12th Sep 2014 07:38
LONDON (Alliance News) - AVEVA Group PLC Friday warned that it now expects its revenue to be between GBP84 million to GBP90 million in the first-half of its current financial year, as results have been hit by the strength of sterling and the timing of key engineering, procurement and construction rental renewals.
The company reported revenue of GBP108.5 million in the first-half of its last financial year, up 11% on the previous year.
The engineering data and design IT system provider had previously noted these issues at the time of its first quarter update in July, and on Friday said it expects them to result in a hit on first-half revenues of about GBP14 million.
Additionally, it said it had seen a temporary hit from its sales force reorganisation and mixed levels of customer activity, as it saw reduced demand in South America and parts of Asia, offset by double-digit growth in China.
The company continues to expect a heavier second-half weighting than it has seen in previous years, as the benefits of its revamped selling strategy dubbed 'One AVEVA' come through. It said that "in light of the performance to date" it would review its headcount growth plans and discretionary expenditure.
Despite the concerns about its revenue, AVEVA reiterated that its balance sheet and cash generation continued to be strong in the first-half.
Broker Liberum expects to see material cuts to consensus earnings per share, as AVEVA's revised revenue expectations are well below consensus of GBP107 million.
Liberum noted that in addition to the factors AVEVA gave, it also believes a high level driver may be the moderation in capital expenditures from oil majors.
"We estimate that increasing oil & gas capex has accounted for 95% of AVEVA's revenue growth over the last 5 years," Liberum said. "The recent focus that oil majors have put on capital discipline may be the high level driver of AVEVA's weaker than expected performance in H1."
Liberum maintained its Hold rating for the company.
Numis gave an Add rating for the stock, saying that this was "clearly disappointing news, but given the broader market backdrop it does not feel to us like there has been a sudden collapse and we think that with good cost control and an improvement in sales performance, a little ground can be recovered in the second half."
Shares in AVEVA were trading 19.54% lower at 1,744.40 pence per share Friday morning, the biggest faller on the FTSE 250.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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