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SUMMARY OF CHIEF EXECUTIVE'S REVIEW
In the Asia Pacific region our successes have positioned the Company very well against our competition.
Latin America revenue grew significantly following the opening of our offices in Mexico and Brazil.
Continued growth in the CES region, particularly with power related projects.
Merger of WEMEA and CES to form a more efficient organisation to serve Europe, Middle East and Africa (EMEA).
AVEVA is a global leader in the provision of engineering IT software and services. 2008/09 proved to be another record year with strong growth in sales, profit and cash generation. Headquartered in Cambridge and with 35 offices around the world, we continue to offer localised sales and customer service enabling us to ensure that our products and services match the evolving demands of our customers.
AVEVA delivers world class technologies which support the design and through life operation of complex engineering projects mainly in the Oil & Gas, Power, Marine, Paper and Pulp, Chemical and Mining industries. These demanding global industries depend on mission critical products such as AVEVA's to provide an integrated engineering software platform embracing conceptual design and specification, detailed engineering, procurement, materials management and project control. AVEVA's software and unrivalled industrial expertise provide complete data integrity.
AVEVA's strategy is to remain a world class provider of technologies and services in its core markets, attract new customers and maintain and grow its existing customer base through new enhanced technologies. Its policy of providing continual progression to its customers through ongoing development of established products has resulted in some major upgrades to products during the year, further enhancing customers' ability to integrate a variety of complex applications and data sources through platform technology.
Close, long standing, strategic customer partnerships are at the heart of AVEVA's success. This gives us an unrivalled insight into the evolving demands of our customers across all of our market verticals. As a result, we are able to ensure that we are aligned to capitalise on all development opportunities in more turbulent times.
Each year the AVEVA customer base becomes more geographically diverse and our continued investment in direct sales means we are progressively better positioned to understand and serve the complex global networked customer base.
Increasingly, customers demand the ability to work on projects with multiple international partners and the unique 'global' capability within the AVEVA database has enabled customers to work very efficiently in a virtual global network.
Following a very successful 2007/08, the Asia Pacific business had a very strong business in Marine to complement the growing Power and Oil & Gas business in the region.
Marine business was strong in the first half and although orders for new standard ships have declined significantly in the second half year, most customers have long order books and AVEVA continued to receive business for Very Large Crude Carriers (VLCC's) and deep water offshore platforms. These projects tend to be very complex, thus driving wider use of AVEVA products. Our successes in Marine and Plant industries and AVEVA NET in this region have positioned the Company very well against our competition in this more difficult trading environment.
The partnership with Hyundai Heavy Industries has been very successful and has led to the new generation of Marine design tools being delivered during the year. These are already in use in many of the world's largest shipyards.
We expect to see further take up of the new system in yards during 2009/10 financial year, as AVEVA Marine continues to deliver clear productivity benefits to customers.
Korea has become a significant region not just as a revenue generator, but also as a development centre for new products. The AVEVA Marine Technology Centre based in Busan has increased its capacity to develop both products and customer specific enhancements, as well as helping with localisation. We are very grateful to the Busan Metropolitan Government for their ongoing support in the region.
The contacts and reputation the Asia Pacific team have built across the region over recent years also enabled the Company to complete the acquisition of a small, but very highly regarded, organisation with a product for creating and maintaining instrumentation data. This product has already been integrated into the AVEVA suite and is being sold across all industries globally.
Performance across the Americas region was mixed with difficult trading conditions in North America and Canada but strong growth in Latin America.
The region has a growing Power related business, and our relationships with customers in other geographies are helping us to exploit opportunities locally. Oil related customers are the mainstay of the US business, in particular deep water oil field production where we have successfully increased the penetration of AVEVA NET with the oil majors. The expertise developed by many of AVEVA's large multinational engineering companies has meant that the business is less susceptible to a sharp drop in commodity prices, as the deep water fields remain a long-term proposition with very long build cycles and significant capital expenditure commitments. AVEVA has very little Marine business in North America. Towards the end of the year some confidence returned to our smaller markets of Mining, Metals and Paper and Pulp.
Projects in Canada have been hit by the oil price as exploitation of the tar sands oil fields is becoming marginal with prices between $40 and $50 per barrel. Due to the strength of our competitors in the Calgary market in the traditional CAD products, we have successfully focused on selling the AVEVA NET solution in Canada and will continue with this strategy this year.
Latin America revenue grew significantly following the successful opening of our office in Mexico. At the start of the year we replaced our agent in Brazil with a direct sales and service office based in Rio de Janeiro. The business in Latin America has been building steadily and is expected to deliver significant growth in future years. Brazil is the dominant economy in the Latin American region and is seen as strategically important, even more so with the deep water oil field activity driven by Petrobras, which is an AVEVA foundation customer. We will continue to invest in growing the Brazilian organisation during the coming year and have already been successfully hiring new engineers and sales people.
The Central, Eastern and Southern European region is a complex geographic mix of markets with differing sales and service offerings.
We have seen continued growth in the CES region, in particular with oil related projects. The largest constituent of the CES region is Deutschland (Germany), Austria and Switzerland (DACH), which has continued to win business from our competitors as well as developing existing customer relationships.
The Southern region, headquartered in Paris, operates across a wide area but has a predominance of customers in the Power business. The growing enthusiasm for nuclear power is a key expansion driver in the region. Many countries are now planning or considering nuclear power as a key part of their energy mix. AVEVA customers such as AREVA and EDF, along with the very long relationships we have enjoyed with fossil fuelled Power providers such as Alstom, will help drive growth in this region.
For some years now AVEVA has enjoyed a solid relationship with a number of outsourced development organisations in the region. These relationships have been enhanced during the year to provide assistance for localised application development, as well as core product development managed by the central Products Group. These outsource centres provide a very flexible cost effective extension to our skills pool.
Western Europe, Middle East and Africa is the most mature of AVEVA's markets and has traditionally been heavily biased towards the oil & gas industry, with a dominant position in the North Sea offshore market.
With falling commodity prices and the difficulty in raising investment funding for new projects, some projects have been slowing down or postponed, primarily in the second half of the financial year. We have concentrated more effort during the year on the opportunities which exist in providing technology solutions managing data in brownfield, or existing plants. In the mature North Sea offshore sector we have made strategically important sales into the oil majors with our AVEVA NET solution and have structured the organisation to better exploit the opportunities during the coming year.
AVEVA enjoys particularly strong relationships with its customers in the WEMEA region. This supports our technical strategy and development programmes for both enhancement of existing applications and Research and Development activity in bringing new ideas to market.
In order to capitalise on global project execution, AVEVA has invested to broaden further its own network of offices able to sell to and support customers locally. At the same time, towards the end of the financial year we merged two major regional organisations, being WEMEA and CES, to make cost efficiencies and a more effective organisation to serve the Europe, Middle East and African region (EMEA). For the year to the end of March 2009 we had four reporting regions and this has been rationalised to three for the coming year.
Chief Executive's review (continued)
Close, long standing, strategic customer partnerships...give us unrivalled insight into the evolving demands of our customers. As a result, we are aligned to capitalise on all opportunities in more turbulent times.
Building on our relationships
