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Axway Software Interim / Quarterly Report 2016
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Interim / Quarterly Report
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Interim financial report for the six-month period ended 30 June 2016
axway business. in motion.
Summary
- HALF-YEAR MANAGEMENT REPORT 3
- Key events in the first half of 2016 4
- Business performance in the first half of 2016 5
- Results for the first half of 2016 6
- Main risks and uncertainties for the second half of 2016 7
- Outlook for the second half of 2016 7
-
Events after the reporting period 7
-
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016 9
- Income statement 10
- Other comprehensive income statement items 11
- Balance sheet 12
- Changes in shareholders' equity 13
- Statement of cash flows 14
-
Notes to the condensed interim consolidated financial statements 15
-
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS 25
-
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT 27
HALF-YEAR MANAGEMENT REPORT
Key events in the first half of 2016 4
Business performance in the first half of 2016 5
Results for the first half of 2016 6
Main risks and uncertainties for the second half of 2016 7
Outlook for the second half of 2016 7
Events after the reporting period 7
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Key events in the first half of 2016
KEY EVENTS IN THE FIRST HALF OF 2016
The highlights of the first half were as follow:
- acquisition of Appcelerator in January 2016. It significantly enhanced the Digital portfolio of Axway's product offerings. The integration of this business is progressing smoothly, and the commercial synergies are beginning to materialise and will naturally broaden in the months to come;
- global revenue of €144.7 million for HY 2016 with an increase in total growth of 7.1% and in organic growth of 5.7%. There was 10.3% organic growth in license revenues during the first half, with acceleration during the course of the second quarter of 2016 (up 22.9% in organic growth);
- profit on operating activities of €16.3 million, or 11.3% of revenue, as compared to €12.7 million or 9.4% over the same period in 2015;
- net profit of €11 million, or 7.6% of revenue, as compared to €2.3 million, or 1.7% for the same period in 2015.
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Business performance in the first half of 2016
BUSINESS PERFORMANCE IN THE FIRST HALF OF 2016
| (in millions of euros) | 1^{st} half 2016 | 1^{st} half 2015 | 2015 Restated(1) | Total Growth | Organic Growth |
|---|---|---|---|---|---|
| France | 43.9 | 47.5 | 47.5 | -7.5% | -7.5% |
| Rest of Europe | 31.8 | 31.6 | 31.2 | 0.9% | 2.1% |
| America's | 61.5 | 49.6 | 52.1 | 24.0% | 18.1% |
| Asia/Pacific | 7.4 | 6.5 | 6.2 | 15.1% | 20.1% |
| AXWAY | 144.7 | 135.1 | 136.9 | 7.1% | 5.7% |
(1) At comparable perimeter and exchange rate.
For the third consecutive quarter, global operations in the United States have posted positive organic growth, at a level which was up by 23% in the second quarter 2016. This organic growth is supported by licenses, for which organic growth increased by more than 50% for the first half. Such performance comes from excellent sales and marketing operations (size of business portfolio, success rate).
The "Rest of Europe" region is continuing the growth already achieved by the first quarter, setting its growth at +2.1% for the whole first half. France is further stabilising its operations, with a second quarter that topped the first quarter. The Asia/Pacific region is continuing its strong growth, with more than 10 consecutive quarters of organic growth exceeding 10%.
| (in millions of euros) | 1^{st} half 2016 | 1^{st} half 2015 | 2015 Restated(1) | Total Growth | Organic Growth |
|---|---|---|---|---|---|
| Licenses | 37.4 | 34.2 | 33.9 | 9.5% | 10.3% |
| Maintenance | 70.2 | 68.0 | 67.5 | 3.1% | 4.0% |
| Services | 37.1 | 32.8 | 35.5 | 12.9% | 4.4% |
| AXWAY | 144.7 | 135.1 | 136.9 | 7.1% | 5.7% |
(1) At comparable perimeter and exchange rate.
The key event of the first six months was the performance of licenses, which have seen positive organic growth of 10.3%. This results from an excellent second quarter, during which the Digital product offerings experienced significant success.
Axway is continuing to transform its Services operations with, in particular, the development of its Cloud revenue, which saw positive organic growth over the first half amounting to more than 30%. Maintenance represents 48.5% of revenue for the first half, and its organic growth rate has been increasing since the start of the year.
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Results for the first half of 2016
RESULTS FOR THE FIRST HALF OF 2016
Profit on operating activities was €16.3 million (11.3% of revenue), a significant increase compared to the first half of 2015. This shows, firstly, good progress in revenue over first half 2015 (+5.7% in organic growth), but also the benefits from the policy of streamlining operating expenses, which has been in place since last year.
| 1^{st} half 2016 | 1^{st} half 2015 | |||
|---|---|---|---|---|
| (in millions of euros) | (% Rev) | (in millions of euros) | (% Rev) | |
| Total Revenue | 144.7 | 100.0% | 135.1 | 100.0% |
| Total Costs of sales | 44.4 | 30.7% | 44.1 | 32.7% |
| Gross profit: | 100.3 | 69.3% | 91.0 | 67.3% |
| Operating expenses | ||||
| Sales and marketing | 42.2 | 29.2% | 41.8 | 30.9% |
| Research and Development | 27.0 | 18.7% | 23.2 | 17.1% |
| General and administrative | 14.8 | 10.2% | 13.3 | 9.9% |
| Total operating expenses | 84.0 | 58.0% | 78.3 | 57.9% |
| Profit on operating activities | 16.3 | 11.3% | 12.7 | 9.4% |
The gross margin of revenue for Licenses, Maintenance and services was up by 2.0 points. Gross profit rose by €9.3 million, which was mainly driven by our improvement in Services Margin in the first half of 2016.
Total operating expenses represented 58.0% of revenue in the first half of 2016 as opposed to 57.9% in the first half of 2015, an €5.7 million increase in absolute values, which is mainly due to the incremental costs coming from Appcelerator. But total operating expenses remain stable in percentage of revenue compared to first half of 2015.
Research and Development costs rose by €3.8 million following transformation in Digital product offerings like Appcelerator and in Cloud operations and enhancement in our dynamic technologies such as API and Operational Intelligence. We spent 18.7% of our total revenue in the first half of 2016, as opposed to 17.1% in 2015.
General and administrative expenses increased by €1.5 million, or 0.3% of revenue.
Financial situation of the Group
At 30 June 2016, Axway's financial position remains robust with a cash balance in excess of €41.7 million and shareholders' equity totalling €338.4 million. Banking debt at 30 June 2016 is €31.2 million, which includes the acquisition of Appcelerator in January 2016. The Company's banking covenants are thus comfortably respected. Earnings per share amounted to €0.53 at first half of 2016 compared with €0.11 in first half of 2015.
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Events after the reporting period
MAIN RISKS AND UNCERTAINTIES FOR THE SECOND HALF OF 2016
The level and nature of risks that the Group is subject are not changed compared to the risk factors set out on pages 102 to 110 of the 2015 Registration Document.
However, the evolution of the economy is one of the main factors influencing the course of business during the second half.
OUTLOOK FOR THE SECOND HALF OF 2016
To date, there is no known event that may have a significant impact on the financial position of Axway.
As with each year, performance in the first half does not provide any particular indication of overall performance in the full year. In the short term, and continuing the trend seen in the first half of 2016, the next half-year looks encouraging, with promising commercial portfolios.
EVENTS AFTER THE REPORTING PERIOD
Between 1 July 2016 and the date of the Board of Director's meeting, there were no significant events likely to impact the financial statements presented.
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
axway - Interim financial report for the six-month period ended 30 June 2016
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
- Income statement 10
- Other comprehensive income statement items 11
- Balance sheet 12
- Changes in shareholders' equity 13
- Statement of cash flows 14
- Notes to the condensed interim consolidated financial statements 15
9
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Income statement
INCOME STATEMENT
| (in thousands of euros) | Notes | 1^{st} half 2016 | 1^{st} half 2015 |
|---|---|---|---|
| Amount | Amount | ||
| Revenue | 3,4 | 144,691 | 135,073 |
| Staff costs | 5 | -97,105 | -92,371 |
| External expenses | -33,128 | -31,806 | |
| Taxes and duties | -1,431 | -1,237 | |
| Depreciation and amortisation, Provisions and impairment | -3,132 | -2,515 | |
| Other operating expenses and income from recurring operations | 6,411 | 5,574 | |
| Operating profit on business activity | 16,306 | 12,717 | |
| as % of revenue excl. VAT | 11.3% | 9.4% | |
| Share-based payment expense | -208 | -308 | |
| Amortisation of allocated intangible assets | -3,833 | -3,009 | |
| Profit from recurring operations | 12,265 | 9,400 | |
| as % of revenue excl. VAT | 8.5% | 7.0% | |
| Other operating income and expenses | 6 | -1,523 | -8,138 |
| Operating profit | 10,742 | 1,262 | |
| as % of revenue excl. VAT | 7.4% | 0.9% | |
| Cost of net financial debt | 7 | -154 | -234 |
| Other financial income and expense | 7 | 946 | -96 |
| Tax charge | 8 | -494 | 1,385 |
| Net income from associates | - | - | |
| Net profit for the period from continuing operations | 11,040 | 2,318 | |
| Profit after tax from discontinued operations | - | - | |
| Attributable to Group | 11,040 | 2,318 | |
| as % of revenue excl. VAT | 7.6% | 1.7% | |
| Minority interests | -0 | 0 | |
| NET PROFIT | 11,040 | 2,318 |
Earnings per share
| (in euros) | Notes | 1^{st} half 2016 | 1^{st} half 2015 |
|---|---|---|---|
| Basic earnings per share | 9 | 0.53 | 0.11 |
| Fully diluted earnings per share | 9 | 0.53 | 0.11 |
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Other comprehensive income statement items
OTHER COMPREHENSIVE INCOME STATEMENT ITEMS
| (in thousands of euros) | 1^{st} half 2016 | 1^{st} half 2015 |
|---|---|---|
| Net profit | 11,040 | 2,318 |
| Other comprehensive income statement: | ||
| Actuarial gains and losses on pension plans | -214 | 865 |
| Tax impact | 74 | -287 |
| Subtotal of items not reclassifiable to profit or loss | -141 | 577 |
| Minority interests | -1 | -1 |
| Translation differential | -2,469 | 12,309 |
| Change in the value of derivatives | 46 | 256 |
| Tax impact | -16 | -12 |
| Subtotal of items reclassifiable to profit or loss | -2,440 | 12,553 |
| Total other comprehensive income statement | -2,581 | 13,130 |
| TOTAL COMPREHENSIVE PROFIT | 8,459 | 15,448 |
| Minority interests | -2 | -1 |
| Attributable to Group | 8,461 | 15,449 |
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Balance sheet
BALANCE SHEET
| ASSETS
(in thousands of euros) | | | |
| --- | --- | --- | --- |
| | Notes | 30/06/2016 | 31/12/2015 |
| Goodwill | 10 | 279,936 | 251,838 |
| Intangible assets | | 52,348 | 40,909 |
| Property and equipment | | 8,547 | 7,772 |
| Financial assets | | 2,354 | 1,780 |
| Deferred tax assets | | 50,949 | 45,240 |
| Other non-current assets | | 394,133 | 347,539 |
| Inventories | | 234 | 323 |
| Trade accounts receivable | 11 | 69,899 | 73,856 |
| Other current receivables | | 23,382 | 22,204 |
| Cash and cash equivalents | | 41,715 | 44,664 |
| Current assets | | 135,230 | 141,048 |
| TOTAL ASSETS | | 529,363 | 488,587 |
| LIABILITIES AND EQUITY
(in thousands of euros) | | | |
| --- | --- | --- | --- |
| | Notes | 30/06/2016 | 31/12/2015 |
| Share capital | | 41,609 | 41,548 |
| Capital reserves | | 113,458 | 113,152 |
| Consolidated reserves | | 172,285 | 158,062 |
| Profit for the period | | 11,040 | 27,856 |
| Equity – Group share | | 338,393 | 340,617 |
| Minority interests | | 1 | 3 |
| TOTAL EQUITY | 12 | 338,394 | 340,620 |
| Financial debt – long-term portion | 13 | 31,924 | 7,518 |
| Deferred tax liabilities | | 5,872 | 7,055 |
| Other non-current liabilities | | 8,905 | 8,621 |
| Non-current liabilities | | 46,701 | 23,194 |
| Financial debt – short-term portion | 13 | 2,943 | 1,465 |
| Trade accounts payables | | 8,629 | 8,483 |
| Deferred revenue | | 86,875 | 66,609 |
| Other current liabilities | 14 | 45,821 | 48,215 |
| Current liabilities | | 144,268 | 124,773 |
| TOTAL LIABILITIES | | 190,969 | 147,966 |
| TOTAL LIABILITIES AND EQUITY | | 529,363 | 488,587 |
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Changes in shareholders' equity
CHANGES IN SHAREHOLDERS' EQUITY
| (in thousands of euros) | Share capital | Capital reserves | Treasury shares | Reserves and consolidated profit | Other comprehensive income statement items | Total attributable to Group | Minority interests | Total |
|---|---|---|---|---|---|---|---|---|
| Equity at 30/06/2015 | 41,170 | 109,790 | -462 | 125,728 | 31,323 | 307,549 | 2 | 307,551 |
| Capital transactions | 378 | 2,455 | - | - | - | 2,832 | 2,832 | |
| Share-based payments | - | 237 | - | - | - | 237 | 237 | |
| Transactions in treasury shares | - | - | 86 | - | - | 86 | 86 | |
| Earnings appropriation | - | - | - | 0 | - | 0 | 0 | |
| Changes in scope of consolidation | - | - | - | - | - | - | - | |
| Others movements | - | 670 | - | -1,639 | - | -969 | -969 | |
| Transactions with shareholders | 378 | 3,362 | 86 | -1,639 | - | 2,185 | - | 2,185 |
| Profit for the year | - | - | - | 25,538 | - | 25,538 | 0 | 25,538 |
| Other comprehensive income statement | - | - | - | -249 | 5,594 | 5,345 | 1 | 5,346 |
| Total comprehensive profit for the year | - | - | - | 25,289 | 5,594 | 30,883 | 1 | 30,884 |
| Equity at 31/12/2015 | 41,548 | 113,152 | -376 | 149,377 | 36,917 | 340,617 | 3 | 340,620 |
| Capital transactions | 62 | 100 | - | - | - | 161 | 161 | |
| Share-based payments | 207 | - | - | 207 | 207 | |||
| Transactions in treasury shares | -196 | - | - | -196 | -196 | |||
| Earnings appropriation | -8,310 | - | -8,310 | -8,310 | ||||
| Changes in scope of consolidation | - | - | - | - | ||||
| Others movements | - | -2,548 | - | -2,548 | -2,548 | |||
| Transactions with shareholders | 62 | 306 | -196 | -10,858 | - | -10,686 | - | -10,686 |
| Profit for the year | - | - | - | 11,040 | - | 11,040 | -0 | 11,040 |
| Other comprehensive income statement | - | - | - | - | -2,579 | -2,579 | -1 | -2,581 |
| Total comprehensive profit for the year | - | - | - | 11,040 | -2,579 | 8,461 | -2 | 8,459 |
| EQUITY AT 30/06/2016 | 41,609 | 113,458 | -572 | 149,560 | 34,338 | 338,393 | 1 | 338,394 |
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Statement of cash flows
STATEMENT OF CASH FLOWS
The closing cash position is cash and cash equivalents less bank overdrafts.
| (in thousands of euros) | 1st half 2016 | 1st half 2015 |
|---|---|---|
| Consolidated net profit (including minority interests) | 11,040 | 2,318 |
| Net increase in depreciation, amortisation and provisions | 2,832 | 11,128 |
| Unrealised gains and losses relating to changes in fair value | -221 | -2,187 |
| Share-based payment expense | 180 | 308 |
| Other calculated income and expense | - | - |
| Gains and losses on disposal | -2 | 201 |
| Cash from operations after cost of net debt and tax | 13,829 | 11,768 |
| Net cost of financial debt | 154 | 234 |
| Income taxes (including deferred tax) | 494 | -1,385 |
| Cash from operations before cost of net debt and tax (A) | 14,477 | 10,616 |
| Tax paid (B) | -1,136 | -2,294 |
| Changes in operating working capital requirements (including liabilities related to employee benefits) (C) | 8,654 | 27,801 |
| Net cash from operating activities (D) = (A+B+C) | 21,995 | 36,123 |
| Purchase of tangible and intangible fixed assets | -3,426 | -1,478 |
| Proceeds from sale of tangible and intangible fixed assets | 0 | 1 |
| Purchase of financial assets | -528 | -153 |
| Proceeds from sale of financial assets | 219 | - |
| Impact of changes in the scope of consolidation | -45,945 | -6 |
| Variations of lending | -680 | 112 |
| Net cash from (used in) investing activities (E) | -50,360 | -1,524 |
| Proceeds on the exercise of stock options | 115 | 253 |
| Purchase and proceeds from disposal of treasury shares | - | - |
| Dividends paid during the period | 0 | - |
| Change in borrowings | 24,753 | -40,130 |
| Net interest paid (including finance leases) | -154 | -234 |
| Other cash flow relating to financing activities | -164 | 45 |
| Net cash from (used in) financing activities (F) | 24,550 | -40,065 |
| Effect of foreign exchange rate changes (G) | -558 | 919 |
| NET CHANGE IN CASH AND CASH EQUIVALENTS (D + E + F + G) | -4,373 | -4,547 |
| Opening cash position | 43,866 | 44,568 |
| Closing cash position | 39,493 | 40,021 |
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Contents of the notes to the consolidated financial statements
| Note 1 | Accounting policies | 16 |
|---|---|---|
| Note 2 | Key events and scope of consolidation | 16 |
| ■ NOTES TO THE CONSOLIDATED INCOME STATEMENT | ||
| Note 3 | Revenue | 17 |
| Note 4 | Segment information | 17 |
| Note 5 | Employee costs | 18 |
| Note 6 | Other operating income and expenses | 18 |
| Note 7 | Financial income and expenses | 19 |
| Note 8 | Tax expense | 20 |
| Note 9 | Earnings per share | 20 |
| ■ NOTES TO THE CONSOLIDATED BALANCE SHEET | ||
| Note 10 | Goodwill | 21 |
| Note 11 | Trade receivables | 22 |
| Note 12 | Equity | 22 |
| Note 13 | Financial liabilities – Net debt | 22 |
| Note 14 | Other current liabilities | 23 |
| ■ DEFERRED INCOME | ||
| ■ OTHER INFORMATION | ||
| Note 15 | Related-party transactions | 24 |
| Note 16 | Off-balance sheet commitments and contingent liabilities | 24 |
| Note 17 | Exceptional events and legal disputes | 24 |
| Note 18 | Events after the reporting period | 24 |
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
Note 1 Accounting policies
These condensed interim consolidated financial statements for the six months ended 30 June 2016, together with the accompanying notes, were prepared under the responsibility of the Board of Directors and approved at its meeting of 26 July 2016.
1.1 Basis of preparation of the condensed interim consolidated financial statements
The condensed interim consolidated financial statements for the six months ended 30 June 2016 were prepared in accordance with IAS 34 Interim Financial Reporting and do not therefore contain all the information required for the annual financial statements. For this reason, they should be read in conjunction with the Group's consolidated financial statements for the year ended 31 December 2015, which were prepared in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union.
These condensed interim consolidated financial statements are presented in thousands of euros, unless indicated otherwise.
1.2 Summary of the main accounting policies
The accounting policies and principles applied in these condensed interim consolidated financial statements are the same as those used to prepare the financial statements for the year ended 31 December 2015, with the exception of provisions specific to the preparation of interim financial statements:
- tax expense is calculated by applying the tax rate for the period ended in December 2016 to profit before tax for the period ended in June 2016;
- retirement commitments for the period were estimated using actuarial studies carried out for the 2015 financial year, discounted for the first half of 2016.
The new standards, amendments to existing standards and interpretations, which must be applied for the accounting periods beginning on or after 1 January 2016 did not have any material impact on the Group's financial statements and operating profit. These relate to:
- Annual improvements (2010-2012 cycle);
- Amendments to IAS 19 Defined Benefit Plans: Employee;
- Contributions;
- Annual improvements (2012-2014 cycle);
- Amendments to IAS 16 and IAS 38 Clarification of Acceptable;
- Methods of Depreciation and Amortization;
- Amendments to IAS 27 Equity method in Separate Financial Statements;
- Amendment to IAS 1 Disclosure Initiative: Presentation of Financial Statements; and
- Amendments to IFRS 11 Acquisition of Interests in Joint Operations.
The Group chose not to apply the standards and interpretations not yet adopted by the European Union for accounting periods beginning on or after 1 January 2016 or not mandatory at
30 June 2016, namely:
- Amendments to IFRS 10, IFRS 12 and IAS 28 Investment;
- entities: Applying the Consolidation Exception;
- Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture;
- Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealized Losses; and
- Amendments to IAS 7 Disclosure Initiative.
The main accounting methods used by the Group are described in the notes to the annual financial statements.
Note 2 Key events and scope of consolidation
2.1 Change in the scope of consolidation
a. Deconsolidated entities
During the first half of 2016, the Group liquidated Systar Inc. in the United States. This company was removed from the scope of the consolidation.
b. Newly-consolidated entities
At 14 January 2016, Axway Software, through its subsidiary Axway Inc. acquired 100% of shares of the company Appcelerator Inc. in the United States. Appcelerator Inc. owns 100% of shares of its four affiliates: Appcelerator GmbH in Germany, Appcelerator UK, Appcelerator China and Appcelerator Singapore.
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
NOTES TO THE CONSOLIDATED INCOME STATEMENT
Note 3 Revenue
3.1 Revenue by activity
| (in millions of euros) | 1^{st} half 2016 | 1^{st} half 2015 | ||
|---|---|---|---|---|
| Licences | 37.4 | 25.9% | 34.2 | 25.3% |
| Maintenance | 70.2 | 48.5% | 68.0 | 50.4% |
| Services | 37.1 | 25.6% | 32.8 | 24.3% |
| TOTAL REVENUE | 144.7 | 100.0% | 135.1 | 100.0% |
3.2 International revenue
| (in millions of euros) | 1^{st} half 2016 | 1^{st} half 2015 | ||
|---|---|---|---|---|
| France | 43.9 | 30.3% | 47.5 | 35.1% |
| International | 100.8 | 69.7% | 87.6 | 64.9% |
| TOTAL REVENUE | 144.7 | 100.0% | 135.1 | 100.0% |
Note 4 Segment information
Geographical breakdown of revenue
| (in millions of euros) | 1^{st} half 2016 | 1^{st} half 2015 | ||
|---|---|---|---|---|
| France | 43.9 | 30.3% | 47.5 | 35.1% |
| Rest of Europe | 31.8 | 22.0% | 31.6 | 23.4% |
| Americas | 61.5 | 42.5% | 49.6 | 36.7% |
| Asia Pacific | 7.4 | 5.1% | 6.5 | 4.8% |
| TOTAL REVENUE | 144.7 | 100.0% | 135.1 | 100.0% |
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
Note 5 Employee costs
5.1 Breakdown of employee costs
| (in thousands of euros) | 1st half 2016 | 1st half 2015 |
|---|---|---|
| Salaries | 76,350 | 72,308 |
| Social charges | 20,442 | 19,341 |
| Employee profit sharing | 313 | 721 |
| TOTAL | 97,105 | 92,371 |
5.2 Workforce
| No. of employees at 30 June | 1st half 2016 | 1st half 2015 |
|---|---|---|
| France | 642 | 692 |
| International | 1,315 | 1,234 |
| TOTAL | 1,957 | 1,926 |
| Average no. of employees | 1st half 2016 | 1st half 2015 |
| --- | --- | --- |
| France | 655 | 698 |
| International | 1,298 | 1,244 |
| TOTAL | 1,952 | 1,942 |
Note 6 Other operating income and expenses
In the first half of 2016, the non-recurring expenses recognised under this item are mainly related to the acquisition of Appcelerator and relate to the specific fees and costs in respect of this acquisition (€1.5 million).
In the first half of 2015, expenses of €8.1 million recorded under this heading relate to the Group restructuring.
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
Note 7 Financial income and expenses
7.1 Cost of net financial debt
| (in thousands of euros) | 1^{st} half 2016 | 1^{st} half 2015 |
|---|---|---|
| Income from cash management | 34 | 84 |
| Interest expense | -188 | -318 |
| TOTAL | -154 | -234 |
7.2 Other financial income and expenses
| (in thousands of euros) | 1^{st} half 2016 | 1^{st} half 2015 |
|---|---|---|
| Foreign exchange gains and losses | 1,193 | 40 |
| Reversal of provisions | 269 | 321 |
| Other financial income | - | - |
| Total other financial income | 1,462 | 361 |
| Charges to provisions | - | -281 |
| Discounting of retirement commitments | -82 | -59 |
| Discounting of employee profit sharing | - | - |
| Change in the value of derivatives | -37 | 30 |
| Other financial expenses | -397 | -148 |
| Total other financial expense | -516 | -457 |
| TOTAL OTHER FINANCIAL INCOME & EXPENSE | 946 | -96 |
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
Note 8 Tax expense
| (in thousands of euros) | 1^{st} half 2016 | 1^{st} half 2015 |
|---|---|---|
| Current tax | -1,504 | -2,401 |
| Deferred tax | 1,010 | 3,786 |
| TOTAL | -494 | 1,385 |
The prior earnings and future growth prospects of the US subsidiary Axway Inc. resulted in the degree to which deferred tax assets are activated being based on the profits for five years, from the half-yearly closing for 2013, rather than two years as was previously the case. This option led to the activation of deferred tax assets of €0.7 million at 30 June 2016.
At 30 June 2016, unrecognised deferred tax assets in relation to tax loss carryforwards amounted to €25.7 million and mainly concerned the following subsidiaries: Axway Inc. (€16.2 million), Appcelerator Inc. (€5.5 million), Axway Pte Ltd in Singapore (€1.0 million) and Axway UK (€0.7 million).
Note 9 Earnings per share
| (in euros) | 1^{st} half 2016 | 1^{st} half 2015 |
|---|---|---|
| Net profit – Group share | 11,040,349 | 2,317,844 |
| Weighted average no. ordinary shares in issue | 20,793,375 | 20,578,418 |
| BASIC EARNINGS PER SHARE | 0.53 | 0.11 |
| (in euros) | 1^{st} half 2016 | 1^{st} half 2015 |
| --- | --- | --- |
| Net profit – Group share | 11,040,349 | 2,317,844 |
| Weighted average number of ordinary shares in issue | 20,793,375 | 20,578,418 |
| Weighted average number of securities retained in respect of dilutive items | 201,849 | 243,216 |
| Weighted average number of shares retained for the calculation of diluted net earnings per share | 20,995,224 | 20,821,634 |
| FULLY DILUTED EARNINGS PER SHARE | 0.53 | 0.11 |
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
NOTES TO THE CONSOLIDATED BALANCE SHEET
Note 10 Goodwill
The movements in the first half were as follows:
| (in thousands of euros) | Gross value | Impairment | Net |
|---|---|---|---|
| 31 December 2015 | 260,658 | 8,820 | 251,838 |
| Acquisition of Appcelerator | 32,014 | 32,014 | |
| Translation differential | -3,966 | -50 | -3,916 |
| 30 JUNE 2016 | 288,706 | 8,770 | 279,936 |
The goodwill recorded relates to the acquisition of Appcelerator.
| (in thousands of euros) | |
|---|---|
| Acquisition price | 46,766 |
| Discounted value of earn-out | - |
| Acquisition cost | 46,766 |
| Net equity acquired | -6,150 |
| Difference | 52,916 |
| Assets and liabilities at fair value net of tax | 20,902 |
| GOODWILL | 32,014 |
As of 30 June 2016, an independent expert was appointed to assess the fair value of the acquired assets and liabilities. Since the work of this expert was in progress at 30 June 2015, the intangible assets were temporarily valued at €15.3 million.
This assessment will be adjusted in accordance with the expert's conclusions and will become definitive no later than 31 December 2016.
The details of Appcelerator's net assets are given below:
| (in thousands of euros) | Carrying amount with the seller | Restatements | Fair value |
|---|---|---|---|
| Intangible assets | 627 | 14,680 | 15,307 |
| Property, plant and equipment | - | ||
| Financial assets | 211 | -100 | 111 |
| Differed tax assets | 6,323 | 6,323 | |
| Current assets | 1,702 | 1,702 | |
| Cash and cash equivalents | 821 | 821 | |
| Financial liabilities | - | ||
| Provision for post-employment benefits | - | ||
| Current liabilities | -9,511 | -9,511 | |
| NET ASSETS ACQUIRED | -6,150 | 20,902 | 14,753 |
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
Note 11 Trade receivables
| (in thousands of euros) | 30/06/2016 | 31/12/2015 |
|---|---|---|
| Trade accounts receivable | 58,094 | 67,820 |
| Accrued income | 12,645 | 6,948 |
| Accrued credit notes | - | - |
| Provision for doubtful debtors | -840 | -911 |
| TOTAL | 69,899 | 73,856 |
Note 12 Equity
12.1 Changes in the share capital
At 31 December 2015, the share capital stood at €41,547,832, comprising 20,773,916 fully paid-up shares with a nominal value of €2.00 each.
In the first half of 2016, 7,725 share subscription options were exercised and 23,040 free shares were distributed, leading to the creation of 30,765 new shares at the price of €2.00, with a share premium of €12.9.
At 30 June 2016, the share capital stood at €41,609,362, comprising 20,804,681 fully paid-up shares with a nominal value of €2.00 each.
12.2 Dividends
The General Shareholders' Meeting of Axway Software held on 21 June 2016 to approve the 2015 financial statements approved a dividend of €0.40 per share, representing a total of €8,310 thousand.
This dividend was scheduled for payment on 7 July 2016.
Note 13 Financial liabilities – Net debt
| (in thousands of euros) | Current | Non-current | 30/06/2016 | 31/12/2015 |
|---|---|---|---|---|
| Bank loans | 128 | 28,816 | 28,944 | 4,342 |
| Employee profit sharing | 556 | 3,108 | 3,664 | 3,803 |
| Debt related to financial leasing | 37 | - | 37 | 40 |
| Current bank overdrafts | 2,222 | - | 2,222 | 798 |
| FINANCIAL DEBT | 2,943 | 31,924 | 34,868 | 8,983 |
| Cash and cash equivalents | -41,715 | - | -41,715 | -44,664 |
| NET DEBT | -38,771 | 31,924 | -6,847 | -35,681 |
The impact of Appcelerator's acquisition on net debt is negative €45.9 million, analysed as follows:
| (in thousands of euros) | |
|---|---|
| Acquisition cost | -46,766 |
| Net debt /net cash of company acquired | 821 |
| Earn-out | - |
| IMPACT OF CHANGES IN THE SCOPE OF CONSOLIDATION | -45,945 |
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
Note 14 Other current liabilities
| (in thousands of euros) | 30/06/2016 | 31/12/2015 |
|---|---|---|
| Employees | 18,906 | 18,581 |
| Social security | 7,902 | 10,382 |
| Value added tax | 6,653 | 11,796 |
| Other tax liabilities | -35 | 5 |
| Corporate income tax | 809 | 927 |
| Other liabilities | 2,848 | 3,422 |
| Restructuring provision | 428 | 3,102 |
| Dividend to pay | 8,310 | - |
| TOTAL | 45,821 | 48,215 |
DEFERRED INCOME
The rise in deferred income compared with 31 December 2015 primarily relates to the maintenance activities, for which invoices are mainly issued at the beginning of the year. The deferred income figure at 30 June 2016 is consistent with the growth achieved in the maintenance activity in the first half of 2016.
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
Notes to the condensed interim consolidated financial statements
OTHER INFORMATION
Note 15 Related-party transactions
The agreements concluded with the parties related to the Axway Group were identified in Note 2.3 "Related-party transactions" to Axway's 2015 Registration Document, filed with the Autorité des marchés financiers on 25 April 2016. In addition, this Registration Document includes the report on regulated agreements.
There is no additional agreement concluded with parties related to the Axway Group during the first half of 2016, other than those described in the 2015 Registration Document.
Note 16 Off-balance sheet commitments and contingent liabilities
The Group's off-balance sheet commitments are those made or received by Axway and its subsidiaries. These commitments were not subject to any significant changes compared with 31 December 2015.
At 30 June 2016, the Group complied with all covenants and commitments included in the revolving credit contract.
Three financial ratios must be met under covenants entered into with partner banking establishments. These ratios are:
-
net debt/EBITDA ratio of below 3.0 from the date of signing until 30 June 2018 and below 2.5 from 31 December 2018 and 2 from 31 December 2020. This ratio was -0.21 at 30 June 2016;
-
EBITDA/financial expense ratio of above 5.0 throughout the term of loan. This ratio was 181.99 at 30 June 2016;
- net debt/shareholders' equity ratio of lower than 1.0 throughout the term of the loan. This ratio was -0.03 at 30 June 2016.
A €20 million drawdown was made in January of 2016 to finance the acquisition of Appcelerator. At 30 June 2016, unused revolving credit amounts to €105 million.
Note 17 Exceptional events and legal disputes
As far as the Group is aware, and notwithstanding the information provided in this report, there were no disputes or litigation known of or under way that may have a significant negative impact on the Group's financial position, at the date of this report.
Note 18 Events after the reporting period
Between 1 July 2016 and the date of the Board of Director's meeting, there were no significant events likely to impact the financial statements presented.
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
To the Shareholders,
In compliance with the assignment entrusted to us by your General Shareholders' Meeting and pursuant to Article L. 451-1-2 III of the French Monetary and Financial Code (Code monétaire et financier), we have performed:
- a limited review of the accompanying condensed interim consolidated financial statements of Axway Software for the period from 1 January to 30 June 2016;
- verification of the information provided in the half-year management report.
These condensed interim consolidated financial statements were prepared under the responsibility of the Board of Directors. Our responsibility is to express our conclusion on these financial statements, based on our limited review.
I. Conclusion on the financial statements
We conducted our limited review in accordance with the professional standards applicable in France.
A limited review mainly consists of interviewing management in charge of accounting and financial matters and applying analytical procedures. These procedures are less broad in scope that those required for an audit performed in accordance with French auditing standards. Accordingly, a limited review only provides moderate assurance, which is less assurance than that provided by an audit, that the financial statements taken as a whole are free of material misstatements.
Based on our limited review, we did not identify any material misstatements that would cause us to believe that the condensed interim consolidated financial statements do not comply with IAS 34, the IFRS relating to interim financial reporting adopted by the European Union.
axway - Interim financial report for the six-month period ended 30 June 2016
HALF YEAR MANAGEMENT REPORT
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2016
STATUTORY AUDITOR'S REPORT ON THE INTERIM FINANCIAL STATEMENTS
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
II. Specific verification
We have also verified the information presented in the half-year management report commenting on the condensed interim consolidated financial statements that were the subject of our limited review.
We have no matters to report as to its fair presentation and consistency with the condensed interim consolidated financial statements.
Paris and Courbevoie, 29 July 2016
The Statutory Auditors
Auditeurs & Conseils Associés
François Mahé
Mazars
Bruno Pouget
axway - Interim financial report for the six-month period ended 30 June 2016
www.axway.fr
DECLARATION BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT
I declare that, to the best of my knowledge, the financial statements presented in the interim financial report have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and of all the entities included in the scope of consolidation, and that the half-year management report provides a fair review of the significant events that occurred in the first six months of the financial year and their impact on the interim financial statements, and of the main transactions between related parties, as well as a description of the main risks and uncertainties for the remaining six months of the financial year.
Puteaux, 29 July 2016
Jean-Marc LAZZARI
Chief Executive Officer
axway - Interim financial report for the six-month period ended 30 June 2016
axway
business. in motion.
AXWAY
France
26, Rue des Pavillons
92807 Puteaux Cedex
P: +33 (0) 1.47.17.24.24
F: +33 (0) 1.47.17.22.23
USA
6811 E. Mayo Boulevard, Suite 400
Phoenix, Arizona 85054
P: +1.480.627.1800
F: +1.480.627.1801
www.axway.com