18:00 Tue 12 Nov 2019
AVEVA Group PLC - Half-year Report
RESULTS FOR THE SIX MONTHS ENDED
AVEVA delivers on the Digital Twin with strong results and makes continued progress against its medium-term targets
Summary results
Six months ended 30 September |
H1 FY20 |
H1 FY19 |
Change |
|
|||
Revenue1 |
|
|
16.5% |
Recurring revenue2 |
|
|
42.1% |
Adjusted EBIT3 |
|
|
66.5% |
Adjusted EBIT margin |
23.1% |
16.2% |
+690bps |
Profit/(Loss) before tax |
|
|
- |
Adjusted3 diluted earnings per share |
43.31p |
26.25p |
65.0% |
Diluted earnings per share |
11.13p |
(3.61)p |
- |
Highlights
· Revenue grew 16.5% to
· 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
· Recurring revenue up 42.1% to
· Adjusted EBIT up 66.5% to
· Interim dividend up 10.7% to
· Net cash and deposits of
· Strong progress on product integration with the launch of AVEVA Unified Engineering and AVEVA
· Outlook remains positive
Chief Executive Officer,
"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.
I'm pleased with these results and proud of the focus and execution at AVEVA that is realising our ambition and vision for the digitalisation of the industrial world. By working to understand our customers' needs, delivering innovation to accelerate their digital transformation and meticulous business execution, we are producing on all fronts and continue to recruit globally for world class talent.
Looking ahead, we see strong demand for digitalisation and industrial software within the industries we serve and remain confident in the outlook."
Notes
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 are calculated before amortisation of intangible assets (excluding other software), share-based payments, gain/loss on fair value of forward foreign exchange contracts and exceptional items. Adjusted earnings per share also includes the tax effects of these adjustments.
4 Organic constant currency revenue excludes the reverse acquisition accounting adjustment to deferred revenue of
Enquiries:
Tel: 01223 556 676
Tel: 020 3727 1000
Conference call and webcast
AVEVA will host a conference call and webcast, for registered participants, at 09:30 (GMT) today.
To register for the webcast and access the presentation materials please visit: www.aveva.com/Investors
Conference calls dial in details:
Telephone: +44 (0) 207 1928 000 / +1 866 966 1396
Conference call code: 5887706
Conference call participants will be able to ask questions during the Q&A session, but those on the webcast will be in a listen only mode.
A replay of the call will be made available later in the day.
Chief Executive's review
Summary
AVEVA 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
In addition, the Group launched AVEVA Unified Engineering, the
Trading and markets
The 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 markets
Around 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
The ongoing structural growth drivers in each of our end markets are strong.
In
Sales channel and geographical performance
AVEVA 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.
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
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.
Business Unit performance
Engineering 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
The acquisition of MaxGrip, a company that optimises asset performance with Reliability Centred Maintenance (RCM) solutions, was completed in
Since the acquisition, the focus has been on integrating the MaxGrip toolset 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 development
AVEVA 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
The integration of AVEVA's research and development teams has enabled key integrated products to be delivered with the launch of
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.
Progress against our medium-term targets
In
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 margin
The 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 revenue
AVEVA 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 rentals & 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 and 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 overachievement was assisted by early contract renewals, including an EPC contract, and an element of upfront revenue recognition on multi-year contracts.
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.
Chief Executive Officer
Finance Review
Overview
Revenue was
Organic constant currency revenue grew 11.9%, excluding a deferred revenue haircut of
Six months ended 30 September |
H1 FY20 £m |
H1 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% |
400bps |
Adjusted EBIT margin |
23.1% |
16.2% |
690bps |
Tax charge |
21.3% |
21.5% |
- |
Revenue overview
Revenue 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
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
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
Support and maintenance
Support and maintenance revenue grew by 8.1% to
Initial fees and perpetuals
Initial fees and perpetual revenue reduced by 11.7% to
Training and services
Training and services revenue reduced by 7.4% to
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 management
Together with cost control, the revenue growth delivered an increase in constant currency adjusted EBIT of 46.5% versus the prior year (excluding the
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
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
An analysis of total expenses is summarised below:
£m |
Cost of sales |
R&D |
Selling and distribution |
Admin. |
Net impairment loss from financial assets |
Total |
Statutory |
92.5 |
92.0 |
113.1 |
67.2 |
1.6 |
366.4 |
Amortisation |
- |
(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 |
282.2 |
Change |
(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
The cost of sales reduction was also helped by the disposal of Wonderware Italy, a wholly-owned distributor.
Research & Development costs were
Selling and distribution expenses were
Administrative expenses were
Net impairment loss from financial assets represents the impairment of accounts receivable during the year of
Normalised and exceptional items
The 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 |
7.8 |
Restructuring costs |
1.0 |
3.0 |
Profit from the sale of a business |
(0.2) |
- |
Total exceptional items |
13.3 |
10.8 |
|
|
|
Amortisation (excl. other software) |
45.3 |
43.8 |
Share-based payments |
6.4 |
4.3 |
Loss 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 the 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.
Taxation
The statutory tax charge was
The adjusted tax rate was 21.3% (H1 FY19: 21.5%) and is expected to be around 20% on a full year basis.
Earnings per share
Statutory diluted EPS was
Dividends
In line with the Board's progressive dividend policy, AVEVA intends to pay an interim dividend of
Balance sheet and cash flow
The Group continues to maintain a strong balance sheet, with net cash and treasury deposits of
In
Trade and other receivables at
Cash generated from operating activities before tax was
Deputy CEO & CFO
12 November 2019
Independent review report
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 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 (
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRS as adopted by the
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the
12 November 2019
Consolidated income statement
for the six months ended 30 September 2019
|
|
Six months ended |
Year ended |
||
|
|
30 September |
31 March |
||
|
|
2019 |
2018 |
2019 |
|
|
|
£m |
£m |
£m |
|
|
Notes |
(unaudited) |
(unaudited) |
(audited) |
|
Revenue |
5 |
391.9 |
336.5 |
766.6 |
|
Cost of sales |
|
(92.5) |
(95.0) |
(193.2) |
|
Gross profit |
|
299.4 |
241.5 |
573.4 |
|
Operating expenses |
|
|
|
|
|
Research & 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) |
47.2 |
|
Finance revenue |
|
0.1 |
0.1 |
0.2 |
|
Finance expense |
|
(1.6) |
(0.4) |
(0.7) |
|
Profit/(Loss) before tax |
|
24.0 |
(5.5) |
46.7 |
|
Income 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) |
47.2 |
Amortisation of intangibles (excluding other software) |
|
45.3 |
43.8 |
88.1 |
Share-based payments |
|
6.4 |
4.3 |
11.2 |
Losses on fair value of forward foreign exchange contracts |
|
0.1 |
0.7 |
0.5 |
Exceptional 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 statement of comprehensive income
for the six months ended 30 September 2019
|
Six months ended |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Profit/(Loss) for the period |
18.0 |
(5.8) |
33.8 |
Items that may be reclassified to profit or |
|
|
|
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 |
|
|
|
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 sheet
30 September 2019
|
|
As at 30 September |
As at 30 September |
As at 31 March |
|
|
2019 |
2018 |
2019 |
|
|
£m |
£m |
£m |
|
Notes |
(unaudited) |
(unaudited) |
(audited) |
Non-current assets |
|
|
|
|
|
|
1,298.8 |
1,291.4 |
1,285.3 |
Other intangible assets |
|
558.7 |
638.5 |
599.5 |
Property, plant and equipment |
|
20.4 |
14.9 |
17.1 |
Right-of-use assets |
16 |
81.0 |
- |
- |
Deferred tax assets |
|
12.3 |
8.4 |
11.8 |
Other receivables |
13 |
3.5 |
1.2 |
2.2 |
Retirement benefit surplus |
|
8.6 |
7.8 |
7.1 |
|
|
1,983.3 |
1,962.2 |
1,923.0 |
Current assets |
|
|
|
|
Inventories |
|
0.6 |
0.9 |
0.8 |
Trade and other receivables |
13 |
204.1 |
196.2 |
237.9 |
Contract assets |
|
127.3 |
77.9 |
100.5 |
|
|
- |
0.2 |
0.6 |
Cash and cash equivalents |
|
78.6 |
93.5 |
127.2 |
Current 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 |
Equity |
|
|
|
|
Issued share capital |
|
5.7 |
5.7 |
5.7 |
Share premium |
|
574.5 |
574.5 |
574.5 |
Other reserves |
|
1,184.7 |
1,186.5 |
1,178.8 |
Retained earnings |
|
143.5 |
142.2 |
165.5 |
Total equity |
|
1,908.4 |
1,908.9 |
1,924.5 |
Current liabilities |
|
|
|
|
Trade and other payables |
14 |
134.2 |
145.5 |
156.8 |
Contract liabilities |
|
148.3 |
128.6 |
174.6 |
Loans and borrowings |
|
20.0 |
11.9 |
- |
Lease liabilities |
16 |
17.3 |
- |
- |
Financial liabilities |
|
0.6 |
0.2 |
0.1 |
Provisions |
|
1.2 |
- |
1.9 |
Current tax liabilities |
|
4.4 |
14.7 |
12.8 |
|
|
326.0 |
300.9 |
346.2 |
Non-current liabilities |
|
|
|
|
Lease liabilities |
16 |
53.0 |
- |
- |
Deferred tax liabilities |
|
109.2 |
120.0 |
111.3 |
Other liabilities |
|
0.8 |
0.2 |
3.1 |
Provisions |
|
1.1 |
- |
2.6 |
Retirement 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' equity
30 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 |
£m |
Total other reserves £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 |
1,954.7 |
Loss 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) |
6.0 |
Share-based payments |
- |
- |
- |
- |
- |
- |
- |
- |
- |
4.3 |
4.3 |
Tax arising on share options |
- |
- |
- |
- |
- |
- |
- |
- |
- |
0.6 |
0.6 |
Investment 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 |
1,908.9 |
Profit for the period |
- |
- |
- |
- |
- |
- |
- |
- |
- |
39.6 |
39.6 |
Other comprehensive income |
- |
- |
- |
(2.9) |
- |
- |
- |
- |
(2.9) |
(1.4) |
(4.3) |
Total comprehensive income |
- |
- |
- |
(2.9) |
- |
- |
- |
- |
(2.9) |
38.2 |
35.3 |
Share-based payments |
- |
- |
- |
- |
- |
- |
- |
- |
- |
6.9 |
6.9 |
Tax arising on share options |
- |
- |
- |
- |
- |
- |
- |
- |
- |
0.6 |
0.6 |
Investment in own shares |
- |
- |
- |
- |
- |
- |
- |
(4.9) |
(4.9) |
- |
(4.9) |
Capital contribution |
- |
- |
- |
- |
0.1 |
- |
- |
- |
0.1 |
- |
0.1 |
Equity 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 |
1,924.5 |
Profit for the period |
- |
- |
- |
- |
- |
- |
- |
- |
- |
18.0 |
18.0 |
Other comprehensive income |
- |
- |
- |
8.6 |
- |
- |
- |
- |
8.6 |
0.7 |
9.3 |
Total comprehensive income |
- |
- |
- |
8.6 |
- |
- |
- |
- |
8.6 |
18.7 |
27.3 |
Share-based payments |
- |
- |
- |
- |
- |
- |
- |
- |
- |
6.4 |
6.4 |
Investment in own shares |
- |
- |
- |
- |
- |
- |
- |
(3.1) |
(3.1) |
- |
(3.1) |
Cost of employee benefit trust shares issued to employees |
- |
- |
- |
- |
- |
- |
- |
0.4 |
0.4 |
(0.4) |
- |
Equity dividends |
- |
- |
- |
- |
- |
- |
- |
- |
- |
(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 |
Consolidated cash flow statement
for the six months ended 30 September 2019
|
Six months ended |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Cash flows from operating activities |
|
|
|
Profit/(Loss) for the period |
18.0 |
(5.8) |
33.8 |
Income tax expense |
6.0 |
0.3 |
12.9 |
Net finance expense |
1.5 |
0.3 |
0.5 |
Amortisation of intangible assets |
46.1 |
44.6 |
88.8 |
Depreciation of property, plant and equipment, and right of use assets |
10.1 |
3.2 |
5.4 |
Loss on disposal of property, plant and equipment |
0.1 |
- |
0.1 |
Gain on disposal of subsidiary |
(0.2) |
- |
- |
Share-based payments |
6.4 |
4.3 |
11.2 |
Difference between pension contributions paid and amounts charged to operating profit |
(0.1) |
(0.3) |
0.1 |
Research & 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) |
69.2 |
Changes 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 |
169.1 |
Income taxes paid |
(27.6) |
(8.6) |
(32.4) |
Net cash generated from operating activities |
15.9 |
36.0 |
136.7 |
Cash flows from investing activities |
|
|
|
Purchase 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 activities |
|
|
|
Interest 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) |
23.5 |
Net 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 |
Notes to the Interim Report
1 The Interim Report
The 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,
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 policies
The 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
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
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 earnings per share 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 2019
The 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.
The 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 judgments
The 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 concern
The Group has significant financial resources. At 30 September 2019, the Group had bank, cash and treasury deposits of £78.6m (31 March 2019: £127.8m) and debt draw down of £20.0m (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 uncertainties
As with any organisation, there are a number of potential risks and uncertainties which could have a material impact on the Group's long-term performance. The 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 Revenue
An analysis of the Group's revenue is as follows:
|
Six months ended |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Support and maintenance, including annual fees |
101.5 |
93.9 |
194.4 |
Rental and subscriptions |
141.0 |
76.8 |
218.2 |
Initial fees and perpetual licences |
85.4 |
96.7 |
211.6 |
Training and services |
64.0 |
69.1 |
142.4 |
|
391.9 |
336.5 |
766.6 |
|
|
|
|
Timing of revenue recognition |
|
|
|
Services transferred at a point in time |
169.2 |
121.0 |
357.3 |
Services transferred over time |
222.7 |
215.5 |
409.3 |
|
391.9 |
336.5 |
766.6 |
Finance revenue |
0.1 |
0.1 |
0.2 |
|
392.0 |
336.6 |
766.8 |
6 Segment information
The Executive Leadership Team monitors and appraises the business on a geographic basis with three operating regions:
|
|
Six months ended 30 September 2019 (unaudited) |
|||
|
|
EMEA |
|
Corporate |
Total |
|
£m |
£m |
£m |
£m |
£m |
Revenue |
|
|
|
|
|
Support and maintenance, including annual fees |
23.8 |
34.6 |
43.1 |
- |
101.5 |
Rental and subscriptions |
58.2 |
46.1 |
36.7 |
- |
141.0 |
Initial fees and perpetual licences |
27.1 |
32.9 |
25.4 |
- |
85.4 |
Training and services |
15.2 |
21.1 |
27.7 |
- |
64.0 |
Regional revenue total |
124.3 |
134.7 |
132.9 |
- |
391.9 |
Cost 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) |
150.7 |
Research & 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) |
|||
|
|
EMEA |
|
Total |
|
£m |
£m |
£m |
£m |
Revenue |
|
|
|
|
Support and maintenance including annual fees |
21.8 |
30.3 |
41.8 |
93.9 |
Rental and subscriptions |
22.2 |
40.3 |
14.3 |
76.8 |
Initial fees and perpetual licences |
26.4 |
35.0 |
35.3 |
96.7 |
Training and services |
13.1 |
23.4 |
32.6 |
69.1 |
|
83.5 |
129.0 |
124.0 |
336.5 |
|
|
Year ended 31 March 2019 (audited) |
|||
|
|
EMEA |
|
Corporate |
Total |
|
£m |
£m |
£m |
£m |
£m |
Revenue |
|
|
|
|
|
Support and maintenance, including annual fees |
45.0 |
71.7 |
77.7 |
- |
194.4 |
Rental and subscriptions |
49.4 |
107.2 |
61.6 |
- |
218.2 |
Initial fees and perpetual licences |
57.3 |
86.6 |
67.7 |
- |
211.6 |
Training and services |
27.8 |
48.8 |
65.8 |
- |
142.4 |
Regional revenue total |
179.5 |
314.3 |
272.8 |
- |
766.6 |
Cost 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) |
290.4 |
Research & 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 expenses
An analysis of selling and administration expenses is set out below:
|
Six months ended |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Selling and distribution expenses |
113.1 |
106.9 |
235.6 |
Administrative expenses |
67.2 |
54.0 |
106.3 |
|
180.3 |
160.9 |
341.9 |
8 Exceptional items
|
Six months ended |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Acquisition and integration activities |
12.5 |
7.8 |
23.0 |
Restructuring 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
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 £13.3m (H1 FY19: £10.8m) is £2.5m (H1 FY19: £1.7m).
9 Income tax expense
The total tax charge for the half year ended 30 September 2019 is £6.0m (H1 FY19: £0.3m).
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
The tax charge on adjusted profit before tax is £19.0m (H1 FY19: £11.6m) which equates to an effective tax rate of 21.3% (H1 FY19: 21.5%).
10 Ordinary dividends
The 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 the year ended 31 March 2019 were declared and paid relating to
An analysis of dividends paid is set out below:
|
Six months ended |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Final 2018/19 paid at 29.0 pence per share |
46.7 |
- |
- |
Interim 2018/19 paid at 14.0 pence per share |
- |
- |
22.5 |
Final 2017/18 paid at 27.0 pence per share |
- |
43.5 |
43.5 |
|
46.7 |
43.5 |
66.0 |
11 Earnings per share
|
Six months ended |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
pence |
pence |
Pence |
|
(unaudited) |
(unaudited) |
(audited) |
Earnings/(Loss) per share for the period: |
|
|
|
- basic |
11.19 |
(3.61) |
20.97 |
- diluted |
11.13 |
(3.61) |
20.90 |
Adjusted 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 £18.0m and the following weighted average number of shares:
|
Six months ended |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
Number of shares |
Number of shares |
Number of shares |
|
(unaudited) |
(unaudited) |
(audited) |
Weighted average number of ordinary shares for basic EPS |
161,014,600 |
161,092,331 |
161,081,559 |
Effect 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 |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Profit/(Loss) after tax for the period |
18.0 |
(5.8) |
33.8 |
Intangible amortisation (excluding other software) |
45.3 |
43.8 |
88.1 |
Share-based payments |
6.4 |
4.3 |
11.2 |
Losses on fair value of forward foreign exchange contracts |
0.1 |
0.7 |
0.5 |
Exceptional items |
13.3 |
10.8 |
28.9 |
Effect of acquisition accounting adjustments |
- |
- |
8.6 |
Tax 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 combinations
Acquisition 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 £m |
Fair value £m |
Intangible assets |
2.4 |
11.5 |
13.9 |
Trade receivables |
1.4 |
- |
1.4 |
Contract assets |
0.2 |
- |
0.2 |
Cash 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 |
10.3 |
|
|
|
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 £21.6m was settled in cash. The associated transaction costs of £0.3m 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 Italy
On 30 April 2019 the Group disposed of a wholly owned distributor business in
13 Trade and other receivables
Current
|
30 September 2019 |
30 September 2018 |
31 March 2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Trade receivables |
141.0 |
121.6 |
174.9 |
Amounts owed from related parties |
32.3 |
45.7 |
35.5 |
Prepayments and other receivables |
30.8 |
28.9 |
27.5 |
|
204.1 |
196.2 |
237.9 |
Non-current
|
30 September 2019 |
30 September 2018 |
31 March 2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(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 payables
|
30 September 2019 |
30 September 2018 |
31 March 2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Trade payables |
18.2 |
12.0 |
20.3 |
Amounts owed to related parties |
7.3 |
36.4 |
10.5 |
Social security, employee and sales taxes |
14.5 |
11.2 |
22.6 |
Accruals |
92.3 |
56.3 |
100.5 |
Other payables |
1.9 |
29.6 |
2.9 |
|
134.2 |
145.5 |
156.8 |
15 Related party transactions
Transactions between Group subsidiaries have been eliminated on consolidation. A list of subsidiaries can be found in the notes to the
During the period, Group companies entered into the following transactions with Schneider Electric group companies:
|
Six months ended |
Year ended |
|
|
30 September |
31 March |
|
|
2019 |
2018 |
2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Sales of goods and services |
31.9 |
39.2 |
80.1 |
Purchase 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 |
30 September 2018 |
31 March 2019 |
|
£m |
£m |
£m |
|
(unaudited) |
(unaudited) |
(audited) |
Trade and other receivables |
28.0 |
41.8 |
34.1 |
Trade and other payables |
(7.3) |
(19.0) |
(10.5) |
Non-trading receivables |
4.3 |
3.9 |
1.4 |
Non-trading payables |
- |
(17.4) |
- |
Loan payable |
- |
(1.9) |
- |
16 Changes in accounting policies
The 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 had 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) |
585.1 |
Right-of-use assets |
- |
76.1 |
76.1 |
Non-current assets |
|
61.7 |
|
|
|
|
|
Lease liabilities |
- |
15.0 |
15.0 |
Provisions |
1.9 |
(0.6) |
1.3 |
Current liabilities |
|
14.4 |
|
|
|
|
|
Lease liabilities |
- |
49.9 |
49.9 |
Provisions |
2.6 |
(2.6) |
- |
Non-current liabilities |
|
47.3 |
|
The 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 |
46.3 |
Less: |
|
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 |
5.7 |
Payments 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 |
Computer equipment |
Motor vehicles |
Total |
|
|
|
£m |
£m |
£m |
£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 |
- |
- |
- |
- |
|
7.7 |
Exchange 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 £3.3m and leases of low-value assets of £0.1m for the six months ended 30 September 2019.
Responsibility statement of the Directors
in respect of the Interim Report
The Directors of the Company confirm that to the best of our knowledge:
· the Interim Report has been prepared in accordance with IAS 34;
· the Interim Report includes a fair review of the information required by DTR 4.2.7R, being an indication of the important events that have occurred during the first six months of the financial year and a description of the principal risks and uncertainties for the remaining six months of the year; and
· the Interim Report includes a fair review of the information required by DTR 4.2.8R, being disclosure of related party transactions and changes therein since the last Annual Report.
By order of the Board
Chief Executive Officer |
Deputy CEO & CFO |
12 November 2019 |
|
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