AVEVA expects revenue growth but forecasts coronavirus disruption

Engineering and industrial software company AVEVA expects to report revenue growth for the year ended March 31 but forecasts disruption in its current financial year as a result of the Covid-19 pandemic.

In a trading statement on Thursday, April 16, the firm, based at High Cross, off Madingley Road, said it will take measures including freezing pay and recruitment to create “a meaningful reduction in costs”. It does not expect staff reductions or furloughs or to use any government support programmes. Senior executives are also donating 10 per cent of base salary to support communities where staff work or live.

AVEVA said it entered the Covid-19 pandemic “in a strong position” and had a satisfactory close to the year ending March 31. It expects to report revenue growth of around nine per cent on a reported basis with recurring revenue exceeding its medium-term target of 60 per cent of total revenue.

Strong growth in rental and subscription revenue was partly offset by significantly lower initial and perpetual licences and services, but this was “as intended”. Overall software revenue grew by more than 10 per cent.

The firm said revenue may be impacted by the coronavirus disruption and the global macro-economic downturn especially in the six months to September 30, when set against a strong comparative period.

It expects to see capital expenditure reductions, predominantly in the oil & gas sector, leading to revenues below previous targets particularly in its engineering business area, while reduced GDP will impact demand for new licences.

AVEVA will “manage its cost base appropriately without damaging the longer-term growth prospects of the group”. This includes protecting investments in strategic areas such as cloud and artificial intelligence, while reducing costs to support operating margin and cash generation.

The firm’s Action for Good commitment aims to return one per cent of net profit into the community and the focus will be on supporting medical care, medical workers, food and education. Each of AVEVA’s chairman, CEO, deputy CEO and CFO, non-executive directors and executive leadership team will donate 10 per cent of base salary for a six-month period from April 1 to further Action for Good's work.

AVEVA has a strong balance sheet with more than £110m cash at March 31, no debt and an undrawn £100m revolving credit facility. It will make a decision on the FY20 final dividend as part of the full-year results announcement, expected in June.

AVEVA said: “The group will continue to drive its business model transition to subscription, increasing recurring revenue as a proportion of overall revenue and accelerating cloud adoption. This will offer increased flexibility to customers, while generating long-term value for shareholders.”