AVEVA Group plc
Annual report 2013
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About us
thE world’s lEAdinG EnGinEErinG
softwArE proVidEr
AVEVA is one of the world’s leading engineering, design and
information management software providers to the process plant,
power and marine industries. Celebrating our 45th anniversary
in 2012, we have achieved our long‑term success by working in
close partnership with leading engineering companies to deliver
continual and visionary technical innovation.
Global engineering contractors, Owner Operators and shipbuilders
trust AVEVA to help them create and operate the world’s most
complex assets. We empower our customers to make thousands
of accurate and timely design, engineering and business decisions
every day, across the entire project and asset lifecycle – improving
productivity, minimising risk and reducing costs.
01
our VISIoN
Always the leading innovator and our customers’ most trusted partner.
02
our mISSIoN
AVEVA enables the creation and management of complex digital assets,
allowing our customers to work globally with less risk, shorter lead times
and greater business efficiency throughout the lifecycle of physical assets.
CELEBrATING 45 YEArS
The artwork on the front
cover was commissioned
for AVEVA’s 45th anniversary
and provided to all of our
offices in recognition of
this major milestone.
WWW.AVEVA.COM
directors’ report
annual report 2013 | aveva Group plc
01
In this report
01
contents
02
Features
DIrectors’ report
overvIew
About us
our performAnce in 2012/13
our business
our tArget mArkets
our difference
our strAtegy
chAirmAn’s stAtement
BusIness revIew
chief executive’s review
finAnce review
key performAnce indicAtors
risks And uncertAinties
corporate governance
corporAte responsibility
corporAte governAnce stAtement
Audit committee report
remunerAtion committee report
other stAtutory informAtion
FInancIaL stateMents
consoLIDateD
stAtement of directors’ responsibilities
independent Auditor’s report
consolidAted income stAtement
consolidAted stAtement of comprehensive income
consolidAted bAlAnce sheet
consolidAted stAtement of chAnges in shAreholders’ equity
consolidAted cAsh flow stAtement
notes to the consolidAted finAnciAl stAtements
coMpany
stAtement of directors’ responsibilities
independent Auditor’s report
compAny bAlAnce sheet
notes to the compAny finAnciAl stAtements
other InForMatIon
five yeAr record
compAny informAtion And Advisers
group directory
Latest news and investor
information can be found at
www.aveva.com
IFC
02
04
06
08
10
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14
20
24
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28
30
38
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50
53
54
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87
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90
IBC
IBC
IBC
£39.3m
£107.6m
£73.3m
our performance in 2012/13
02
2012/13 was a milestone year for aveva.
we successfully launched some of our
most innovative technology...
our strategy
10
for 45 years aveva has been a consistent
leader in the markets we serve, but we
cannot afford to rest on our past success…
chairman’s statement
12
In my first year as Chairman, I am pleased
to report another strong performance
for aveva during 2012/13...
corporate responsibility
28
as a global organisation, we strive to
be socially responsible and to operate
with the highest ethical standards...
overview
business review
governAnce
finAnciAls
02
aveva Group plc | annual report 2013
directors’ report
our performance in 2012/13
2012/13 was a milestone year for AVEVA. We successfully launched some
of our most innovative technology in the 45 year history of the Company
and made two strategic technology acquisitions.
01
our hIghLIghts
our latest technology is targeted at both our existing customers and at capturing
market share from our competition. The recent acquisitions also provide
cross‑selling opportunities into our existing customer base, as well as planting
longer‑term seeds for future technology development and sales growth.
a
InnovatIon
b
acquIsItIons
c
recognItIon
aveva everything3D
Bocad acquisition
techmaRK – company of the Year
the launch of aveva everything3d™
(aveva e3d™) sets a new level of
performance for major capital engineering
projects. aveva e3d drives the adoption
of Lean construction concepts by enabling
engineering, Procurement and construction
contractors (ePcs) to break down barriers
between design and construction, reducing
overall project cost, compressing
schedules and mitigating risk.
in may 2012, aveva purchased the bocad
group for its structural steel design software.
the new capability is being integrated
into the aveva Plant™ and aveva marine™
portfolios for the design of plant and offshore
assets by ePcs and fabricators. the bocad
acquisition has also enabled aveva
to establish a new centre of excellence
for structural steel design to focus on
the integration and on‑going development
of the recently acquired technology.
in recognition of its innovation and business
success, aveva was presented the coveted
techmarK company of the Year award in
2012. Hosted by the London stock exchange
and sponsored by Pwc, the techmarK
event is the largest annual gathering of
quoted technology companies in the uK.
it celebrates the best in the sector and
highlights the achievements of individuals
and companies.
aveva enterprise Resource management
Global majic acquisition
cambridge News – Business of the Year 2013
a combination of internally developed
technology and software from a 2010
acquisition, the aveva enterprise resource
management™ (aveva erm™) suite
brings a comprehensive project execution
management capability to the material,
planning and production process. ePcs
and shipyards benefit from lower material
and production/construction costs through
improved project efficiency, shortening
timescales and increasing project quality
and control.
in december 2012, aveva purchased the
advanced visualisation and simulation software
assets of Global majic software, inc. the highly
skilled team and the new technology have
been integrated into aveva’s simulation
development programme that creates world‑
class 3d interactive virtual environments. this
software provides an immersive environment
that enables virtual access to plant facilities
for the purposes of inspection, training and
maintenance review, minimising travel costs
and the need to expose staff to on‑site hazards.
chosen from a list of prestigious
cambridgeshire companies, aveva
was awarded business of the Year for
2013 by the cambridge news. the award
recognises a company with outstanding
growth performance and diversification,
noting the recent release of new aveva
products and the acquisition of strategic
technology to further fuel the company’s
success in the future.
02
In FIgures
revenue
(£m)
Adjusted* profit before tax
(£m)
adjusted* basic earnings
per share (p)
net cash and deposits
(£m)
£220.2m
+12%
£70.7m
+13%
74.87p
+17%
£190.4m
+6%
164.0 148.3 174.0 195.9 220.2
66.4
50.7
54.7
62.3
70.7
69.99 50.92 56.08 63.81 74.87
126.2 149.7 153.2 179.0 190.4
2009
2010 2011 2012 2013
2009
2010 2011 2012 2013
2009
2010 2011 2012 2013
2009
2010 2011 2012 2013
* Adjusted profit before tax is stated before amortisation of intangibles (excluding other software), share‑based payments, the gain/loss on the fair value of forward
foreign currency contracts and exceptional items. adjusted basic earnings per share is also adjusted for the tax effect of these items.
www.AvevA.com
directors’ report
annual report 2013 | aveva Group plc
03
more information about
tHis can be found at
www.aveva.com
03
By terrItory
Regionally, aveva’s business is broadly spread – selling into all major
territories around the world. one of aveva’s core strengths lies in being
close to the customer and we now have 48 offices around the globe, offering
local support wherever our customers operate. we are seeing rapid expansion
in the world’s fast growing economies, particularly India and china.
americas
europe, middle east & africa
Asia Pacific
£39.3m
x
£107.6m
x
£73.3m
x
regional contribution
to Group revenue
17.8%
+3%
regional contribution
to Group revenue
48.9%
+15%
regional contribution
to Group revenue
33.3% +14%
Significant opportunity
for growth remains
Significant growth in
enterprise Solutions sales
Strong licence growth
compared to 2011/12
whilst the overall performance in
americas was affected by project
delays in brazil, the regional growth
opportunity remains substantial.
we have seen increased activity in
north america, where our canadian
presence is expanding rapidly.
we saw continued good growth in
emea during the year, with strength
in our core market selling to our design
tools to ePcs and expansion in the
owner operator market delivering
significant growth in Enterprise
solutions sales.
In Asia Pacific we saw good progress
in china, particularly in the second
half of the year, with strong growth
compared to a year ago – despite
the continued weakness in marine.
our investment in india during
the year has begun to bear fruit,
with an acceleration in the volume
of deals.
overview
business review
governAnce
finAnciAls
04
aveva Group plc | annual report 2013
directors’ report
our business
AVEVA’s solutions directly reflect the complex project and operational
realities of our EPC, shipyard and Owner Operator customers, delivering
different value propositions at multiple stages throughout the lifecycle
of a project or asset.
01
how we work
To ensure that we meet the needs of our clients
and to focus on the different skills, delivery models
and business models demanded by our extensive
technology portfolio, we have structured the
organisation around two lines of business:
we serve the FoLLowIng InDustrIes detail on pages 06–07 z
oil & Gas
Power
marine
related
engIneerIng & DesIgn systeMs (eDs)
enterprIse soLutIons (es)
The EDS line of business focuses on the creation of digital plants
and ships that are part of a major capital project. Our AVEVA Plant
and AVEVA Marine portfolios cover all aspects of engineering
and design process. Through our tight product architecture,
we deliver Integrated Engineering & Design solutions that allow
our customers to compress schedules, eliminate expensive rework
and drive efficiency across both major engineering projects and
through‑life ‘in‑plant’ engineering.
Our Enterprise Solutions line of business is rooted in the creation
and management of a digital asset that supports the entire
lifecycle of a complex physical asset. Building on the concept
of a Digital Information Hub, our AVEVA NET™ technology creates
a central repository for all project and asset information; providing
the right information to the right people at the right time. This
ability enables AVEVA to deliver information intensive solutions
that draw upon data from any number of systems that support
processes from material management, planning and scheduling,
project management, handover, operations and maintenance,
through to decommissioning.
capItaL project anD
pLant operatIon LIFecycLe
AVEVA’s software solutions
play a key role with EPCs,
shipbuilders and Owner
Operators in the design and
construction of major capital
projects and throughout
the operational lifecycle
of their assets.
01
engineering
contractors
major capital
projects
01
FEED
02
03
PrOjECT
MANAgEMENT
ENgINEErINg AND
DETAIlED DESIgN
04
PrOCurEMENT
05
MATErIAlS
MANAgEMENT
www.AvevA.com
02
10
03
04
nnttrraaccttoo
r i n G c ontracto
e c t p hAse 2–6 yeArs
o
J
r
p
ss
rr
r
s (e
((ee
PP
P
cc
c
ss
s
))
)
e
e
en Gi n
03
04
02
05
01
50
PROJECT
LIFECYCLE
06
07+
operAtions up t o 5 0
A
e
y
s
r
o
o
wner oPer a t o r
wner oP
s
05
07
06
owner
operators
Long‑term plant
operations
CONSTruCTION
06
OPErATIONS
07
MAINTENANCE
08
rEVAMP
09
09
08
DECOMMISSIONINg
10
directors’ report
annual report 2013 | aveva Group plc
05
more information about
tHis can be found at
www.aveva.com/PRoDucTS
02
our contInuaL progressIon
aveva’s tagline of ‘continual Progression’ applies
to all aspects of our business, including our business
model. we are constantly investing in the quality and
innovation of our products to drive growth in recurring
revenue from existing and new customers.
our LIcensIng MoDeL
We operate a ‘right to use’ licence model for the software
developed by our Enterprise Solutions and Engineering &
Design Systems lines of business.
options:
z Initial fee + annual fee
z Fixed rental
z Licence tokens
Benefits:
z Recurring revenue base
z on‑going commitment
z Flexibility
under this model, customers license our software by paying
an initial licence fee followed by an obligatory annual fee,
or by paying a rental fee over a fixed period of time. In both
cases, the customer has to continue to pay a fee in order to
have on‑going access to the software. This model provides
a strong recurring revenue base for AVEVA which allows us to
invest in the future development of our products and markets.
In addition, we also offer the concept of licence ‘tokens’ which
allow our customers to gain access to our full portfolio of software
solutions subject to a minimum commitment level. This provides
greater flexibility in usage while again securing an on‑going
commitment to AVEVA and recurring revenue stream.
our BusIness MoDeL
01
Our product licensing
model delivers
a consistent stream
of recurring revenue
that provides business
resilience and a
strong foundation
for future growth.
03
We strive to meet
the evolving needs
of our customers
through constant
investment in
technology innovation
and world‑class
sales and support
resources to ensure
the long‑term success
of our business.
02
We continue to
expand the range
and capability of
industry‑leading
products and
services though
focused in‑house
development and
carefully targeted
acquisitions that
provide compelling
business benefits for
our current and
future customers.
u e
n
con
tin
G re v e
01
in
r
r
u
c
e
r
COnTInuaL
PROgREssIOn
i
m
Proved P r o d u
u
a
L
02
i
n
v
e
s
t
m
e
n
t
t
c
03
overview
business review
governAnce
finAnciAls
06
aveva Group plc | annual report 2013
directors’ report
our target markets
AVEVA’s products are most applicable in industries where scale and complexity are greatest.
As a result, in recent years the principal driver of growth has been the Oil & gas industry.
AVEVA also has a strong market position in the global Power market. The Marine industry is also
traditionally a key area of strength although the industry is currently in a cyclical downturn,
offset partially by offshore projects. AVEVA also sells into related industries, shown below.
01
oIL & gas
02
power
03
MarIne
04
new growth Markets
www.AvevA.com
01
oil & Gas is a critical industry, with oil and
natural gas meeting more than half of the
world’s primary energy supply, and providing
the raw materials used to manufacture many
of the essential products we use in our
everyday lives. oil powers virtually all
of the world’s transportation.
Revenue contribution
Population growth and rising standards
of living in the world’s developing economies,
as well as increasing energy usage in the
developed world require a sustained long‑term
investment in power projects globally. Global
energy demand is expected to grow at 36%
from 2011–2030 (BP Energy Outlook, January 2013).
The marine industry creates the arteries
of the world economy, providing the most
efficient method for the global transportation
of commodities, fuel, raw materials and products.
The features that place aveva’s technology
at the heart of these key industry verticals,
also make a compelling value case in other
capital‑intensive industries.
02
Revenue contribution
03
Revenue contribution
04
Revenue contribution
directors’ report
annual report 2013 | aveva Group plc
07
AVEVA has had a long association with the global Oil & gas
industry. Our technology continues to enable many of the most
advanced engineering developments, as Oil & gas reserves
become increasingly remote and difficult to extract, particularly
in challenging offshore environments where AVEVA has
a dominant presence.
With rising global energy demands and steadily growing levels
of investment from oil operating companies to build and maintain
the complex infrastructure required to meet these needs,
AVEVA is in a good position to benefit from the expected
continued growth in Exploration & Production (E&P) activity.
It is generally accepted that renewable energy sources
are unable to meet growing demand, and hence fossil fuels
and nuclear energy will continue to be the dominant form
of power generation over the long term.
AVEVA is already a preferred supplier to the world’s nuclear
industry and expects long‑term growth in infrastructure investment,
particularly in China and India. AVEVA is also well‑established
in a wide range of other power generation markets.
The industry is highly cyclical and following a multi‑year
boom in recent years the market is currently depressed.
Within this there are some buoyant areas, for example in
the production of complex specialist (FPSO, lNg, FlNg)
and naval vessels, to which AVEVA’s products are particularly
suited. The majority of the world’s largest shipyards use
AVEVA’s technology, which provides the greatest productivity
advantage of any product on the market. Our Enterprise
Solutions tools help customers streamline their processes
and optimise their operations for the greatest efficiency.
Among these are Chemicals, Pharmaceuticals, Metals & Mining
Processing, Pulp & Paper and other specialist manufacturing
sectors. Many of these industries are concentrated in specific
geographic regions of the world, for example South America,
South Africa and Australia for Metals and Mining Processing,
and Central Europe for Chemicals.
AVEVA’s global presence and local industry expertise provides
us with the flexibility to respond to these attractive business
opportunities and extend the reach of our products and
services into other related industrial sectors.
Market drivers
Growing demand from emerging markets
Tight supply/demand balance
Trend towards higher oil prices
Increased complexity of production
multi‑year engineering projects backlog
Health and safety, regulatory and compliance
need for consistent information
Market drivers
Long‑term secular growth in world energy
consumption, growing 40% 2013–2035
Fossil fuels will continue to drive
energy production
Further investment in alternative forms
of energy production
china and India investment in nuclear power
Health and safety, regulatory and compliance
Market drivers
expectations are for the marine industry
to remain flat over the medium term
overcapacity in shipping continues
to stifle new orders
Specialist sectors remain buoyant,
for example offshore and naval
Increasing interest in efficiency of ship
design to save costs
Market drivers
Project complexity, process‑related plant
design and construction
Industry adoption of 3D engineering design
and information management technologies
Health and safety, regulatory and compliance
z
z
z
z
overview
business review
governAnce
finAnciAls
08
aveva Group plc | annual report 2013
directors’ report
our difference
At AVEVA, we have long recognised that our people are our most important
asset. The talent, skills and experience they bring to the development and
delivery of our software and services is key to maintaining our leadership
position across the industries we serve.
01
our peopLe
we are committed to strengthen our employee asset by continually
working to recruit, retain and motivate our staff in‑line with our five AVEVA
values of Trustworthy, Flexible, Inspiring, accessible and Innovative.
This is a proven and effective process and we are proud of how our
colleagues demonstrate their commitment back to aveva through high
retention, longevity and engagement in development programmes.
Facts
93.2% of
all employees
have stayed
with AVEVA
throughout
2012/13
Despite the
rapid growth in
our employee
numbers, 39%
of our staff
have been
with AVEVA
for more than
five years
In 2012/13
AVEVA
conducted
more than 300
development
and training
courses
www.AvevA.com
262
new
employees
39%
5 years or more
2012/13 saw a large number of new employees
for AVEVA, a 25% increase on the previous year.
z Graduate Development Programme
z Grads & Stars Personal Development Scheme
z management Development Programmes
z advanced Leadership Programme
z Personal and Skills Development workshops
z mentoring Programmes
z eLearning modules
z Technical Training
1,000+
in training
In 2012/13 more than 1,000 employees participated
in development and training programmes.
directors’ report
annual report 2013 | aveva Group plc
09
more information about
tHis can be found at
www.aveva.com
02
our InnovatIon
aveva continues to deliver world‑class, industry‑leading products
to its customers in order to help them remain competitive and take
advantage of new technology trends which can deliver increasing
efficiencies in their businesses.
InvestIng In r&D
LaunchIng our new proDuct: aveva e3D
The launch of AVEVA E3D represents a major
milestone and a significant step‑change in our
industry, and as a platform it is shaping the direction
of our future development efforts, many of which
are now focused on exciting new areas such as the
opportunities that the cloud and mobile computing
promise to deliver.
£35.5m
£32.1m
£28.1m
£20.9m
£27.3m
During the past five years, AVEVA has invested almost
£150 million in innovation:
2012/13
2011/12
2010/11
2009/10
2008/09
A key focus has
been to build our
presence in India,
a rapidly growing
market. Over the
past twelve months,
R&D headcount has
expanded more than
120%, located in
state‑of‑the‑art
new facilities
in Hyderabad
120
new r&d
employees
in india
There was a great deal of excitement surrounding the launch
of AVEVA E3D at the AVEVA World Summit in Paris. Delegates
were also shown a glimpse of future applications which utilise
the latest tablet computing technology, and could lead to a new
frontier in cloud computing for Engineering and Design as well
as operational information management.
z
To ReaD moRe aBouT
ouR New PRoDucT
aveva e3D ScaN THe
QR coDe oR Go To
www.aveva.com/FoPD
overview
business review
governAnce
finAnciAls
10
aveva Group plc | annual report 2013
directors’ report
our strategy
For 45 years AVEVA has been a consistent leader in the markets we serve,
but we cannot afford to rest on our past success.
our strategIc prIorItIes
we have challenging ambitions to build on our core competencies
and expand our business in the years ahead. To achieve this goal,
we have six Strategic Growth Themes that we promote throughout
our organisation. These themes are tied directly to the goals and
targets of departments and individuals, providing a framework
upon which we define strategies and priorities and set out the
roadmaps that will ensure our future success.
z emerging markets
z Plant operations
z Global accounts
z enterprise Solutions
z extending Design Footprint
z New Business models
a
prIorIty anD oBjectIve
b
opportunIty
01
eMergIng Markets
we will invest in focused solutions and local
presence to become the dominant supplier to
the emerging markets
z
High growth markets offer a significant business
opportunity for AVEVA. Companies in these areas of
the world are looking for a trusted partner to provide
a complete portfolio of solutions. With the right focus
and investment on the ground, AVEVA is ideally positioned
to respond to the technology and support requirements
of these exciting markets.
02
pLant operatIons
we will grow our Plant operations
business to become as large as
our design and engineering base
By creating a stronger relationship with Owner Operators,
AVEVA taps into a long‑term market opportunity. We have
the expertise and technology to bring tremendous value
to these customers through the efficient support of operational
processes and execution of in‑plant engineering projects.
Success in this market will allow us to extend our business
engagement across the entire lifecycle of an asset.
z
03
gLoBaL accounts
we will continue to strengthen our relationships
with Global accounts and support their global
co‑ordination and standardisation efforts
z
Global EPCs are extremely influential in determining
the software tools deployed on major capital projects.
To embed our solutions within the entire project ecosystem
and be responsive to the changing environment, it is important
for AVEVA to establish strong global relationships with the
industry’s leading EPCs.
www.AvevA.com
directors’ report
annual report 2013 | aveva Group plc
11
more information about
tHis can be found at
www.aveva.com/INveSToRS
Richard Longdon | Chief Executive Officer
“ Accelerating sales of our Enterprise Solutions is key to
our objective in positioning AVEVA as a strategic partner
to our customers. We aim to further expand our presence
in the Owner Operator market in the near term.”
to read more, turn to PaGe 14
a
prIorIty anD oBjectIve
b
opportunIty
04
enterprIse soLutIons
we will continue to accelerate the adoption of
our enterprise Solutions to become a strategic
partner to our customers and secure our position
across the entire project and asset lifecycle
z
The design, construction and operation of complex assets
is highly competitive and subject to increasingly strict reporting
requirements. It is driven by a business imperative to constantly
achieve more with less resource. AVEVA’s Enterprise Solutions
is helping our customers effectively manage their businesses
and react to changing legislation by providing timely access
to accurate project and asset information.
05
extenDIng DesIgn FootprInt
we will extend our existing Design Footprint
with new products and solutions that bring
enhanced value to our customers
and shareholders
z
using our extensive domain knowledge and market leading
position, we have the opportunity to develop and integrate
advanced new products which complement our existing
portfolios. This allows us to extend our reach and influence
within the existing customer base while providing a more
compelling offering to new customers, increasing our
revenue and market penetration.
06
new BusIness MoDeLs
explore new and innovative Business models
to better serve our customers and enhance
revenue growth
z
As technology and markets evolve, opportunities will arise
for AVEVA to rethink the way we operate different aspects
of our business. By actively exploring alternative business
models we can create dramatic new possibilities for AVEVA
and our customers. As an example, we are currently working
to examine different ways of making our products more easily
accessible to the widest possible audience, improving
AVEVA’s efficiency and providing a more flexible service
to our customers.
overview
business review
governAnce
finAnciAls
12
aveva Group plc | annual report 2013
directors’ report
chairman’s statement
Philip aiken | Chairman
“ We delivered a record set of results,
both in terms of revenue and profit,
by continuing to provide world‑class
engineering software and solutions
to our global customer base.”
suMMary oF revIew
z I am delighted to be involved
with such an exciting, world‑class
company which continues to benefit
from a global platform, exposure to
developing markets and world‑beating
technology and innovation
z In enterprise Solutions we set clear
targets for the year to deliver both
growth and profitability, and we were
very pleased to report success on
both fronts
z From a technology perspective
it has been a most exciting year and
we continue to build on our leadership
position. we have delivered the
successful commercial launch of
aveva e3D
z The Board is proposing to return
£100 million to shareholders in the form
of a special dividend, subject to approval
at the aGm
www.AvevA.com
z
revIew
overvIew
In my first year as Chairman, I am pleased to report another
strong performance for AVEVA during 2012/13, reflecting our
market leading position in engineering design and information
management solutions for the oil & Gas, Power and marine
industries worldwide. i joined aveva at the beginning of the
2012/13 financial year and I am delighted to be involved with
such an exciting, world‑class company which continues to
benefit from a global platform, exposure to developing markets
and world‑beating technology and innovation.
these results are a testament to the hard work of all aveva
employees around the world. in particular, a notable milestone
was achieved during the year as our enterprise solutions business
grew more than 30% and moved into profitability for the first time.
another major achievement for the Group was the launch of
aveva everything3d (aveva e3d) in october 2012, the most
significant new product release that AVEVA, or the engineering
design industry as a whole, has seen for many years.
our engineering & design systems business also delivered good
growth, and we were able to expand the breadth of our product
offering, both organically and through the strategic acquisitions
of bocad in may 2012 and Global majic in december 2012, further
deepening our relationships with our customers, in line with our
long‑term strategy.
key FInancIaLs
aveva delivered record revenue for the year in 2012/13 of
£220.2 million (2012 – £195.9 million), up 12% on the same
period a year ago. this was driven by strong revenue growth
and excellent execution in enterprise solutions and further
expansion in engineering & design systems.
Adjusted profit before tax grew by 13% to £70.7 million (2012 –
£62.3 million) and we achieved an adjusted profit margin of 32%
(2012 – 32%), whilst still maintaining our investment in the business
as planned. Profit before tax for the year was £63.6 million (2012
– £57.7 million). Adjusted basic earnings per share amounted to
74.9 pence, an increase of 17% over the prior year (2012 – 63.8 pence).
Basic earnings per share was 67.0 pence (2012 – 58.9 pence).
directors’ report
annual report 2013 | aveva Group plc
13
aveva continues to maintain a strong balance sheet and
remains highly cash generative. we closed the year with more
than £190 million of cash (2012 – £179.0 million) and no debt. This
was after investing £12.5 million on the acquisitions of bocad and
Global majic and after paying £14.6 million in dividends.
operatIons
in our core engineering & design systems division, revenue grew
10% to a record £189.5 million (2012 – £172.5 million) – driven
by sustained demand from our engineering, Procurement and
construction (ePc) customers where we continue to expand
our footprint within key accounts.
roLe oF the BoarD
we have revamped our board agenda to put more emphasis
on the Group’s key areas of focus such as our technology plan,
strategy and people. AVEVA has grown significantly in recent
years and has a great future and i see the role of the board
as supporting and reviewing our growth strategy. the balance
between delivering short‑term performance and investing for
future growth is a challenge for any organisation and one where
I believe the Board has a significant role to play in working with
and supporting the executive team.
prospects
in enterprise solutions we set clear targets for the year to deliver
both growth and profitability, and we were very pleased to report
success on both fronts. Revenue increased by 31% to £30.7 million
(2012 – £23.5 million) which delivered a contribution of £2.0 million
(2012 – loss of £4.4 million).
aveva has world‑beating technology and products, strong
underlying market drivers, a truly international breadth of operations,
long‑term customer relationships, as well as a highly dedicated
and expert team. The Group has significant opportunities to
continue to deliver strong growth in the future.
PHiLiP aiKen
chairman
23 may 2013
technoLogy
from a technology perspective it has been a most exciting year
and we continue to build on our leadership position. we have
delivered the successful commercial launch of aveva e3d, a major
new platform focused on Plant design for ‘Lean construction’, which
we believe will create significant efficiencies for our customers
and raise the competitive benchmark for the plant design industry.
in addition to this, we have released a number of other exciting
new products in the schematics and enterprise solutions portfolios.
we also continue to add to our technology capabilities through
acquisition, with bocad and Global majic both being acquired
during the year.
DIvIDenDs
The Board is recommending a final dividend of 19.5 pence
(2012 – 17.0 pence), an increase of 15% over the prior year.
this gives a full year dividend of 24 pence (2012 – 21.0 pence)
when combined with the interim dividend of 4.5 pence announced
earlier in the year, gives an increase of 14% over last year. subject
to approval at the Annual General Meeting (AGM), the final dividend
will be paid on 26 July 2013 to shareholders on the register on
21 June 2013.
return oF capItaL
aveva is committed to generating returns for our shareholders
whilst maintaining a strong balance sheet to provide adequate
resources for future investment and growth. in light of the Group’s
strong performance and strong cash generation over many years,
the board is proposing the return of cash to shareholders of
approximately £100 million in the form of a special dividend
which is expected to be paid in august 2013. the board is also
recommending the special dividend is accompanied by a share
consolidation to maintain, as far as possible, the comparability of
the share price before and after the special dividend. the special
dividend and share consolidation will be subject to shareholder
approval at the aGm on 9 July 2013. the ex‑dividend, record and
payment dates for the special dividend and the share consolidation
factor will be set out in the aGm circular for shareholders.
peopLe
aveva continues to have a team of highly skilled and dedicated
employees who are the driving force behind the success of the
Group and the strong performance in 2012/13. on behalf of the
board i would like to thank everyone at the company for their
excellent contribution and commitment.
overview
business review
governAnce
finAnciAls
14
AVEVA Group plc | Annual report 2013
Directors’ report
Chief Executive’s review
Richard Longdon | Chief Executive Officer
“ The success of the Group is founded
on its world‑leading technology and
global platform. We achieved another
major milestone during the year with
the launch of our ground‑breaking
new product, AVEVA E3D.”
summaRy Of REviEw
z By selling world‑leading technology
into global industries we have been able
to benefit from the positive fundamentals
in many of the vertical and regional
end markets
z We saw particularly strong
demand from the Oil & Gas market,
with customers involved in increasingly
complex projects, some of which
are the largest ever undertaken,
necessitating additional design hours
and more licences of our 3D design
software tools
z Our Enterprise Solutions division
achieved a major milestone as the
business grew by more than 30%
in the year and moved into profitability
for the first time
z Our new product, AVEVA E3D,
has been seen by industry watchers
as the most significant new product to
be launched in the plant design market
for many years and is potentially a true
game changer
WWW.AVEVA.COM
z
REviEw
OvERviEw
AVEVA delivered another excellent year of growth in 2012/13.
As a truly international company selling world‑leading technology
into global industries, we have been able to benefit from the
positive fundamentals in many of our markets.
This growth has enabled us to continue to make significant
investment in both innovation and the development of our
global platform. In particular, we successfully launched AVEVA
Everything3D (AVEVA E3D), one of the industry’s most significant
new product releases in many years, which strengthens our
technology leadership and delivers enhanced efficiencies
for our customers.
Our Engineering & Design Systems business, which provides
software solutions for the design and construction of assets
in the Plant, Power and Marine industries, continued to benefit
from global growth trends in Oil & Gas and Power, whilst as
expected the Marine segment remained subdued.
Our Enterprise Solutions division, which provides software
and support for ongoing information management throughout
an asset’s lifecycle, achieved a major milestone as the business
grew by more than 30% in the year and moved into profitability
for the first time. This was achieved as a result of increased
management and internal focus, and is now benefitting from
the returns on investment we have made to build our service
delivery infrastructure and sales organisation.
GlObal GROwth maRkEts
One of AVEVA’s core strengths is our global presence, enabling
us to be close to our customers. During the year we continued
to develop our international reach, targeting and investing in high
growth markets with new offices in Mumbai and Hyderabad in India
and by establishing, through the acquisition of Bocad, a new Centre
of Excellence for Structural Design in Germany.
Demand for AVEVA’s products remained strong in the Oil & Gas
and Power markets during the year whilst activity levels in Marine
remained flat. The trends driving demand in Oil & Gas continued with
an increase in the number, size and complexity of projects worldwide.
Global energy demand is expected to grow at 36% from 2011–2030
Directors’ report
Annual report 2013 | AVEVA Group plc
15
(BP Energy Outlook 2030, Jan 2013) with an increasing proportion
of the supply to be satisfied by difficult to exploit deep‑water fields.
This drives up design hours and the use of AVEVA’s software
tools for ever more complex engineering and design.
Power also has long investment cycles and AVEVA serves a wide
variety of customers around the world involved in all types of
power generation. We are strongly positioned to benefit from new
nuclear projects in China, where the nuclear build programme
has recently recommenced, and in India, where nuclear is a key
part of the government’s long‑term power infrastructure build
programme. The World Nuclear Association report that over
half of the 480 proposed or planned new builds will be located
in China and India by 2030. Whilst there remains some hesitancy
around new‑build nuclear projects in Europe, the building
of additional conventional power stations further drives
demand for AVEVA’s design tools.
In Marine, the industry is in the midst of a cyclical downturn
and hence sales of our design software have remained subdued,
particularly in China where the shipyards have been more focused
on conventional shipbuilding. This is in contrast to Korea where
an increasing amount of the shipyard’s work is now related
to offshore Oil & Gas projects. We anticipate the Marine market
conditions will remain for another two years. Meanwhile we are
focused on selling our other products, such as Enterprise
Resource Management which helps shipyards become more
efficient through streamlining and improving their planning
and construction.
innOvatiOn
In October we launched AVEVA E3D, a next generation product
for ‘Lean Construction’ in the plant design industry. AVEVA E3D was
previewed at the Achema trade fair in Frankfurt during the summer
followed by a working demo at the AVEVA World Summit in October
and first customer shipments were made in January 2013. AVEVA
E3D has been seen by industry watchers as the most significant new
product to be launched in the plant design market for many years
and is potentially a true game changer. AVEVA E3D is the result
of years of development and incorporates much of the functionality
of our acquisitions over recent years. AVEVA E3D has been
designed to be fully compatible with our existing 3D applications.
As a result we believe AVEVA E3D will deliver enhanced efficiencies
to customers seeking to maintain competitive advantage.
01
02
03
RusGaz EnGinEERinG – Russia
DELIVERS FASTER PROJECTS
AND RAPID GROWTH
Ilshat Valiullin
President of RGE
“ AVEVA’s Integrated
Engineering & Design
capabilities provide
powerful management
tools and we’ve been
able to scale our system
implementation in line
with the Company’s
rapid growth.”
ScAn thE qr cODE
tO rEAD thE full
cASE StuDy
AVEVA PDMS model of a heat exchanger unit for the Beregovoye gas condensate field project.
Image courtesy of RGE.
In the space of a few years, the
ruzGaz Engineering Group of
companies (rGE) has become a
leader in the design and construction
of complete Oil & Gas and chemical
turnkey field facilities in russia
and the rest of the world.
avEva’s ROlE
In addition to AVEVA’s design and
engineering software, RGE deployed
AVEVA NET, a web‑based solution for
system consolidation and the management
of engineering data. The principal advantage
for project leaders and members is the
ability to quickly locate critical information
and they now have a consistent, full
picture of all their projects.
wORkinG with RGE
“ Like many of our customers, RGE has
grown rapidly as the energy market
has expanded and at the same time the
complexity of projects is increasing
dramatically. These circumstances
demand a new way of managing
and understanding information.
Our Integrated Engineering & Design
strategy ensures consistency across
disciplines and in conjunction with
Enterprise Solutions we are helping
customers increase productivity and
reduce risk by providing a complete
view of the entire project regardless
of where information is authored.”
Derek Middlemas
COO and Head of Enterprise Solutions
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
16
AVEVA Group plc | Annual report 2013
Directors’ report
Chief Executive’s review
Continued
divisiOnal pERfORmanCE at a GlanCE
Engineering & Design Systems
£189.5m revenue
z
Our EDS business performed well during the year,
delivering constant currency growth of 9% over 2011/2012.
z Demand sustained
z Further competitive wins with major EPCs
z AVEVA E3D launch very positively received
z H2 weighting due to the phasing of rental contracts
z Bocad integration progressing well, mitigating risk
Divisional revenue
(£m)
£189.5m
+10%
155.1
172.5
189.5
2011
2012
2013
” The quality of the people is
a major determinant of AVEVA’s
continued innovation and success.
This can be seen through the
continual progression of our
world‑leading products, as well
as our ability to deliver new
solutions based upon our
customers’ needs.”
WWW.AVEVA.COM
innOvatiOn continued
Customers will be able to transition easily to AVEVA E3D
and will find a range of new features, such as fully integrated
2D drafting, laser scanning and enhanced visualisation,
allowing them to perform many functions within a fully
integrated engineering environment.
Early feedback from customers has been positive and the
prospects for AVEVA E3D are encouraging as Engineering,
Procurement and Construction companies (EPCs) seek to further
improve design efficiency, reduce time to start‑up and remove
costly rework in fabrication and construction. Nonetheless, our
customers are highly conservative and it will take some time
to convert them all from PDMS™ to AVEVA E3D.
We are particularly excited about the new directions that the
AVEVA E3D platform promises for future innovation, including
in the areas of mobile and cloud computing. During our World
Summit in October 2012, we provided customers with a preview
of some new mobile applications, which were met with great
enthusiasm. We plan to release the first of these new tablet‑based
applications later in 2013/14. Our customers are rightly cautious
in their approach to new technologies and thus our approach is
to follow AVEVA tradition and deliver such solutions through
working in partnership with our customers. We are fortunate
in that the introduction of mobile and cloud technology is far
less of a technology disruption than for many of our peers.
Elsewhere, AVEVA further broadened its product portfolio during
the year with the release of a powerful new version of AVEVA
Instrumentation and a brand new product, AVEVA Electrical™.
We believe there is a major opportunity to extend our design
solution footprint with our existing customers.
AVEVA has always been a leading innovator in using advanced
visualisation techniques to bring engineering data to life.
The acquisition of Global Majic and the subsequent establishment
of a Centre of Excellence for Visualisation in Huntsville, Alabama
will see the Global Majic visualisation technology introduced
across the AVEVA product range to enhance the value of
engineering data to a wider audience.
Directors’ report
Annual report 2013 | AVEVA Group plc
17
REGiOnal summaRy
EnGinEERinG & dEsiGn systEms (Eds)
EMEA once again delivered good growth with revenue up 15% over
the prior year with expansion within the larger global EPCs and
Owner Operators being the key drivers together with strong regional
performance in UK, Russia and Middle East. Revenue growth in
the Americas was 3% and was negatively affected by a slowdown
in Brazil, where demand was impacted by delays in project awards
to our customers. We do expect the situation to improve in 2013/14
and see the long‑term market opportunity as undiminished. In Asia
Pacific, we were pleased to see our China operations continue to
make progress, with strong licence growth over the previous year
despite the continued subdued demand in Marine across the region.
As a part of our strategy to expand significantly our presence
in the emerging markets, we invested in a new office in Mumbai
as well as a new Research and Development centre in Hyderabad.
Our headcount in India materially increased during the period and
as a result of this planned investment, we will have the capability
to carry out the majority of our offshore Research and Development
activities within our own facilities in India. This will reduce our
dependency on outsourced development partners while improving
knowledge retention.
Our EDS business performed well during the year, delivering
constant currency growth of 9% over 2011/12. Again, we saw
particularly strong demand from the Oil & Gas market, with
customers involved in increasingly complex projects, some of
which are the largest ever undertaken, necessitating additional
design hours and more licences of our 3D design software tools.
We also released a number of new products to broaden our
design footprint, for example with AVEVA Electrical and AVEVA
Instrumentation™. In addition, these solutions have been designed
to meet the needs of operations and in‑plant engineering and are
contributing to revenue growth, particularly with the Owner
Operators. We further extended our capabilities through the
acquisitions of Bocad and the software assets of Global Majic,
which added market‑leading structural steel detailing and
visualisation software to the AVEVA solution.
The overall revenue performance for the EDS division
was affected by the difficult situation in Brazil but despite
this, strength elsewhere enabled the EDS business to deliver
a record result.
01
02
03
pROjECtus – bRazil
OuT OF THE bOx PRODuCTIVITy
WITH AVEVA PLANT
Gustavo Dessotti Pinto
PDMS Administrator at Projectus
“ AVEVA has enabled
Projectus to increase
efficiency in the design
process by allowing
concurrent working
between different design
disciplines. Perhaps
most important is the
ability to generate
completely clash‑free
designs. This saves
both time and money
by avoiding costly
modification at the
construction site.”
ScAn thE qr cODE
tO rEAD thE full
cASE StuDy
A pipe rack for the cOMPErJ refinery project. Photograph courtesy of Petrobras and CPPR.
founded in 1990, Projectus
is one of the leading Brazilian
engineering companies in the Oil
& Gas and Petrochemical industries.
It currently uses AVEVA Plant as
its engineering toolset on several
Oil & Gas projects in Brazil.
avEva’s ROlE
The rapid expansion of Brazil’s Oil & Gas
industry has created a demand for many
complex, large‑scale projects. To meet
this challenge, Projectus has extended
its use of AVEVA PDMS with the addition
of AVEVA Steel and AVEVA Global. These
solutions help the company to maintain
its high quality, reliability and productivity
performance while executing their
increasingly complex projects.
wORkinG with pROjECtus
“ AVEVA is committed to supporting
high growth emerging markets as a key
component of our growth strategy.
Working with highly professional and
ambitious companies like Projectus
in Brazil allows us to continually focus
our solutions to the changing landscape
of major capital projects. Combined
with our investment in local support
and services, we are positioning
AVEVA to best support high growth
investment centres across the globe.”
Mat Truche‑Gordon
Executive Vice President Business
Strategy and Marketing
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
18
AVEVA Group plc | Annual report 2013
Directors’ report
Chief Executive’s review
Chief Executive’s review
Continued
Continued
divisiOnal pERfORmanCE at a GlanCE
Enterprise Solutions
£30.7m revenue
z
We achieved against challenging targets in ES during
the year, and now the division is positioned for profitable
growth in a rapidly expanding market.
z Progress with the oil super majors, AVEVA NET mandated
by Owner Operators for data handover
z Extending sales into the engineering companies
z Regulatory/compliance a major driver
Divisional revenue
(£m)
£30.7m
+31%
18.9
23.5
30.7
z Improved revenue mix; total backlog +16% mitigating risk
2011
2012
2013
” AVEVA’s goal is to deliver
sustainable, strong long‑term
earnings growth. Our proven
management team, technology
leadership and global platform
have been key to growing
the business, even during
a period of severe global
economic uncertainty.”
MORE INFORMATION ABOUT
THIS CAn BE fOunD AT
WWW.AVEVA.cOM/PrODuctS z
WWW.AVEVA.COM
EnGinEERinG & dEsiGn systEms (Eds) continued
We invested in additional headcount in EDS, particularly
in the area of technical sales and product strategy. As AVEVA
has expanded its design footprint by selling a broader solution
to our customers, the requirement has evolved for a more specialist
sales approach with an even greater depth of technical and domain
expertise. Due to the fragmented nature of the acquired group
of companies, the integration of Bocad into AVEVA took longer
than normal and as a result the revenue was slightly behind our
expectations for the year. The necessary restructuring to integrate
Bocad was completed in April 2013 and this, combined with the
upfront investment in sales during the year, has positioned us
well to realise new growth opportunities in 2013/14.
EntERpRisE sOlutiOns (Es)
We set ourselves challenging revenue targets for the ES business
at the beginning of the year. We also had the goal to further
improve service delivery and manage costs of sale. We grew
revenue by more than 30% and moved into profitability for the
first time. Accelerating ES is key to our objective in positioning
AVEVA as a strategic partner to our customers. The market
opportunity continues to develop and we were particularly
encouraged to see further inroads into the Oil & Gas Owner
Operators including the largest Independent Oil Companies
(IOCs). In addition we have seen growing sales of AVEVA NET
to our traditional EPC customers as Owner Operators demand
our technology for project execution and data handover and
throughout the project lifecycle.
ORGanisatiOn and pEOplE
The quality of our people is a major determinant of AVEVA’s
continued innovation and success. This can be seen through
the continual progression of our world‑leading products, as well
as our ability to deliver new solutions based upon our customers’
needs. AVEVA invests in its workforce in multiple ways, with an
extensive range of human resources development and training
programmes, central induction and leadership development
for future senior staff.
Directors’ report
Annual report 2013 | AVEVA Group plc
19
We have invested during the year in growing our headcount,
particularly within Research and Development and Sales and
Marketing. We also welcome the teams joining through Bocad,
in Belgium and Germany, and Global Majic, in Huntsville, Alabama.
My thanks go to the AVEVA team for the efforts they have made
to help us achieve our financial targets and position the Group
for another phase of strong growth.
OutlOOk
AVEVA’s goal is to deliver sustainable, strong, long‑term earnings
growth. Our proven management team, technology leadership
and global platform have been key to growing the business,
even during a period of severe global economic uncertainty.
During 2012/13 we built upon our market‑leading position through
delivering one of the most significant new products in the Company’s
history, AVEVA E3D, and further extending our product portfolio
through Research and Development and selective acquisitions.
As a result we are well placed to extend our leadership position
through providing unrivalled engineering design and information
management solutions to our global blue chip customer base.
We expect to see further growth in the Oil & Gas industry in coming
years and a solid demand backdrop in Power, underpinned by
nuclear new‑build in China and India in particular.
The move to profitability within the ES division is an important
milestone and we aim to build on this in 2013/14. We anticipate
a return to growth in Latin America as project delays subside
and the spending freeze unwinds. China and South East Asia
are well positioned to deliver further good growth and
we will continue to invest in growing our presence in the
world’s developing economies. Against this backdrop
we view the outlook for 2013/14 with confidence.
RICHARD LOnGDOn
Chief Executive Officer
23 May 2013
01
02
03
Edf – fRanCE
WORLD’S LEADING LOW‑CARBON ENERGy COMPANy
INCREASINGLy RELIES ON AVEVA TECHNOLOGy
Bruno Pentori
Head of CAD Department, EDF
“ Our AVEVA deployment
provides many benefits.
One of the most valuable
is the ease of design reuse,
which not only reduces
project cost and timescales,
but also eliminates a great
deal of technical risk.”
ScAn thE qr cODE
tO rEAD thE full
cASE StuDy
flamanville construction site. Image courtesy of EDF. © Copyright EDF – Alexis MORIN.
Electricité de france (EDf) is a global player in energy technology,
whether for nuclear, hydro, wind or solar power, leading the drive
toward carbon‑free energy.
avEva’s ROlE
wORkinG with Edf
AVEVA Plant has played an integral
part in EDF’s design and construction
activity since the 1980s. Recently
EDF has added a number of AVEVA’s
schematic applications which allow
effective management of the flow
of engineering schematic data and
3D design between all participants
throughout a project. With hundreds
of engineers working concurrently across
globally distributed projects, there could
be many opportunities for errors and
inconsistencies were it not for the robust
control provided by AVEVA’s software.
“ Now into the fourth decade of leadership
using our 3D technology, EDF continues
to extend the range of AVEVA applications
deployed across their Engineering &
Design teams. It is an example of how
we are extending our traditional design
footprint by providing an expanding
suite of tightly integrated software
that adds increasing value to our
customers’ business.”
Dave Wheeldon
CTO and Head of Engineering
& Design Systems
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
20
AVEVA Group plc | Annual report 2013
Directors’ report
finance review
James Kidd | Chief Financial Officer
“ AVEVA’s high recurring revenues
and profitability have enabled us to
continue to grow the business and
invest in innovation, while maintaining
a strong balance sheet.”
summaRy Of REviEw
z
z Our business model continued
to drive recurring revenue with an
increase of 11% to £153.2 million
(2012 – £137.9 million) representing
70% (2012 – 70%) of total revenue
z the adjusted profit margin was
32.1% compared to 31.8% for last
year. reported profit before tax was
£63.6 million (2012 – £57.7 million)
z the Board is declaring a final
dividend of 19.5 pence per share
(2012 – 17.0 pence per share),
an increase of 15%. In addition,
a special dividend of £1.46 is being
proposed, subject to approval at
the AGM
Adjusted profit before tax 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. In addition,
adjusted earnings per share also include the tax effects
of these adjustments.
WWW.AVEVA.COM
REviEw
AVEVA continued to deliver a strong financial performance
in 2012/13 across the business with total revenue increasing
12% in the year to £220.2 million, adjusted profit before tax up
13% to £70.7 million and operating cash inflows of £40.8 million
resulting in the year‑end cash balance being just over £190 million.
REvEnuE
AVEVA’s revenue increased 12% in the year to £220.2 million
(2012 – £195.9 million). Our business model continued to drive
recurring revenue with an increase of 11% to £153.2 million
(2012 – £137.9 million) representing 70% (2012 – 70%)
of total revenue.
Foreign currency exchange rates had a negative impact on revenue
in the year of £3.8 million, mainly due to the weakening of Euro
against Sterling. After adjusting for this, the constant currency
growth rate was 14% (2012 – 13%).
Revenue from the acquisition of Bocad contributed £5.1 million
in the ten‑month period since the acquisition, with £2.7 million
from annual fees, £1.7 million from initial licence fees, £0.1 million
from rental licence fees and £0.7 million in services.
Underlying revenue growth after adjusting for the Bocad
acquisition and currency effects was 12% (2012 – 12%).
During the year, EMEA revenue grew by 15% (2012 – 21%),
Asia Pacific grew by 14% (2012 – down 3%) and Americas 3%
(2012 – 24%).
Total revenue from end user markets remained in line with
previous periods with Oil & Gas accounting for approximately
45–50%, Marine 20–25%, Power 15% and Other, consisting of
Mining, Petrochemical, Chemical and Paper and Pulp, 10–20%.
EnGinEERinG & dEsiGn systEms (Eds)
Revenue was £189.5 million, up 10% on the previous year.
Excluding the contribution in the period from the acquisition
of Bocad, the underlying constant currency growth rate was 9%
(2012 – 10%). We continued to see good licence growth with rental
licences up 7% and initial licence fees up 9% over the previous year.
Growth in rental licences was impacted by the delays in project
Directors’ report
Annual report 2013 | AVEVA Group plc
21
” Revenue from end user markets
remained in line with previous
periods with Oil & Gas accounting
for approximately 45–50%,
Marine 20–25%, Power 15%
and Other, consisting of Mining,
Petrochemical, Chemical and
Paper and Pulp, 10–20%.”
in fiGuREs
Segment revenue (£m) –
Engineering & Design Systems
Segment revenue (£m) –
Enterprise Solutions
£189.5m
+10%
£30.7m
+31%
155.1
172.5
189.5
18.9
23.5
30.7
2011
2012
2013
2011
2012
2013
awards to Engineering, Procurement and Construction customers
(EPCs) in Brazil and the timing of rental renewals. This was offset
by continued expansion within the large engineering contractors
and customers in Europe and north America. In Asia Pacific we
did see an increase in rental licences within India and South East
Asia. Initial licences growth was driven by growth in Oil & Gas
and Power in Asia but offset by weaker conditions generally
in Marine and particularly in China.
ES costs were £28.7 million compared to £27.9 million in the
prior year, an increase of 3%. At the start of the financial year
there was a lot of focus put on the ES cost base both in terms
of business capture and on improving the efficiency of service
delivery. This was achieved by careful cost control and expanding
our existing Indian Research and Development team and establishing
a service and support team in Hyderabad to assist with service
delivery globally.
EDS costs increased by 16% to £45.4 million (2012 – £39.0 million).
This included £3.2 million from the acquisition of Bocad, without
which the increase would have been 8%. This increase was due
to the development and launch of the new products, AVEVA
Everything3D™ (AVEVA E3D) and AVEVA Electrical, and further
investment in sales technical resources in our sales areas to support
selling our specialist products within the Schematics portfolio.
In addition, we continued to invest in developing our existing products
and in product strategy and marketing to help launch our products
with improved marketing campaigns, training and collateral.
EDS had a segment contribution of £144.1 million (2012 –
£133.4 million), up 8% on the previous year and representing
a contribution margin of 76% (2012 – 77%).
EntERpRisE sOlutiOns (Es)
We saw a strong performance in the second half of the year
resulting in annual growth of 31%, which delivered revenue of
£30.7 million for the year (2012 – £23.5 million). At the start of the
year we invested in a dedicated team focused on selling both EDS
and ES solutions to the Owner Operators and independent oil
companies. It is pleasing that this has delivered positive benefits
during the year with progress made with many of the oil super
majors and Owner Operators such as Lundin Norway AS. We have
also continued to make progress with the EPCs, with AVEVA NET
being deployed across many projects as the preferred tool to
assist with project execution and data handover.
We also monitor revenue backlog, which we define to include all
contracted ES revenue (including software licences and services) that
has not yet been recognised but which is expected to be recognised
in the next twelve months. Revenue backlog also includes twelve
months of annual fees. The backlog in ES at 31 March 2013 was
£14.7 million, up 16% from £12.7 million at 31 March 2012.
ES delivered a segment contribution of £2.0 million compared
to a segment loss of £4.4 million in the previous year, which
reflects the strong organic revenue growth and careful cost
management during 2012/13.
shaREd OpERatinG COsts
Shared selling and distribution expenses increased by 18%
to £55.0 million (2012 – £46.7 million). The increase is due to
the investment in India, China and Latin America in sales resources
to expand our business in these fast developing geographies,
the establishment of a dedicated team focused on the Owner
Operators and the sales and support organisation inherited from
Bocad. The increase was also partly due to the bad debt provision
in China of approximately £2.0 million, which is explained in the
balance sheet section.
Other shared operating expenses increased by 2% to £21.7 million
(2012 – £21.3 million).
hEadCOunt
Total headcount at 31 March 2013 was 1,317 (2012 – 1,055),
a net increase of 262 from the previous year which includes
97 employees acquired through the Bocad and Global Majic
acquisitions. The average headcount during the year was 1,238
(2012 –1,053) with 407 (2012 – 347) in Research and Development
and product support, 597 (2012 – 515) in sales, marketing and
customer support and 234 (2012 – 191) in administration.
The staff costs for the year were £92.8 million (2012 – £81.8 million),
an increase of 13% due to the increased headcount, annual salary
increases and higher bonus and commission payments.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
22
AVEVA Group plc | Annual report 2013
Directors’ report
finance review
Continued
” The adjusted profit margin
was 32.1% compared to
31.8% for last year.”
in fiGuREs
Revenue
(£m)
Adjusted* profit before tax
(£m)
£220.2m
+12%
£70.7m
+13%
164.0 148.3 174.0 195.9 220.2
66.4
50.7
54.7
62.3
70.7
2009
2010 2011 2012 2013
2009 2010 2011 2012 2013
pROfit bEfORE tax and maRGins
REtuRn Of Capital
The adjusted profit before tax (as disclosed and defined
within the income statement) for the year was £70.7 million
(2012 – £62.3 million), an increase of 13%, which consisted
of £71.1 million from the organic business and an adjusted loss
of £0.4 million from Bocad. Reported profit before tax was
£63.6 million (2012 – £57.7 million).
The adjusted profit margin was 32.1% compared to 31.8% for
last year. Reported profit margin was 28.9% (2012 – 29.5%).
taxatiOn
The Group’s effective tax rate for the year was 28.5% (2012 – 30.8%)
which is higher than the underlying UK tax rate of 24% because
of profits earned in higher tax jurisdictions as well as
non‑deductible expenses.
The UK government has substantively enacted a 1% reduction
in the main rate of corporation tax from 24% to 23% effective
from 1 April 2013. It has further proposed reducing the UK rate
by a further 2% to 21% from 1 April 2014 and a further 1% to
20% from 1 April 2015. These changes have no material impact
on the tax charge in 2012/13 but the Group expects to benefit
from these reductions in future periods as future uK profits are
earned and subject to the lower rates of corporation tax.
EaRninGs pER shaRE and final dividEnd
Basic earnings per share were 67.0 pence (2012 – 58.9 pence),
an increase of 14%, and diluted earnings per share were 66.8 pence
(2012 – 58.7 pence). Adjusted basic earnings per share were
74.9 pence (diluted adjusted basic earnings per share 74.7 pence),
an increase of 17% over the same period in 2011/12 (2012 – adjusted
basic earnings per share 63.8 pence, adjusted diluted earnings
per share 63.7 pence).
The Board is declaring a final dividend of 19.5 pence per share
(2012 – 17.0 pence per share), an increase of 15%. The dividend
will be payable on 26 July 2013 to shareholders on the register
on 21 June 2013.
The Board is proposing to return £100 million to shareholders in
the form of a special dividend. The Board is also recommending
that the special dividend is accompanied by a share consolidation
in order to maintain, as far as possible, the comparability of the
share price before and after the special dividend. The special
dividend and share consolidation will be subject to shareholder
approval at the Annual General Meeting on 9 July 2013.
balanCE shEEt and Cash flOws
AVEVA continues to maintain a strong balance sheet supported by
net assets at 31 March 2013 of £251.6 million (2012 – £221.5 million).
In May 2012, we completed the acquisition of Bocad for
consideration of £14.0 million on a debt‑free/cash‑free basis.
The acquisition resulted in additions of developed technology
and customer relationships of £7.0 million and £0.4 million
respectively. In addition, goodwill of £8.1 million arose on
the acquisition. In December 2012, we acquired the developed
technology and staff from Global Majic Software Inc for cash
consideration of £1.0 million.
Gross trade receivables at 31 March 2013 were £78.8 million
(2012 – £67.1 million). We have increased the bad debt provision
to £4.8 million (2012 – £3.4 million) to cover the risk of non‑payment
of certain debts. We experienced delays in payment of debts from
some Chinese customers during the course of the year which,
as noted above, has triggered a net bad debt provision charge
of approximately £2.0 million, of which £1.0 million was incurred
in the first half. We consider that this exposure has been fully
provided for.
Deferred revenue increased by 9% to £36.6 million at 31 March 2013
compared to £33.5 million in the prior year, reflecting the continued
growth in rental and annual licences.
Net cash (including treasury deposits) at 31 March 2013 was
£190.4 million, an increase of £11.4 million from 31 March 2012.
During the year we have paid £12.5 million for the acquisition
of Bocad and Global Majic, £14.6 million for dividends (2012 –
£12.8 million) and corporate tax payments of £19.6 million
WWW.AVEVA.COM
in fiGuREs
Directors’ report
Annual report 2013 | AVEVA Group plc
23
Adjusted* basic earnings
per share (p)
Net cash and deposits
(£m)
Research and Development
expenditure (£m)
Average monthly
number of employees
74.87p
+17%
£190.4m
+6%
£35.5m
+11%
1,238
+18%
69.99 50.92 56.08 63.81 74.87
126.2 149.7 153.2 179.0 190.4
27.3
20.9
28.1
32.1
35.5
809
815
902
1,053 1,238
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
2009 2010 2011 2012 2013
invEstOR COmmuniCatiOns CalEndaR
In 2013/14, the Group plans to provide updates to investors
as follows:
July 2013
November 2013
B Interim Management Statement
B Interim results for the six months ended
30 September 2013
January 2014
May 2014
B Interim Management Statement
B Preliminary results for the year ended
31 March 2014
JAMES KIDD
Chief financial Officer
23 May 2013
(2012 – £16.9 million). Total cash and treasury deposits held in
the UK represented 80% of the total balance held (2012 – 79%).
The Group continues to have no debt.
non‑current liabilities include retirement benefit obligations
of £17.0 million (2012 – £9.9 million) which relate to defined
benefit pension obligations in the uK and Germany and the
South Korean severance pay provision. The uK defined benefit
pension liability increased from £7.8 million to £13.2 million is due
mostly to a decline in the discount rate applied to the scheme
liabilities. In addition, as part of the acquisition of Bocad, we inherited
certain defined benefit pension liabilities in Germany.
Cash generated from operating activities before tax was
£40.8 million compared to £47.8 million last year which is due
to higher tax payments during the course of the year and timing
of working capital. Cash conversion, measured by cash generated
from operating activities before tax as a percentage of profit from
operations, was 97% compared to 115% in the previous period.
This mainly reflects timing differences in working capital.
Capital stRuCtuRE
The issued share capital at 31 March 2013 was 68.1 million
(2012 – 68.0 million) ordinary shares of 3.33 pence each. During
the year the AVEVA Group Employee Benefit Trust 2008 purchased
36,345 ordinary shares in the Company in the open market at
an average price of £16.90 per share for total consideration of
£615,000 in order to satisfy awards made under the AVEVA Group
Management Bonus Deferred Share Scheme 2008. At 31 March
2012, the Trust owned 81,420 ordinary shares in the Company.
tREasuRy pOliCy
The Group treasury policy aims to ensure that the capital held
is not put at risk and the treasury function is managed under
policies and procedures approved by the Board. These policies
are designed to reduce the financial risk arising from the Group’s
normal trading activities, which primarily relate to credit, interest,
liquidity and currency risk. The Group is, and expects to continue
to be, cash positive and currently holds net deposits. The treasury
policy includes strict counter‑party limits.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
24
AVEVA Group plc | Annual report 2013
Directors’ report
key performance indicators
The Group’s key financial and non‑financial performance indicators
for the year ended 31 March 2013 are summarised below.
kEy pERfORmanCE indiCatORs 2012/13
KPI and definition
REvEnuE (£m)
The total revenue that the Group has recognised in respect
of both software and services delivered to customers during
the year.
2012/13 Achievement
comment
£220.2m x 12%
2011/12: £195.9m
RECuRRinG REvEnuE (£m )
The total of revenue from annual fees and rental fees,
which the Group feels is highly probable to recur.
£153.2m x 11%
2011/12: £137.9m
EnGinEERinG & dEsiGn systEms REvEnuE (£m )
The total revenue recognised during the year by the EDS line
of business.
£189.5m x 10%
2011/12: £172.5m
Another year of strong
growth driven by strong
activity in the Oil & Gas
end user market driving
high activity amongst our
EPC customers.
Strong increase year on year
in recurring revenue. Annual
fees increased 14% despite
adverse foreign currency
exchange rate movements.
Double‑digit growth in
AVEVA’s largest line of
business despite adverse
foreign currency exchange
rate movements.
EntERpRisE sOlutiOns REvEnuE (£m)
The total revenue recognised during the year by the ES line
of business.
£30.7m x 31%
2011/12: £23.5m
This demonstrates the
Group’s success in growing
this strategically important
line of business.
EnGinEERinG & dEsiGn systEms COntRibutiOn (£m)
The contribution to Group profit made by the EDS line
of business before any allocation of shared costs.
£144.1m x 8%
2011/12: £133.4m
Another year of strong
growth in revenue. The
contribution margin % has
slightly reduced following
the first year impact of the
Bocad acquisition.
EntERpRisE sOlutiOns COntRibutiOn ( £m)
The contribution to Group profit made by the ES line
of business before any allocation of shared costs.
£2.0m x
2011/12: £(4.4)m
This demonstrates the
Group’s success in growing
this strategically important
line of business.
REsEaRCh and dEvElOpmEnt ExpEnsEs (£m)
The amount the Group has invested in future technologies
and the continuing development of existing products.
£35.5m x 11%
2011/12: £32.1m
Continuing investments
in new technologies.
Includes the impact of
two strategically important
technology acquisitions in
Bocad and Global Majic.
WWW.AVEVA.COM
kEy pERf ORmanCE indiCat ORs 2012/13
Directors’ report
Annual report 2013 | AVEVA Group plc
25
KPI and definition
2012/13 Achievement
comment
adjustEd* pROfit bEfORE tax (£m)
The profit that the Group has recorded for the year before
tax. This adjusted measure of profit is considered by the
Board to provide a reliable and more consistent measure
of the Group’s underlying performance.
£70.7m x 13%
2011/12: £62.3m
Following a 14% increase
last year, in 2012/13 profit
increased again by 13%.
adjustEd* pROfit bEfORE tax maRGin (%)
The profit that the Group has recorded for the year before tax
as a percentage of total Group revenue.
32.1% x 1.0%
2011/12: 31.8%
As revenue and profits grow,
the Group is benefiting from
improving profit margins.
EffECtivE tax RatE (%)
The proportion of profit paid in tax.
28.5% v -7%
2011/12: 30.8%
The rate at which the Group
has paid tax has declined in
line with the reduction in the
UK rate of Corporation Tax.
adjustEd* basiC Eps (p)
The value earned for shareholders during the year
on a per share basis.
74.87p x 17%
2011/12: 63.81p
AVEVA continues to
deliver very strong
shareholder returns.
dividEnd pER shaRE (p)
The total of dividends declared during the year.
24.0p x 14%
2011/12: 21.0p
Dividend per share
increased in line with
growth in adjusted* profit.
Cash GEnERatEd fROm OpERatinG aCtivitEs ( £m)
The cash that the Group has generated before consideration
of investment activities and before financing activities.
£40.8m v -15%
2011/12: £47.8m
The Group continues
to generate significant
cash inflows.
Cash COnvERsiOn (%)
Measured by cash generated from operating activities before
tax as a percentage of profit from operations.
97%
2011/12: 115%
v -16%
Strong conversion of profit
into cash. 2011/12 was
unusually high due to
movement in working
capital balances.
EntERpRisE sOlutiOns REvEnuE baCklOG (£m )
Contracted Enterprise Solutions revenue that has not yet
been recognised but which is expected to be recognised in
the next 12 months. Also includes 12 months of annual fees.
£14.7m x 16%
2011/12: £12.7m
The increase in ES revenue
and backlog demonstrates
the increasing traction
with customers.
* Adjusted profit before tax is stated before amortisation of intangibles (excluding other software), share‑based payments, the gain/loss on the fair value of forward
foreign currency contracts and exceptional items. Adjusted basic earnings per share is also adjusted for the tax effect of these items.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
26
AVEVA Group plc | Annual report 2013
Directors’ report
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 are as follows:
Key: Risk change from previous year
v
RISk
DECREASE
z
RISk
uNCHANGED
x
RISk
INCREASE
01
stRatEGiC and maRkEt Risks
risk
Mitigation
dEpEndEnCy On kEy maRkEts
AVEVA generates a substantial amount of its income from
customers whose main business is derived from capital
projects driven predominantly by growth in the Oil and Gas,
Power and Marine markets. World economic conditions or
funding constraints for new capital projects may adversely
affect our financial performance.
z
COmpEtitiOn
AVEVA operates in highly competitive markets that serve
the Oil & Gas, Power and Marine markets. We believe that
there are a relatively small number of significant competitors
serving our markets. However, some of these competitors
could, in the future, pose a greater competitive threat,
particularly if they consolidate or form strategic or commercial
relationships among themselves or with larger, well capitalised
companies. A further threat is posed by the entrance, into
AVEVA’s markets, of a much larger technology competitor.
EntERpRisE sOlutiOns
The development of the Group’s Enterprise Solutions
business represents a significant opportunity for the Group.
This is a relatively new market with different characteristics
compared to our traditional Engineering and Design business.
This brings different challenges and opportunities for the
Group which we believe we are well positioned to manage
and exploit. However, there remains a risk that our investment
in this area does not produce the financial returns as quickly
as expected.
z
v
idEntifiCatiOn and suCCEssful intEGRatiOn Of aCquisitiOns
During the year, the Group successfully completed two
acquisitions and expects to continue to review acquisition
targets as part of its strategy. The integration of acquisitions
involves a number of unique risks, including diversion of
management’s attention, failure to retain key personnel
of the acquired business, failure to realise the benefits
anticipated to result from the acquisition and successful
integration of the acquired intellectual property.
z
AVEVA already has a broad spread across existing
and new market segments. It is central to our
strategy to diversify our customer offerings into
Enterprise Solutions and Plant operations. This
will help secure a longer term income stream that
extends beyond the design/build phase of these
capital projects. In addition, our expanding global
presence provides some mitigation from
over‑reliance on key geographic markets.
We carefully monitor customers and other suppliers
operating within our chosen markets. We stay close
to our customers and ensure we have a strong
understanding of their needs and their expectations
from the AVEVA product development roadmap.
During FY13 we launched AVEVA E3D and our
vision for the future of plant design. This together
with a number of other new products will help
cement our relationships with our customers
and reinforce barriers to competition.
We have managed our investment into Enterprise
Solutions carefully: employing experienced industry
professionals; building commercial partnerships
with third party systems integrators; and carefully
selecting our target markets and customers. In FY13,
Enterprise Solutions financial results improved and
this line of business recorded a positive contribution
for the first time.
While each acquisition and integration is unique,
AVEVA now has an experienced team to appraise
and complete acquisitions. The Group’s
experience of previous ‘bolt‑on’ acquisitions
provides a good understanding of potential
integration risks and as a result we feel well
placed to manage these risks successfully.
WWW.AVEVA.COM
Directors’ report
Annual report 2013 | AVEVA Group plc
27
02
OpERatiOnal Risks
risk
pROtECtiOn Of intEllECtual pROpERty
The Group’s success has been built upon the development
of its substantial intellectual property rights and the future
growth of the business requires the continual protection
of these tools.
z
REsEaRCh and dEvElOpmEnt
The Group makes substantial investments in Research and
Development in enhancing existing products and introducing
new products and must effectively appraise its investment
decisions and ensure that we continue to provide class‑leading
solutions that meet the needs of our markets. Our software
products are complex and new products or enhancements may
contain undetected errors, failures, performance problems
or defects which may impact our strong reputation with
our customers.
intERnatiOnal OpERatiOns
The Group now operates in over 40 countries globally and must
determine how best to utilise its resources across these diverse
markets. Where necessary the business must adapt its market
approach to best capitalise on local market opportunities,
particularly in the strategically key growth economies. In addition,
the Group is required to comply with the local laws, regulations
and tax legislation in each of these jurisdictions. Significant
changes in these laws and regulations or failure to comply
with them could lead to additional liabilities and penalties.
RECRuitmEnt and REtEntiOn Of EmplOyEEs
AVEVA’s success has been built on the quality and reputation
of its products and services, which rely almost entirely on
the quality of the people developing and delivering them.
Managing this pool of highly skilled and motivated individuals
across all disciplines and geographies remains key to our
ongoing success.
z
z
Mitigation
The protection of the Group’s proprietary software
products is achieved by licensing rights to use
the application, rather than selling or licensing the
computer source code. The Group uses third party
technology to encrypt, protect and restrict access to
its products. Access limitations and rights are also
defined within the terms of the software licence
agreement. The Group seeks to ensure that its
intellectual property rights are appropriately protected
by law and seeks to vigorously assert its proprietary
rights wherever possible.
AVEVA continually reviews the alignment of the
activities of its Research and Development teams
to ensure that they remain focused on areas that
will eet the demands of customers and deliver
appropriate financial returns. This process is managed
by developing a product roadmap that identifies the
schedule for new products and the enhancements
that will be made to successive versions of existing
products. Products are extensively tested prior
to commercial launch.
The Group manages its overseas operations
by employing locally qualified personnel who
are able to provide expertise in the appropriate
language and an understanding of local culture,
custom and practice. Local management are
supported by local professional advisers and
further oversight is maintained from the Group’s
corporate legal and finance functions.
The Group endeavours to ensure that employees
are motivated in their work and there are regular
appraisals, with staff encouraged to develop
their skills.
z
Annually there is a Group‑wide salary review
that rewards strong performance and ensures
salaries remain competitive.
Commission and bonus schemes help to ensure
individual success is appropriately rewarded.
03
finanCial Risks
risk
fOREiGn ExChanGE Risk
Exposure to foreign currency gains and losses can be
material to the Group, with approximately 80% of the
Group’s revenue denominated in a foreign currency,
of which the two largest are US Dollar and Euro.
x
Mitigation
The Group enters into forward foreign currency
contracts to manage the currency risk where
material. The overseas subsidiaries trade in their
own currencies, which also acts as a natural hedge
against currency movements. In recent months,
world currencies have become more volatile.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
28
AVEVA Group plc | annual report 2013
directors’ report
Corporate responsibility
As a global organisation, we strive to be socially responsible and to operate
with the highest ethical standards. We look to achieve these objectives through
the cultivation of positive, long‑term working relationships with our colleagues,
partners and communities across all areas of our business.
our CSr FraMEWork For thE FuturE
Last year’s annual report segmented our CSR activities into four
distinct areas: External Stakeholders, Internal Stakeholders, the
Environment and our Community. Over the last year this format has
provided a framework for how we have developed our corporate
responsibility practices. As we move into the next fiscal year it will
remain pivotal in how we engage with our colleagues and
external stakeholders.
Reporting on each of the four areas, this section of the report
emphasises our continued efforts to operate ethically and
responsibly in all areas of the business and community.
t
x
e
te r
in
e
n
vir
e r n a l stakeh
o
l
d
e
r
a l stakeh
o
n
l
d
e
r
CSR
onment
y
n i t
c o m m u
ExtErnal StakEholdErS
maintaining our dedication to be honest and fair in our relationships
with our customers and suppliers is fundamental to how we build
trusted relationships and increase our reputation as an organisation
with high ethical practices.
We have a clear corporate policy against accepting payment
or bribes. We are 100% committed to conducting our business
with honesty and integrity. We expect all staff, suppliers and
customers to share these high standards of ethical behaviour
and foster a culture of openness and accountability.
our anti‑piracy and compliance team have made further steps to
protect our software and our customer’s interest by continuing to
seek out illegal use of aveva software, and enforcing compliance
of our terms and conditions.
dedicated to meeting our customer’s needs, we continue to
develop the skills within our training and Product support teams
to provide a high level of customer service to our customers and
ensure they are using their AVEVA products to maximum benefit.
Following the csr review that took place over the last year,
it was recommended that we increase the visibility of the
practices supporting our activities in this field. As a result,
we have moved the csr web page on our external website
and internal portal to a location of greater prominence and
updated our policies and procedures.
IntErnal StakEholdErS
We now have over 1,300 colleagues globally, an increase of nearly
300 people since last year’s reporting. this number has increased
through organic growth and by two corporate acquisitions. despite
this significant growth, we continue to maintain our focus on our
internal stakeholders, our people.
our processes to recruit, retain, educate and motivate staff are
proving to be a continued success with high retention rates and
development programme participation.
in June 2012 aveva celebrated its 45th anniversary. We attribute
reaching this milestone to the talent and success of our people
and celebrated this achievement with the entire aveva team
throughout each of our 48 offices.
2013/14 CSr MISSIon StatEMEnt
Communication
Our mission for the coming financial year is to develop
our CSR practices further by providing a global structure
to our activities. This will include:
zEngaging globally with colleagues on all
aspects of CSR
zIntroduce a global strategy and purpose
to our CSR activity
zCreating a central location for colleagues
to access information on CSR
zSharing local CSR practices globally
zContinual Progression with our CSR practices
the introduction of the aveva internal communications team
was announced in last year’s annual report and they have
created a multi‑phase communication plan that has already
delivered major improvements in the effectiveness of our
communication programmes.
the biggest area for focus this year is the development of
our new intranet, named ‘onespace’. the name was selected
through an internal competition inviting colleagues to submit their
proposals. the onespace name represents all of our information
that colleagues will ever need in one place, in onespace.
onespace has allowed us to become much more interactive in
how we communicate with our colleagues, with capabilities that
enable the communication team to share news items in a timelier
manner. onespace has also provided an opportunity to become
much more social through functions such as an executive blog
and integration with our twitter and flickr accounts.
WWW.AVEVA.COM
directors’ report
annual report 2013 | AVEVA Group plc
29
development
our four major development programmes continue to attract
prospective and current employees:
B the 2013 graduate recruitment campaign saw over
500 applicants apply.
B the ‘Grads & stars’ development programme, which opened
the graduate personal development scheme to existing
colleagues had a record number of ‘stars’ join this year.
B due to the success of aveva’s management development
programme, some of the modules are now being offered
as independent ‘workshop’ development sessions.
B into its second year, the advanced leadership Programme is proving
to be a success with the identification of future AVEVA leaders.
the Job level structure introduced in 2011 is now fully embedded
into our internal processes and is enhancing our performance
management process by comparing individual and organisational
training needs against career development opportunities.
Benefits
We continue to be competitive with our benefits package and have
a stringent process to review each individual’s financial rewards
through a global annual review. in January 2013, we launched
our global Recognition Programme, which supports our financial
reward practices by encouraging a culture of both informal and formal
recognition. through this programme colleagues are encouraged
to give feedback, thanks and congratulations on a job well done
to anyone within that organisation that they choose.
Wellness
our dedication to employee wellbeing was covered under the
benefits section last year. This year, however, we feel the steps
we have made in this field warrant a section to showcase our wellness
initiatives. the introduction of wellness programmes has extended
to more offices where we offer activities such as meditation, health
checks and free fruit to all employees. in may 2012 we invested
in the Global corporate challenge, a health and well‑being initiative
which encourages colleagues to form teams and get active!
AVEVA had 343 colleagues take part in the 16 week fitness challenge.
as an organisation we did fantastically well and were recognised
as the top science and technology organisation across the globe,
by collectively covering over 176,000 miles.
EnvIronMEnt
With no manufacturing facilities, aveva is classed as a ‘low impact’
environmental organisation, with the majority of software
delivered electronically to our customers.
As a global organisation operating in over 40 offices, we faced
the challenge of reducing our travel and impact on the environment.
We are tackling this by defining a travel target reduction goal each
year and creating strategies to achieve this target. our investment
in video conferencing over the last year has also enabled us to make
a positive reduction in the amount of international and domestic
travel, and we intend to make further steps in this area by providing
this technology to more of our offices.
CoMMunIty
We are committed to the development of our global and local
communities, and continually extend our involvement in educational
partnerships and charitable giving.
Education partnerships
the aveva academic initiative is a strategic investment that provides
benefits to AVEVA, Universities, and the broader engineering discipline.
CharItaBlE gIvIng at BytE nIght
In October 2012, AVEVA entered into Byte Night,
an IT industry charity event raising money for Action
for Children.
With a target of £500 per person, the team of ten worked hard
to raise money for this cause through activities such as a silent
auction and a charity quiz. aveva colleagues were highly
supportive of this fundraising event, with people offering their
time and skills for auction. the team did fantastically
and raised £7,107, 142% of the target.
the three key objectives for the aveva academic initiative are:
B Work with universities to promote the use of aveva products
during under and post graduate studies by providing both
software and training support;
B Work with government agencies to re‑skill engineers for employment
in other disciplines by providing free training courses; and
B Work with engineering bodies to encourage graduates to pursue
careers in engineering.
this year we have also increased our involvement with young
enterprise which is a business and enterprise educational charity.
aveva’s involvement consists of colleagues volunteering to be
Business advisors or coaches to students studying for a range
of qualifications, providing insight into the commercial world
for these young people.
Charitable giving
We continue to sponsor a range of charities, with aveva donating
over £50,000 in charitable contributions last year, including making
considerable donations to the outward Bound trust and macmillan
cancer support.
our colleagues continue to inspire aveva with their individual
and team commitment to events such as the cambridge dragon
Boat Festival and chariots of Fire supporting east anglia children’s
hospice as was as charitable activities around the world.
in october 2012, aveva entered into Byte night, an it industry
charity event raising money for action for children. For this event
aveva had a team of 10 colleagues who slept out for the night,
and through an incredible range of fundraising activities raised
over £7,000.
this event, also encouraged the creation of our aveva Just Giving
web page, and in 2013, we were recognised by justgiving.com
as one of the top mid‑sized companies for fundraising.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
30
AVEVA Group plc | annual report 2013
directors’ report
Corporate governance statement
Philip Aiken | Chairman
AVEVA is committed to the principles contained in the UK
Corporate Governance Code. We aim to follow current best
practice guidance wherever possible and each year we try to
report as fully and transparently as possible on our methods
of governance and our compliance with the Code.
IntroduCtIon
I am pleased to introduce the 2013 Corporate
Governance statement. The Company is
committed to the principles of Corporate
Governance contained in the UK Corporate
Governance Code provided by the Financial
Reporting Council and for which the Board
is accountable to shareholders. The Company
has complied with the provisions of the
UK Corporate Governance Code throughout
the year and to the date of this report.
Further explanation of how the principles
have been applied is set out below and,
in connection with Directors’ remuneration,
in the Remuneration Committee report on
pages 40 to 49.
Board MEEtIng attEndanCE
No. of meetings
MEETINGS hELd
MEETINGS ATTENdEd
PhILIP AIkEN (100% after appointment)
NICk PREST (100% up to retirement)
JONAThAN BROOkS
PhILIP dAyER
hERVé COuTuRIER
RIChARd LONGdON
JAMES kIdd
9
7
2
9
9
8
9
9
WWW.AVEVA.COM
CoMpoSItIon oF thE Board
during the year the Board comprised the chairman, three
non‑executive directors (including the senior independent
director) and two executive directors (being the chief executive
and Chief Financial Officer).
as announced in april 2012, nick Prest indicated that he wished
to step down from the Board at the July 2012 aGm. Philip aiken,
who was appointed to the Board in may 2012, succeeded nick Prest
as chairman following his appointment at the July 2012 aGm.
Further details of the process for the appointment of mr aiken
are contained in the nominations committee report on page 36.
Brief biographical details of all Board members are set out
on pages 32 and 33. the membership of all Board committees
is set out on pages 36 and 37.
opEratIon oF thE Board
the chairman, along with the executive directors and company
secretary, ensures that the Board functions effectively and has
established Board processes designed to maximise its performance
and effectiveness. key aspects of these processes are:
B the aveva Group Board meets regularly in combination
with the Board of aveva solutions limited, the main operating
company in the Group which owns all the Group’s trading
subsidiaries. the aveva solutions limited Board includes
as members the cto and head of engineering & design
systems and the coo and head of enterprise solutions
as well as all the members of the Group Board. this ensures
that the aveva Group Board is well informed on technical
and market factors driving the Group’s performance as well
as on financial outcomes.
B the Board met nine times during the year. these meetings,
together with any committee meetings, are generally held
at the Group’s Head Office in Cambridge or in London.
B the Board aims that once per year a Board meeting will be held
outside the UK at one of the Group’s overseas offices. During
2012/13, the october Board meeting was held in Paris, France.
B in addition, the Board holds a full day strategy meeting every
year which is generally held at an off‑site location at which
executive directors and members of the senior management
team make presentations covering progress against current
strategy and objectives and ideas for future investment.
B the Board delegates the day to day responsibility
for managing the Group to the executive directors.
directors’ report
annual report 2013 | AVEVA Group plc
31
group StruCturE 2012/13
thE Board
ExECutIvE dIrECtorS
Richard Longdon
James Kidd
non‑ExECutIvE dIrECtorS
Philip Aiken (Chairman)
Jonathan Brooks
Philip Dayer
Hervé Couturier
CoMpany SECrEtary
Helen Barrett‑Hague
ExECutIvE ManagEMEnt tEaM
ChIEF ExECutIvE oFFICEr
Richard Longdon
ChIEF FInanCIal oFFICEr
James Kidd
Coo and hEad oF
EntErprISE SolutIonS
Derek Middlemas
Cto and hEad oF
EngInEErIng & dESIgn SyStEMS
ExECutIvE vICE prESIdEnt
– gloBal SalES
ExECutIvE vICE prESIdEnt
– BuSInESS StratEgy
ExECutIvE vICE prESIdEnt
– huMan rESourCES
Dave Wheeldon
Hans Van Der Drift
Mat Truche‑Gordon
Hilary Wright
B to enable the Board to discharge its duties, all directors
receive appropriate and timely information. Briefing papers
are distributed by the company secretary to all directors
usually four working days in advance of Board and
committee meetings.
B a monthly reporting pack containing management accounts
with commentary and reports from each executive are
distributed to the Board on a monthly basis.
B meetings were held between the chairman and the
non‑executive directors during the year, without the
executives being present, to discuss appropriate
matters as necessary.
B the chairman ensures that the directors take independent
sufficient calibre to bring the independent judgement on issues
of strategy, performance, resources and standards of conduct
which is vital to the Group.
the roles of the chairman and the chief executive are distinct
and the division of responsibility between these roles has been
clearly established, set out in writing and agreed by the Board.
the chairman is responsible for the effectiveness of the Board
and ensuring that it meets its obligations and responsibilities.
the chief executive is responsible to the Board for the day to
day management of the business, leadership of the executive
team and execution of the Group’s strategic and operating plans.
MattErS rESErvEd For thE Board
professional advice, at the Group’s expense, where they judge
it necessary to discharge their responsibilities as directors.
all members of the Board have access to the advice of the
company secretary.
the Board is responsible to shareholders for the proper management
of the Group. There is a formal schedule of matters specifically
reserved for the Board’s decision that covers key areas of the
Group’s affairs, which include:
B non‑executive directors and executive directors are encouraged
annually to undertake training in furtherance of their specific roles
and general duties as a director.
the attendance of individual directors at Board meetings during
the year is set out in the table on page 30.
IndEpEndEnCE oF non‑ExECutIvE dIrECtorS
and SEgrEgatIon oF dutIES
the Board has considered the independence of the chairman
and the non‑executive directors and believes that all are currently
independent of management and free from any material business
or other relationships that could materially interfere with the
exercise of their independent judgement. their biographies
on pages 32 and 33 demonstrate a range of experience and
B overall responsibility for the strategy of the Group;
B corporate governance;
B review of trading performance and forecasts;
B risk management;
B Board membership;
B communications with shareholders;
B approval of major transactions, including mergers and
acquisitions; and
B approval of the financial statements and annual operating
and capital expenditure budgets.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
32
AVEVA Group plc | annual report 2013
directors’ report
Corporate governance statement
Continued
Board oF dIrECtorS
during the year the Board comprised the Chairman, three Non‑Executive directors
(including the Senior Independent director) and two Executive directors (being the
Chief Executive and Chief Financial Officer). As announced in April 2012, Nick Prest
indicated that he wished to step down from the Board at the July 2012 AGM.
Philip Aiken, who was appointed to the Board in May 2012, succeeded Nick Prest
as Chairman following his appointment at the July 2012 AGM.
a
ChaIrMan and ExECutIvE dIrECtorS
Philip Aiken | Chairman
(appointed 1 may 2012)
Philip aiken has 40 years’ experience in industry and commerce having been, from 1997 to 2006,
President BhP Petroleum and then Group President energy of BhP Billiton. Prior to that he held
senior positions with Btr plc (1995 to 1997) and Boc Group (1970 to 1995). other roles have
included chairman of robert Walters plc, senior adviser for macquarie capital europe, chairman
of the 2004 World energy congress and serving on the Boards of the Governor of Guangdong
international council, World energy council and monash mt eliza Business school. he is senior
independent director of kazakhmys plc and essar energy plc and a non‑executive director
of national Grid plc and newcrest mining limited.
Richard Longdon | Chief Executive
(appointed 16 august 1994)
richard longdon received engineering training in the defence industry then gained experience
in the project management of high value engineering projects. he moved into sales and held a series
of international sales and marketing positions. he joined aveva in 1984 and shortly afterwards
was made marketing manager for the process products. in January 1992, he relocated to Frankfurt
where he was responsible for setting up and running the Group’s German office. He returned
to the uk as part of the management buyout team in 1994, taking responsibility for the Group’s
worldwide sales and marketing activities, before being appointed managing director in may 1999.
he took over as Group chief executive in december 1999.
James kidd | Chief Financial Officer
(appointed 1 January 2011)
James kidd is a chartered accountant and joined aveva in 2004. Prior to his appointment to
the Board, James held several senior finance roles within the Group and was Head of Finance
from 2006. He joined the Group at the time of the Tribon acquisition and played a significant part
in the completion of this transaction and the subsequent integration of the acquired business.
his responsibilities have included investor relations, the development of the Group’s overseas
subsidiaries, standardisation of financial processes and procedures as well as being heavily involved
in the Group’s recent acquisitions. Prior to joining aveva James worked for both arthur andersen
and deloitte, serving technology clients in both transactional and audit engagements.
WWW.AVEVA.COM
Board oF dIrECtorS
directors’ report
annual report 2013 | AVEVA Group plc
33
BalanCE oF ExECutIvE and non‑ExECutIvE
lEngth oF tEnurE
ChAIRMAN
ExECuTIVE dIRECTORS
NON‑ExECuTIVE dIRECTORS
07
01
06
02
05
03
04
B
non‑ExECutIvE dIrECtorS
Jonathan Brooks | Non‑Executive Director
0–3 yEARS
3–6 yEARS
6+ yEARS
PHILIP AIKEN 01
02
JAMES KIDD
NICK PREST (retired)
JoNATHAN BRooKS
PHILIP DAyER
HERVé CoUTURIER
RICHARD LoNGDoN
05
07
06
04
03
(appointed 12 July 2007)
Jonathan Brooks joined aveva in July 2007 and currently holds a number of directorships
with technology based companies. he is chairman of xyratex limited, a nasdaq‑listed provider
of enterprise class data storage sub‑systems and network technology, and is a non‑executive
director and chair of the audit committee of iP Group Plc, which commercialises intellectual
property from leading UK universities. Between 1995 and 2002, he was Chief Financial Officer
and a director of arm holdings Plc where he was a key member of the team that developed
arm holdings to be a leader in its sector.
Philip dayer | Non‑Executive Director
(appointed 7 January 2008)
Philip Dayer qualified as a Chartered Accountant and pursued a corporate finance career
in investment banking, specialising in advising UK listed companies. He was first appointed an
advisory director in 1983 of Barclays merchant Bank limited and since then has held the position
of corporate Finance director with a number of banks. he retired from hoare Govett limited in 2004.
Philip was a financial consultant to OJSC Rosneft Oil Company, the Russian state‑owned oil and gas
company, on their flotation in 2006. Philip is a Non‑Executive Director of Kazmunaigas Exploration
Production Jsc, the Parkmead Group plc, navigators underwriting agency limited and chairman
of iP Plus plc.
hervé Couturier | Non‑Executive Director
(appointed 1 april 2010)
hervé couturier joined the aveva Board in april 2010. he is executive vice President, r&d, at amadeus,
the leader in airline reservation systems. since 2008, he was executive vice President of saP aG’s
technology Group and head of research. he also serves as a board member for simcorp a/s,
a public danish software company, and has held management positions at a number of it companies
including Business objects, the worldwide leader of business intelligence solutions, now part of
SAP, S1 Corporation, a provider of software for financial and payment services, and XRT, a leading
european treasury management software company, now part of the sage Group Plc. hervé holds
both an engineering degree and a master of science degree from the École centrale Paris in France.
he began his career at iBm in 1982, where he held various engineering and business positions until 1997.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
34
AVEVA Group plc | annual report 2013
directors’ report
Corporate governance statement
Continued
rISk ManagEMEnt
thE Board
BuSInESS arEaS
B Sets strategic objectives
B Approves risk governance structure and sets
a strategy for acceptable levels of risk
B Approves delegation of authority
B Reviews Group Risk Register
B Approves annual budget process
including key investment decisions
B Approves all M&A activity
audIt CoMMIttEE
B Review and challenges Group Risk Register
B Receives and reviews reports from
external auditors
B Sets direction for internal audit reviews
and receives output reports
d
BO A R
Bu
SIN
E
S
S
A
R
E
A
S
RiSk
management
pRoCeSSeS
A
u
d
I
T
C
O
M
M
ITTEE
E
d
N
E
I N d E P
E
C
N
A
R
u
S
N T AS
B Management responsible for identification,
monitoring and reporting of risks
B Quarterly reporting of KPIs relevant
to strategic objectives
B Monthly reporting of financial results data
and KPIs
B Implementation of risk mitigation plans
IndEpEndEnt aSSuranCE
B External audit
B Internal audit reviews
B Quality standards audit
B Insurer and property risk surveys
IntErnal Control and rISk ManagEMEnt
B an annual budget process which is reviewed, monitored
the Board has overall responsibility for the Group’s system of
internal control and for monitoring its effectiveness. however,
such a system is designed to manage rather than eliminate the
risk of failure and by its very nature can only provide reasonable
and not absolute assurance against material misstatement or loss.
the Board has established a continuous process for identifying,
evaluating and managing the significant risks the Group faces.
the Board regularly reviews the effectiveness of the Group’s
internal controls, which have been in place from the start of
the year to the date of approval of this report, and believes
that it is in accordance with the turnbull Guidance.
the key elements of the system of internal controls currently include:
B each member of the executive Board has responsibility for
specific aspects of the Group’s operations. They meet on
a regular basis and are responsible for the operational strategy,
reviewing operating results, identification and mitigation
of risks and communication and application of the Group’s
policies and procedures. Where appropriate, matters are
reported to the Board;
B regular reports to the Board from the executive Board on
key developments, financial performance and operational
issues in the business;
B operational and financial controls and procedures which
include authorisation limits for expenditure, sales contracts
and capital expenditure, signing authorities, it application
controls, organisation structure, Group policies, segregation
of duties and reviews by management;
and approved by the Board;
B regular meetings between the executive Board, sales area
managers and lines of Business managers to discuss actual
performance against forecast, budget and prior years. the operating
results are reported on a monthly basis to the Board and compared
to the budget and the latest forecast as appropriate;
B targeted internal audit reviews which focus on confirming
the operation of controls in key process areas; and
B maintenance of insurance cover to insure all major risk areas
of the Group based on the scale of the risk and availability
of the cover in the external market.
the Board’s monitoring covers all material controls, including
financial, non‑financial, operational and compliance controls and
risk management. it is based principally on reviewing reports from
management to consider whether significant risks are identified,
evaluated, managed and controlled and whether any significant
weaknesses are promptly remedied and indicate a need for more
extensive monitoring. the Board periodically carries out visits to the
Group’s subsidiaries and receives presentations on their operations.
The Board has also performed a specific assessment for the
purpose of this annual report. this involved reviewing a risk
matrix for the Group that was prepared during a risk assessment
workshop involving the executive Board and senior members
of management from lines of Business, sales and Finance/legal.
This assessment considered all significant aspects of internal
control necessary for the company to successfully carry out the
key business strategies of the Group together with more generic
inherent risks of the Group’s operations. the audit committee
assists the Board in discharging its review responsibilities.
WWW.AVEVA.COM
directors’ report
annual report 2013 | AVEVA Group plc
35
pErForManCE EvaluatIon
Performance evaluation of the Board, its committees and individual
directors takes place on an annual basis. this year the evaluation
was led by the chairman facilitated by a questionnaire which was
completed by each director. among other things, the questionnaire
asked directors for their views on:
B Board structure (including the mix of skills, experience,
independence, knowledge, understanding and diversity
of the Board);
B Board procedure (including frequency of meetings, content
of board papers, coverage of issues and topics and conduct
of meetings);
B the appropriateness of the company’s internal controls;
B the visibility and effectiveness of its risk management
processes; and
B how well the Board operates and its effectiveness.
directors were also asked to comment on the individual
performance of their peers.
at the march 2013 meeting, the chairman led a group discussion
regarding the effectiveness of the Board. Following the meeting,
he held one‑to‑one interviews with each director regarding their
individual performance. the effectiveness of the committees was
discussed in separate meetings of each committee.
overall, the Board concluded that the performance of its directors
was effective and that it provides the effective leadership and
control required for a listed company. the evaluations found the
Board committees were working well with the effectiveness of
almost all of the processes undertaken by the committee being
rated above average or fully satisfactory.
as a result of recommendations made in this year’s Board
performance evaluation:
B the frequency of Board meetings will be reduced but each
meeting will last longer as the Board will continue to cover
each issue in as much depth;
B a greater number of representatives from the different business
divisions will be invited to present to the Board; and
B the Board will increase its interaction with each other outside
of the formal Board meeting.
the Board will continue to review its procedures, its effectiveness
and development in the financial year ahead and in compliance
with the uk corporate Governance code the committee intends
to appoint an external facilitator to assist with its next
performance evaluation.
IndEMnItIES to dIrECtorS
in accordance with the company’s articles of association,
directors are granted an indemnity from the company to the
extent permitted by law in respect of liabilities incurred as a result
of the performance of their duties in their capacity as directors
to the company. the indemnity would not provide any coverage
to the extent the director is proven to have acted fraudulently
or dishonestly. the company has maintained directors’ and
officers’ liability insurance cover throughout the year.
polICy on appoIntMEnt and rEappoIntMEnt
in accordance with the articles of association, all directors
are required to retire and submit themselves for re‑election
at least every three years by rotation and also following their
appointment. in addition, as in the prior year and in accordance
with corporate Governance best practice, all of the remaining
Board members are offering themselves for re‑election at the annual
General meeting.
On appointment, all Directors are asked to confirm that they have
sufficient time to devote to the role which is confirmed together
with details of their duties in the letter of appointment. all directors
undergo an induction as soon as practical following their appointment.
as part of the induction process, directors are provided with
background information on the Group and attend the Group’s
headquarters in cambridge for meetings and presentations from
senior management. in addition, where appropriate, meetings are
also arranged with the Group’s advisers.
non‑executive directors are appointed for a term of three years.
the terms and conditions of appointment of non‑executive directors
are available for inspection at the Company’s registered office
during normal business hours and will be available for inspection
on the day of the forthcoming annual General meeting.
dIaloguE WIth InStItutIonal SharEholdErS
communication with shareholders is given high priority
by the Board. The Chief Executive, the Chief Financial Officer
and a newly recruited head of investor relations have meetings
with representatives of institutional shareholders and hold analyst
briefings at least twice a year, following the announcement of the
interim and full year results, but also at other times during the year
as necessary. a capital markets day was also held in september 2012
to present the strategy and future product roadmap of the Group.
senior managers from Product development, Business strategy
and Finance also attended analyst and shareholder meetings during
the year. all of these meetings seek to build a mutual understanding
of objectives with major shareholders by discussing long‑term
strategy and obtaining feedback. the Board also receives formal
feedback from analysts and institutional shareholders through
the Company’s public relations adviser and financial advisers.
the Board is appraised of discussions with major shareholders
to ensure that executive and non‑executive directors consider
any matter raised by shareholders and to enable all directors
to understand shareholder views. in addition, during 2012,
the Group consulted with shareholders in respect of proposals
for the remuneration of executive directors. the senior independent
non‑executive director, Philip dayer, is available to shareholders
if they have concerns which contact through the normal channels
of Chairman, Chief Executive or Chief Financial Officer has failed
to resolve or if such contact would be inappropriate. the chairman,
senior independent and non‑executive directors are available for
dialogue with shareholders at any time and attend (together with
the other members of the Board) the annual General meeting,
but are not routinely involved in investor relations or shareholder
communications. corporate information is also available on
the company’s website, www.aveva.com.
ConStruCtIvE uSE oF thE annual gEnEral MEEtIng
the Board seeks to use the annual General meeting to communicate
with investors and all shareholders are encouraged to participate.
the chairmen of the audit, remuneration, nominations and the
treasury risk management committees will be available at the
annual General meeting to answer any questions.
SharE CapItal StruCturE
Further information on the share capital structure of the company
is contained on pages 50 and 51.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
36
AVEVA Group plc | annual report 2013
directors’ report
Corporate governance statement
Continued
CoMMIttEES oF thE Board
The Board has four Committees: Audit, Remuneration, Nominations and Treasury
Risk Management. In accordance with the uk Corporate Governance Code, the duties
of the Committees are set out in formal terms of reference. They are available on request
from the Company’s registered office during normal business hours and are available
on the Company’s website at www.aveva.com.
01
audIt CoMMIttEE
02
noMInatIonS CoMMIttEE
MEETINGS hELd IN 2012/13
MEMBERShIP ANd ATTENdANCE
COMMITTEE ChAIRMAN:
JONAThAN BROOkS
COMMITTEE MEMBERS:
PhILIP dAyER
hERVé COuTuRIER
No. of meetings
4
4
4
4
MEETINGS hELd IN 2012/13
MEMBERShIP
COMMITTEE ChAIRMAN:
PhILIP AIkEN
COMMITTEE MEMBERS:
JONAThAN BROOkS
PhILIP dAyER
No. of meetings
—
the audit committee assists the Board in its oversight and
monitoring of financial reporting, risk management and internal
controls. it tests and challenges these areas in conjunction with
management and the auditor as appropriate. the audit committee
met four times during the year.
the audit committee report on pages 38 and 39 sets out
in more detail the audit committee’s policies, practices and
areas of focus.
the activities of the nominations committee include nomination,
selection and appointment of non‑executive and executive directors,
succession planning and the composition of the Board, particularly
in relation to the diversity of background, skills and experience.
the nominations committee meets periodically when required.
in addition to the meetings there are a number of ad‑hoc meetings
to address specific matters. The Chief Executive is invited to attend
meetings as appropriate to the business being considered.
during 2012/13, the committee did not meet formally but discussed
a number of matters informally.
in late 2011 nick Prest communicated his decision to retire
from the Board in 2012, subject to a suitable succession being
arranged. the nominations committee met under nick Prest’s
chairmanship and with the participation of the ceo to consider
an appropriate process for choosing a successor. a committee
was formed to manage the process, chaired by Jonathan Brooks.
An external executive search firm with a strong board practice
was appointed to assist with the identification of appropriate
candidates having considered the requisite skills, knowledge
and experience for the position. the short‑listed individuals,
who included both external and internal candidates, were
interviewed by the committee and met separately with the ceo.
as a result the nominations committee recommended the
appointment of Philip aiken to the Board, initially as deputy
chairman then becoming chairman, subject to shareholder
approval, after the aGm in July 2012. upon his appointment,
Philip aiken was considered to be independent.
REAd MORE: For the Full
audit committee rePort
SEE PAGE 38
z
WWW.AVEVA.COM
CoMMIttEES oF thE Board
directors’ report
annual report 2013 | AVEVA Group plc
37
03
rEMunEratIon CoMMIttEE
04
trEaSury rISk ManagEMEnt CoMMIttEE (trMC)
No. of meetings
No. of meetings
MEETINGS hELd IN 2012/13
MEMBERShIP ANd ATTENdANCE
COMMITTEE ChAIRMAN:
PhILIP dAyER
COMMITTEE MEMBERS:
PhILIP AIkEN (from date of appointment)
JONAThAN BROOkS
NICk PREST (to date of retirement)
MEETINGS hELd IN 2012/13
MEMBERShIP ANd ATTENdANCE
COMMITTEE ChAIRMAN:
PhILIP dAyER
COMMITTEE MEMBERS:
JONAThAN BROOkS
JAMES kIdd
4
4
3
4
1
2
2
2
2
the remuneration committee makes recommendations
to the Board on the Group’s policy for executive and senior
management remuneration and determines the individual
remuneration packages on behalf of the Board for the executive
directors of the Group.
the chief executive attends meetings by invitation, except when
the chief executive’s own remuneration package is being discussed.
the committee has access to professional advice, both inside
and outside the company, in the furtherance of its duties. during
the year the committee asked deloitte llP for advice on the structure
and comparability of incentive bonus plans for executive directors
and senior management. the directors’ remuneration report sets
out in more detail the remuneration committee’s policies and
practices on executive remuneration.
the trmc was formed to oversee the Group’s treasury function
given the increasing importance of managing the Group’s treasury
activities and associated risks. in addition to the above members,
the head of Finance and Group treasurer are also invited to
attend the meetings. the trmc reviews the Group’s overall
financial risk management including:
B foreign exchange risk and related hedging policy;
B credit risk which includes monitoring the Group’s counter‑party
exposure to banks; and
B liquidity risk which includes reviewing the cash management
structure in the Group.
the policies of the Group in relation to these areas are explained
in note 26 to the financial statements.
during the year the trmc met twice to discuss the above matters
and provided a report to the Board after each meeting.
PhiliP aiken
chairman
23 may 2013
REAd MORE: For the Full
remuneration committee
rePort SEE PAGE 40
z
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
38
AVEVA Group plc | annual report 2013
directors’ report
audit Committee report
Jonathan Brooks | Audit Committee Chairman
The Board places a very high priority on the integrity of the Group’s
financial statements, the quality and transparency of its financial
reporting and the effectiveness of AVEVA’s risk management and
internal control systems. The Audit Committee assists the Board
in its oversight and governance of these critical areas.
2012/13 rEvIEW
audIt CoMMIttEE tErMS oF rEFErEnCE
The Audit Committee monitors the integrity of the financial
statements of the Group and the committee members, as part
of the full Board, reviews all proposed announcements to be made
by the Group and consideration is given to any significant financial
reporting judgements contained in them.
The Committee considers the effectiveness of financial reporting
and internal controls, compliance with legal requirements, accounting
standards and the listing, disclosure and transparency rules of
the Financial services authority and also reviews any proposed
change in accounting policies and any recommendations from
the Group’s auditor regarding improvements to internal controls
and the adequacy of resources within the Group’s finance function.
a full copy of the committee’s terms of reference, which were
unchanged in 2012, is available from the company’s website
at www.aveva.com.
CoMMIttEE MEMBErShIp
the committee is formed of three independent non‑executive
directors. Jonathan Brooks, as the chairman of the committee, is
deemed by the Board to have recent and relevant financial experience.
he is a chartered management accountant and has held a number
of senior financial positions in his career. Brief biographical
information for Jonathan Brooks is included on page 33.
InForMatIon FloWS to thE audIt CoMMIttEE
the audit committee meets at least four times per annum. the
company chairman and cFo are invited to attend all meetings.
the external auditor and the Group’s head of Finance are also invited
to attend. members of senior management are invited from time to time
to make presentations such as the committee’s agenda necessitates.
the committee meets three or four times annually with the auditor
without any members of the executive management team being
present. the audit committee chairman also meets with the external
auditor two to three times per annum away from the Company’s offices.
the Board has granted authority to the audit committee such that the
committee and its members can seek independent legal, accounting
or other advice when it reasonably believes it necessary to do so.
rISk and IntErnal ControlS
throughout the process the Board or the audit committee:
B gives consideration to whether areas should be looked at more
closely through specific control reviews;
B identifies areas where enhancement of internal controls
is required; and
B agrees action plans to deliver the necessary
or recommended enhancements.
there is a formal whistle‑blowing policy which has been
communicated to employees. this policy provides information
on the process to follow in the event that any employee feels
it is appropriate to make a disclosure. the audit committee is
satisfied that the policy provides an adequate basis for employees
to make representations in confidence to the Group and for
appropriate and proportionate investigations.
valuatIon oF aSSEtS and lIaBIlItIES
the audit committee discusses with management and the auditor
the approach that has been taken in assessing all key estimates.
these include revenue recognition, provisions for impairment of
intangible assets and receivables and the valuation of retirement
benefit obligations. In addition during 2012/13, the Committee
also reviewed the valuation approach and methodology for
the purchase price allocation related to the Bocad acquisition.
annually, the committee considers the going concern principle
on which the financial statements are prepared and also considers
and approves the impairment review of goodwill prepared by
management. during the year, particular attention was paid to
the carrying value of goodwill related to the enterprise solutions line
of business for which there is lower headroom in the impairment
test calculations. the committee examined the forecasts for this
business and with its move to profitability during 2012/13
was comfortable that no impairment was required.
IntErnal audIt
the Group does not maintain a separate internal audit function. this
is principally due to the geographical spread of the Group’s operations
where there is a clear advantage in any internal audit work or review
of controls being undertaken by teams with specific local regulatory
knowledge and without any local language barrier. this favours
the outsourced provision of internal audit work which is considered
as both more efficient and cost‑effective than having its own central
internal audit team. however, the audit committee does review
the need to have its own separate internal audit function each year.
the key elements of the Group’s internal control framework and
procedures are set out on page 34. the principal risks the Group faces
are set out on pages 26 and 27. annually, the audit committee
considers the Group risk register and related management controls.
To complement the use of outsourced resources on specific
internal audit projects, the audit committee has developed
a framework to gain assurance over the system of internal
financial and operational controls.
WWW.AVEVA.COM
directors’ report
annual report 2013 | AVEVA Group plc
39
this comprises:
B a risk assessment performed by operational management
and the Board to identify key areas for assurance;
B a series of peer and head office reviews of key risk areas of financial
internal control. in the last year there was an extensive review of
the contract management process worldwide which highlighted
some inconsistencies in certain geographies as well as the need
to provide more accounting support for the larger enterprise
solutions contracts. Both issues have now been dealt with;
B an extension of the external auditor’s work in certain areas
and geographies to cover other key financial risks, such as
operations in fast growth areas and taxation risks arising from
trading in emerging markets. during 2012/13 additional testing
was carried out in Brazil and in russia. While overall controls
were considered to be very good, some areas for improvement
were identified with respect to certain customer debtor policies,
and local tax compliance. in 2013/14 similar exercises are
scheduled to take place in south korea and china; and
B an annual assessment by the audit committee of the whole
system of internal financial and operational controls.
ExtErnal audIt
the audit committee advises the Board on the appointment
of the external auditor and on its remuneration both for audit
and non‑audit work and discusses the nature, scope and results
of the audit with the external auditor. the committee keeps under
review the cost effectiveness and the independence and objectivity
of the external auditor. controls in place to ensure this include
monitoring the independence and effectiveness of the audit,
implementing a policy on the engagement of the external auditor
to supply non‑audit services, and a review of the scope of the audit
and fee and performance of the external auditor.
the audit committee approves all fees paid to the auditor for non‑audit
work. during the year the auditor did perform some non‑audit work
which mainly consisted of tax compliance work for subsidiaries of
the Group, financial and tax due diligence in connection with the
Bocad acquisition and some other statutory filing work.
The Group engages other independent firms of accountants
to perform tax consulting work and other consulting engagements
to ensure that the independence of the auditor is not compromised.
For example, during 2012/13, external advisors were used for tax
advisory projects and to advise on elements of Bocad’s intellectual
property and its valuation.
Audit partners are rotated every five years, with the current
incumbent in his third year, and a formal statement of independence
is received from the auditor each year. the Board and the audit
Committee are satisfied that the independence of the auditor,
originally appointed in 2002, has been maintained. an analysis
of non‑audit fees is provided in note 7 to the financial statements.
at the march 2013 meeting, the committee assessed the effectiveness
of the external auditor. this assessment was based upon individual
questionnaire feedback from key members of the Group’s finance
team as well as from the audit committee members. the overall
conclusion was that while the audit process was effective, some
areas of potential improvement were identified.
the audit was last tendered in 2002. the audit committee consider
the re‑appointment or tendering of the audit each year. the company
will tender the audit service in line with the revised uk corporate
Governance code, including the associated transitional guidance,
which together would require a tender before the 2021 audit.
audit planning and main audit issues
at the november 2012 meeting of the committee the auditor presented
its audit plan for 2012/13. this included a summary of the proposed
audit scope for each of the Group’s subsidiaries and a summary
of what the auditor considered to be the most significant financial
MEEtIng datES 2012/13 and SuMMary agEndaS
September 2012
B Review and confirmation of Audit Committee terms
of reference
B Consideration of the financial reporting risks for the
6 month interim report
B Update on Group risk register
November 2012
B Full review of the Group risk register
B Discussion and agreement of framework to gain assurance
over the system of internal financial and operational controls
B Receipt of the report from the auditors on their Interim
review findings
B Review and approval of the 6 month interim report
B Discussion of the auditors’ 2012/13 audit plan
March 2013
B Presentation of reports on extended external audit procedures
B Consideration of potential financial reporting risks
for the full year report
B Presentation from management on the Group’s
tax status and current risks
B Presentation from management on the internal business
systems management information projects
B Ratification of internal audit priorities for 2013/14
B Assessment of effectiveness of external auditor
May 2013
B Receipt of reports from management considering
significant financial reporting risks
B Receipt of the report from the auditors on their audit findings
B Formal going concern review
B Tests of goodwill impairment
B Review and approval of the preliminary announcement
and 2013 annual report
reporting risks facing the Group together with the auditor’s proposed
audit approach to these significant risk areas. The main areas of audit
focus for the year were the areas of significant judgement of revenue
recognition, provisions for impairment of assets and receivables
and retirement benefit obligations. These are the principal areas
of financial reporting risk for the Group and are likely to remain
so. these areas are described in more detail in note 3 to the
financial statements.
Jonathan Brooks
audit committee chairman
23 may 2013
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
40
AVEVA Group plc | Annual report 2013
Directors’ report
Remuneration Committee report
Philip Dayer | Chairman of the Remuneration Committee
I am pleased to present this year’s Report on Directors’ Remuneration.
The Remuneration Committee believes that remuneration
arrangements should align Executive Directors with the delivery
of the long‑term strategy and the creation of shareholder value
while rewarding Executives fairly if success is achieved.
DeaR ShaReholDeR
exeCutive RemuneRation
The Department for Business Innovation and Skills (‘BIS’) has
prescribed new executive remuneration disclosure requirements
that will come into force for AVEVA’s 2014 annual report. At the time
of writing this year’s Directors’ Remuneration Report, the regulations
are not yet final. Nevertheless, the Remuneration Committee has
decided to include additional information this year based on the draft
regulations such as a single total figure of remuneration for each
director and a summary remuneration policy table.
Pay foR PeRfoRmanCe
AVEVA has continued to perform well over the course of 2012/13
and has delivered strong revenue growth of 12% and adjusted
basic earnings per share growth of 17%. We also completed
the acquisitions of Bocad and Global Majic and, in October 2012,
launched a major new flagship product initiative, AVEVA E3D
which the Board believes will offer strong growth opportunities
going forward. In this context the Committee determined that
the CEO would be awarded a bonus of 94% of base salary
and the CFO would be awarded a bonus of 94% of base salary.
Over the long‑term, we have continued to deliver strong performance
with EPS growth of 7% in excess of RPI over the last three years.
This will result in 33% of the 2010 LTIP vesting. During this period
total shareholder return increased by 98% and our dividend increased
from 16.9 pence to 24.00 pence (excluding the special dividend)
generating significant value to shareholders.
Dialogue with ShaReholDeRS
In recent years the Remuneration Committee has increased
the number of its consultations with its largest shareholders
and this year the Remuneration Committee has introduced
a new section in the Directors’ Remuneration Report entitled
‘Dialogue with Shareholders’ to report: (1) the extent of its
consultations with shareholders; (2) the major issues that have
emerged through that dialogue; and, (3) how the Remuneration
Committee has responded to those issues.
The Committee is mindful that shareholders each have differing
views on executive remuneration arrangements and the Committee
seeks to reflect, where possible, the views of the majority of
shareholders whilst still operating arrangements which are
considered to be in the best interest of the business and the creation
of long‑term shareholder value. During late 2012 and early 2013,
the Committee consulted extensively with our major shareholders
on the performance conditions for our LTIP and the proposed
changes to the annual bonus. Generally those shareholders
consulted were supportive of the changes proposed for 2013/14.
WWW.AVEVA.COM
In line with salary increases being awarded across the Group which
average 5%, Richard Longdon, the Chief Executive, will receive a 4%
salary increase effective from 1 April 2013 to £405,600. James Kidd
was promoted to the role of Chief Financial Officer in January 2011.
On appointment, his remuneration arrangements were positioned
significantly below the lower end of the market competitive range
given that he was new to a CFO role. As reported last year, but
which was subject to strong performance in 2012/13, his salary
has been increased to £260,000 effective from 1 April 2013.
In order to further support the delivery of outperformance, the
Committee has decided that from 2013/14 the stretch in the performance
targets for the annual bonus should be increased at both threshold
and maximum levels of performance. To reward management for
the delivery of additional shareholder value and outperformance
the maximum bonus opportunity will be increased from 100% to
125% of base salary. Achievement of any of the additional 25%
for outperformance would be satisfied wholly in deferred shares.
Taking into account the feedback received from our shareholders last
year, the Committee undertook a review of the Long‑term Incentive
Plan (LTIP) to ensure performance measures used continued to
be appropriate for the Group and that the level of reward delivered
at differing levels of performance remained appropriate. We used
Deloitte LLP to assist us with this review. The conclusion of the review
was that earnings per share remains the most appropriate measure
to incentivise the delivery of the Group’s strategic objectives. This
conclusion was then the subject of shareholder consultations in
December 2012. A further round of shareholder consultations was
conducted in April 2013. The Committee decided to increase the
level of stretch in the target ranges for LTIP awards to be granted
in 2013. These awards will fully vest provided that average annual
growth in adjusted diluted EPS of 18% or more is achieved.
agenDa foR 2013/14
The Committee will continue to keep the structure and details
of our remuneration arrangements under review and will prepare
for the new Executive Remuneration reporting requirements being
introduced in the UK. The Committee last undertook an Executive
remuneration benchmark exercise in 2011 and proposes to
commission the next Executive remuneration survey in early 2014.
We remain committed to strong communication with shareholders
and will continue to consult with investors as appropriate.
PhILIP DAyER
Remuneration Committee Chairman
23 May 2013
Directors’ report
Annual report 2013 | AVEVA Group plc
41
RemuneRation PoliCy SummaRy
Purpose and link to strategy
Operation for 2012/13
Operation for 2013/14
BaSe SalaRy
B Help recruit and retain employees.
B Reflects experience and role.
B Reviewed annually and fixed for 12 months
commencing 1 April. The Committee
determines base salaries taking into account:
– role, experience and performance;
– average change in broader
workforce salary;
– total organisational salary budgets.
B Salaries are benchmarked periodically
against other companies of a similar size
and complexity in the FTSE 250 as well
as global technology peers.
PenSionS
B Provides a competitive retirement benefit
in a way that manages the overall cost
to the Group.
otheR BenefitS
B Help recruit and retain employees.
annual BonuS
B Incentivises and rewards the
achievement of annual financial and
strategic business targets and delivery
of personal objectives.
B CEO – £390,000.
B CFO – £230,000.
B CEO – 4% increase to £405,600.
B CFO – 13% increase to £260,000.
B CEO has reached his Life Time Allowance
(LTA) so no further contributions are
made into pension schemes by the
Company on his behalf.
B CFO receives 10% of base salary
pension contribution.
B No change.
B CEO has a company car and receives
B No change.
a fuel allowance.
B CFO receives a car and fuel allowance.
B CEO and CFO receive £500 annual allowance
towards a range of flexible benefits.
B Potential bonus of up to 100%
of base salary.
B 10% based on first half financial
performance, 10% on individual
performance and 80% based on full year
financial performance:
– 70% achievement at target performance;
– linear achievement between 90%
of target and 110% of target.
B Of the element based on full year financial
performance, 25% of this element was
based on Enterprise Solutions contribution
and the remainder was based on
adjusted profit before tax.
B Potential bonus of up to 125% of base salary
(core award 100% of salary, outperformance
award 25% of salary).
B 10% based on first half financial
performance, 10% on individual
performance and 80% based on
full year financial performance:
– 47% achievement at target performance;
– linear achievement between 95%
of target and 110% of target.
B 25% outperformance award is available
for over‑achievement between 110%
and 120% of target.
B The element based on full year financial
performance shall be measured by
achievement of adjusted profit before tax.
B Core award – no change.
B Any bonus award payable for
outperformance shall be paid entirely
in deferred shares.
B Deferred shares vest in equal tranches
over three years.
DefeRReD ShaReS SCheme
B Deferred element encourages long‑term
shareholding, helps retention and
discourages excessive risk taking.
B Minimum deferral of 25% of bonus
(up to 70% of maximum bonus) increasing
to 40% if maximum bonus is achieved.
B Deferred shares vest in equal tranches
over three years.
ltiP
B Establishes a motivational and
performance‑orientated structure
to incentivise Directors to focus on
the creation of shareholder value
aligned with the longer term
strategy for the Group.
B CEO maximum LTIP award 120%
B No change.
of base salary.
B CFO maximum LTIP award 100%
of base salary.
B Subject to performance conditions based
on growth over three years of diluted
adjusted EPS.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
42
AVEVA Group plc | Annual report 2013
Directors’ report
Remuneration Committee report
Continued
This report has been prepared in accordance with Schedules 5
and 8 to the Large and Medium‑Sized Companies and Groups
(Accounts and Reports) Regulations 2008, the relevant
requirements of the Listing Rules of the Financial Conduct
Authority and the UK Corporate Governance Code (together
the Regulations). The report also describes how the Board has
applied the Principles of Good Governance relating to Directors’
remuneration. As required by the Regulations, a resolution
to approve the report will be proposed at the Annual General
Meeting of the Company at which the financial statements
of the Company will be approved.
The Regulations require the auditor to report on the ‘auditable
part’ of the Directors’ remuneration report and to state whether,
in their opinion, that part of the report has been properly prepared
in accordance with the Large and Medium‑Sized Companies
and Groups (Accounts and Reports) Regulations 2008. The report
has therefore been divided into separate sections for audited
and unaudited information.
unauDiteD infoRmation
Role of the RemuneRation Committee
The Board sets the remuneration policy for the Group.
The Remuneration Committee makes recommendations
to the Board within its agreed terms of reference, details
of which are available at www.aveva.com.
The Remuneration Committee’s principal responsibility is to determine
the remuneration package of both the Company’s Executive Directors
and its senior management within broad policies agreed with
the Board. When reviewing and setting remuneration policy the
Committee considered a range of factors including the Company’s
strategy and circumstances, the prevailing economic environment
and the evolving landscape in best practice guidelines to ensure
that it remains appropriate. In addition, it reviews the remuneration
policy for the Company as a whole and oversees and approves the
Company’s share incentive plans for all participants. The remuneration
of the Non‑Executive Directors is determined by the Executive
Directors and the Chairman, rather than the Committee.
The conclusions and recommendations of the Remuneration
Committee were finalised in four formal meetings during the year,
but these were preceded by several informal discussions, including
some with advisers (none of whom had any other connection with
the Company). The members of the Committee were Philip Dayer
(Chairman), Phil Aiken and Jonathan Brooks. Nick Prest was
a committee member until his retirement in July 2012.
The Chief Executive (Richard Longdon) is invited to submit
recommendations to the Remuneration Committee and to
attend meetings when appropriate. he was not present when
his own remuneration was discussed.
The Committee has access to external advisers as required.
During the year the Committee received advice from Deloitte LLP.
Deloitte also provided unrelated advisory services to the Group
in respect of taxation advice during the year. Deloitte is one of
the founding members of the Remuneration Consultants Code
of Conduct and adheres to this Code in its dealings with the
Committee. The Committee is satisfied that the advice provided
by Deloitte is independent.
RemuneRation PoliCy
The Remuneration Committee aims to ensure that members
of the Executive management are provided with appropriate
incentives to align them with the Company’s strategy and
the future creation of shareholder value, encourage enhanced
performance and are, in a fair and responsible manner, rewarded
for their individual contributions to the success of the Group.
WWW.AVEVA.COM
Relative SPenD on Pay
Year on year growth %
120%
100%
80%
60%
40%
20%
0%
-20%
Adjusted profit before tax
Dividends per share
CEO remuneration
2009
2010
2011
2012
2013
It also aims for a combination of fixed and variable payments,
benefits and share‑based awards that will achieve a balance
in incentives to deliver short and long‑term goals. The Company’s
policy is that a substantial proportion of remuneration of Executive
Directors should be performance‑related and should be delivered
in shares to create alignment with shareholders’ interests.
Remuneration for Executive Directors is set in the context
of the economic environment in which the Group operates,
the outcome of the wider pay review for all Group employees
as well as the financial performance of the Group. When
determining remuneration arrangements, the Committee takes
into consideration relevant external market data as well
as the remuneration for employees of the Group generally.
linking pay with strategy
The Committee’s guiding philosophy is that remuneration
arrangements that operate throughout the Group should support
the delivery of our long‑term business strategy and therefore the
creation of shareholder value. Our key long‑term strategic priority
is to deliver strong but sustainable EPS growth. To support the
delivery of this strategic priority:
B Our annual bonus arrangements incentivise the delivery of
adjusted PBT performance and the achievement of key individual
objectives that are aligned with the delivery of our strategy.
B EPS growth is the primary measure used for long‑term
incentive arrangements.
The payment of bonuses and the vesting of share incentives
are subject to stretching targets established by the Committee
at the beginning of each performance period. These targets are
set taking account of the markets in which the Group operates,
our long‑term growth ambitions and the expectations of the
investment community on the Group’s future potential performance.
The Committee considers that it is appropriate to have a deferred
component to the bonus scheme in order to retain key individuals
and to create enhanced alignment with shareholders. Subject to
the achievement of performance conditions relating to a single
financial year, these incentive arrangements are intended to reward
the recipient partly in cash, payable on announcement of interim
and/or final results, and partly in ordinary shares in the Company to
be delivered on a deferred basis under the Deferred Share Scheme.
employee context
AVEVA undertakes an annual salary review in April each year
and uses this opportunity to reward strong performance and
ensure salaries are in line with market rates. It manages this in
a competitive environment particularly in the fast growth economic
areas. The overall increase in employee salaries across the Group
for 2013/14 is expected to be 5%.
Directors’ report
Annual report 2013 | AVEVA Group plc
43
PeRfoRmanCe‑RelateD RewaRD 2013/14
Chief Executive Officer
On target performance
Maximum performance
01
01
Chief Financial Officer
On target performance
Maximum performance
01
01
£405,600
£25,000
£141,960
£47,320
02
02
04
04
05
05
£405,600
£25,000
£243,360
£263,340
£260,000
£17,500
£26,000
£91,000
£30,333
02 03
02 03
04
05
04
05
£260,000
£17,500
£26,000
£156,000
£169,000
£619,880
£937,600
£424,833
£628,500
FIxEd
ELEMEnTS
01 SALARy
02 BEnEFITS
03 PEnSIOn
PERFORMAnCE
RELATEd
ELEMEnTS
04 CASh BOnuS
05 dEFERREd
ShARES
Performance‑related reward
For maximum levels of performance and excluding the value of
any LTIP awards, 55% of the CEO’s and CFO’s total remuneration
is performance related (2012/13 – 50%). Including the value of
LTIP awards, performance‑related elements are 71% and 69% for
the CEO and CFO respectively (2012 – 69% and 67% respectively).
As set out last year and following shareholder consultation, it was
decided that the salary of the CFO should increase to £260,000
over a two year period subject to continued good performance.
Following a review of the CFO’s performance in the year, it was
considered appropriate that the second increment of this salary
adjustment should be applied and that James Kidd’s salary effective
from 1 April 2013 should be increased from £230,000 to £260,000.
Dialogue with shareholders
Benefits
The views of our shareholders on remuneration matters is
important to the Committee and prior to making any material
changes to remuneration arrangements the Committee consults
with key shareholders to obtain their views.
In last year’s Directors’ Remuneration Report we outlined some
changes to remuneration arrangements and consulted with
shareholders regarding these changes. Shareholders were
generally supportive of most aspects of the proposals, however,
some shareholders and corporate governance bodies expressed
concerns regarding the use of a single performance measure for
the long‑term incentive plan and the levels of EPS targets.
In light of this, in December 2012, the Committee undertook,
in conjunction with our independent advisers Deloitte, a detailed
review of performance measures. Following this review, the
Committee concluded that earnings per share continued to be
the most appropriate measure to incentivise the delivery of the
Group’s business strategy. The Committee shared the outcome
of this review with key shareholders.
In April 2013, the Committee consulted with shareholders regarding
the changes to the annual bonus arrangements and the increase
in the stretch of the EPS targets for 2013 LTIP awards. Shareholders
consulted were generally supportive of the changes.
The Company remains committed to engaging with shareholders
in relation to remuneration issues.
RemuneRation elementS
Basic salaries
It is the policy of the Committee to pay base salaries to the
Executive Directors taking account of the nature, complexity
and scale of the business of the Group, the performance of the
individual in achieving financial and non‑financial goals within
his areas of responsibility and comparable market data.
In line with range of salary increase awards for the Group’s
employees, the CEO’s salary will be increased by 4% to £405,600
effective from the 1 April 2013.
In line with benefits provided for other senior employees, Executive
Directors are provided with a company car or a mobility allowance,
a fuel allowance and a £500 annual allowance towards a range
of flexible benefits. Non‑Executive Directors do not receive
any benefits.
Bonus payments
The Executive Directors participate in annual performance‑related
bonus arrangements determined by the Committee. For 2012/13
the maximum bonus opportunity for Executive Directors was 100%
of base salary. These arrangements include a component using
the Deferred Share Scheme. Under these incentive arrangements,
depending on the extent to which performance conditions are
achieved, an overall bonus amount is determined. At 100%
achievement of bonus performance conditions, 60% of the bonus
amount is payable in cash and the balance, 40%, is used to calculate
the number of ordinary shares which the bonus recipient is eligible
to receive on a deferred basis over three years. If the bonus amount
is less than or equal to 70% of the potential maximum bonus,
then 75% of the bonus is paid in cash and 25% paid in deferred
shares. If the bonus amount is between 70% and 100% of the
potential maximum then the proportion paid in deferred shares
is determined by linear interpolation between 25% and 40%.
Deferred awards, which take the form of nil‑cost options,
will normally deliver the shares to participants in three equal
tranches, one in each of the three years following the year in
which an award is granted. Delivery of the deferred shares is
not subject to further financial performance conditions but the
participant must remain an employee or Director of the Group.
Exceptions to this may be granted by the Committee for
compassionate reasons or in the event of a takeover, reconstruction
or amalgamation, or voluntary winding up of the Company. In such
instances the period for which the participant must remain an
employee or Director would be reduced below the normal three
years and entitlement to delivery of the shares may be accelerated.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
44
AVEVA Group plc | Annual report 2013
Directors’ report
Remuneration Committee report
Continued
DefeRReD ShaReS element of BonuS
Proportion of bonus payable in deferred shares
Period of deferral
50%
40%
30%
20%
10%
0
E
L
B
A
Y
A
P
S
U
N
O
B
F
O
%
S
E
R
A
H
S
D
E
R
R
E
F
E
D
N
I
One-third
One-third
One-third
0
20%
40%
60%
80%
100%
0
1
2
3
% BONUS ACHIEVEMENT
YEARS
RemuneRation elementS continued
Bonus payments continued
Under the annual bonus plan in respect of awards granted from
2012 onwards, any deferred element is subject to clawback prior
to vesting if it is subsequently discovered that there has been
a material misstatement of results in achieving the original bonus
or for gross misconduct.
2012/13 bonus
For the annual performance bonus arrangements for 2012/13,
65% of bonus was based on achieving stretching Group adjusted
profit before tax (PBT) targets. In addition, 25% of the bonus was
based on performance against growth objectives for Enterprise
Solutions. The agreed targets were considered to be appropriate
and stretching against the budgeted profit for 2011/12 and market
conditions prevailing at that time. 10% of the potential bonus
is contingent upon achievement of key individual performance
objectives which had been agreed by the Remuneration Committee
at the start of the financial year. These metrics are specific and
measurable and are linked to the strategy and operation of the
business. Of the 90% of the bonus based on financial performance,
10% is based on achievement for the six months to 30 September
and the remaining 80% is based on the full year results.
For 2012/13, full year performance targets (including that related
to Enterprise Solutions) were partially achieved, with the Group
delivering 14% adjusted PBT growth and Enterprise Solutions
achieving a contribution of £2,015,000. Performance targets in
respect of the half year to 30 September 2012 were met in full.
This resulted in a total bonus of 94% of base salary which
comprised a cash bonus equal to 59% (2012 – 51%) of basic
salary and 35% (2012 – 17%) of basic salary being used to calculate
the number of deferred shares for which each Executive Director
was eligible. The Committee considered that this level of payout
is appropriate both in the context of performance against targets
as well as the underlying performance of the business in what
continue to be challenging economic conditions.
2013/14 bonus
For the annual performance bonus arrangements for 2013/14, it was
agreed that 90% of bonus shall be based on achieving stretching
Group adjusted profit before tax (PBT) targets. The agreed targets
were considered to be appropriate and stretching against the
budgeted profit for 2013/14 and prevailing market conditions.
10% of the potential bonus is contingent upon achievement
of key individual performance objectives which had been agreed
by the Remuneration Committee at the start of the financial year.
These metrics are specific and measurable and are linked to the
strategy and operation of the business. Of the 90% of the bonus
based on financial performance, 10% is based on achievement
for the six months to 30 September and the remaining 80% is
based on the full year results.
For 2013/14 the maximum proportion of bonus payable at
achievement of financial targets is 47% (2012 – 72%). However,
the maximum bonus opportunity for the Executive Directors has
increased from 100% to 125% with the additional 25% available
only for overachievement above 110% of target. The entire
overachievement element, if earned, would be payable in
deferred shares.
Pensions
Since 2010 when he had accrued the maximum benefits that he
is entitled to under the scheme rules, Richard Longdon has been
a deferred member of AVEVA Solutions Limited’s defined benefit
pension scheme. He is no longer accruing any further benefit.
It is a contributory, funded, occupational pension scheme
registered with HM Revenue and Customs (HMRC) and, since
1 October 2004, Career Average Revalued Earnings benefits
apply. Under this scheme he is entitled to a pension on normal
retirement, or on retirement due to ill health, equivalent to
two‑thirds of his pensionable salary provided he has completed
(or would have completed in the case of ill health) 25 years’
service. A scheme‑specific earnings limit applies to the benefits
earned by Richard Longdon. A lower pension is payable on earlier
retirement after the age of 50 by agreement with the Company
and subject to HMRC guidelines. Pensions are payable to dependants
on the Director’s death in retirement and a lump sum is payable
if death occurs in service.
James Kidd is a member of the AVEVA Group Personal Pension
Plan (a defined contribution scheme) and each year the Company
contributes 10% of salary to the plan. James Kidd also contributes
7.5% of base salary into the plan via salary sacrifice.
No other Directors were members of a pension scheme during
the year (2012 – nil).
Share awards
There are three share schemes in existence: the AVEVA Group
Management Bonus Deferred Share Scheme 2008, the AVEVA
Group plc Long‑Term Incentive Plan and the AVEVA Group plc
Executive Share Option Scheme 2007 (which is not currently in use).
The Company share schemes are used to provide long‑term
incentives to assist in creating and sustaining growth in share value.
The Remuneration Committee considers that periodic grants of
share‑related incentives constitute an important element of the
WWW.AVEVA.COM
Directors’ report
Annual report 2013 | AVEVA Group plc
45
gRouP PRofit element of BonuS
enteRPRiSe SolutionS element of BonuS
Group adjusted profit before tax (£m)
Enterprise Solutions contribution (£m)
89% achievement of bonus element
100% achievement of bonus element
2012/13
13% growth
2011/12
£70.7m
£62.3m
2012/13
£2.0m
2011/12
(£4.4m)
£58m
£60m
£62m
£64m
£66m
£68m
£70m
£72m
(£5m)
(£4m)
(£3m)
(£2m)
(£1m)
£0
£1m
£2m
reward of the Company’s senior Executives. This is in line with
common practice in comparable companies and is cascaded to
senior managers as appropriate. The Remuneration Committee
consults with major shareholders and their representative bodies
regarding the operation of these schemes.
The number of shares which may be allocated on exercise of
any options granted under any of the Company’s share option
schemes (including employee schemes) shall not, when aggregated
with the number of shares which have been allocated in the previous
ten years under these schemes, exceed 10% of the ordinary share
capital of the Company in issue immediately prior to that date. There
is also a claw back provision for the Executive Directors’ awards
in the event of material misstatement of results. As recipients of
these awards, Executive Directors and Executive Board members
are required to hold or use the schemes to build a minimum
share ownership.
The shareholding requirement from vesting awards for the CEO and
CFO are at 200% and 100% of salary respectively. As at 31 March 2013
the CEO exceeds his holding requirement and the CFO holds 52%
of salary accumulated since his appointment in 2011.
Details of the awards made under these schemes are as follows:
long‑term incentive Plan (ltiP)
Under the LTIP, options are granted to selected individuals to
acquire ordinary shares at an exercise price equal to the nominal
value of the shares (3.33 pence); these options will be exercisable
only if stretching performance criteria are met. For 2011/12 and
2012/13 the market value of awards under the LTIP awarded to
Richard Longdon and James Kidd amounted to 120% and 100%
of basic salary respectively (2010/11 – 100%). The maximum
award under the LTIP will be 250% of salary, which will only
be awarded in exceptional circumstances, e.g. on recruitment.
LTIP awards from 2012 onwards are subject to clawback prior
to vesting if it is subsequently discovered that there has been
a material misstatement of results in achieving the original
bonus or for gross misconduct.
The Committee continues to believe that earnings per share
growth is an appropriate performance measure for awards
under the LTIP, as growing earnings is strongly aligned with our
long‑term business strategy and the creation of shareholder value.
This was discussed with shareholders following consultations
in December 2012 and again in April 2013. In determining each
of the awards under the LTIP, the Remuneration Committee
considered and concluded that the performance conditions
set were challenging in the context of internal and external
expectations at the time of the awards.
2013/14 awards
It is intended that nominal priced share options be awarded
to Executive Directors and that, similar to previous awards,
the performance conditions should be based on EPS growth over
the three year period from 2013/14 to 2015/16. however, in light of
the feedback received from shareholders last year, the Committee
has decided to increase the level of stretch in the target ranges
for the LTIP awards from those adopted in 2012. 25% of the awards
will vest for average annual adjusted diluted EPS growth is 12%
per annum with maximum vesting (100% of award) for average
annual adjusted diluted EPS growth of 18% per annum (linear
interpolation between these points). The Remuneration Committee
believes that these targets are appropriately stretching and if
delivered represent significant value creation for shareholders.
2010/11 awards
Awards were granted in July 2010 to Executive Directors subject
to the delivery of EPS growth performance. Average EPS growth
for the three year period from 2010/11 to 2012/13 exceeded RPI
by 7% per annum and therefore 33% of the award shall vest.
The Committee considered this level of vesting in the context of
the wider performance of the business and returns to shareholders
during the period and considered that it was appropriate.
Deferred annual bonus share plan
As described above, part of the annual bonus earned by
Executive Directors in the year is used to determine eligibility
for an award of deferred shares under the Deferred Share
Scheme. In order to deliver shares under the Deferred Share
Scheme, an Employee Benefit Trust (EBT) was established
following shareholder approval at the 2008 Annual General
Meeting. Awards of deferred shares are made by the trustee
of the EBT using shares purchased in the market.
On 6 July 2012 the EBT awarded 4,189 and 2,009 deferred shares
to Richard Longdon and James Kidd respectively in respect of
the bonus arrangements for the year ended 31 March 2012.
Following the achievement of the objectives for 2012/13,
it is anticipated that 5,903 and 3,481 deferred shares will be
awarded to Richard Longdon and James Kidd respectively
in respect of the bonus arrangements for the year ended
31 March 2013.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
46
AVEVA Group plc | Annual report 2013
Directors’ report
Remuneration Committee report
Continued
SummaRy of ltiP taRgetS
Period of performance measurement
Performance targets/measures
Achievement
2009/10–2011/12
date of award: 7 July 2009
36,628
options granted to Executive directors
2010/11–2012/13
date of award: 26 July 2010
37,961
options granted to Executive directors
2011/12–2013/14
date of award: 6 July 2011
35,155
options granted to Executive directors
2012/13–2014/15
date of award: 9 July 2012
41,180
options granted to Executive directors
2013/14–2015/16
—
B Average diluted EPS over three years of 52.14 pence
B Target met,
award vested
in full
B 0% vest for diluted EPS growth of less than RPI plus 4% p.a.
B 100% vest for diluted EPS growth of more than RPI plus
12% p.a.
B Linear interpolation to determine the number of shares
that vest between RPI plus 4% and RPI plus 12% p.a.
B Target partially
met, 33%
of award
expected
to vest
B 0% vest for diluted EPS growth of less than RPI plus 5% p.a.
B 100% vest for diluted EPS growth of more than RPI plus 12% p.a.
B Linear interpolation to determine the number of shares that
vest between RPI plus 5% and RPI plus 12% p.a.
B Performance
period not
yet completed
B 0% for diluted adjusted EPS growth of less than 8% p.a.
B 25% for diluted adjusted EPS growth of 8% p.a.
B 100% for diluted adjusted EPS growth of more than 15% p.a.
B Linear interpolation to determine the number of shares that
vest between 8% and 15% p.a.
B Performance
period not
yet completed
B 0% for diluted adjusted EPS growth of less than 12% p.a.
B 25% for diluted adjusted EPS growth of 12% p.a.
B 100% for diluted adjusted EPS growth of more than 18% p.a.
B Linear interpolation to determine the number of shares that
vest between 12% and 18% p.a.
B Award not
yet granted
total ShaReholDeR RetuRn PeRfoRmanCe gRaPh
Total shareholder return v techMARK All‑Share Index 2008–2013
The Large and Medium‑Sized Companies
and Groups (Accounts and Reports)
Regulations 2008 require the presentation
of a performance graph of total shareholder
return compared with a broad equity
market index for a period of five years.
The graph shows the Company’s
performance, measured by total
shareholder return, compared with the
performance of the techMARK All‑Share
Index. Total shareholder return is the
share price plus dividends reinvested
compared against the techMARK
All‑Share Index, rebased to the start
of the period.
The directors consider the techMARK
All‑Share Index to be an appropriate
choice as the Index includes
AVEVA Group plc.
WWW.AVEVA.COM
250
200
150
100
50
0
AVEVA GROUP PLC
TECHMARK ALL-SHARE INDEX
Mar 08
Mar 09
Mar 10
Mar 11
Mar 12
Mar 13
Directors’ report
Annual report 2013 | AVEVA Group plc
47
SeRviCe ContRaCtS
The service contracts and letters of appointment of the Directors include the following terms:
Philip Aiken
Philip Dayer
Jonathan Brooks
Hervé Couturier
Richard Longdon
James Kidd
Date of contract
Date of appointment
Expiry/review date of
current contract
Notice period
Months
1 May 2012
1 May 2012
30 April 2015
2 January 2011
7 January 2008
2 January 2014
12 July 2010
18 March 2010
12 July 2007
1 April 2010
28 November 1996
28 November 1996
1 January 2011
1 January 2011
12 July 2013
1 April 2013
Rolling
Rolling
3
3
3
3
12
9
PoliCy foR leaveRS
non‑exeCutive DiReCtoR feeS
The Committee considers that the notice periods of the Executive
Directors are in line with those in other companies of a similar size
and nature and are in the best interests of the Group to ensure
stability in senior management. The service agreements provide
for a period of garden leave not exceeding six months.
There are no predetermined special provisions for Executive
or Non‑Executive Directors with regard to compensation in
the event of loss of office. Their continuous service date for
the purposes of the Employments rights Act 1996 are for the CEO
29 May 1984 and for the CFO 5 January 2004. The Remuneration
Committee would be responsible for considering the circumstances
of the early termination of an Executive Director’s contract and
determining whether in exceptional circumstances there should
be compensation payments in excess of the Company’s contractual
obligations. Such circumstances (‘good leaver’) where the earlier
vesting of share awards may be granted are in the event of
termination of office as a result of injury or disability, redundancy,
in the event of early or normal retirement, or in the event of
a change of control or ownership resulting in the Executive
no longer being employed by the Group or being an employee
or officer of the Group.
ReCRuitment of new exeCutive DiReCtoRS
In the event of hiring a new Executive Director, the Committee
will typically align the remuneration package with the above
remuneration policy. However, the Committee retains the
discretion to make remuneration proposals on hiring a new
Executive Director which are outside the standard policy to
facilitate the hiring of someone of the calibre required to
deliver the Group's strategy.
The Committee may make awards on hiring an external
candidate to 'buyout' remuneration arrangements forfeited
on leaving a previous employer. In doing so the Committee
would take account of relevant factors including any performance
conditions attached to these awards, the form in which they
were granted (eg cash or shares) and the time over which
they would have vested. Generally buy‑out awards would
be made on a comparable basis.
Fees for the Chairman and the Non‑Executive Directors are
determined taking account of the individual’s responsibilities,
time devoted to the role and prevalent market rates. Non‑Executive
Directors receive a basic fee of £45,760 per annum. Additional fees
of £10,400 are paid to Non‑Executive Directors who hold the position
of Committee Chairman. Annual fees for Non‑Executive Directors
are summarised below:
Philip Aiken (Chairman)
Jonathan Brooks (Chair of the Audit Committee)
Philip Dayer (Chair of the Remuneration Committee)
Hervé Couturier
£
150,800
56,160
56,160
45,760
outSiDe aPPointmentS
The Board believes that accepting non‑executive appointments with
other companies enhances the experience of Executive Directors
and therefore they are entitled to accept appointments outside
of the Company provided that Board approval is sought prior
to accepting the appointment. Whether or not the Director
concerned is permitted to retain their fees is considered on
a case by case basis. Richard Longdon was appointed as an
adviser to Detica, a division of BAE Systems in July 2011. Prior
to his appointment, the Board considered the impact on his role
as CEO and concluded that he could still devote sufficient time
to his role and therefore approved his appointment. Mr Longdon
does not receive a salary for this role but is paid a daily fee for
attendance. As Mr Longdon performs these services independently
of his duties to the Company, he is thus entitled to receive
such compensation.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
48
AVEVA Group plc | Annual report 2013
Directors’ report
Remuneration Committee report
Continued
auDiteD infoRmation
DiReCtoRS’ RemuneRation
The total amounts for Directors’ emoluments and other benefits received were as follows:
Salary/fees
£000
Benefits
in kind
£000
Company
pensions
contributions
£000
Subtotal
£000
Bonus1
£000
Amounts
receivable
under
LTIPs2
£000
Executives
Richard Longdon
James Kidd
Non‑Executives
Phil Aiken (Chairman)
Nick Prest
Jonathan Brooks
Philip Dayer
Hervé Couturier
Total emoluments
390
230
620
127
32
54
54
44
311
931
25
17
42
—
—
—
—
—
—
42
—
23
23
—
—
—
—
—
—
23
415
270
685
127
32
54
54
44
311
996
365
215
580
—
—
—
—
—
—
183
18
201
—
—
—
—
—
—
2013
Total
£000
963
503
2012
restated3
Total
£000
1,022
402
1,466
1,424
127
32
54
54
44
311
—
120
48
48
39
255
580
201
1,777
1,679
1 Bonus includes a deferred share award of 5,903 and 3,481 for Richard Longdon and James Kidd respectively under the Deferred Share Scheme (2012 – 4,190 and 2,010 shares).
The estimated monetary value of these awards is £137,192 (2012 – £61,594) for Richard Longdon and £80,908 (2012 – £29,548) for James Kidd.
2 Amounts receivable under LTIPs include those awards for which 2012/13 was the final year of measurement for the performance conditions attached. For 2012/13
this was the LTIP award of 2010. The shares have not yet vested and so the value of the benefit has been estimated using the average share price during the three
months prior to the 31 March 2013.
3 2012 disclosures have been restated so as to be on a consistent basis with 2013. Amounts receivable under LTIPs have been valued using the market share price
at the date of vesting.
ShaRe oPtionS
The interests of Directors in options to acquire ordinary shares were as follows:
Granted
Number
Exercised
Number
Forfeited
Number
As at
31 March
2013
Number
Gain on
exercise
£
Exercise
price
Pence
Earliest
date of
exercise
Date of
expiry
Scheme
Richard Longdon
LTIP
LTIP
LTIP
LTIP
Deferred Share Scheme (2009)
Deferred Share Scheme (2010)
Deferred Share Scheme (2011)
Deferred Share Scheme (2012)
James Kidd
LTIP
LTIP
LTIP
LTIP
Deferred Share Scheme (2009)
Deferred Share Scheme (2010)
Deferred Share Scheme (2011)
Deferred Share Scheme (2012)
As at
1 April
2012
Number
22,264
25,038
25,115
—
27,611
7,495
8,314
8,536
—
4,289
2,435
10,040
—
443
492
1,464
—
—
—
—
4,189
—
—
—
13,569
—
—
—
2,009
— (22,264)
—
—
—
—
—
(7,495)
(4,157)
(2,845)
—
(4,289)
—
—
—
(443)
(246)
(488)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 396,936
25,038
25,115
27,611
—
—
—
— 125,766
4,157
5,691
4,189
69,754
47,739
—
—
76,274
2,435
10,040
13,569
—
246
976
2,009
—
—
—
7,434
4,128
8,189
—
3.33
3.33
3.33
3.33
0.00
0.00
0.00
0.00
3.33
3.33
3.33
3.33
0.00
0.00
0.00
0.00
07.07.12
26.07.13
06.07.14
07.07.16
26.07.17
06.07.18
09.07.15
09.07.19
26.05.10
26.05.11
26.05.12
26.05.13
07.07.12
26.07.13
06.07.14
09.07.15
26.05.10
26.05.11
26.05.12
26.05.13
Note 1
Note 1
Note 1
Note 1
07.07.16
26.07.17
06.07.18
09.07.19
Note 1
Note 1
Note 1
Note 1
1 The last date of the exercise is the end of the 42‑day period following the announcement of the financial results of the Group in the third calendar year following that
in which the option was granted or (if applicable) such later date as the Remuneration Committee may specify.
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Directors’ report
Annual report 2013 | AVEVA Group plc
49
The market price as at 31 March 2013 was £22.64 (31 March 2012 – £16.57) with a high‑low spread for the year of £14.69 to £23.22.
During the year Richard Longdon and James Kidd exercised options over 14,497 and 1,177 ordinary shares under the Deferred Share
Scheme respectively at an exercise price of £nil. The market price on the date of exercise was £16.78 which resulted in an aggregate gain
on exercise of £243,259 for Richard Longdon and £19,751 for James Kidd. Richard Longdon retained 6,957 and James Kidd 564 of the
shares over which options were exercised.
At 31 March 2013, Richard Longdon owned 353,159 ordinary shares (2012 – 385,565 ordinary shares) and 91,801 options over ordinary
shares (2012 – 96,762 options). James Kidd owned 6,168 ordinary shares (2012 – 3,555 ordinary shares) and options over 29,275
ordinary shares (2012 – 19,163 options).
Options under the LTIP are normally exercisable in full or in part between the third and tenth anniversaries of the date of grant.
Details of the performance conditions of share option awards are set out on page 46.
PenSionS
Richard Longdon is a deferred member of the CadCentre Pension Scheme, a defined benefit pension scheme for which AVEVA
Solutions Ltd is the principal employer, and has accrued the maximum benefit he is entitled to. The Directors had accrued
entitlements under the pension scheme as follows:
Accumulated
accrued pension at
31 March 2013
£
Accumulated
accrued pension at
31 March 2012
£
Increase in
accrued pension
during year
£
Increase in accrued
pension during the
year, after removing
the effects of inflation
£
Transfer value of
increase, after removing
the effects of inflation, less
Directors’ contributions
£
Richard Longdon
159,974
156,644
3,330
—
—
The pension entitlement shown is that which would be paid annually, based on service to the end of the year.
The transfer value as at date of retirement of each Director’s accrued benefits at the end of the financial year is as follows:
31 March 2013
£
31 March 2012
£
Movement, less
Directors’ contributions
£
Richard Longdon
3,147,575
2,709,559
438,016
The transfer values have been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Note GN11. Members
of the scheme have the option to pay Additional Voluntary Contributions. Neither the contributions nor the resulting benefits are included
in the above table.
James Kidd is a member of the AVEVA Group Personal Pension Plan and during 2012/13 received employer contributions of £23,000
(2012 – £17,510).
By order of the Board
PhILIP DAyER
Non‑Executive Director and
Chairman of the Remuneration Committee
23 May 2013
High Cross, Madingley Road, Cambridge CB3 0HB
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
50
AVEVA Group plc | Annual report 2013
Directors’ report
other statutory information
PRinCiPal aCtivitieS
The principal activities of the Group are the marketing and
development of computer software and services for engineering
and related solutions. The Company is a holding company.
ReSultS anD DiviDenDS
The Group made a profit for the year after taxation of £45.5 million (2012
– £40.0 million). Revenue was £220.2 million (2012 – £195.9 million) and
comprised software licences, software maintenance and services.
The Directors recommend the payment of a final dividend of 19.5 pence
per ordinary share (2012 – 17.00 pence). If approved at the forthcoming
Annual General Meeting, the final dividend will be paid on 26 July 2013
to shareholders on the register at close of business on 21 June 2013.
In addition, the Board is proposing to return £100 million to shareholders
in the form of a special dividend of 146 pence per share. The Board
is recommending that the special dividend is accompanied by a share
consolidation in order to maintain, as far as possible, the comparability
of the share price before and after the special dividend. The special
dividend and share consolidation will be subject to shareholder approval
at the AGM on 9 July 2013.
BuSineSS Review anD futuRe DeveloPmentS
A review of the Group’s operations during the year and its plans
for the future is given in the Chairman’s statement, the Chief
Executive’s review and the Finance review.
The Key Performance Indicators (KPIs) used by AVEVA to measure
its own performance at the Group level are total revenue, recurring
revenue, segment profit contribution, adjusted profit before tax,
adjusted earnings per share and headcount. The figures for the year
ended 31 March 2013 are set out on pages 24 to 25, together with
figures for the previous year and a discussion of the principal risks
and uncertainties facing the Group is included on pages 26 and 27.
SuPPlieRS’ Payment PRaCtiCe
It is the Group’s policy that payments to suppliers are made
in accordance with those terms and conditions agreed between
the Company and its suppliers, provided that all trading terms
and conditions have been complied with by the other party.
The Company has nil trade creditors (2012 – nil). At 31 March 2013,
the Group had an average of 30 days’ purchases owed to trade
creditors (2012 – 32 days’).
ReSeaRCh anD DeveloPment
The Group continues an active programme of Research
and Development which covers the updating of and extension
to the Group’s range of products.
(2012 – £179.0 million) and no debt. Therefore, 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 financial statements.
DiReCtoRS anD theiR inteReStS
The Directors who served during the year under review are
shown below:
B Philip Aiken (Chairman)
B Nick Prest (Chairman until retirement in July 2012)
B Philip Dayer (Non‑Executive Director and Senior
Independent Director)
B Jonathan Brooks (Non‑Executive Director)
B Hervé Couturier (Non‑Executive Director)
B Richard Longdon (Chief Executive)
B James Kidd (Chief Financial Officer)
The interests (all of which are beneficial) in the shares of the
Company of Directors who held office at 31 March 2013 in respect
of transactions notifiable under Disclosure and Transparency
Rule 3.1.2 that have been disclosed to the Company are as follows:
Philip Aiken
Philip Dayer
Jonathan Brooks
Hervé Couturier
Richard Longdon
James Kidd
At
31 March
2013
ordinary
shares
1,000
7,000
—
—
At
31 March
2012
ordinary
shares
—
7,000
—
—
353,159
385,565
6,168
3,555
No changes took place in the interests of Directors in the shares
of the Company between 31 March 2013 and 23 May 2013.
Directors’ share options are disclosed in the Remuneration
Committee report on page 48.
No Director had a material interest in any significant contract,
other than a service contract or contract for services, with the
Company or any of its subsidiaries at any time during the year.
Resolutions will be submitted to the Annual General Meeting
for the re‑election of all current Directors. Brief biographical
details of all Directors appear on pages 32 and 33.
intelleCtual PRoPeRty
The Group owns intellectual property both in its software tools
and the products derived from them. The Directors consider
such properties to be of significant value to the business and
has a comprehensive programme to protect it.
ConfliCt of inteReSt
Throughout the year the Company has operated effective
procedures to deal with potential or actual conflicts of interest.
During the year no conflict arose requiring the Board to exercise
its authority or discretion.
finanCial inStRumentS
ShaRe CaPital
The Group’s financial risk management objectives and policies
are discussed in note 26 to the Consolidated financial statements.
going ConCeRn
The Group has significant financial resources, is profitable and
has a strong position in the markets it serves. At 31 March 2013
the Group had cash and treasury deposit balances of £190.4 million
Details of the issued share capital can be found in note 30
to the Consolidated financial statements. The rights attaching to
the Company’s shares are set out in its Articles of Association.
Subject to any restrictions referred to in the next section, members
may attend any general meeting of the Company.
There are no restrictions on transfer of the ordinary shares in the
Company other than: certain restrictions which may from time to time
be imposed by laws and regulations (for example, insider trading laws);
WWW.AVEVA.COM
Directors’ report
Annual report 2013 | AVEVA Group plc
51
and pursuant to the Listing Rules of the Financial Services Authority
whereby Directors and certain employees of the Company require
the approval of the Company to deal in the ordinary shares and
pursuant to the Articles of Association where there is default in
supplying the Company with information concerning interests
in the Company’s shares there are no special control rights
in relation to the Company’s shares.
voting rights
Subject to any restrictions below, on a show of hands every
member who is present in person or by proxy at a general
meeting has one vote on each resolution and, on a poll, every
member who is present in person or by proxy has one vote on
each resolution for every share of which he/she is the registered
member. A proxy will have one vote for and one vote against a
resolution on a show of hands in certain circumstances specified
in the Articles of Association. The Notice of Annual General
Meeting specifies deadlines for exercising rights.
A resolution put to the vote of a general meeting is decided on
a show of hands, unless before or on the declaration of the result
of the show of hands, a poll is demanded by the Chairman of the
meeting. The Articles of the Company also allow members, in certain
circumstances, to demand that a resolution is decided by a poll.
A member may vote personally or by proxy at a general meeting.
Any form of proxy must be delivered to the Company not less
than 48 hours before the time appointed for holding the meeting or
adjourned meeting at which the person named in the appointment
proposes to vote (for this purpose, the Directors may specify that
no account shall be taken of any part of a day that is not a working
day). A corporation which is a member of the Company may
authorise such persons as it thinks fit to act as its representatives
at any general meeting of the Company.
No member shall be entitled to attend or vote, either personally
or by proxy, at a general meeting in respect of any share if any
call or other sum presently payable to the Company in respect
of such share remains unpaid or in certain other circumstances
specified in the Articles of Association where there is default
in supplying the Company with information concerning interests
in the Company’s shares.
If the Company is wound up, the liquidator can, with the sanction
of the members by special resolution and any other sanction
required by law, divide among the members all or any part
of the assets of the Company and he/she can value any assets
and determine how the divisions shall be carried out as between
the members or different classes of members. The liquidator can
also transfer the whole or any part of the assets to trustees upon
any trusts for the benefit of the members. No members can be
compelled to accept any asset which would give them any liability.
There are no agreements between holders of securities that
are known to the Company which may result in restrictions on
the transfer of securities or on voting rights, save as described
overleaf in relation to the Employee Benefit Trust.
Change of ContRol
All of the Company’s share‑based plans contain provisions
relating to change of control. Outstanding awards and options
normally vest and become exercisable on a change of control,
subject to the satisfaction of any relevant performance conditions
at that time.
There are no other significant agreements to which the Company
is a party that take effect, alter or terminate upon a change of
control of the Company following a takeover bid.
There are no agreements between the Company and its Directors
or employees providing for compensation for loss of office or
employment that occurs because of a takeover bid.
SuBStantial ShaReholDingS
Interests in the ordinary share capital of the Company are set out
in the table below.
aRtiCleS of aSSoCiation
Any amendments to the Articles of Association of the Company
may be made in accordance with the provisions of the Companies
Act by way of special resolution.
PoweRS of the DiReCtoRS
Dividends, distributions and liquidation
Members can declare final dividends by passing an ordinary
resolution but the amount of the dividends cannot exceed the
amount recommended by the Board. The Board can pay interim
dividends provided the distributable profits of the Company
justify such payment. The Board may, if authorised by an ordinary
resolution of the members, offer any member the right to elect to
receive new shares, which will be credited as fully paid, instead
of their cash dividend. Any dividend which has not been claimed
for twelve years after it became due for payment will be forfeited
and will then revert to the Company. Members may share in surplus
assets on a liquidation.
The business of the Company is managed by the Directors,
who may exercise all powers of the Company, subject to the
Company’s Articles of Association, relevant statutory law and
to any direction that may be given by the Company in general
meeting by special resolution. Subject to the Companies Act,
shares may be issued by Board resolution. At the Company’s last
Annual General Meeting, powers were granted to the Directors
(subject to limits set out in the resolutions) to issue and to buy
back its own shares; similar powers are proposed to be granted
at the forthcoming Annual General Meeting. The buy‑back
authority was limited to 10% of the Company’s issued share
capital. No shares have been bought back under this authority.
SuBStantial ShaReholDingS
The Company had been notified, in accordance with Disclosure and Transparency Rule 5, of the following interests in the ordinary
share capital of the Company:
Name of holder
BlackRock
Allianz Global Investors
Capital Research & Management
Standard Life Investments
Legal & General Investment Management
As at 31 March 2013
Number
Percentage
held
As at 28 May 2013
Number
Percentage
held
9,160,642
13.4%
9,257,491
13.5%
4,194,691
3,397,500
3,219,450
2,569,297
6.2%
5.0%
4.7%
3.8%
4,376,834
3,397,500
3,224,697
2,400,862
6.4%
5.0%
4.7%
3.5%
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
52
AVEVA Group plc | Annual report 2013
Directors’ report
other statutory information
Continued
aPPointment of DiReCtoRS
emPloyee involvement
The Articles of Association limit the number of Directors to not
less than two and not more than ten save where members decide
otherwise. Members may appoint Directors by ordinary resolution
and may remove any Director (subject to the giving of special
notice) and, if desired, replace such removed Director by ordinary
resolution. New Directors may be appointed by the Board but are
subject to election by members at the first annual general meeting
after their appointment. A Director may be removed from office
if requested by all other Directors.
The Company’s Articles of Association require that at each AGM
they shall retire from office (and be subject to re‑election by
members) any Director who shall have been a Director at the
preceding two annual general meetings and who was not appointed
or re‑appointed then or subsequently. however, in accordance with
the UK Corporate Governance Code, the Company requires all
Directors who held office at 31 March 2013 to stand for re‑election.
ChaRitaBle anD PolitiCal DonationS
During the year the Group made charitable donations totalling
£55,245 (2012 – £49,557) of which £13,000 was paid to Macmillan
Cancer Support and £15,000 to The Outward Bound Trust.
The remainder was donated to local and national charities.
No political donations were made in the year (2012 – £nil).
annual geneRal meeting
The Annual General Meeting will be held on 9 July 2013 at
The Trinity Centre, 24 Cambridge Science Park, Milton Road,
Cambridge CB4 0FN. The Notice of the Annual General Meeting
is being sent to shareholders along with this annual report which
contains details of the resolutions proposed.
emPloyee Benefit tRuSt
The AVEVA Group Employee Benefit Trust 2008 was established
in 2008 to facilitate satisfying the transfer of shares to employees
within the Group on exercise of vested options under the various
share option and deferred bonus share plans of the Company.
The Trust holds a total of 81,420 ordinary shares in AVEVA Group plc
representing 0.12% (2012 – 93,763 shares representing 0.14%)
of the issued share capital at the date of this report. Under the
terms of the Trust deed governing the Trust, the trustees are
required (unless the Company directs otherwise) to waive all
dividends and abstain from voting in respect of ordinary shares
in AVEVA Group plc held by the Trust except where beneficial
ownership of any such ordinary shares was passed to a beneficiary
of the Trust. In the same way as other employees, the Executive
Directors of the Company are potential beneficiaries under the Trust.
DiSaBleD emPloyeeS
The Group gives full consideration to applications for employment
from disabled persons where the candidate’s particular aptitudes
and abilities are consistent with adequately meeting the requirements
of the job. Opportunities are available to disabled employees for
training, career development and promotion.
Where existing employees become disabled, it is the Group’s
policy to provide continuing employment wherever practicable
in the same or an alternative position and to provide appropriate
training to achieve this aim as well as reasonable adjustments
to the workplace and other support mechanisms.
The Group places considerable value on the involvement of its
employees and has continued to keep them informed of matters
affecting them as employees and on the various factors affecting
the performance of the Group. This is achieved through formal
and informal meetings, employee newsletters, the Group intranet
and presentations from senior management. There is an employee
representative committee which meets on a regular basis to discuss
a wide range of matters affecting their current and future interests.
This year the Group also launched an employee engagement survey.
All employees are entitled to receive an annual discretionary
award related to the overall profitability of the Group subject
to the performance of the individual and the Group. The Group
conducts employee wide surveys from time to time to gauge
the success or otherwise of its policies and uses this information
to improve matters as appropriate.
DiReCtoRS’ inDemnity
The Company has granted an indemnity to its Directors against
liability in respect of proceedings brought by third parties, subject
to the conditions set out in the Companies Act. Such qualifying
third party indemnity provision remains in force as at the date
of approving the Directors’ report.
auDitoR
A resolution to reappoint Ernst & Young LLP as auditor for the ensuing
year will be put to the members at the Annual General Meeting.
DiSCloSuRe of infoRmation to auDitoR
The Directors who were members of the Board at the time
of approving the Directors’ report are listed on page 50. having
made enquiries of fellow Directors and of the Company’s auditor,
each of these Directors confirms that:
B so far as he is aware, there is no relevant audit information
(as defined by Section 418 of the Companies Act 2006)
of which the Company’s auditor is unaware; and
B he has taken all the steps he ought to have taken as a Director
in order to make himself aware of any such relevant audit
information and to establish that the Company’s auditor
is aware of that information.
ReSPonSiBility Statement PuRSuant to fSa’S DiSCloSuRe
anD tRanSPaRenCy Rule 4 (DtR 4)
Each Director of the Company (whose names and functions
appear on pages 32 and 33) confirms that (solely for the purpose
of DTR 4) to the best of his knowledge:
B the financial statements in this document, prepared in accordance
with the applicable UK law and applicable accounting standards,
give a true and fair view of the assets, liabilities, financial position
and result of the Company and of the Group taken as a whole; and
B the Chairman’s statement and Business review include a fair
review of the development and performance of the business
and the position of the Company and Group taken as a whole,
together with a description of the principal risks and uncertainties
that they face.
On behalf of the Board
JAMES KIDD
Chief Financial Officer
23 May 2013
RICHARD LONGDON
Chief Executive
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Financial statements
Annual report 2013 | AVEVA Group plc
53
Consolidated financial statements
Statement of DireCtorS’ reSponSibilitieS in relation to the ConSoliDateD finanCial StatementS
z The Directors are responsible for preparing the annual report and the Consolidated financial
statements in accordance with applicable United Kingdom law and those International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
The Directors are required to prepare Consolidated financial statements for each financial year
which present fairly the financial position of the Group and the financial performance and cash flows
of the Group for that period. In preparing those Consolidated financial statements, the Directors
are required to:
B select suitable accounting policies in accordance with IAS 8 and then apply them consistently;
B present information, including accounting policies, in a manner that provides relevant, reliable, comparable
and understandable information;
B provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient
to enable users to understand the impact of particular transactions, other events and conditions on
the entity’s financial position and financial performance; and
B state that the Group has complied with IFRSs, subject to any material departures disclosed and explained
in the financial statements.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy
at any time the financial position of the Group and enable them to ensure that the Consolidated financial
statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible
for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
This annual report contains forward‑looking statements. These forward‑looking statements are not guarantees
of future performance. Rather, they are based on current views and assumptions and are subject to a number
of known and unknown risks, uncertainties and other factors that may cause actual results to differ materially
from any future results or developments expressed or implied from the forward‑looking statements. Each
forward‑looking statement speaks only as of the date of the particular statement and, save to the extent
required by the applicable law or regulation, we do not undertake any obligation to update or renew
any forward‑looking statement.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
54
AVEVA Group plc | Annual report 2013
Financial statements
independent auditor’s report
to the members of AVEVA Group plc
We have audited the Group financial statements of AVEVA Group plc
for the year ended 31 March 2013 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 31. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions
we have formed.
reSpeCtive reSponSibilitieS of DireCtorS anD auDitor
As explained more fully in the Directors’ responsibilities statement
set out on page 53, the Directors are responsible for the preparation
of the Group financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit and express
an opinion on the Group financial statements in accordance with
applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
SCope of the auDit of the finanCial StatementS
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes
an assessment of: whether the accounting policies are appropriate
to the Group’s circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall
presentation of the financial statements. In addition, we read
all the financial and non‑financial information in the annual
report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent
material misstatements or inconsistencies we consider
the implications for our report.
opinion on finanCial StatementS
In our opinion the Group financial statements:
B give a true and fair view of the state of the Group’s affairs
as at 31 March 2013 and of its profit for the year then ended;
B have been properly prepared in accordance with IFRSs
as adopted by the European Union; and
B have been prepared in accordance with the requirements of
the Companies Act 2006 and Article 4 of the IAS Regulation.
opinion on other matter preSCribeD
by the CompanieS aCt 2006
In our opinion the information given in the Directors’ report for
the financial year for which the Group financial statements are
prepared is consistent with the Group financial statements.
matterS on whiCh we are requireD
to report by exCeption
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
B certain disclosures of Directors’ remuneration specified by law
are not made; or
B we have not received all the information and explanations
we require for our audit.
Under the Listing Rules we are required to review:
B the Directors’ statement, set out on page 50, in relation
to going concern; and
B the part of the Corporate governance statement on pages 30 to 37
relating to the Company’s compliance with the nine provisions
of the UK Corporate Governance Code specified for our
review; and
B certain elements of the report to shareholders by the Board
on Directors’ remuneration.
other matter
We have reported separately on the parent Company financial
statements of AVEVA Group plc for the year ended 31 March 2013
and on the information in the Directors’ remuneration report that
is described as having been audited.
BOB FORSyTh (SEnIOR STATUTORy AUDITOR)
for and on behalf of Ernst & young LLP, Statutory Auditor
Cambridge
23 May 2013
WWW.AVEVA.COM
Financial statements
Annual report 2013 | AVEVA Group plc
55
Consolidated income statement
For the year ended 31 March 2013
Revenue
Cost of sales
Gross profit
Operating expenses
Research and Development costs
Selling and distribution expenses
Administrative expenses
Total operating expenses
Profit from operations
Finance revenue
Finance expense
Analysed as:
Adjusted profit before tax
Amortisation of intangibles (excluding other software)
Share‑based payments
(Loss)/gain on fair value of forward foreign exchange contracts
Exceptional items
Profit before tax
Income tax expense
Profit for the year attributable to equity holders of the parent
Earnings per share (pence)
– basic
– diluted
All activities relate to continuing activities.
The accompanying notes are an integral part of this Consolidated income statement.
Consolidated statement of comprehensive income
For the year ended 31 March 2013
Profit for the year
Other comprehensive income
Exchange differences arising on translation of foreign operations
Actuarial loss on retirement benefit obligations
Tax on items relating to components of other comprehensive income
Notes
2013
£000
2012
£000
5, 6
220,230
195,935
(16,141)
(16,066)
204,089
179,869
(35,539)
(32,121)
(87,588)
(75,008)
(18,570)
(16,241)
(141,697)
(123,370)
7
9
10
62,392
4,211
56,499
3,962
(2,956)
(2,724)
70,714
(3,946)
(1,226)
(796)
(1,099)
62,276
(3,368)
(666)
308
(813)
63,647
(18,134)
57,737
(17,769)
45,513
39,968
66.97
66.82
58.86
58.73
8
12
14
14
Notes
2013
£000
2012
£000
45,513
39,968
2,886
(6,030)
1,348
(2,777)
(7,083)
1,701
28
12(a)
Total comprehensive income for the year attributable to equity holders of the parent
43,717
31,809
The accompanying notes are an integral part of this Consolidated statement of comprehensive income.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
56
AVEVA Group plc | Annual report 2013
Financial statements
Consolidated balance sheet
31 March 2013
Non‑current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Other receivables
Current assets
Trade and other receivables
Financial assets
Treasury deposits
Cash and cash equivalents
Current tax assets
Total assets
Equity
Issued share capital
Share premium
Other reserves
Retained earnings
Total equity
Current liabilities
Trade and other payables
Financial liabilities
Current tax liabilities
Non‑current liabilities
Deferred tax liabilities
Retirement benefit obligations
Total equity and liabilities
Notes
2013
£000
2012
£000
16
17
18
27
20
20
21
22
22
30(a)
40,527
25,041
9,150
6,291
1,113
30,839
18,605
8,042
4,009
811
82,122
62,306
80,277
68,054
—
223
136,085
130,282
54,272
1,865
48,669
589
272,499
247,817
354,621
310,123
2,269
27,288
17,712
2,266
27,288
14,971
204,337
176,937
251,606
221,462
23
24
73,543
67,995
574
9,858
—
8,936
83,975
76,931
27
28
2,081
16,959
1,855
9,875
19,040
11,730
354,621
310,123
The accompanying notes are an integral part of this Consolidated balance sheet.
The financial statements were approved by the Board of Directors and authorised for issue on 23 May 2013. They were signed
on its behalf by:
PhILIP AIKEn
Chairman
RIChARD LOnGDOn
Chief Executive
COMPAny nUMBER
2937296
WWW.AVEVA.COM
Financial statements
Annual report 2013 | AVEVA Group plc
57
Consolidated statement of changes in shareholders’ equity
31 March 2013
Share
capital
£000
Share
premium
£000
Notes
Other reserves
Merger
reserve
£000
Cumulative
translation
adjustments
£000
Own
shares
held
£000
Total
£000
Retained
earnings
£000
Total
equity
£000
2,266
27,288
3,921
14,933
(1,223)
17,631
155,187
202,372
At 1 April 2011
Profit for the year
Other comprehensive income
Total comprehensive income
Share‑based payments
Tax on share‑based payments
Investment in own shares
Cost of employee benefit trust
shares issued to employees
Equity dividends
13
At 31 March 2012
Profit for the year
Other comprehensive income
Total comprehensive income
Issue of share capital
Share‑based payments
Tax on share‑based payments
Investment in own shares
Cost of employee benefit trust
shares issued to employees
Equity dividends
13
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,266
—
27,288
—
3,921
—
—
—
3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,777)
(2,777)
—
—
—
—
—
12,156
—
2,886
2,886
—
—
—
—
—
—
—
—
—
—
—
(563)
680
—
(1,106)
—
—
—
—
—
—
—
39,968
39,968
(2,777)
(5,382)
(8,159)
(2,777)
—
—
(563)
34,586
666
10
—
31,809
666
10
(563)
680
(680)
—
— (12,832)
(12,832)
14,971
—
2,886
176,937
45,513
221,462
45,513
(4,682)
(1,796)
2,886
—
—
—
40,831
—
1,226
415
—
43,717
3
1,226
415
(615)
(615)
(615)
470
—
470
(470)
—
— (14,602)
(14,602)
At 31 March 2013
2,269
27,288
3,921
15,042
(1,251)
17,712
204,337
251,606
The accompanying notes are an integral part of this Consolidated statement of changes in shareholders’ equity.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
58
AVEVA Group plc | Annual report 2013
Financial statements
Consolidated cash flow statement
For the year ended 31 March 2013
Cash flows from operating activities
Profit for the year
Income tax
net finance revenue
Amortisation of intangible assets
Depreciation of property, plant and equipment
Loss on disposal of property, plant and equipment
Share‑based payments
Difference between pension contributions paid and amounts charged to operating profit
Changes in working capital
Trade and other receivables
Trade and other payables
Changes to fair value of forward foreign exchange contracts
Cash generated from operating activities before tax
Income taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Acquisition of subsidiaries and business undertakings, net of cash acquired
Proceeds from disposal of property, plant and equipment
Interest received
Purchase of treasury deposits (net)
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Purchase of own shares
Proceeds from the issue of shares
Dividends paid to equity holders of the parent
Net cash flows used in financing activities
Net increase in cash and cash equivalents
net foreign exchange difference
Opening cash and cash equivalents
Closing cash and cash equivalents
The accompanying notes are an integral part of this Consolidated cash flow statement.
Notes
2013
£000
2012
£000
12(a)
9, 10
17
18
7
29
45,513
18,134
39,968
17,769
(1,255)
(1,238)
4,022
2,599
254
1,226
(261)
(11,136)
429
796
3,451
2,161
35
666
(413)
5,462
(2,848)
(308)
60,321
(19,567)
64,705
(16,927)
40,754
47,778
18
17
15
(3,862)
(1,341)
(2,601)
(583)
(12,485)
(5,749)
693
1,736
110
1,471
22
(5,803)
(7,280)
(21,062)
(14,632)
30(b)
30(a)
(165)
(615)
3
(22)
(563)
—
13
(14,602)
(12,832)
(15,379)
(13,417)
4,313
1,290
48,669
19,729
(1,245)
30,185
54,272
48,669
22
22
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Financial statements
Annual report 2013 | AVEVA Group plc
59
notes to the consolidated financial statements
1 Corporate information
AVEVA Group plc is a public limited company incorporated and domiciled in the United Kingdom. The address of the registered office
is given on the inside back cover. AVEVA Group plc’s shares are publicly traded on the Official List of the London Stock Exchange.
2 baSiS of preparation
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended
31 March 2013. The Consolidated financial statements are presented in Pounds Sterling (£) and all values are rounded to the nearest
thousand (£000) except when otherwise indicated.
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 profit before tax and reconciles this to profit before tax as required to be presented
under the applicable accounting standards. Adjusted earnings per share, as disclosed in note 14, is calculated having adjusted profit after
tax for the same items and their tax effect. The term adjusted profit 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.
a) Statement of compliance
The Consolidated financial statements of AVEVA Group plc and all its subsidiaries (the Group) have been prepared in accordance
with International Financial Reporting Standards (IFRSs), as adopted by the European Union, as they apply to the financial statements
of the Group for the year ended 31 March 2013. The Group’s financial statements are also consistent with IFRSs as issued by the IASB.
The parent Company financial statements of AVEVA Group plc have been prepared in accordance with UK Generally Accepted
Accounting Practice (UK GAAP) and are included on pages 89 to 92.
b) basis of consolidation
The Consolidated financial statements comprise the financial statements of AVEVA Group plc and its subsidiaries as at 31 March each year.
The financial statements of subsidiaries are prepared using existing GAAP for each country of operation. Adjustments are made to
translate any differences that may exist between the respective local GAAP and IFRSs.
Inter‑company balances and transactions, including unrealised profits arising from intra‑Group transactions, have been eliminated in full.
Subsidiaries are consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date
on which control is transferred out of the Group.
On acquisition, assets and liabilities of subsidiaries are measured at their fair values at the date of acquisition, with any excess of the cost
of acquisition over this value being capitalised as goodwill.
c) adoption of new and revised standards
The accounting policies adopted are consistent with those of the previous financial year. new standards and interpretations which
came into force during the year did not have a significant impact on the Group’s financial statements.
new standards and interpretations not yet effective
During the year, the IASB and IFRIC have issued the following standards (although in some cases not yet adopted by the EU) which are
expected to have implications for the reporting of the financial position or performance of the Group or which will require additional
disclosures in future financial years:
IAS 1
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 27
IAS 28
IAS 19
Amendment – Presentation of Items of Other Comprehensive Income
Financial Instruments classification and measurement
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
Revised – Separate Financial Statements
Revised – Investments in Associates and Joint Ventures
Revised – Employee Benefits
Effective for periods
commencing after
1 July 2012
1 January 2015
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
The Group intends to adopt these standards in the first accounting period after the effective date. The adoption of IAS19 revised
in 2013/14, is expected to reduce the element of finance revenue associated with retirement benefit obligations by approximately
£500,000. The Directors do not anticipate that the adoption of the other standards and interpretations listed will have a material effect
on the Consolidated financial statements in the period of initial application.
OVERVIEW
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60
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
3 SignifiCant aCCounting eStimateS
The key assumptions concerning the future and other key sources of judgement and estimation uncertainty at the Balance sheet date
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year are discussed below:
a) retirement benefit obligations
The determination of the Group’s obligations and expense for defined benefit pensions is dependent on the selection, by the Board
of Directors, of assumptions used by the pension scheme actuary in calculating these amounts. The assumptions applied together with
sensitivity analysis are described in note 28 and include, amongst others, the discount rate, the inflation rate, rates of increase in salaries
and mortality rates. While the Directors consider that the assumptions are appropriate, significant differences in the actual experience
or significant changes in assumptions may materially affect the reported amount of the Group’s future pension obligations, actuarial
gains and losses included in the Consolidated statement of comprehensive income in future years and the future staff costs. The carrying
amount of retirement benefit obligations at 31 March 2013 was £16,959,000 (2012 – £9,875,000).
b) provision for impairment of receivables
The Group makes provision for the impairment of receivables on a customer specific basis. The determination of the appropriate level
of provision involves an estimate of the potential risk of default or non‑payment by the Group’s customers and management consider
a number of factors including the financial strength of the customers, the level of default that the Group has suffered in the past, the age
of the receivable outstanding and the Group’s trading experience with that customer. The provision for impairment of receivables
at 31 March 2013 was £4,771,000 (2012 – £3,431,000).
c) revenue recognition
Revenue from sales of software licences when these are combined with the delivery of significant implementation or customisation
services is recognised in line with the delivery of the services to the customer. This policy involves the assessment of which customer
projects include significant customisation or implementation and also an assessment of the stage of completion of such projects.
We generally only enter into this type of contract in our Enterprise Solutions segment but the assessments and estimates used
by the Group could have a significant impact on the amount and timing of revenue recognised on a project.
4 Summary of SignifiCant aCCounting poliCieS
a) revenue
The Group generates its revenue principally from licensing the rights to use its software products directly to end users and to a lesser
extent indirectly through resellers. Revenue is measured at fair value of the consideration received or receivable and represents the
amounts receivable for goods and services provided in the ordinary course of business, net of discounts and sales taxes. It comprises
initial licence fees, annual fees and rental licence fees, together with income from consultancy and other related services.
For each revenue stream, revenue is not recognised unless and until:
B a clear contractual arrangement can be evidenced;
B delivery has been made in accordance with that contract;
B if required, contractual acceptance criteria have been met; and
B the fee has been agreed and collectability is probable. Where extended payment terms beyond 180 days exist, revenue recognition
is deferred until payment is due.
initial/annual licence agreements
Users are charged an initial licence fee upon installation for a set number of users together with an obligatory annual fee, which is charged
every year. Annual fees consist of the continuing right to use and customer support and maintenance, which includes core product upgrades
and enhancements and remote support services. Users must continue to pay annual fees in order to maintain the right to use the software.
Initial licence fees are recognised once the above conditions have been met. Annual fees are recognised on a straight‑line basis over
the period of the contract, which is typically twelve months. If annual fees are charged at a discount, an amount is allocated out of
the initial licence fee at fair market value based on the value established when annual fees are charged separately to customers.
rental licence agreements
As an alternative to the initial licence fee plus annual fee model, the Group also supplies its software under three different types
of rental licence agreement.
Rental licence fees which are invoiced monthly and which are cancellable by the customer are recognised on a monthly basis.
Other rental licence agreements are invoiced at the start of the contracted period, which is typically one year, are non‑cancellable and consist
of two separate components, the initial software delivery; and the continuing right to use with customer support and maintenance. Revenue
in respect of the continuing right to use and customer support and maintenance element is valued at fair market value based on the value
established when annual fees are charged separately to the customer. This component is recognised on a straight‑line basis over the period
of the contract. The residual amount representing the implied initial fee element is recognised upfront, provided all of the above criteria
have been met. Where uncertainty exists and it is not possible to reliably determine the fair value of the customer support and maintenance
element, all revenue is recognised on a straight‑line basis over the period of the contract.
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Annual report 2013 | AVEVA Group plc
61
4 Summary of SignifiCant aCCounting poliCieS continued
a) revenue continued
rental licence agreements continued
The Group also licenses its software using a token licensing model. Under this model, a ‘basket of tokens’ representing licences to use
different software products over a defined period is granted, which enables the customer to draw these down as and when required.
Where the customer commits in advance to a specified number of tokens over a defined period, a proportion of revenue is recognised
with an appropriate element deferred for customer support and maintenance obligations, subject to the above recognition conditions
being met. Where the customer is charged in arrears, revenue is recognised based on actual number of tokens used.
Services
Services consist primarily of consultancy, implementation services and training and are performed under separate service arrangements.
Revenue from these services is recognised as the services are performed and stage of completion is determined by reference to the
costs incurred as a proportion of the total estimated costs of the service project. If a contract cannot be reliably estimated, revenue
is recognised only to the extent that costs have been incurred. Provision is made as soon as a loss is foreseen.
If an arrangement includes both licence and service elements, licence fee revenue is recognised upon delivery of the software provided
that services do not include significant customisation or modification of the base product and the payment terms for licences are not subject
to acceptance criteria. In all other cases, revenues from both licence and service elements are recognised as services are performed.
b) foreign currencies
The functional and presentational currency of AVEVA Group plc is Pounds Sterling (£). Transactions in foreign currencies are initially
recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency rate of exchange ruling at the Balance sheet date. All differences are taken to
the Consolidated income statement.
non‑monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date
of the initial transaction.
The subsidiaries have a number of different functional currencies. As at the reporting date, the assets and liabilities of these overseas
subsidiaries are translated into Pounds Sterling (£) at the rate of exchange ruling at the Balance sheet date, and their Income statements
are translated at the weighted average exchange rates for the year. Exchange differences arising on the retranslation are taken directly
to the Consolidated statement of comprehensive income.
c) exceptional items
The Group discloses items of both income and expense which are exceptional by virtue of their size or incidence so as to allow a better
understanding of the underlying trading performance of the Group. The Group includes the costs of significant restructuring exercises,
fees associated with business combinations and costs incurred in integrating acquired companies.
d) goodwill
Goodwill on acquisitions is initially measured at cost, being the excess of the cost of the business combination over the acquirer’s interest
in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost
less any accumulated impairment losses.
Where goodwill forms part of a cash‑generating unit and part of the operation within that unit is disposed of, the goodwill associated with
the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion
of the cash‑generating unit retained.
If the potential benefit of tax losses or other deferred tax assets does not satisfy the criteria in IFRS 3 for separate recognition when
a business combination is initially accounted for but is subsequently realised, the Group recognises the deferred tax income in the
Consolidated income statement.
e) intangible assets
Intangible assets acquired separately are capitalised at cost and from a business acquisition are capitalised at fair value as at the date
of acquisition. Following initial recognition, the cost model is applied to each class of intangible asset as set out below.
Expenditure on internally developed intangible assets, excluding development costs, is taken to the Consolidated income statement
in the year in which it is incurred. Internal software development expenditure is recognised as an intangible asset only after its technical
feasibility and commercial viability can be demonstrated.
Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Amortisation
is calculated on a straight‑line basis over the estimated useful economic lives of the asset, which are as follows:
Developed technology
Customer relationships
Other software
Purchased software rights
Years
5–12
10–20
3
5–10
OVERVIEW
BUSINESS REVIEW
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FINANCIALS
62
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
4 Summary of SignifiCant aCCounting poliCieS continued
f) research expenditure
Research expenditure is written off in the year of expenditure.
g) property, plant and equipment
Property, plant and equipment is stated at cost less depreciation and any accumulated impairment losses.
Depreciation is calculated on a straight‑line basis to write down the assets to their estimated residual value over the useful economic
life of the asset as follows:
Computer equipment
Fixtures, fittings and office equipment
Motor vehicles
Years
3
6–8
4
Leasehold buildings and improvements are amortised on a straight‑line basis over the period of the lease (3 to 49 years) or useful
economic life, if shorter.
h) impairment of assets
Goodwill arising on acquisition is allocated to cash‑generating units expected to benefit from the combination’s synergies and represents
the lowest level at which goodwill is monitored for internal management purposes and generates cash flows which are independent
of other cash‑generating units. The recoverable amount of the cash‑generating unit to which goodwill has been allocated is tested
for impairment annually or when events or changes in circumstance indicate that it might be impaired. The carrying values of property,
plant and equipment and intangible assets other than goodwill are reviewed for impairment when events or changes in circumstance
indicate the carrying value may be impaired. If any such indication exists and where the carrying values exceed the estimated recoverable
amount, the assets or cash‑generating units are written down to their recoverable amount. The recoverable amount is the greater of
net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre‑tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash‑generating
unit to which the asset belongs. Impairment losses are recognised in the Income statement in the administrative expenses line item.
i) trade and other receivables
Trade receivables, which generally have 30 to 90 day terms, are recognised and carried at original invoice amount less an allowance for
any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts
are written off when identified.
j) Cash and cash equivalents
Cash and short‑term deposits in the Consolidated balance sheet comprise cash at bank and in hand and short‑term deposits with an original
maturity of three months or less. The carrying amount of these approximates their fair value. For the purpose of the Consolidated cash
flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
k) Derivative financial instruments
The only derivative financial instruments the Group holds are forward foreign exchange contracts to reduce exposure to foreign
exchange risk. The Group does not hold or issue derivative financial instruments for speculative purposes. All forward foreign
exchange contracts have been marked‑to‑market and are held at fair value on the consolidated balance sheet. The Group has not
applied hedge accounting during the year and therefore movements in fair value are being recorded in the Consolidated income
statement. Fair value is estimated using the settlement rates prevailing at the period end.
l) leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating
lease payments are recognised as an expense in the Consolidated income statement on a straight‑line basis over the lease term.
m) taxation
Deferred income tax is provided, using the liability method, on all temporary differences at the Balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences:
B except where the deferred income tax liability arises from goodwill amortisation or the initial recognition of an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable
profit or loss; and
B in respect of taxable temporary differences associated with investments in subsidiaries, except where the timing of the reversal of the
temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
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Financial statements
Annual report 2013 | AVEVA Group plc
63
4 Summary of SignifiCant aCCounting poliCieS continued
m) taxation continued
Deferred income tax assets are recognised for all deductible temporary differences, carry‑forward of unused tax assets and unused tax
losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry‑forward
of unused tax assets and unused tax losses can be utilised:
B except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; and
B in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised
to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be
available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each Balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the Balance sheet date.
The income tax effects of items recorded in either other comprehensive income or equity are recognised in the Consolidated statement
of comprehensive income or the Consolidated statement of changes in shareholders’ equity respectively. Otherwise, income tax is
recognised in the Consolidated income statement.
Revenue, expenses and assets are recognised net of the amount of sales taxes except:
B where the sales tax incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case
the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
B receivables and payables are stated with the amount of sales taxes included.
The net amount of sales taxes recoverable from, or payable to, the taxation authority is included as part of receivables or payables
in the Consolidated balance sheet.
n) post retirement benefits
The Group operates defined benefit pension schemes in the UK, Sweden and Germany. The Group also provides certain post
employment benefits to its South Korean employees.
The UK defined benefit pension scheme, previously available to all UK employees, was closed to new applicants in 2002. UK employees
are now offered membership of a defined contribution scheme.
The German unfunded defined benefit schemes are closed to new applicants and provide benefits to nine deferred members.
These schemes were acquired as part of previous business combinations. no current employees participate in the scheme.
Full provision has been made for the liability on the Consolidated balance sheet. The Group also operates a defined benefit pension
scheme for one German employee.
The Group provides pension arrangements to its Swedish employees through an industry‑wide defined benefit scheme. It is not possible
to identify the share of the underlying assets and liabilities in the scheme which is attributable to the Group on a fair and reasonable
basis. Therefore the Group has applied the provisions in IAS 19 to account for the scheme as if it was a defined contribution scheme.
For the defined benefit schemes, the defined benefit obligation is calculated annually for each plan by qualified external actuaries
using the projected unit credit method which attributes entitlement to benefits to the current period (to determine current service cost)
and to the current and prior periods (to determine the present value of defined benefit obligation). The retirement benefit liability in the
Consolidated balance sheet represents the present value of the defined benefit obligation (using a discount rate derived from a published
index of AA rated corporate bonds) as reduced by the fair value of plan assets out of which the obligations are to be settled directly.
Fair value is based on market price information and in the case of quoted securities is the published bid price. The value of a net pension
benefit asset is restricted to the present value of any amount the Group expects to recover by way of refunds from the plan or reductions
in the future contributions. The current service cost is recognised in the Consolidated income statement as an employee benefit expense.
The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage
of time and is determined by applying the discount rate to the opening present value of the benefit obligation, taking into account
material changes in the obligation during the year. The expected return on plan assets is based on an assessment made at the beginning
of the year of long‑term market returns on scheme assets, adjusted for the effect on the fair value of plan assets of contributions received
and benefits paid during the year. The expected return on plan assets and the interest cost is recognised in the Consolidated income
statement as finance revenue and finance expense respectively.
Actuarial gains and losses arising from experience adjustments or changes in actuarial assumptions are credited or charged in the
Consolidated statement of comprehensive income in the period in which they arise.
The Group also operates defined contribution pension schemes for a number of UK and non‑UK employees. Contributions to defined
contribution plans are charged to profit before tax as they become payable.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
64
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
4 Summary of SignifiCant aCCounting poliCieS continued
o) Share‑based payments
The cost of equity‑settled transactions with employees is measured by reference to the fair value at the date at which they are granted,
further details of which are given in note 29. In valuing equity‑settled transactions, no account is taken of any performance conditions,
other than conditions linked to the price of the shares of AVEVA Group plc (market conditions).
The cost of equity‑settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (vesting
date). The cumulative expense recognised for equity‑settled transactions at each reporting date until the vesting date reflects the extent
to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.
no expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other
performance conditions are satisfied.
Where the terms of an equity‑settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification,
as measured at the date of modification.
Where an equity‑settled award is cancelled, it is treated as if it had vested on the date of cancellation and any expense not yet recognised
for the award is recognised immediately. however, if a new award is substituted for the cancelled award, and designated as a replacement
award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award,
as described in the previous paragraph.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share, subject
to an estimate of whether performance conditions will be met.
p) employee benefit trust
The Group has established an employee benefit trust (AVEVA Group Employee Benefit Trust 2008), which is a separately administered
trust and is funded by loans from Group companies. The assets of the trust comprise shares in AVEVA Group plc and cash balances.
The Group recognises assets and liabilities of the trust in the Consolidated financial statements and shares held by the trust
are recorded at cost as a deduction from shareholders’ equity.
Consideration received for the sale of shares held by the trust is recognised in equity, with any difference between the proceeds
from the sale and the original cost being taken to retained earnings.
5 revenue
An analysis of the Group’s revenue is as follows:
Annual fees
Rental licence fees
Total recurring revenue
Initial licence fees
Training and services
Total revenue
Finance revenue
2013
£000
54,391
98,833
153,224
42,431
24,575
220,230
4,211
2012
£000
47,779
90,111
137,890
37,289
20,756
195,935
3,962
224,441
199,897
Services consist of consultancy, implementation services and training fees.
Included within revenue for the year ended 31 March 2013 are annual fees of £2,633,000, initial fees of £1,675,000, rental fees of £115,000
and services of £707,000 related to the acquisition of Bocad.
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Financial statements
Annual report 2013 | AVEVA Group plc
65
6 Segment information
The Group is organised into two lines of business being Engineering & Design Systems and Enterprise Solutions. These two lines
of business are considered to be the two reportable segments for the Group. Each line of business is managed separately due to
the differing requirements of each market. The products of each of the lines of business are taken to market by a shared sales force
that is itself organised into three geographical sales divisions: Asia Pacific; Americas; and Europe, Middle East and Africa (EMEA).
The Executive Board, comprising the Chief Executive, Chief Financial Officer, Chief Operating Officer, Chief Technology Officer,
Executive Vice President Sales, Executive Vice President Business Strategy and Marketing, and Executive Vice President human
Resources and Business Services, monitors the operating results of the lines of business for the purposes of making decisions
about performance assessment and resource allocation. Performance is evaluated based on adjusted profit contribution using
the same accounting policies as adopted for the Group’s financial statements. There is no inter‑segment revenue. Balance sheet
information is not included in the information provided to the Executive Board. Support functions such as head Office departments
are controlled and monitored centrally.
Year ended 31 March 2013
Income statement
Revenue
Annual fees
Rental licence fees
Initial licence fees
Training and services
Segment revenue
Operating costs
Segment profit contribution
Reconciliation of segment profit contribution to profit before tax
Shared selling and distribution expenses
Other shared operating expenses
net finance revenue
Adjusted profit before tax
Exceptional items and other normalised adjustments*
Profit before tax
Engineering
& Design
£000
Enterprise
Solutions
£000
Total
£000
49,032
93,343
36,268
10,902
5,359
5,490
6,163
13,673
54,391
98,833
42,431
24,575
189,545
(45,439)
30,685
(28,670)
220,230
(74,109)
144,106
2,015
146,121
(54,957)
(21,705)
1,255
70,714
(7,067)
63,647
* normalised adjustments include amortisation of intangible assets (excluding other software), share‑based payments, (losses)/gains on fair value of forward foreign
exchange contracts and exceptional items.
Engineering & Design Systems revenue includes £5,130,000 relating to the acquired business of Bocad.
Year ended 31 March 2012
Income statement
Revenue
Annual fees
Rental licence fees
Initial licence fees
Training and services
Segment revenue
Operating costs
Segment profit/(loss) contribution
Reconciliation of segment profit contribution to profit before tax
Shared selling and distribution expenses
Other shared operating expenses
net finance revenue
Adjusted profit before tax
Exceptional items and other normalised adjustments*
Profit before tax
Engineering
& Design
£000
Enterprise
Solutions
£000
Total
£000
43,063
86,864
33,197
9,350
4,716
3,247
4,092
11,406
47,779
90,111
37,289
20,756
172,474
(39,032)
23,461
(27,878)
195,935
(66,910)
133,442
(4,417)
129,025
(46,713)
(21,274)
1,238
62,276
(4,539)
57,737
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BUSINESS REVIEW
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FINANCIALS
66
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
6 Segment information continued
analysis of revenue by geographical location
Revenue
Annual fees
Rental licence fees
Initial licence fees
Training and services
Total revenue
Revenue
Annual fees
Rental licence fees
Initial licence fees
Training and services
Total revenue
other segmental disclosures
Year ended 31 March 2013
Asia Pacific
£000
EMEA
£000
Americas
£000
Total
£000
22,962
26,083
20,237
3,993
26,707
46,787
18,027
16,148
4,722
25,963
4,167
4,434
54,391
98,833
42,431
24,575
73,275
107,669
39,286
220,230
Year ended 31 March 2012
Asia Pacific
£000
EMEA
£000
Americas
£000
Total
£000
20,497
21,230
20,301
2,378
23,141
41,362
14,684
14,169
4,141
27,519
2,304
4,209
47,779
90,111
37,289
20,756
64,406
93,356
38,173
195,935
The Company’s country of domicile is the UK. Revenue attributed to the UK and all foreign countries amounted to £19,190,000 and £201,040,000
(2012 – £16,609,000 and £179,326,000) respectively. no individual country accounted for more than 10% of the Group’s total revenue.
Revenue is allocated to countries on the basis of the location of the customer.
non‑current assets (excluding deferred tax assets) held in the UK and all foreign countries amounted to £21,966,000 and £53,865,000
(2012 – £11,647,000 and £46,650,000) respectively. There are no material non‑current assets located in an individual country outside
of the UK.
no single external customer accounted for 10% or more of the Group’s total revenue (2012 – none).
Further information concerning revenue by type of product and service is disclosed in note 5.
7 profit from operationS
Profit from operations is stated after charging:
Depreciation of owned property, plant and equipment
Amortisation of intangible assets:
– included in Research and Development costs
– included in administrative expenses
– included in selling and distribution expenses
Staff costs
Operating lease rentals – minimum lease payments
Loss on disposal of property, plant and equipment
net foreign exchange losses
2013
£000
2012
£000
2,599
2,161
3,126
825
71
92,769
5,003
254
1,247
2,641
83
727
81,811
4,534
35
1,020
During the year the Group (including its subsidiaries) obtained the following services from the Group’s auditor at costs as detailed below:
Fees payable to the Company auditor for the audit of parent Company and Consolidated financial statements
Fees payable to the Company auditor and its associates for other services:
– the audit of Company’s subsidiaries pursuant to legislation
– tax assurance services
– other tax services
– corporate finance services (transaction support)
– other services pursuant to legislation
2013
£000
265
205
73
66
114
63
786
2012
£000
250
188
65
154
144
5
806
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Financial statements
Annual report 2013 | AVEVA Group plc
67
8 exCeptional itemS
In 2012/13 exceptional costs totalling £1,099,000 (2012 – £813,000) were incurred on acquisition and integration activities. These costs
principally relate to fees paid to professional advisers for legal, due diligence and taxation advice related to the acquisitions of Bocad and
Global Majic. In 2011/12, the costs related to the acquisition of LFM Software Limited and the integration of Logimatic Software A/S.
9 finanCe revenue
Expected return on pension scheme assets
Bank interest receivable
10 finanCe expenSe
Interest on pension scheme liabilities
Bank interest payable and similar charges
11 Staff CoStS
Staff costs relating to employees (including Executive Directors) are shown below:
Wages and salaries
Social security costs
Pension costs
Expense of share‑based payments
The average monthly number of persons (including Executive Directors) employed by the Group was as follows:
Research, development and product support
Sales, marketing and customer support
Administration
Directors’ remuneration
2013
£000
2,489
1,722
4,211
2013
£000
2,805
151
2,956
2012
£000
2,491
1,471
3,962
2012
£000
2,702
22
2,724
2013
£000
75,879
9,312
6,352
1,226
2012
£000
67,165
8,474
5,506
666
92,769
81,811
2013
Number
407
597
234
2012
Number
347
515
191
1,238
1,053
The disclosure of an individual Director’s remuneration and interests required by the Companies Act 2006 and those specified for audit
by the Listing Rules of the Financial Services Authority is shown in the audited section of the Remuneration Committee report on pages
48 and 49 and forms part of these financial statements.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
68
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
12 inCome tax expenSe
a) tax on profit
The major components of income tax expense for the years ended 31 March 2013 and 2012 are as follows:
Tax charged in Consolidated income statement
Current tax
UK corporation tax
Adjustments in respect of prior periods
Foreign tax
Adjustments in respect of prior periods
Total current tax
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior periods
Total deferred tax (note 27)
Total income tax expense reported in Consolidated income statement
Tax relating to items credited directly to Consolidated statement of comprehensive income
Deferred tax on retranslation of intangible assets
Deferred tax on actuarial (loss)/gain on retirement benefit obligation
Tax (credit)/charged reported in Consolidated statement of comprehensive income
2013
£000
2012
£000
12,743
284
13,027
5,560
570
6,130
7,195
(161)
7,034
10,000
1,393
11,393
19,157
18,427
(1,217)
194
(1,023)
(184)
(474)
(658)
18,134
17,769
2013
£000
2012
£000
(44)
(1,304)
(62)
(1,639)
(1,348)
(1,701)
b) reconciliation of the total tax charge
The differences between the total tax charge shown above and the amount calculated by applying the standard rate of UK corporation
tax to the profit before tax are as follows:
Tax on Group profit before tax at standard UK corporation tax rate of 24% (2012 – 26%)
Effects of:
– expenses not deductible for tax purposes
– irrecoverable withholding tax
– movement on unprovided deferred tax balances
– change in UK tax rate for deferred tax balances
– differing tax rates on overseas earnings
– adjustments in respect of prior years
Income tax expense reported in Consolidated income statement
2013
£000
2012
£000
15,275
15,012
870
228
5
42
666
1,048
189
1,620
(291)
91
390
758
18,134
17,769
At the Balance sheet date the UK government had substantively enacted a 1% reduction in the main rate of UK corporation tax from 24%
to 23% effective from 1 April 2013. The government has also proposed reducing the UK corporation tax rate to 21% by 1 April 2014 and
20% by 1 April 2015. however, these further rate changes had not been substantively enacted at the Balance sheet date and their effects
are not, therefore, included in these financial statements. We do not expect that the enactment of these changes will have a material
impact on the deferred tax balance of the Group.
13 DiviDenDS paiD anD propoSeD on equity ShareS
Declared and paid during the year
Interim 2012/13 dividend paid of 4.50 pence (2011/12 – 4.00 pence) per ordinary share
Final 2011/12 dividend paid of 17.00 pence (2010/11 – 14.89 pence) per ordinary share
Proposed for approval by shareholders at the Annual General Meeting
Final proposed dividend 2012/13 of 19.5 pence (2011/12 – 17.00 pence) per ordinary share
WWW.AVEVA.COM
2013
£000
2012
£000
3,030
11,572
2,715
10,117
14,602
12,832
13,260
11,558
Financial statements
Annual report 2013 | AVEVA Group plc
69
13 DiviDenDS paiD anD propoSeD on equity ShareS continued
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 9 July 2013 and has not
been included as a liability in these financial statements. If approved at the Annual General Meeting the final dividend will be paid
on 26 July 2013 to shareholders on the register at the close of business on 21 June 2013.
In addition, the Board is proposing to return £100 million to shareholders in the form of a special dividend of 146 pence per share.
The Board is recommending that the special dividend is accompanied by a share consolidation in order to maintain, as far as possible,
the comparability of the share price before and after the special dividend. The special dividend and share consolidation will be subject
to shareholder approval at the AGM on 9 July 2013.
14 earningS per Share
Earnings per share for the year:
– basic
– diluted
Adjusted earnings per share for the year:
– basic
– diluted
Weighted average number of ordinary shares for basic earnings per share
Effect of dilution: employee share options
Weighted average number of ordinary shares adjusted for the effect of dilution
2013
Pence
66.97
66.82
74.87
74.70
2013
Number
2012
Pence
58.86
58.73
63.81
63.66
2012
Number
67,962,515
153,801
67,901,203
154,890
68,116,316
68,056,093
The calculations of basic and diluted earnings per share are based on the net profit attributable to equity holders of the parent for the year
of £45,513,000 (2012 – £39,968,000). Basic earnings per share amounts are calculated by dividing the net profit attributable to equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts
are calculated by dividing the net profit attributable to equity holders of the parent by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the
potentially dilutive share options into ordinary shares. Details of the terms and conditions of share options are provided in note 29.
Details of the calculation of adjusted earnings per share are set out below:
Profit after tax for the year
Intangible amortisation (excluding other software)
Share‑based payments
Loss/(gain) on fair value of forward foreign exchange contracts
Exceptional items
Tax effect
Adjusted profit after tax
2013
£000
45,513
3,946
1,226
796
1,099
(1,696)
2012
£000
39,968
3,368
666
(308)
813
(1,180)
50,884
43,327
The denominators used are the same as those detailed above for both basic and diluted earnings per share.
The adjustment made to profit after tax in calculating adjusted basic and diluted earnings per share has been adjusted for the tax effects
of the items adjusted.
The Directors believe that adjusted earnings per share is a more representative presentation of the underlying performance of the business.
15 buSineSS CombinationS
On 22 May 2012, the Group acquired 100% of the issued share capital of the Bocad group of companies based in Belgium and Germany.
The acquisition consideration was cash of €17.5 million (£14.0 million) on a debt free/cash free basis.
Acquisition costs (including due diligence and professional fees) and integration costs have been included in the Consolidated
income statement.
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FINANCIALS
70
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
15 buSineSS CombinationS continued
Details of the fair values of the net assets acquired and goodwill is set out below, which includes purchased intangibles consisting of
developed technology and customer relationships. Fair value adjustments of £2.4 million have been made to align with the Group’s
accounting policies as well as an adjustment to increase the value of an acquired property by £0.2 million to an estimate of market value.
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Long‑term loans
Retirement benefit obligations
Deferred tax liabilities
Net (liabilities)/assets acquired
Goodwill
Total consideration
Satisfied by:
Cash
net cash outflow arising on acquisition:
Cash consideration
Less: cash and cash equivalents acquired
Book value
£000
Fair value
£000
1,066
507
1,815
402
(3,654)
(6)
(1,009)
(880)
—
(1,759)
7,425
659
1,573
402
(3,840)
(6)
(1,009)
(880)
(562)
3,762
8,136
11,898
11,898
11,898
(402)
11,496
From the date of acquisition to 31 March 2013, the business contributed £5,130,000 to revenue and a loss before tax of £440,000.
Goodwill represents the value of the assembled workforce and the future synergy benefits of integrating the business in the AVEVA Group.
The assembled workforce brings product development skills and expertise, service delivery skills and domain knowledge of the end
user markets to the Group.
acquisition of trade and assets from global majic Software inc.
On 17 December 2012, the Group acquired the trade and certain assets and liabilities of Global Majic Software Inc. for cash
consideration of £989,000.
The fair value of the assets acquired consisted mainly of developed technology of £1,092,000.
lfm Software limited
On 7 October 2011, the Group acquired 100% of the issued share capital of Z+F UK Limited, a UK software company which develops
and markets laser scanning software for the capture and management of laser scan data. The company’s name has since been changed
to LFM Software Limited. The acquisition was satisfied for net consideration of £6.3 million on a debt free/cash free basis. As part of
this acquisition, Z+F Gmbh, the former parent company of Z+F UK Limited, has also been granted a licence to continue to distribute
the Z+F UK software together with Z+F Gmbh’s laser scanning hardware products. This initial licence has been granted free of royalty
up to the value of the first £1 million of royalties over the next five years.
The fair value of the assets acquired of £8,937,000 consisted mainly of developed technology of £2,433,000, customer relationships
of £855,000, goodwill of £4,340,000 and cash and cash equivalents of £2,188,000.
16 gooDwill
At 1 April 2011
Acquisition of LFM Software Limited
Exchange adjustment
At 31 March 2012
Acquisition of Bocad group of companies
Exchange adjustment
At 31 March 2013
Engineering
& Design
£000
Enterprise
Solutions
£000
18,340
4,340
(705)
21,975
8,136
1,403
31,514
9,194
—
(330)
8,864
—
149
9,013
Total
£000
27,534
4,340
(1,035)
30,839
8,136
1,552
40,527
Goodwill acquired in a business combination is allocated, at acquisition, to the cash‑generating units (CGUs) that are expected to benefit
from that business combination.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired.
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Annual report 2013 | AVEVA Group plc
71
16 gooDwill continued
Considering the sensitivity levels for the two cash‑generating units:
engineering & Design Systems
During 2012/13 the Contribution of the Engineering & Design Systems CGU was £144.1 million. This is far in excess of the attributable
goodwill value. Therefore, the Directors believe that no reasonably foreseeable changes to key assumptions would result in an impairment
of goodwill, such is the margin by which the estimated recoverable amount exceeds the carrying value.
enterprise Solutions
The recoverable amount of the Enterprise Solutions CGU is determined from a value in use calculation. The key assumptions for this
calculation are those regarding discount rates and growth rates. Management estimates discount rates using pre‑tax rates that reflect
current market assessments of the time value of money and the risks specific to the CGU.
The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the year ending
31 March 2014 together with the most recent three year business plan and extrapolates cash flows for future years based on an average
estimated new business growth rate of 4% (2012 – 4%). In addition, revenue is also forecast to grow from the impact of sales of initial
licenses driving increased annual fees in future periods. In total, the revenue growth in periods beyond the period covered by the business
plan is 7%. The long‑term average growth rate is based on typical growth rates for companies with strong software and technology
services that are exposed to high growth sectors (such as Oil & Gas and Power) and high growth economies such as Asia Pacific,
India and Latin America.
Future cash flows are discounted in line with the weighted average cost of capital of approximately 12% pre‑tax (2012 – 12%).
headroom for goodwill based on current forecasts is £32 million. Sensitivity levels on these calculations indicate that impairment
would need to be considered if:
B instead of 12%, a discount rate of 18.5% or higher had been used; or
B instead of 4%, a long‑term new business growth rate of 1% or lower had been used.
17 intangible aSSetS
Cost
At 1 April 2011
Additions
Acquisitions
Disposals
Exchange adjustment
At 31 March 2012
Additions
Acquisitions
Disposals
Exchange adjustment
At 31 March 2013
Amortisation
At 1 April 2011
Charge for the year
Disposals
Exchange adjustment
At 31 March 2012
Charge for the year
Disposals
Exchange adjustment
At 31 March 2013
Net book value
At 31 March 2011
At 31 March 2012
At 31 March 2013
Developed
technology
£000
Customer
relationships
£000
Other
software
£000
Purchased
software
rights
£000
20,298
—
2,433
—
(568)
22,163
—
8,059
—
963
11,132
—
855
—
(482)
11,505
—
438
—
583
1,401
38
—
(8)
(9)
1,422
709
20
(46)
10
31,185
12,526
2,115
11,251
2,249
—
(387)
13,113
2,890
—
687
16,690
9,047
9,050
14,495
3,076
722
—
(144)
3,654
818
—
258
4,730
8,056
7,851
7,796
1,282
83
(8)
(14)
1,343
76
(46)
11
1,384
119
79
731
6,208
545
—
—
(2)
6,751
632
—
—
—
7,383
4,734
397
—
(5)
5,126
238
—
—
5,364
1,474
1,625
2,019
Total
£000
39,039
583
3,288
(8)
(1,061)
41,841
1,341
8,517
(46)
1,556
53,209
20,343
3,451
(8)
(550)
23,236
4,022
(46)
956
28,168
18,696
18,605
25,041
For the purposes of the adjusted earnings per share calculation (note 14), intangible asset amortisation excludes the charge relating to
other software of £76,000 (2012 – £83,000).
OVERVIEW
BUSINESS REVIEW
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FINANCIALS
72
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
17 intangible aSSetS continued
Developed technology
Developed technology includes the Bocad technology acquired in 2012/13, the MARS technology which was acquired as part of the
acquisition of Logimatic Software A/S in 2010/11, the ADB technology that was also acquired in 2010/11 and the LFM software acquired
in 2011/12. All amortisation is calculated using the straight‑line method over periods between five and twelve years.
Customer relationships
The customer relationships intangible asset includes those relationships acquired as part of the acquisition of Bocad in 2012/13,
Logimatic Software A/S during 2010/11 and those acquired in 2011/12 as part of the acquisition of LFM Software Limited. The value
of these relationships is being amortised using the straight‑line method over lives between five and ten years.
18 property, plant anD equipment
Long
leasehold
buildings and
improvements
£000
3,778
96
—
—
—
(19)
3,855
199
555
(1,517)
17
Fixtures,
fittings
and office
equipment
£000
7,584
796
89
(235)
(166)
(84)
7,984
1,561
14
(877)
144
Computer
equipment
£000
10,744
1,395
20
(539)
166
(123)
11,663
1,721
90
(1,045)
103
Motor
vehicles
£000
1,223
314
—
(383)
—
(8)
1,146
381
—
(291)
49
Total
£000
23,329
2,601
109
(1,157)
—
(234)
24,648
3,862
659
(3,730)
313
3,109
12,532
8,826
1,285
25,752
1,030
169
—
52
(10)
1,241
214
(918)
7
9,283
956
(523)
133
(82)
9,767
1,284
(984)
68
4,615
769
(157)
(185)
(57)
4,985
818
(637)
81
680
267
(332)
—
(2)
613
283
(244)
24
15,608
2,161
(1,012)
—
(151)
16,606
2,599
(2,783)
180
544
10,135
5,247
676
16,602
2,748
2,614
2,565
1,461
1,896
2,397
2,969
2,999
3,579
543
533
609
7,721
8,042
9,150
Cost
At 1 April 2011
Additions
Acquisition
Disposals
Reclassification
Exchange adjustment
At 31 March 2012
Additions
Acquisition
Disposals
Exchange adjustment
At 31 March 2013
Depreciation
At 1 April 2011
Charge for the year
Disposals
Reclassification
Exchange adjustment
At 31 March 2012
Charge for the year
Disposals
Exchange adjustment
At 31 March 2013
Net book value
At 31 March 2011
At 31 March 2012
At 31 March 2013
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Financial statements
Annual report 2013 | AVEVA Group plc
73
19 inveStmentS
At 31 March 2013 the Group had the following principal investments, which are held by AVEVA Solutions Limited unless stated and all
of which have been included in the consolidation:
AVEVA Solutions Limited*
AVEVA Pty Limited
Country of
incorporation
or registration
Great Britain
Australia
Belgium
AVEVA Belgium
AVEVA do Brasil Informática Ltda
Brazil
AVEVA (Shanghai) Consultancy Co. Limited*** China
China
AVEVA Solutions (Shanghai) Co. Ltd
AVEVA Denmark A/S
AVEVA SA
AVEVA Gmbh
AVEVA Software Gmbh****
AVEVA East Asia Limited
AVEVA India Limited
AVEVA Information Technology India
Private Limited
AVEVA KK
AVEVA Korea Limited
AVEVA Sendirian Berhad**
AVEVA Asia Pacific Sendirian Berhad
AVEVA AS
AVEVA Limited Liability Company
AVEVA Pte Limited***
AVEVA AB
AVEVA Inc.
* held by AVEVA Group plc.
Denmark
France
Germany
Germany
hong Kong
India
India
Japan
Korea
Malaysia
Malaysia
norway
Russia
Singapore
Sweden
USA
Principal activity
Software development
and marketing
Software marketing
Software development
and marketing
Software marketing
Services and training
Software marketing
Software marketing
and development
Software marketing
Software marketing
Software development
and marketing
Software marketing
Software development
Software marketing
Software marketing
Software marketing
Software marketing
Software marketing
Software marketing
and development,
training and consultancy
Software marketing
Software marketing
Software development
and marketing
Software marketing
Description and proportion of
shares and voting rights held
100% ordinary shares of £1 each
100% ordinary shares of AUD$1 each
100% ordinary shares of €1 each
100% of ordinary shares of BRL 1 each
100% of issued share capital
100% of ordinary shares
100% of ordinary shares of DKK 1 each
100% ordinary shares of €30 each
100% ordinary shares of €25,565 each
100% ordinary shares of €1 each
100% ordinary shares of hK$1 each
100% ordinary shares of 10 Rupees each
100% ordinary shares of 10 Rupees each
100% ordinary shares of 50,000 yen each
100% ordinary shares of KRW 500,000 each
49% ordinary shares of MyR1 each
100% ordinary shares of MyR1 each
100% ordinary shares of nOK 500 each
100% of ordinary shares
100% of ordinary shares of SGD 10 each
100% of ordinary shares of SEK 10 each
100% common stock of US$1 each
** AVEVA Sendirian Berhad has been consolidated on the basis that the Group exercises control over its financial and operating policies under the terms of the
shareholders’ agreement.
*** held by AVEVA AB.
**** held by AVEVA Gmbh.
20 traDe anD other reCeivableS
Current
Amounts falling due within one year:
Trade receivables
Prepayments and other receivables
Accrued income
2013
£000
2012
£000
74,066
5,155
1,056
63,700
3,613
741
80,277
68,054
Trade receivables are non‑interest bearing and generally on terms of between 30 and 90 days. The Directors consider that the carrying
amount of trade and other receivables approximates their fair value.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
74
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
20 traDe anD other reCeivableS continued
Non‑current
Prepayments and other receivables
2013
£000
2012
£000
1,113
811
non‑current prepayments and other receivables consist of rental deposits for operating leases.
As at 31 March 2013 the provision for impairment of receivables was £4,771,000 (2012 – £3,431,000) and an analysis of the movements
during the year was as follows:
At 1 April 2011
Charge for the year, net of amounts reversed
Utilised
Exchange adjustment
At 31 March 2012
Arising from business combination
Charge for the year, net of amounts reversed
Utilised
Exchange adjustment
As at 31 March 2013
As at 31 March, the ageing analysis of trade receivables (net of provision for impairment) was as follows:
£000
3,643
1,081
(1,199)
(94)
3,431
427
2,625
(1,844)
132
4,771
2013
2012
21 finanCial aSSetS
Current
Fair value of forward foreign exchange contracts
22 CaSh anD CaSh equivalentS anD treaSury DepoSitS
Cash at bank and in hand
Short‑term deposits
net cash and cash equivalents per cash flow
Treasury deposits
Past due not impaired
Neither past
due nor
impaired
£000
Total
£000
74,066
63,700
47,046
40,418
Less than
four
months
£000
24,261
17,818
Four to
eight
months
£000
2,393
3,291
Eight to
twelve
months
£000
308
1,829
More than
twelve
months
£000
58
344
2013
£000
2012
£000
—
223
2013
£000
2012
£000
51,458
2,814
48,426
243
54,272
136,085
48,669
130,282
190,357
178,951
Treasury deposits represent bank deposits with an original maturity of over three months.
Short‑term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements
of the Group, and earn interest at the respective short‑term deposit rates.
The fair value of cash and cash equivalents and treasury deposits is £190,357,000 (2012 – £178,951,000).
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Annual report 2013 | AVEVA Group plc
75
23 traDe anD other payableS
Current
Trade payables
Social security, employee taxes and sales taxes
Accruals and other payables
Deferred revenue
Deferred consideration
2013
£000
2012
£000
4,093
8,827
23,160
36,585
878
4,799
7,390
21,290
33,540
976
73,543
67,995
Trade payables are non‑interest bearing and are normally settled on terms of between 30 and 60 days. Social security, employee taxes
and sales taxes are non‑interest bearing and are normally settled on terms of between 19 and 30 days. The Directors consider that the
carrying amount of trade and other payables approximates their fair value.
24 finanCial liabilitieS
Current
Fair value of forward foreign exchange contracts
borrowing facilities
At 31 March 2013 the Group had no committed bank overdraft or loan facilities.
25 obligationS unDer leaSeS
2013
£000
574
2012
£000
—
At 31 March 2013 the Group had the following future minimum rentals payable under non‑cancellable operating leases as follows:
not later than one year
After one but not more than five years
2013
2012
Land and
buildings
£000
Plant and
machinery
£000
4,049
4,124
8,173
277
337
614
Land and
buildings
£000
3,392
4,079
7,471
Plant and
machinery
£000
214
303
517
The Group has entered into commercial leases on certain properties, motor vehicles and items of equipment. These leases have a duration
of between one and five years. Certain property leases contain an option for renewal.
26 finanCial riSk management
The Group’s principal financial instruments comprise cash and short‑term deposits, treasury deposits and forward foreign exchange
contracts. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly
from its operations.
The Group also enters into forward foreign currency contracts to manage currency risks arising from the Group’s operations.
It is, and has been throughout the period under review, the Group’s policy that no speculative trading in financial instruments shall
be undertaken.
The main risks arising from the Group’s financial instruments are market risk, credit risk and liquidity risk. The Board reviews and agrees
policies for managing such risks on a regular basis as summarised below:
a) market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group’s income or
the value of its holding of financial instruments. The objective of market risk management is to manage and control market risk exposures
within acceptable parameters.
interest rate risk
The Group holds net funds and hence its interest rate risk is associated with short‑term cash deposits and treasury deposits. The Group’s
overall objective with respect to holding these deposits is to maintain a balance between security of funds, accessibility and competitive
rates of return.
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
76
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
26 finanCial riSk management continued
a) market risk continued
interest rate risk continued
For the presentation of market risks, IFRS 7 requires sensitivity analyses that show the effects of hypothetical changes of relevant risk
variables on profit or loss and shareholders’ equity. The Group is exposed to fluctuations in interest rates on its cash and cash equivalents
and treasury deposits. The Group does not have any borrowings. The impact is determined by applying sensitised interest rates to the
cash and cash equivalents and treasury deposit balances.
A 1% point decrease in the Sterling and US Dollar interest rates would have reduced interest income by approximately £1,148,000
(2012 – £1,302,000) and profit after tax by £872,000 (2012 – £963,000).
foreign currency risk
Foreign currency risk arises from the Group undertaking a significant number of foreign currency transactions in the course of operations.
These exposures arise from sales by business units in currencies other than the Group’s functional currency of Sterling. The majority of
costs are denominated in the functional currency of the business unit. The main exposures relate to the US Dollar, Euro and yen reflecting
the fact that a significant proportion of the Group’s revenue and cash receipts are denominated in these currencies whilst a large proportion
of its costs, such as Research and Development, are settled in Sterling and Swedish Krona.
The Group manages these exchange risks, where possible, by using currency exchange contracts for the sale of US Dollar, Euro and
yen as appropriate. The Group enters into specific forward foreign exchange contracts for individually significant revenue contracts
when the timing of forecast cash flows is reasonably certain. In addition, the Group enters into forward foreign exchange contracts to
sell US Dollars and Euro to match forecast cash flows arising from its recurring revenue base. These are renewed on a revolving basis
as required. At 31 March 2013, the Group had outstanding currency exchange contracts to sell $21.0 million (2012 – $13.0 million),
€14.25 million (2012 – €6.65 million) and ¥304.0 million (2012 – ¥nil). It has also had outstanding currency exchange contracts to buy
Kr24.0 million (2012 – Kr nil).
The Group has not applied hedge accounting during the current year and therefore all gains and losses on forward foreign exchange
contracts have been included in the Consolidated income statement.
The Group has investments in foreign operations whose net assets are exposed to currency translation risk. Gains and losses arising
from these structural currency exposures are recognised in the Consolidated statement of comprehensive income.
foreign currency sensitivity analysis
For the presentation of market risks, IFRS 7 requires sensitivity analyses that show the effects of hypothetical changes in the foreign
exchange rates in profit or loss or shareholders’ equity. The impact is determined by applying the sensitised foreign exchange rate
to the monetary assets and liabilities at the Balance sheet date.
Currency risks as defined by IFRS 7 arise on account of financial instruments being denominated in a currency that is not the functional
currency and being of a monetary nature; differences resulting from the translation of financial statements into the Group’s presentation
currency are not taken into consideration.
A 10% change in the US Dollar against Sterling, Euro against Sterling and Swedish Krona against Sterling would have impacted equity
and profit after tax by the amounts shown below as at the reporting date shown. In management’s opinion, this is a reasonably possible
change given current market conditions. This analysis assumes that all other variables, in particular interest rates and other foreign
currencies, remain constant. The analysis is performed on the same basis for 2012/13.
31 March 2013
US Dollar
Euro
Swedish Krona
31 March 2012
US Dollar
Euro
Swedish Krona
WWW.AVEVA.COM
Increase/
(decrease)
in average
rate
10%
(10%)
10%
(10%)
10%
(10%)
Increase/
(decrease)
in average
rate
10%
(10%)
10%
(10%)
10%
(10%)
Profit/
(loss)
£000
(766)
843
448
(492)
79
(88)
Profit/
(loss)
£000
1,670
(1,838)
262
(289)
203
(223)
Equity
£000
(766)
843
448
(492)
79
(88)
Equity
£000
1,670
(1,838)
262
(289)
203
(223)
Financial statements
Annual report 2013 | AVEVA Group plc
77
26 finanCial riSk management continued
b) Credit risk
The Group’s principal financial assets are cash equivalents, treasury deposits, trade and other receivables.
Counter‑parties for cash and cash equivalents and treasury deposits are governed by the treasury policy, which has been approved by
the Board, and are limited to financial institutions which have a high credit rating assigned by international credit rating agencies. The amount
of exposure to each counter‑party is subject to a specific limit, up to a maximum of £70 million as set out in the Group’s treasury policy.
The Group trades only with recognised, creditworthy third parties and provides credit to customers in the normal course of business.
The amounts presented in the Consolidated balance sheet are net of allowances for doubtful receivables. An allowance for impairment
is made where there is an identified loss event, which, based on previous experience, is evidence of a reduction in the recoverability of
the cash flows. The Group has credit control functions to monitor receivable balances on an ongoing basis. Credit checks are performed
before credit is granted to new customers. The Group has no significant concentration of credit risk, with exposure spread over a large
number of customers. The maximum exposure to credit risk is represented by the carrying amount of each financial asset. The exposure
to credit risk is mitigated where necessary by either letters of credit or payments in advance.
The Group does not require collateral in respect of its financial assets.
Disclosures relating to the credit associated with trade receivables are in note 20.
c) liquidity risk
The Group manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecast and actual cash flows
and matching the maturity of financial assets and liabilities. The Group has no borrowings from third parties and therefore liquidity risk
is not considered a significant risk at this time.
The table below analyses the Group’s financial liabilities, which will be settled on a net basis, into relevant maturity groupings based
on the remaining period at the Balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows:
As at 31 March 2013
Trade and other payables
As at 31 March 2012
Trade and other payables
Less than
three
months
£000
35,727
33,479
Between
three months
and six
months
£000
Between
six months
and one
year
£000
—
—
—
—
Greater
than
one year
£000
—
—
The table below analyses the Group’s forward foreign exchange contracts, which will be settled on a gross basis, into relevant maturity
groupings based on the remaining period at the Balance sheet to the contractual maturity date. The amounts disclosed in the table are
the contractual undiscounted cash flows:
As at 31 March 2013
Forward foreign exchange contracts (Euro)
Outflow
Inflow
Forward foreign exchange contracts (US Dollar)
Outflow
Inflow
Forward foreign exchange contracts (Swedish Krona)
Outflow
Inflow
Forward foreign exchange contracts (Japanese yen)
Outflow
Inflow
As at 31 March 2012
Forward foreign exchange contracts (Euro)
Outflow
Inflow
Forward foreign exchange contracts (US Dollar)
Outflow
Inflow
Less than
three
months
000
€4,500
£3,739
$6,750
£4,285
Between
three months
and six
months
000
€3,750
£3,116
$8,000
£5,007
Between
six months
and one
year
000
€6,000
£5,036
$6,250
£3,954
£571
Kr6,000
£571
Kr6,000
£1,141
Kr12,000
¥101,000
£713
¥101,000
£713
¥102,000
£722
€1,650
£1,463
$3,250
£2,006
€2,000
£1,734
$3,750
£2,348
€3,000
£2,540
$6,000
£3,850
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
78
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
26 finanCial riSk management continued
d) interest rate profile of financial assets and liabilities
The interest rate profile of the financial assets and liabilities of the Group as at 31 March was as follows:
year ended 31 march 2013
Fixed rate
Cash and short‑term deposits
Treasury deposits
Floating rate
Cash and short‑term deposits
Treasury deposits
year ended 31 march 2012
Fixed rate
Cash and short‑term deposits
Treasury deposits
Floating rate
Cash and short‑term deposits
Treasury deposits
e) fair values
Within
one year
£000
7,498
138,717
43,959
183
Within
one year
£000
1,688
130,220
46,981
62
One to two
years
£000
Two to three
years
£000
Total
£000
—
—
—
—
—
7,498
— 138,717
—
—
43,959
183
One to two
years
£000
Two to three
years
£000
Total
£000
—
—
—
—
—
1,688
— 130,220
—
—
46,981
62
The book values of the Group’s financial assets and liabilities consist of bank and cash balances of £54,272,000 (2012 – £48,669,000)
and treasury deposits of £136,085,000 (2012 – £130,282,000). The carrying amounts of these financial assets and liabilities in the
Group’s financial statements approximates their fair values.
In addition the Group’s financial assets also include forward foreign exchange contracts. Financial instruments which are recognised
at fair value subsequent to initial recognition are grouped into Levels 1 to 3 based on the degree to which the fair value is observable.
The three levels are defined as follows:
B Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
B Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
B Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
At 31 March 2013 the Group had forward foreign exchange contracts, which were measured at Level 2 fair value subsequent to initial
recognition. The fair value of the liability in respect of foreign exchange contracts was £574,000 at 31 March 2013 (2012 – £223,000 asset).
The resulting loss of £796,000 (2012 – gain of £308,000) on the movement of the fair value of forward foreign exchange contracts
is recognised in the Consolidated income statement within administrative expenses.
f) Capital management
The Group’s policy is to maintain a strong capital base so as to maintain investor market, creditor, customer and employee confidence
and to sustain future development of the business. The capital structure of the Group consists of equity attributable to the equity holders
of AVEVA Group plc comprising issued share capital, other reserves and retained earnings.
To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders
or issue new shares. no changes were made in the objectives, policies or processes during the years ended 31 March 2012 or 2013.
The Board monitors the capital structure on a regular basis and determines the level of annual dividend. The Group is not exposed to any
externally imposed capital requirements.
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Financial statements
Annual report 2013 | AVEVA Group plc
79
27 DeferreD tax
The following are the major deferred tax liabilities and assets recognised by the Group and the movements thereon during the current year:
Accelerated
capital
allowances
£000
Land and
buildings*
£000
Retirement
benefit
obligations
£000
At 1 April 2012
Acquisition
Credit/(charge) to Income statement
Credit to other comprehensive income
Credit to equity
Exchange adjustment
At 31 March 2013
(94)
—
68
—
—
(1)
(27)
(194)
—
39
—
—
—
(155)
1,874
—
(138)
1,304
—
—
Intangible
assets
£000
(2,864)
(582)
445
44
—
4
Share
options
£000
785
—
193
—
205
—
Other
£000
2,647
—
416
—
—
59
3,122
Total
£000
2,154
(582)
1,023
1,348
205
62
4,210
3,040
(2,953)
1,183
* A deferred tax liability arises on the difference between the tax base and the accounting base of a long leasehold property that was acquired in 1994.
Other deferred tax assets consist principally of deferred tax on bad debt provision, forward foreign exchange contracts, staff bonus
accrual and timing differences in respect of revenue recognition.
Certain deferred tax assets and liabilities have been offset. The following is the analysis of the deferred tax balances (after offset)
for financial reporting purposes:
Deferred tax liabilities
Deferred tax assets
2013
£000
2012
£000
(2,081)
6,291
(1,855)
4,009
4,210
2,154
At the Balance sheet date, the Group has unused tax losses of £4,109,000 (2012 – £795,000) available for offset against future profits.
Of the total deferred tax asset of £1,237,000 (2012 – £238,000), £1,051,000 (2012 – £238,000) has been recognised and is included
in ‘other’ above. These losses may be carried forward indefinitely.
At the Balance sheet date, the aggregate amount of temporary differences associated with undistributed earnings of overseas subsidiaries
for which deferred tax liabilities have not been recognised was approximately £42,612,000 (2012 – £32,172,000). no liability has been
recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences
and it is probable that such differences will not reverse in the foreseeable future. It is likely that the majority of the overseas earnings
would qualify for the UK dividend exemptions but may be subject to foreign withholding taxes.
28 retirement benefit obligationS
The movement on the provision for retirement benefit obligations was as follows:
At 31 March 2011
Current service cost
Interest on pension scheme liabilities
Expected return on pension scheme assets
Actuarial loss
Employer contributions
Exchange adjustment
At 31 March 2012
Arising from business combination
Current service cost
Interest on pension scheme liabilities
Expected return on pension scheme assets
Actuarial loss
Employer contributions
Exchange adjustment
At 31 March 2013
UK
defined
benefit
scheme
£000
1,408
1,388
2,715
(2,491)
6,828
(2,040)
—
7,808
—
1,580
2,693
(2,475)
5,668
(2,060)
—
German
defined
benefit
schemes
£000
South
Korean
severance
pay
£000
716
38
40
—
86
(82)
(39)
759
880
40
51
(14)
297
(77)
9
903
359
—
—
169
(94)
(29)
1,308
—
295
61
—
65
(30)
101
Total
£000
3,027
1,785
2,755
(2,491)
7,083
(2,216)
(68)
9,875
880
1,915
2,805
(2,489)
6,030
(2,167)
110
13,214
1,945
1,800
16,959
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
80
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
28 retirement benefit obligationS continued
a) uk defined benefit scheme
The Group operates a UK defined benefit pension plan providing benefits based on final pensionable pay which is funded. This scheme
was closed to new employees on 30 September 2002 (with the option of re‑opening if required) and was converted to a Career Average
Revalued Earnings basis on 30 September 2004. Pensions are payable to dependants on death in retirement and a lump sum is payable
if death occurs in service. There is an insurance policy in place which covers this liability. Administration on behalf of the members is
governed by a trust deed, and the funds are held and managed by professional investment managers who are independent of the Group.
Contributions to the scheme are made in accordance with advice from an external, professionally qualified actuary, Broadstone Investment
Management Limited, at rates which are calculated to be sufficient to meet the future liabilities of the scheme using the projected unit
credit method. The employees’ contributions are fixed as a percentage of salary, the balance being made up by the employer. Scheme assets
are stated at their market values at the respective Balance sheet dates.
To develop the expected long‑term rate of return on assets assumption, the Company considered the current level of expected returns
on risk‑free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes
in which the portfolio is invested and the expectations for future returns of each asset class.
The principal assumptions used in determining the pension valuation were as follows:
Main assumptions:
Rate of salary increases
Rate of increase of pensions in payment
Rate of increase of pensions in deferment
Discount rate
Inflation assumption
Expected rate of return on scheme assets:
Equities
Bonds
Other
2013
%
5.50
3.30
2.50
4.20
3.50
6.30
2.30
0.50
2012
%
5.20
2.90
2.20
4.60
3.20
6.40
2.90
0.50
For the years ended 31 March 2013 and 2012, the following weighted average life expectancy at age 65 for mortality has been used:
Male pensioners
Female pensioners
non‑retired males
non‑retired females
2013
Years
24.5
25.5
26.7
27.8
2012
Years
24.4
25.4
26.6
27.7
Member contributions were 7.5% (2012 – 7.5%) of pensionable salary. From 1 September 2012 most members’ contributions were
made by the Company through a salary sacrifice arrangement. Company contributions were £2,060,000 (2012 – £2,040,000). The total
contributions in 2014 are expected to be approximately £2,100,000.
The assumed discount rate, inflation rate and mortality all have a significant effect on the IAS 19 accounting valuation. The following
table shows the sensitivity of the valuation to changes in these assumptions:
0.25 percentage point increase to:
– discount rate
– inflation (including pension increases linked to inflation)
Additional one year increase to life expectancy
The assets and liabilities of the scheme at 31 March 2013 and 2012 were as follows:
Equities
Bonds
Cash and deposits
Total fair value of assets
Present value of scheme liabilities
net pension liability
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Impact on deficit
increase/(decrease)
2013
£000
2012
£000
(3,543)
2,204
1,441
(2,829)
1,639
1,103
2013
£000
22,232
26,414
10,561
2012
£000
31,939
12,869
5,637
59,207
(72,421)
50,445
(58,253)
(13,214)
(7,808)
Financial statements
Annual report 2013 | AVEVA Group plc
81
28 retirement benefit obligationS continued
a) uk defined benefit scheme continued
The amounts recognised in the Consolidated income statement and Consolidated statement of comprehensive income for the year
were analysed as follows:
Recognised in the Consolidated income statement
Current service cost:
Research and Development costs
Selling and distribution expenses
Administrative expenses
Total operating charge
Finance revenue
Expected return on pension scheme assets
Finance costs
Interest on pension scheme liabilities
Taken to Consolidated statement of comprehensive income
Actual return on pension scheme assets
Less: expected return on pension scheme assets
Changes in assumptions and experience adjustments on liabilities
Actuarial loss recognised in Consolidated statement of comprehensive income
2013
£000
974
465
141
2012
£000
926
320
142
1,580
1,388
(2,475)
(2,491)
2,693
2,715
7,710
(2,475)
5,235
(10,903)
1,794
(2,491)
(697)
(6,131)
(5,668)
(6,828)
Analysis of movements in the present value of the defined benefit pension obligations during the year were as follows:
At 1 April
Current service costs
Contributions by employees
Interest on pension scheme liabilities
Benefits paid
Premiums paid
Actuarial loss
At 31 March
The above defined benefit obligation arises from a plan that is wholly funded.
Changes in the fair value of plan assets are as follows:
At 1 April
Expected return
Contributions by employer
Contributions by employees
Benefits paid
Premiums paid
Actuarial gain/(loss)
At 31 March
The history of experience adjustments is as follows:
Fair value of scheme assets
Present value of defined benefit obligations
Deficit in the scheme
Experience adjustments on scheme liabilities
Experience adjustments on scheme assets
2013
£000
58,253
1,580
4
2,693
(979)
(33)
10,903
2012
£000
49,306
1,388
167
2,715
(1,416)
(38)
6,131
72,421
58,253
2013
£000
50,445
2,475
2,060
4
(979)
(33)
5,235
2012
£000
47,898
2,491
2,040
167
(1,416)
(38)
(697)
59,207
50,445
2013
£000
2012
£000
2011
£000
2010
£000
2009
£000
59,207
(72,421)
50,445
(58,253)
47,898
(49,306)
40,736
(52,428)
28,691
(36,313)
(13,214)
(7,808)
(1,408)
(11,692)
(7,622)
(1,702)
5,235
(107)
(697)
3,353
1,729
1,452
8,506
492
(8,043)
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
82
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
28 retirement benefit obligationS continued
b) german defined benefit schemes
There are two defined benefit pension schemes in AVEVA Gmbh. Tribon Solutions Gmbh operated an unfunded defined benefit
scheme that provides benefits to three deferred members following an acquisition in 1992. no current employees participate in the
scheme and it is closed to new applicants. Benefit payments are made as they fall due. The scheme was transferred to AVEVA Gmbh
when Tribon Solutions Gmbh and AVEVA Gmbh merged in 2005.
Since the acquisition of Bocad in May 2012, AVEVA Software Gmbh has been responsible for the pension obligations of six former Bocad
employees. At the time of the acquisition, the pension obligations were only partly financed via external funding vehicles. In March 2013,
AVEVA concluded an agreement with an external insurance provider which results in the insurance company being obliged to provide all
benefits as detailed in the individual pension commitments, with AVEVA only having an obligation if the external insurance provider defaults.
In addition, AVEVA Gmbh operates a defined benefit pension scheme for one employee. This scheme is closed to new members.
Details of the actuarial assumptions used to value these schemes in accordance with IAS 19 are set out below:
Rate of increase of pension in payment
Discount rate
Mortality
Rate of salary increases
2013
2012
2.0%–2.5%
3.25%
14.8 years
0%–2.5%
2.0%–2.5%
4.8%–5.3%
15.5 years
0%–2.5%
The retirement age for the Tribon Solutions Gmbh and AVEVA Gmbh schemes was 60 and 63 years of age respectively
(2012 – 60 and 63 years of age).
The contributions in 2014 are expected to be approximately £80,000.
c) South korean severance pay
South Korean employees are entitled to a lump sum on severance of their employment equal to one month’s salary for each year
of service. The IAS 19 valuation of the liability has been carried out using the following assumptions:
Rate of salary increases
Discount rate
2013
%
5.00
3.68
2012
%
6.00
4.67
The retirement age for AVEVA Korea Limited employees is 60 years of age (2012 – 60 years of age).
d) other retirement schemes
All Swedish employees employed by AVEVA AB aged 28 or over are members of the ITP, an industry scheme for salaried employees which
provides benefits in addition to the state pension arrangements. The ITP scheme is managed by Alecta, a Swedish insurance company.
It is a multi‑employer defined benefit scheme with a supplementary defined contribution component. AVEVA AB pays monthly premiums
to the insurers which vary by age, service and salary of the employee. AVEVA AB is unable to identify its share of the underlying assets
and liabilities in the scheme on a fair and reasonable basis because this information is not provided by the scheme and therefore has
accounted for the scheme as if it was a defined contribution pension scheme. At 31 March 2013, Alecta’s surplus in the form of collective
funding level was 135% (2012 – 124%) which was calculated in accordance with the Swedish Annual Accounts Act for Insurance Companies.
The total cost charged to the income statement was £733,000 (2012 – £666,000).
e) Defined contribution schemes
The Group operates defined contribution retirement schemes for certain UK, US, German, French, norwegian and Asian employees.
The assets of the schemes are held separately from those of the Group. The total cost charged to income of £3,704,000 (2012 – £3,055,000)
represents contributions payable to these schemes by the Group at the rates specified in the rules of the plans.
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Financial statements
Annual report 2013 | AVEVA Group plc
83
29 Share‑baSeD payment planS
The Group has three equity‑settled share schemes: the AVEVA Group plc Long‑Term Incentive Plan (LTIP); the AVEVA Group Management
Bonus Deferred Share Scheme; and the AVEVA Group plc Executive Share Option Scheme 2007. no grants have been made under the
2007 scheme which was approved at the Annual General Meeting on 12 July 2007. Details of these plans are set out below.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options for both
plans during the year:
Outstanding at start of year
Granted during year
Forfeited during year
Exercised during year*
Outstanding at end of year
Exercisable at end of year
2013
Number
460,029
201,615
(13,275)
(137,394)
510,975
47,714
2013
WAEP
Pence
2012
Number
2.67
2.73
3.33
458,759
174,304
(88,414)
— (84,620)
2.82
2.80
460,029
15,151
* The weighted average share price at the date of exercise for the options exercised is £17.71 (2012 – £16.77).
Share options have been granted under both plans to certain employees of the Group and remain outstanding as follows:
Date of grant
2 July 2007
27 May 2009
7 July 2009
15 June 2010
26 July 2010
4 July 2011
6 July 2011
6 July 2012
9 July 2012
Share option plan
LTIP
Deferred Share Scheme
LTIP
Deferred Share Scheme
LTIP
Deferred Share Scheme
LTIP
Deferred Share Scheme
LTIP
Number
of options
2013
Number
5,413
—
34,769
16,185
94,108
25,795
137,630
36,345
160,730
Number
of options
2012
Number
5,413
32,145
123,475
25,039
99,653
33,484
140,820
—
—
510,975
460,029
2012
WAEP
Pence
2.34
2.69
2.91
0.67
2.67
1.19
Exercise
price
Pence
3.33
—
3.33
—
3.33
—
3.33
—
3.33
The weighted average remaining contractual life for the options outstanding at 31 March 2013 is 4.62 years (2012 – 4.45 years).
The average fair value of options granted during the year was £16.67 (2012 – £17.13). In calculating the fair value, the expected life
of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility
reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.
The range of exercise prices for options outstanding at the end of the year was £nil to £0.03 (2012 – £nil to £0.03).
The Group recognised total expenses of £1,226,000 and £666,000 related to equity‑settled share‑based payment transactions in the years
ended 31 March 2013 and 2012 respectively.
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84
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
29 Share‑baSeD payment planS continued
Details of the share option plans are as follows:
a) long‑term incentive plan (ltip)
The following awards have been made under the LTIP. The exercise price is equal to the nominal value of the underlying shares, which is
3.33 pence. Options under the LTIP are normally exercisable in full or in part between the third and tenth anniversaries of the date of grant.
2012/13 awards
In 2012/13 a total of 160,730 share options were awarded to Executive Directors and senior management under the LTIP. The performance
conditions attached to this award are based on EPS growth over the three years from 2012/13 to 2014/15. If average diluted EPS growth
is more than 15% then all shares shall vest. If average diluted EPS growth over the same period is less than 8% then none of the shares
will vest. For growth rates between 8% and 15% the number of shares that vest will be determined by linear interpolation between 25%
and 100%.
2011/12 awards
In 2011/12 a total of 140,820 share options were awarded to the Executive Directors and senior management under the LTIP. The performance
conditions attached to this award are based on EPS growth over the three years from 2011/12 to 2013/14. If average diluted EPS growth
is more than 12% above RPI for the same period then all the shares under this option will vest. If average diluted EPS growth is less than
5% above RPI then none of the shares will vest. If average EPS growth is between 5% and 12% per annum above RPI then the number
of shares that shall vest shall be determined by linear interpolation.
2010/11 awards
In 2010/11, a total of 112,576 share options were awarded to Executive Directors and senior management under the LTIP. The performance
conditions are based on average EPS growth over the three years from 2010/11 to 2012/13. If average diluted EPS growth is more than
12% above RPI for the same period then all of the shares under this option will vest. If average diluted EPS growth is less than 4% above
RPI then none of the shares will vest. If average EPS growth is between 4% and 12% per annum then the number of shares that shall
vest shall be determined by linear interpolation.
2009/10 awards
On 7 July 2009, a total of 137,839 share options were awarded to the Executive Directors and senior management under the LTIP.
The performance conditions are based on average diluted earnings per share over the three years from 2009/10 to 2011/12. All shares
under this option would vest if average diluted earnings per share for the three years ending 31 March 2013 is equal to or above
52.14 pence. If average diluted earnings per share for the period was below 52.14 pence, then no shares would vest and the option
would lapse. During 2011/12, the vesting conditions were tested and had been met. Therefore the award vested in full.
The fair value of each these option awards is measured at grant date using the Black Scholes option pricing model taking into account
the terms and conditions upon which the instruments were granted. The following table lists the inputs to the model used for each
of the LTIP awards:
Dividend yield
Expected volatility
Risk‑free interest rate
Expected life of the option
Weighted average share price
Weighted average exercise price
b) Deferred annual bonus share plan
2012/13
awards
1.21%
28%
1.51%
3 years
£17.29
£0.03
2011/12
awards
1.03%
34.5%
1.51%
3 years
£17.73
£0.03
2010/11
awards
0.70%
47.9%
1.51%
3 years
£13.55
£0.03
2009/10
awards
1.30%
51.1%
2.28%
3 years
£7.20
£0.03
In 2008 the Company established the AVEVA Group Management Bonus Deferred Share Scheme 2008 (the Deferred Share Scheme).
Directors and senior management participate in this scheme. Subject to the achievement of performance conditions relating to a single
financial year, these incentive arrangements are intended to reward the recipient partly in cash and partly in ordinary shares in the
Company to be delivered on a deferred basis.
In July 2012, the AVEVA Group Employee Benefit Trust 2008 awarded 36,345 (2011 – 33,484) deferred shares to the Executive Directors
and senior management in respect of the bonus earned in the year ended 31 March 2012 (2011 – bonus earned in year ended 31 March 2011).
The awards of deferred shares take the form of nil‑cost options exercisable by participants in three equal tranches, one in each of the three
years following the year in which the award is made. The option may be exercised in the 42 day period beginning on the announcement
of the financial results of the Group in each of the three calendar years after that in which the option was granted. The last date of the
exercise is the end of the 42 day period following the announcement of the financial results of the Group in the third calendar year following
that in which the option was granted or (if applicable) such later date as the Remuneration Committee may specify. These awards are
made solely in respect of performance in the financial year immediately prior to their grant. Delivery of the deferred shares is not subject
to further performance conditions but each participant is required to remain an employee or Director of the Group during the three year
vesting period in order to receive his deferred shares in full (except in the case of death or the occurrence of a takeover, reconstruction
or amalgamation, or voluntary winding up of the Company).
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Financial statements
Annual report 2013 | AVEVA Group plc
85
29 Share‑baSeD payment planS continued
b) Deferred annual bonus share plan continued
The fair value of these option awards is measured at grant date using the Black Scholes option pricing model taking into account the
terms and conditions upon which the instruments were granted. The following table lists the inputs to the model used for each of the
Deferred Bonus Share Plan awards:
Dividend yield
Expected volatility
Risk‑free interest rate
Expected life of the option
Weighted average share price
Weighted average exercise price
2012/13
awards
1.21%
28%
1.51%
3 years
£17.29
£0.00
2011/12
awards
1.10%
34.5%
1.51%
3 years
£17.56
£0.00
c) aveva group plc executive Share option Scheme 2007
The above scheme was approved by shareholders at the Annual General Meeting in 2007. no awards have yet been made under this
scheme and performance conditions will be set when awards are made under this scheme.
30 Share Capital anD reServeS
a) Share capital
Allotted, called‑up and fully paid
68,079,078 (2012 – 67,990,372) ordinary shares of 3.33 pence (2012 – 3.33 pence) each
Details of the shares issued during the year and the prior year are as follows:
2013
Number
67,990,372
88,706
68,079,078
At 1 April
Exercise of share options
At 31 March
year ended 31 march 2013
Date of issue
24 July 2012
22 August 2012
7 September 2012
13 September 2012
14 December 2012
year ended 31 march 2012
Date of issue
23 February 2012
2013
£000
2012
£000
2,269
2,266
2012
Number
67,973,420
16,952
67,990,372
Share
premium
2013
£
—
—
—
—
—
2012
£000
2,266
—
2,266
Market
price
£
17.98
18.29
19.07
19.20
20.88
Share
premium
2012
£
Market
price
£
—
17.22
Nominal
value
2013
£
1,951
422
328
85
179
2,965
Nominal
value
2012
£
565
2013
£000
2,266
3
2,269
Number
of shares
2013
58,516
12,654
9,841
2,548
5,147
88,706
Number
of shares
2012
16,952
OVERVIEW
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FINANCIALS
86
AVEVA Group plc | Annual report 2013
Financial statements
notes to the consolidated financial statements
Continued
30 Share Capital anD reServeS continued
b) other reserves
Other reserves consist of the following:
Cumulative translation adjustment reserve
The cumulative translation adjustment reserve is used to record exchange differences which arose from 1 April 2004 from the translation
of the financial statements of foreign subsidiaries.
merger reserve
This represents the difference between the fair value and the nominal value of shares issued in connection with the acquisition of AVEVA AB
in 2004.
own shares held
Own shares held reserve represents the cost of the shares in AVEVA Group plc purchased in the open market and held by the AVEVA
Group Employee Benefit Trust 2008 (EBT) to satisfy deferred shares under the Group’s deferred annual bonus share plan. During the year,
36,345 shares were purchased by the EBT at a price of £16.90 and 48,688 shares (2012 – 67,668) with an attributable cost of £470,000
were issued to employees in satisfying share options that were exercised.
At 1 April 2011
Own shares purchased (27 June 2011)
Shares issued to employees
At 31 March 2012
Own shares purchased (6 July 2012)
Shares issued to employees
At 31 March 2013
31 relateD party tranSaCtionS
£000
1,223
563
(680)
1,106
615
(470)
1,251
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note.
remuneration of key management personnel
The remuneration of the Directors and other members of the Executive Board, who are the key management personnel of the Group,
is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. In addition to their salaries, the
Group also provides non‑cash benefits and contributes to defined benefit or defined contribution pension schemes on their behalf.
Members of the key management team also participate in the Group’s share option schemes and deferred annual bonus share plan.
Further information about the remuneration of individual Directors is provided in the audited part of the Remuneration Committee report
on pages 48 and 49.
Short‑term employee benefits
Share‑based payments
2013
£000
2,498
1,009
3,507
2012
£000
2,066
921
2,987
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Financial statements
Annual report 2013 | AVEVA Group plc
87
Company financial statements
Statement of DireCtorS’ reSponSibilitieS in relation to the Company finanCial StatementS
z The Directors are responsible for preparing the annual report and the financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have elected to prepare the financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). The financial statements are required by law to give a true
and fair view of the state of affairs of the Company and of the profit or loss of the Company
for that period. In preparing those financial statements, the Directors are required to:
B select suitable accounting policies and then apply them consistently;
B make judgements and estimates that are reasonable and prudent;
B state whether applicable UK Accounting Standards have been followed, subject to any material departures
disclosed and explained in the financial statements; and
B prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy
at any time the financial position of the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
OVERVIEW
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88
AVEVA Group plc | Annual report 2013
Financial statements
independent auditor’s report
to the members of AVEVA Group plc
We have audited the parent Company financial statements of
AVEVA Group plc for the year ended 31 March 2013 which comprise
the Balance sheet and the related notes 1 to 10. The financial
reporting framework that has been applied in their preparation
is applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions
we have formed.
reSpeCtive reSponSibilitieS of DireCtorS anD auDitor
As explained more fully in the Directors’ responsibilities statement
set out on page 87, the Directors are responsible for the preparation
of the parent Company financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit the
parent Company financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
SCope of the auDit of the finanCial StatementS
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the parent Company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall
presentation of the financial statements. In addition, we read all
the financial and non‑financial information in the annual report
to identify material inconsistencies with the audited financial
statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications
for our report.
opinion on finanCial StatementS
In our opinion the parent Company financial statements:
B give a true and fair view of the state of the Company’s affairs
as at 31 March 2013;
B have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
B have been prepared in accordance with the requirements
of the Companies Act 2006.
opinion on other matterS preSCribeD
by the CompanieS aCt 2006
In our opinion:
B the part of the Directors’ remuneration report to be audited has
been properly prepared in accordance with the Companies Act
2006; and
B the information given in the Directors’ report for the financial
year for which the financial statements are prepared is consistent
with the parent Company financial statements.
matterS on whiCh we are requireD
to report by exCeption
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if,
in our opinion:
B adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
B the parent Company financial statements and the part of
the Directors’ remuneration report to be audited are not
in agreement with the accounting records and returns; or
B certain disclosures of Directors’ remuneration specified by law
are not made; or
B we have not received all the information and explanations
we require for our audit.
other matter
We have reported separately on the Group financial statements
of AVEVA Group plc for the year ended 31 March 2013.
BOB FORSyTh (SEnIOR STATUTORy AUDITOR)
for and on behalf of Ernst & young LLP, Statutory Auditor
Cambridge
23 May 2013
COMPAny nUMBER
2937296
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Financial statements
Annual report 2013 | AVEVA Group plc
89
Company balance sheet
31 March 2013
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called‑up share capital
Share premium account
Merger reserve
Profit and loss account
Shareholders’ funds
Notes
2013
£000
2012
£000
5
6
29,743
28,732
159,841
146
129,838
145
159,987
7
(61,287)
129,983
(46,196)
98,700
83,787
128,443
112,519
128,443
112,519
8
9
9
9
9
2,269
27,288
3,921
94,965
2,266
27,288
3,921
79,044
128,443
112,519
The accompanying notes are an integral part of this Company balance sheet.
The financial statements on pages 89 to 92 were approved by the Board of Directors on 23 May 2013 and signed on its behalf by:
PhILIP AIKEn
Chairman
RIChARD LOnGDOn
Chief Executive
COMPAny nUMBER
2937296
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FINANCIALS
90
AVEVA Group plc | Annual report 2013
Financial statements
notes to the Company financial statements
1 Corporate information
AVEVA Group plc (the Company) is a limited company incorporated in England and Wales whose shares are publicly traded. The principal
activity of the Company is that of a holding company.
2 aCCounting poliCieS
A summary of the principal accounting policies, which have all been applied consistently throughout the current and the preceding year,
is set out below:
a) basis of accounting
The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared
under the historical cost convention and in accordance with applicable United Kingdom accounting standards and law.
As permitted by FRS 1 (Revised) Cash flow statements, the Company has not included a Cash flow statement as part of its financial
statements because the Consolidated financial statements of the Group (of which the Company is a member) include a Cash flow
statement and are publicly available.
The Company has taken advantage of the exemption available under FRS 8 Related Party Disclosures and not disclosed related party
transactions with wholly owned subsidiary undertakings.
b) taxation
Current tax including UK corporation tax and foreign tax is provided at amounts expected to be paid (or recovered) using the tax rates
and laws that have been enacted or substantively enacted by the Balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the Balance sheet date where
transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred
at the Balance sheet date. Timing differences are differences between the Company’s taxable profits and its results as stated in the
financial statements that arise from the inclusion of gains and losses in tax assessments in periods different from those in which they
are recognised in the financial statements.
A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing
differences can be deducted.
Deferred tax is not recognised when fixed assets are sold and it is more likely than not that the taxable gain will be rolled over, being
charged to tax only if and when the replacement assets are sold.
Deferred tax is recognised in respect of the retained earnings of overseas subsidiaries and associates only to the extent that, at the
Balance sheet date, dividends have been accrued as receivable or a binding agreement to distribute past earnings in the future has
been entered into by the subsidiary or associate.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected
to reverse based on tax rates and laws that have been enacted or substantively enacted by the Balance sheet date. Deferred tax is
measured on a non‑discounted basis.
c) foreign currency
Transactions denominated in foreign currencies are recorded at actual exchange rates as of the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies at the year end are reported at the rates of exchange prevailing at the year end.
Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain
or loss in the profit and loss account.
d) Share‑based payments
The expense for share‑based payments is recognised in accordance with the accounting policy for the Consolidated financial statements
of the Group and is recognised in the subsidiary companies employing the relevant employees. The Company recognises the expense
relating to the Executive Directors. The Company also records a corresponding increase in its investments in subsidiaries with a credit
to equity which is equivalent to the FRS 20 cost in the subsidiary undertakings.
e) investments
Fixed asset investments in subsidiaries are shown at cost less provision for impairment.
3 reSult for the year
As permitted by Section 408 (3) of the Companies Act 2006, the Company has elected not to present its own profit and loss account for
the year. AVEVA Group plc reported a profit for the financial year ended 31 March 2013 of £29,207,000 (2012 – loss £723,000).
Audit fees of £7,000 (2012 – £7,000) are borne by another Group company.
The Company does not have any employees (2012 – nil). Directors’ emoluments are disclosed in the Remuneration Committee report
on pages 40 to 49 and are paid by a UK subsidiary company.
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Financial statements
Annual report 2013 | AVEVA Group plc
91
4 DiviDenDS
Declared and paid during the year
Interim 2012/13 dividend paid of 4.50 pence (2011/12 – 4.00 pence) per ordinary share
Final 2011/12 dividend paid of 17.00 pence (2010/11 – 14.89 pence) per ordinary share
Proposed for approval by shareholders at the Annual General Meeting
Final 2012/13 proposed dividend of 19.5 pence (2011/12 – 17.00 pence) per ordinary share
2013
£000
2012
£000
3,030
11,572
2,715
10,117
14,602
12,832
13,260
11,558
The proposed final dividend is subject to approval by shareholders at the Annual General Meeting on 9 July 2013 and has not been
included as a liability in these financial statements.
In addition, the Board is proposing to return £100 million to shareholders in the form of a special dividend of 146 pence per share.
The Board is recommending that the special dividend is accompanied by a share consolidation in order to maintain, as far as possible,
the comparability of the share price before and after the special dividend. The special dividend and share consolidation will be subject
to shareholder approval at the AGM on 9 July 2013.
5 fixeD aSSet inveStmentS
Cost and net book value
At 1 April 2012
Share‑based payments
At 31 March 2013
£000
28,732
1,011
29,743
Details of the Company’s subsidiary undertakings are set out in note 19 in the Consolidated financial statements of the Group.
6 DebtorS: amountS falling Due within one year
Amounts owed by Group undertakings
7 CreDitorS: amountS falling Due within one year
Accruals
Amounts owed to Group undertakings
8 CalleD‑up Share Capital
Allotted, called‑up and fully paid
68,079,078 (2012 – 67,990,372) ordinary shares of 3.33 pence each
At 1 April
Exercise of share options
At 31 March
2013
Number
67,990,372
88,706
68,079,078
2013
£000
2,266
3
2,269
2013
£000
2012
£000
159,841
129,838
2013
£000
2012
£000
141
61,146
62
46,134
61,287
46,196
2013
£000
2012
£000
2,269
2,266
2012
Number
67,973,420
16,952
67,990,372
2012
£000
2,266
—
2,266
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
FINANCIALS
92
AVEVA Group plc | Annual report 2013
Financial statements
notes to the Company financial statements
Continued
8 CalleD‑up Share Capital continued
Details of the shares issued during the year are as follows:
year ended 31 march 2013
Date of issue
24 July 2012
22 August 2012
7 September 2012
13 September 2012
14 December 2012
year ended 31 march 2012
Date of issue
23 February 2012
Number
of shares
2013
58,516
12,654
9,841
2,548
5,147
88,706
Number
of shares
2012
16,952
Nominal
value
2013
£
1,951
422
328
85
179
2,965
Nominal
value
2012
£
565
Share
premium
2013
£
—
—
—
—
—
—
Market
price
£
17.82
18.19
19.07
18.79
20.88
Share
premium
2012
£
Market
price
£
—
17.22
During the year the Company issued 88,706 (2012 – 16,952) ordinary shares of 3.33 pence each with a nominal value of £2,965 (2012 – £565)
pursuant to the exercise of share options. The total proceeds were £2,965 (2012 – £565), which included a premium of £nil (2012 – £nil).
Details of share options awarded to Executive Directors during the year are contained in the Directors’ remuneration report. note 29
of the Consolidated financial statements for the Group includes details of share option awards made during the year.
9 reConCiliation of ShareholDerS’ funDS anD movementS on reServeS
At 1 April 2011
Loss for the year
Share‑based payments
Share options granted to employees of subsidiary companies
Dividends paid
At 31 March 2012
Profit for the year
Share issues
Share‑based payments
Share options granted to employees of subsidiary companies
Dividends paid
Share
capital
£000
2,266
—
—
—
—
2,266
—
3
—
—
—
Share
premium
£000
27,288
—
—
—
—
27,288
—
—
—
—
—
Merger
reserve
£000
Profit
and loss
account
£000
Total
shareholders’
funds
£000
90,939
3,921
(723)
—
410
—
—
1,250
— (12,832)
124,414
(723)
410
1,250
(12,832)
3,921
79,044
112,519
29,207
—
—
—
305
—
—
1,011
— (14,602)
29,207
3
305
1,011
(14,602)
At 31 March 2013
2,269
27,288
3,921
94,965
128,443
10 relateD party tranSaCtionS
There were no transactions with related parties in either the current or the preceding financial year that require disclosure within these
financial statements.
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Other information
Annual report 2013 | AVEVA Group plc
Five year record
Summarised consolidated results
Revenue
Recurring revenue
Research and development expense
Adjusted* profit before tax
Profit before tax
Income tax expense
Profit for the financial year
Basic earnings per share
Adjusted* basic earnings per share
Total dividend per share
Summarised consolidated balance sheet
Non‑current assets
Cash and cash equivalents and treasury deposits (net)
Net current assets
Shareholders’ funds
2013
£000
2012
£000
2011
£000
2010
£000
2009
£000
220,230
195,935
173,988
148,334
164,041
153,224
137,890
117,199
102,701
35,539
70,714
63,647
32,121
62,276
57,737
28,082
54,720
49,795
20,946
50,685
49,574
94,196
27,332
66,360
59,201
(18,134)
(17,769)
(15,303)
(16,134)
(17,047)
45,513
39,968
34,492
33,440
42,154
66.97p
74.87p
24.00p
58.86p
63.81p
21.00p
50.85p
56.08p
18.25p
49.36p
50.92p
16.90p
62.27p
69.99p
9.36p
82,122
62,306
58,356
42,067
42,219
190,357
178,951
153,187
149,724
126,164
188,524
170,886
149,844
141,663
251,606
221,462
202,372
169,222
111,265
143,131
* Adjusted profit before tax is stated before amortisation of intangibles (excluding other software), share‑based payments, adjustment to goodwill, the gain/(loss)
on the fair value of forward foreign currency contracts and exceptional items. Adjusted basic earnings per share is also adjusted for the tax effect of these items.
Company information and advisers
DIrECTorS
Philip Aiken
Philip Dayer
Chairman
Non‑Executive Director and Senior Independent Director
Jonathan Brooks Non‑Executive Director
Hervé Couturier
Non‑Executive Director
richard Longdon
Chief Executive
James Kidd
Chief Financial officer
rEGISTrArS
Capita registrars Limited
The Registry
34 Beckenham Road
Beckenham BR3 4TU
FINANCIAL Pr
Hudson Sandler
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London EC1A 7NN
SECrETArY
Helen Barrett‑Hague
rEGISTErED oFFICE
High Cross
Madingley Road
Cambridge CB3 0HB
rEGISTErED NumBEr
2937296
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Business Park
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CorPorATE HEADquArTErS
AVEVA Solutions Ltd
High Cross, Madingley Road, Cambridge CB3 0HB, UK
www.aveva.com/offices
OVERVIEW
BUSINESS REVIEW
GOVERNANCE
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AVEVA Group plc
High Cross
Madingley Road
Cambridge CB3 0HB
UK
Tel +44 (0)1223 556655
Fax +44 (0)1223 556666
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