019 have been extracted from the Consolidated statutory financial statements for AVEVA Group plc for the year ended 31 March 2019 which are prepared in accordance with IFRS as adopted by the European Union, on which the auditor gave an unqualified report (which made no statement under section 498 (2) or (3) respectively of the Companies Act 2006 and did not draw attention to any matters by way of emphasis) and have been filed with the Registrar of Companies.

The Group presents a non-GAAP performance measure on the face of the Consolidated income statement. The Directors believe that this alternative measure of profit provides a reliable and consistent measure of the Group’s underlying performance. The face of the Consolidated income statement presents adjusted EBIT and reconciles this to profit from operations as required to be presented under the applicable accounting standards. Adjusted EPS is calculated having adjusted profit after tax for the same items and their tax effect. The term ‘EBIT’ is not defined under IFRS and may not be comparable with similarly titled profit measures reported by other companies. It is not intended to be a substitute for, or superior to, GAAP measures of profit.

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 important and which could, if included, distort the understanding of the performance for the year and the comparability between periods.

The Interim Report has been prepared on the basis of the accounting policies set out in the most recently published Annual Report of the Group for the year ended 31 March 2019, with the exception of the adoption of IFRS 16 Leases, as set out below.

IFRS 16 Leases – Accounting policies applied from 1 April 2019The Group adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 April 2019. Set out below are the new accounting policies of the Group:

The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date that the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment review.

At the commencement date of the lease, the Group also recognises lease liabilities. They are measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

NOTES TO THE INTERIM REPORT


2 Basis of preparation and accounting policies continuedThe Group applies the short-term lease recognition exemption to its short-term leases (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of assets that are considered of low value (i.e. below £5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

Significant judgementsThe Group has an extension option for some of the leases. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g. a change in business strategy).

3 Going concernThe Group has significant financial resources. At 30 September 2019, the Group had bank, cash and treasury deposits of £78.6 million (31 March 2019: £127.8 million) and debt draw down of £20.0 million (31 March 2019: nil). The cash generation profile of the Group in the first half of the year was significantly impacted by the 2018/19 final dividend paid and the acquisition of MaxGrip in April 2019. The Group is expected to generate significant positive cash flows in the second half of the financial year.

After making enquiries and considering the cash flow forecasts for the Group, the Directors have a reasonable expectation that the Group has adequate resources to continue its operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the interim financial statements.

4 Risks and uncertaintiesAs with any organisation, there are a number of potential risks and uncertainties which could have a material impact on the Group’s long-term performance. The principal risks and uncertainties faced by the Group have not changed from those set out in the Annual Report for the year ended 31 March 2019. These are:

• Talent Acquisition & Retention• Move to Subscription Model• Cloud Initiatives• Digital Transformation Agenda• Integration & Synergies • Competitors• Dependency on Cyclical Markets• AVEVA Products Implicated in Industrial Accidents or Customer Cyber-Attack• Cyber Attack• Regulatory Compliance• Internal Systems• Disruptive Technologies

These risks are described in more detail on pages 26-30 of the 2019 Annual Report. The Directors routinely monitor these risks and uncertainties and appropriate actions are taken to manage them within agreed risk appetites. Included in the Business Review is a commentary on the outlook of the Group for the remaining six months of the year.

At an executive level, risk management remains the responsibility of the Strategic Leadership Team (SLT) who report to the Board on risk matters.


5 RevenueAn analysis of the Group’s revenue is as follows:


2019£m

(audited)

2019£m

(unaudited)

2018£m

(unaudited)

Support and maintenance, including annual fees 101.5 93.9 194.4Rental and subscriptions 141.0 76.8 218.2Initial fees and perpetual licences 85.4 96.7 211.6Training and services 64.0 69.1 142.4

391.9 336.5 766.6

Timing of revenue recognitionServices transferred at a point in time 169.2 121.0 357.3Services transferred over time 222.7 215.5 409.3

391.9 336.5 766.6Finance revenue 0.1 0.1 0.2

392.0 336.6 766.8

6 Segment informationThe Executive Leadership Team monitors and appraises the business on a geographic basis with three operating regions: Asia Pacific; EMEA; and Americas. 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. Balance sheet information is not included in the information provided to the Executive Leadership Team.

Six months ended 30 September 2019 (unaudited)

Asia Pacific£m

EMEA£m

Americas£m

Corporate£m

Total£m

RevenueSupport and maintenance, including annual fees 23.8 34.6 43.1 – 101.5Rental and subscriptions 58.2 46.1 36.7 – 141.0Initial fees and perpetual licences 27.1 32.9 25.4 – 85.4Training and services 15.2 21.1 27.7 – 64.0

Regional revenue total 124.3 134.7 132.9 – 391.9Cost of sales (14.2) (16.8) (27.5) (33.8) (92.3)Selling and administrative expenses (21.7) (34.7) (33.1) (57.8) (147.3)Net impairment loss on financial assets 0.7 (0.3) (2.0) – (1.6)

Regional contribution 89.1 82.9 70.3 (91.6) 150.7Research & Development costs (60.1)

Adjusted EBIT 90.6

Exceptional items, other normalised adjustments1 and net interest (66.6)

Profit before tax 24.0

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

As the combination of the two businesses completed so close to the start of the financial period it was not possible to report cost data between the three regions for the period ended 30 September 2018. Neither was it possible to consistently report the combined business on any other segmental basis. Therefore, the segmental information provided has had to be limited to regional revenue only.

Six months ended 30 September 2018 (unaudited)

Asia Pacific£m

EMEA£m

Americas£m

Total£m

RevenueSupport and maintenance including annual fees 21.8 30.3 41.8 93.9Rental and subscriptions 22.2 40.3 14.3 76.8Initial fees and perpetual licences 26.4 35.0 35.3 96.7Training and services 13.1 23.4 32.6 69.1

83.5 129.0 124.0 336.5

NOTES TO THE INTERIM REPORT CONTINUED


Year ended 31 March 2019 (audited)

Asia Pacific£m

EMEA£m

Americas£m

Corporate£m

Total£m

RevenueSupport and maintenance, including annual fees 45.0 71.7 77.7 – 194.4Rental and subscriptions 49.4 107.2 61.6 – 218.2Initial fees and perpetual licences 57.3 86.6 67.7 – 211.6Training and services 27.8 48.8 65.8 – 142.4

Regional revenue total 179.5 314.3 272.8 – 766.6Cost of sales (28.8) (42.6) (66.2) (53.7) (191.3)Selling and administrative expenses (36.6) (65.9) (60.9) (115.2) (278.6)Net impairment loss on financial assets (4.0) (1.6) (0.7) – (6.3)

Regional contribution 110.1 204.2 145.0 (168.9) 290.4Research & Development costs (114.5)

Adjusted EBIT 175.9

Exceptional items, other normalised adjustments1 and net interest (129.2)

Profit before tax 46.7

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

7 Selling and administration expensesAn analysis of selling and administration expenses is set out below:


2019£m

(audited)

2019£m

(unaudited)

2018£m

(unaudited)

Selling and distribution expenses 113.1 106.9 235.6Administrative expenses 67.2 54.0 106.3

180.3 160.9 341.9

8 Exceptional itemsSix months ended 30 September Year ended

31 March2019

£m(audited)

2019£m

(unaudited)

2018£m

(unaudited)

Acquisition and integration activities 12.5 7.8 23.0Restructuring costs 0.8 3.0 5.9

13.3 10.8 28.9

Acquisition and integration costs incurred related principally to consultancy fees paid to advisors and the costs of additional temporary resources required for the integration of AVEVA Group plc and the Schneider Electric industrial software business. Key integration activities included work undertaken to exit the Transitional Service Arrangements provided by Schneider Electric; costs incurred in the initial design and build phases of a new harmonised global ERP system for the enlarged Group; and assistance from consultants to the Group in running programmes designed to deliver revenue and cost synergies from the Combination.

Restructuring costs related to severance payments in a number of global office locations. The costs incurred through the period ended 30 September 2019 are a continuation of the project started in the prior year, following the Combination.

The tax credit on the exceptional items of £13.3 million (H1 FY19: £10.8 million) is £2.5 million (H1 FY19: £1.7 million).

9 Income tax expenseThe total tax charge for the half year ended 30 September 2019 is £6.0 million (H1 FY19: £0.3 million).

The effective tax rate on the profit before tax is 25.0%. The difference from the US tax rate of 23.3% is mainly due to higher overseas tax rates, overseas losses, and the benefit of UK and US tax incentives.

The tax charge on adjusted profit before tax is £19.0 million (H1 FY19: £11.6 million) which equates to an effective tax rate of 21.3% (H1 FY19: 21.5%).


10 Ordinary dividendsThe proposed interim dividend of 15.5 pence per ordinary share will be payable on 7 February 2020, to shareholders on the register on 10 January 2020. In accordance with IFRS, no provision for the interim dividend has been made in these financial statements.

The dividends relating to year ended 31 March 2019 were declared and paid relating to AVEVA Group plc.

An analysis of dividends paid is set out below:Six months ended 30 September Year ended

31 March2019

£m(audited)

2019£m

(unaudited)

2018£m

(unaudited)

Final 2018/19 paid at 29.0 pence per share 46.7 – –Interim 2018/19 paid at 14.0 pence per share – – 22.5Final 2017/18 paid at 27.0 pence per share – 43.5 43.5

46.7 43.5 66.0

11 Earnings per shareSix months ended 30 September Year ended

31 March2019

pence(audited)

2019pence

(unaudited)

2018pence

(unaudited)

Earnings/(Loss) per share for the period:– basic 11.19 (3.61) 20.97– diluted 11.13 (3.61) 20.90Adjusted earnings per share:– basic 43.54 26.33 91.24– diluted 43.31 26.25 90.90

The calculation of EPS is based on the profit after tax for the six months ended 30 September 2019 of £18.0 million and the following weighted average number of shares:

Six months ended 30 September Year ended 31 March 2019

Number of shares(audited)

2019Number of shares

(unaudited)

2018Number of shares

(unaudited)

Weighted average number of ordinary shares for basic EPS 161,014,600 161,092,331 161,081,559Effect of dilution: employee share options 853,703 514,688 589,978

Weighted average number of ordinary shares adjusted for the effect of dilution 161,868,303 161,607,019 161,671,537

Details of the calculation of adjusted EPS are set out below:Six months ended 30 September Year ended

31 March2019

£m(audited)

2019£m

(unaudited)

2018£m

(unaudited)

Profit/(Loss) after tax for the period 18.0 (5.8) 33.8Intangible amortisation (excluding other software) 45.3 43.8 88.1Share-based payments 6.4 4.3 11.2Losses on fair value of forward foreign exchange contracts 0.1 0.7 0.5Exceptional items 13.3 10.8 28.9Effect of acquisition accounting adjustments – – 8.6Tax effect on exceptional items (2.5) (1.7) (4.4)Tax effect on other normalised adjustments (excluding net finance expense) (10.5) (9.7) (18.1)Tax effect on acquisition accounting adjustments – – (1.6)

Adjusted profit after tax 70.1 42.4 147.0



12 Business combinationsAcquisition of MaxGrip On 17 April 2019, the Group completed the acquisition of the software assets of MaxGrip, a pioneer in optimising asset performance with Reliability Centred Maintenance (RCM) solutions. The preliminary fair values of the identifiable assets and liabilities of MaxGrip as at the date of acquisition were:

Carrying value at acquisition

£m

Fair value adjustment

£mFair value

£m

Intangible assets 2.4 11.5 13.9Trade receivables 1.4 – 1.4Contract assets 0.2 – 0.2Cash and cash equivalents (0.6) – (0.6)Trade and other payables (0.9) – (0.9)Contract liabilities (0.6) 0.3 (0.3)Deferred tax – (3.4) (3.4)

Net assets acquired 1.9 8.4 10.3Goodwill 11.3

Total consideration 21.6

The goodwill recognised is primarily attributed to the expected synergies and other benefits from combining the assets and activities of MaxGrip with those of the Group.

The consideration of £21.6 million was settled in cash. The associated transaction costs of £0.3 million were expensed and are included in administrative expenses.

Revenue and contributed net profit before tax from the date of acquisition are immaterial to the Group. If the acquisition had taken place at the beginning of the year, revenue and contributed net profit before tax would also be immaterial.

Disposal of Wonderware ItalyOn 30 April 2019 the Group disposed of a wholly owned distributor business in Italy for £2.2 million, of which £1.3 million deferred consideration is recognised in other receivables at 30 September 2019.

13 Trade and other receivablesCurrent

30 September 2019

£m(unaudited)

30 September 2018

£m(unaudited)

31 March 2019

£m(audited)

Trade receivables 141.0 121.6 174.9Amounts owed from related parties 32.3 45.7 35.5Prepayments and other receivables 30.8 28.9 27.5

204.1 196.2 237.9

Non-current30 September

2019£m

(unaudited)

30 September 2018

£m(unaudited)

31 March 2019

£m(audited)

Other receivables 3.5 1.2 2.2

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

14 Trade and other payables30 September

2019£m

(unaudited)

30 September 2018

£m(unaudited)

31 March 2019

£m(audited)

Trade payables 18.2 12.0 20.3Amounts owed to related parties 7.3 36.4 10.5Social security, employee and sales taxes 14.5 11.2 22.6Accruals 92.3 56.3 100.5Other payables 1.9 29.6 2.9

134.2 145.5 156.8


15 Related party transactionsTransactions between Group subsidiaries have been eliminated on consolidation. A list of subsidiaries can be found in the notes to the AVEVA Group plc financial statements in the 2019 Annual Report.

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


2019£m

(audited)

2019£m

(unaudited)

2018£m

(unaudited)

Sales of goods and services 31.9 39.2 80.1Purchase of goods and services (6.9) (13.4) (19.7)Completion accounts adjustment – (17.4) (19.4)Other non-trading transactions 2.9 4.0 4.3

As at the balance sheet date, Group companies held the following balances with Schneider Electric group companies:

30 September 2019

£m(unaudited)

30 September 2018

£m (unaudited)

31 March 2019

£m(audited)

Trade and other receivables 28.0 41.8 34.1Trade and other payables (7.3) (19.0) (10.5)Non-trading receivables 4.3 3.9 1.4Non-trading payables – (17.4) –Loan payable – (1.9) –

16 Changes in accounting policiesThe Group adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of 1 April 2019. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short term leases’), and lease contracts for which the underlying asset is of low value (‘low-value assets’).

The Group has lease contracts for various items of property, computer equipment and motor vehicles. Before the adoption of IFRS 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. At the date of transition, no finance leases were held, and all leases were classified as operating. Leased property was not capitalised and the lease payments were recognised as rent expense in the statement of profit or loss on a straight-line basis over the lease term. Any prepaid rent and accrued rent were recognised under prepayments and accruals, respectively.

Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases that it is the lessee, except for short-term leases and leases of low-value assets. The right-of-use assets for most leases were recognised based on the carrying amount as if the standard has always been applied, apart from the use of incremental borrowing rate at the date of initial application. In some leases, the right-of-use assets were recognised based on the amount equal to the lease liabilities, adjusted for any related prepaid, accrued lease payments and onerous lease provision previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. In accordance with the modified retrospective method of adoption, the Group has restated the opening balances as at 1 April 2019. The comparative financial information in this Interim Report has not been restated.

Impact on the statement of financial position (increase/(decrease)) as at 1 April 2019:31 March

2019 £m £m

1 April 2019

£m

Other intangible assets 599.5 (14.4) 585.1Right-of-use assets – 76.1 76.1

Non-current assets 61.7

Lease liabilities – 15.0 15.0Provisions 1.9 (0.6) 1.3

Current liabilities 14.4

Lease liabilities – 49.9 49.9Provisions 2.6 (2.6) –

Non-current liabilities 47.3



16 Changes in accounting policies continuedThe lease liabilities as at 1 April 2019 can be reconciled to the operating lease commitments as of 31 March 2019 as follows:

£m

Operating lease commitments as at 31 March 2019 46.3Less:Impact of discounting (5.9)Commitments relating to short-term leases (3.3)Commitments relating to leases of low-value assets (0.1)Add:Service charges 5.7Payments in optional extension periods not recognised as at 31 March 2019 22.2

Lease liabilities as at 1 April 2019 64.9

Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements during the period:

Right-of-use assets Lease liabilities

Long leasehold buildings

£m

Computer equipment

£m

Motorvehicles

£mTotal

£m £m

As at 1 April 2019 73.2 0.2 2.7 76.1 (64.9)Additions 8.2 – 0.6 8.8 (8.8)Depreciation expense (6.2) – (0.6) (6.8) –Interest expense – – – – (1.2)Payments – – – – 7.7Exchange adjustment 2.8 – 0.1 2.9 (3.1)

As at 30 September 2019 78.0 0.2 2.8 81.0 (70.3)

The Group recognised rent expense from short-term leases of £3.3 million, and leases of low-value assets of £0.1 million for the six months ended 30 September 2019.


RESPONSIBILITY STATEMENT OF THE DIRECTORSin respect of the Interim Report

The Directors of the Company confirm that to the best of our knowledge:

• the Interim Report has been prepared in accordance with IAS 34;• the Interim Report includes a fair review of the information required by DTR 4.2.7R, being an indication of the important events that

have occurred during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six months of the year; and

• the Interim Report includes a fair review of the information required by DTR 4.2.8R, being disclosure of related party transactions and changes therein since the last Annual Report.

By order of the Board

Craig Hayman James KiddChief Executive Officer Deputy CEO & CFO12 November 2019

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