16th Apr 2020 09:02
(Alliance News) - AVEVA Group PLC on Thursday said it expects to report revenue growth for its most recently ended financial year, though is forecasting disruption in the first half of its current year as a result of Covid-19.
The engineering and industrial software firm said it entered the Covid-19 pandemic "in a strong position" and "had a satisfactory close to its financial year" in spite of the pandemic's disruption.
This included the negotiating and signing of "key contracts" with customers, including customers involves in consumer packaged goods, water processing, shipbuilding, oil and gas, food production, and power generation.
For its financial year ended March 31, AVEVA expects to report revenue growth of around 9% on a reported basis with recurring revenue beating its medium-term target for 60% of total revenue. While Rental & Subscription revenue was strong, AEVA did experience "significantly lower Initial & Perpetual licences and Services", though is was "as intended". Overall Software revenue was up 10%.
Looking to the first half of AVEVA's financial 2021 year, the company said its revenue may be hurt by disruption from Covid-19 and its resultant "global macro-economic downturn", especially in the six months to September 30. AVEVA said this may stand out "against a strong comparative period".
More specifically, AVEVA is expecting to see capital expenditure declines in the oil and gas sector, leading to revenue below AVEVA's previous target - especially within its Engineering business area. Shrinking gross domestic product is also expected to "impact demand for new licences".
In response, AVEVA is taking action to cut costs. This includes pay freezes, as well as a freeze on recruitment and a reduction in discretionary costs such as travel and customer events. In combination, these are predicted to create "a meaningful reduction in costs". No staff reductions or furloughs are expected, and the company is not expecting to use any government support programmes.
In terms of its targets, AVEVA said it still aims to grow its medium-term revenue at constant currency "at least in line with the blended growth rate of the industrial software market". However, though the target has been maintained, it expects lower growth within the industrial software market as a whole due to "economic disruption".
It is targeting an increase in recurring revenue as a proportion of overall revenue in financial 2021. Having made progress in financial 2020 on its medium-term target for adjusted margins of 30%, AVEVA is maintaining the target in financial 2021 but said the speed of its progress towards the target "may be impacted".
At the end of March, AVEVA had over GBP110 million of cash and no debt. It also has an undrawn GBP100 million revolving credit facility available until early in 2023.
The company said it will make decision on whether to pay a final financial 2020 dividend as part of its annual results announcement, which is expects to post in early June.
"AVEVA has entered the global Covid-19 crisis in a strong position. The group's focus remains on serving its customers, employees and shareholders, as well as the wider communities in which it operates," said AVEVA.
"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."
Shares in AVEVA were up 0.2% at 3,506.00 pence in London on Thursday morning.
By Anna Farley; [email protected]
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