CIMdata PLM Industry Summary Online Archive
9 November 2005
Financial News
AVEVA Interim Results For The Six Months Ended 30 September 2005
AVEVA Group plc announces its unaudited results for the six months ended 30 September 2005.
HIGHLIGHTS
• Strong results with significant increases in revenue, profit from operations, earnings per share and cash.
• Adjusted profit from operations* increased to £5.5m (2004: £2.7m).
• Adjusted earnings per share** increased by 186% to 17.26p (2004: 6.04p). Basic earnings per share were 12.58p (2004: 8.39p).
• An increased interim dividend of 2.2p will be paid (2004: 1.8p), reflecting the Board's continued confidence.
• Revenue up 21% to £29.0m (2004: £24.1m).
• Recurring revenues up 26% to £19.1m (2004: £15.1m).
• Excellent cash generation with net cash at 30 September at £17.8m (2004: £9.3m).
All figures are presented under IFRS with restated comparatives.
*Profit from operations after adding back amortization of intangibles, restructuring costs and past service credit on UK defined benefit pension scheme.
**Earnings per share after adding back amortization of intangibles, restructuring costs and past service credit on UK defined benefit pension scheme.
Commenting on the outlook, Chairman Richard King said:
"Our strong blue chip customer list, leading technologies and exposure to dynamic, fast growing regions and markets, give the Board confidence that we are well placed to build on the momentum that has been established in the business over the last year.
We enter the second half with a healthy pipeline of new business opportunities and are therefore confident that we are in a strong position to achieve our full year objectives."
CHAIRMAN'S STATEMENT
Overview
AVEVA has performed extremely well in the first six months of the year, achieving record growth in revenue, profit and cash. We have outperformed across all regions and markets where we operate. In addition, we are beginning to see acceleration in orders from some of the world's emerging economies, particularly Russia and South America.
These excellent half-year results demonstrate our ability to build on our dominant positions in high growth markets and develop our leading technologies to meet the evolving needs of our customers. Once again, we have worked hard to achieve a better balance between first and second half revenues and therefore expect full year results to be less weighted to the second half than in previous years. We have established a strong momentum across the business and enter the second half with an encouraging order book.
Financials and Dividend
All figures are presented under International Financial Reporting Standards (IFRS), with restated comparatives. For details of main adjustments please refer to the announcement made on 22 September that can be found at http://www.aveva.com .
AVEVA has once again delivered impressive sales and profit growth against the same period last year, with revenue up 21% to £29.0 million. Recurring revenues increased by 26% to £19.1 million (2004: £15.1 million).
Profit from operations before amortization, restructuring costs and past service credit on the UK pension scheme increased to £5.5 million, generating adjusted earnings per share of 17.26p-an increase of 186% on 2004.
Costs have risen in line with expectations and we anticipate that costs will increase at a proportionate rate in the second half to support the Group's expansion and investment in VNET.
AVEVA continues to be highly cash generative, with net cash at 30 September 2005 £17.8 million (2004: £9.3 million). This has been achieved despite investing over £6.4 million in research and development in the period, and expanding further a global sales infrastructure.
Dividend
Given our strong first half performance and confidence in the prospects of the business, the Board is declaring that the interim dividend per share be increased by 22% to 2.2p (2004: 1.8p). Payment will be made on 27 January 2006 to all shareholders on the register on 6 January 2006.
Operating Review
This has been another period of significant growth, both geographically and in our main target markets of oil and gas, power and marine.
Geographic
Our successful penetration of Asia Pacific markets continues to be a key factor in the Group's performance. Revenues from the region were up 35% on the prior period and now represent 38% of Group revenues. This was largely a result of ongoing exposure to high growth markets such as Korea, particularly in the marine sector, with increased opportunities for new business in Japan and Australia.
In terms of EMEA, sales have been good. Growth in Europe continues to be driven by increasing demand in the power industry and the success of European based suppliers of power generation plants. In addition, the demand for large scale Floating, Production and Storage Offshore (FPSO) vessels has driven further growth from our established European offshore contractor base. Revenues increased by 11% on the same period last year and now represent 45% of Group revenues. A particular highlight is that our marketing efforts in Russia over the last two years are now starting to bear fruit, especially in the oil and gas and marine sectors. This performance has been achieved for a number of reasons including a better understanding of business practices in the region and resurgence in Russia's economy. In order to better exploit these emerging opportunities, we have opened an office in Moscow in addition to the Marine sales office we have in St Petersburg.
More encouragingly, for the first time in over two years, we have seen a strong recovery in our Americas business, with revenues up 19% on the same period last year. Whilst this remains our smallest market, representing 17% of Group revenues, it is a strategically important region and one where we see good long-term growth prospects. We have continued to invest in the US and our Houston headquarters has been very busy helping our many customers, either based in or with facilities around the southern states, deal with the problems brought about by the terrible weather conditions in the region.
Markets
We have continued to strengthen our position in the three main markets of oil and gas, power and marine. We have seen a good inflow of new business and renewal of rental contracts.
In terms of the power market, we are realizing good opportunities in China in both nuclear and fossil fuelled power stations as the country seeks to address its massive need for extra power capacity. The foundations we have built locally means that AVEVA suite of products has already become the system of choice.
The European power industry is also now seeing significant growth, in part due to demand from Asia, but also the resurgence of demand for nuclear power in Europe. This is translating into good repeat business for AVEVA, as well as a healthy pipeline of future opportunities. The UK power industry, along with many other countries, is also in a transitional period as governments look to increase power capacity and the immediate growth opportunities look encouraging.
We have continued to see a steady increase in confidence for long-term oil and gas projects around the world. The market opportunity is substantial, with forty-four £1 billion offshore developments, thirteen £1.5 billion refineries, twenty-seven £1 billion LNG plants and eleven £3.5 billion petrochemical plants due to built over the next ten years. We have a good track record on global projects with customers like BP in Angola and Shell in Nanhai, China. Our confidence in our ability to leverage our expertise to increase the work we do with existing customers and indeed attract new customers was borne out in July 2005, when Petrobas, the national oil company of Brazil, migrated its legacy data from four of its refineries to AVEVA's VANTAGE Plant Design 3D solution. Petrobas is using AVEVA software in eight of its refineries and is expected to integrate the product across all fourteen in time.
The marine business has performed in line with expectations during the first half, achieving steady growth against strong prior year comparatives.
The delivery of our first combined process and marine product "VANTAGE Marine 11.6", which we have been developing through our strategic partnership with Hyundai Heavy Industries, the world's leading shipbuilding company, has been well received by customers. We believe it will result in an increase in recurring revenues with existing customers and provide a major driver for new customers to commit to VANTAGE Marine.
Whilst we have secured some significant new contracts in our non-core markets of paper and pulp, mining, food processing, chemical and pharmaceutical, these markets do not represent a material proportion of Group revenue.
Constant Innovation
As a business we never stand still, constantly striving to improve our offering to meet the changing needs of our customers. During the first half of the year we invested £6.4 million in research and development, and completed planned improvements to our core VANTAGE offering with the launch of VANTAGE Project Resource Management (VPRM) 9.6.
During the period we continued to invest in developing a suitable infrastructure to support the wider roll out of VANTAGE Enterprise Net (VNET), our unique internet based technology that enables common applications to be integrated to create an internet-based information portal. Since the end of the last financial year the dedicated VNET team has more than doubled, including strengthening our presence in America and Central Europe. Whilst it is still early days, we believe VNET has enormous potential within the engineering community, transforming AVEVA's position and relationship with large global blue chip EPCs and Owner Operators.
Management and Board
Whilst there have been no changes at the plc Board level, within the operating executive team we have several new appointments. Lennart Olsson, formerly the President of Tribon Solutions, now heads up Global Sales and Customer Service and Derek Middlemas is now responsible for Business Development and Strategic Planning, whilst Matt McKinley, Executive Vice President of our American operation, is making a great improvement in the region.
Outlook
Our strong blue chip customer list, leading technologies and exposure to dynamic, fast growing regions and markets, give the Board confidence that we are well placed to build on the momentum that has been established in the business over the last year.
We enter the second half with a healthy pipeline of new business opportunities and are therefore confident that we are in a strong position to achieve our full year objectives.
Richard King
Chairman
8 November 2005
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