16th Apr 2009 07:00
16th April 2009
AVEVA Group plc
Period end trading update
AVEVA Group plc ("AVEVA" or the "Company"; stock code : AVV), one of the world's leading providers of engineering data and design IT systems, today announces a trading update following the end of the financial year to 31st March 2009.
Outcome of 2008/09 financial year
Overall the Company made excellent progress during the year. As a result, the Board expects that results will be in line with current market forecasts, which anticipate significant growth over the prior year and another record performance. Recurring revenue will represent approximately 55% of total revenue and the balance sheet remains strong with expected net cash of over £120 million at the year end, an increase of 45% over the prior year.
Outlook for 2009/10 financial year
The outcome for 2008/09 has been achieved despite increasing turbulence across the Company's end markets in recent months. Funding constraints have been causing the delay of major new projects and there has been closer scrutiny of capital expenditure budgets for the 2009/10 financial year.
The Board has conducted a review of its major end markets to assess the impact of these trends:-
Plant: The fundamental growth drivers remain in place, although continuing oil price uncertainty is expected to lead to the deferral of some capital expenditure commitments until greater price stability returns;
Power: Whilst there has been some deferral of new projects primarily reflecting funding constraints, the pipeline for new build power stations remains robust and the demand for nuclear reactors continues to accelerate;
Marine: The dramatic decline in new build ship orders and concerns over levels of funding available within the existing ship order backlog means that new licence sales in the marine sector are likely to be significantly down on prior years.
The regional impact of these trends is variable. There is a good pipeline of capital projects in CIS and Latin America. However we expect this to be out-weighed by reductions in other regions.
As a result of these factors, we currently anticipate that revenue from initial licence fees will decline in 2009/10 by between 30% and 40% accompanied by a marginal decline in rental fees and a smaller than expected increase in annual fees. Recurring income from annual and rental fees as a proportion of total revenue will therefore increase materially in 2009/10.
The impact of this revenue decline will only be partly mitigated by increasing revenue from AVEVA NET, where purchases tend to be funded from maintenance expenditure.
Restructuring
Given the outlook for 2009/10, the Company is implementing a restructuring programme. This will ensure AVEVA is better equipped to address the difficult trading environment whilst also selectively investing to exploit growth opportunities. The key elements of this are:
Combining the two European based reporting structures of Central, Eastern and Southern Europe (CES) and Western Europe, Middle East and Africa (WEMEA) under one Europe, Middle East and Africa (EMEA) structure; and,
Reducing headcount across the Company by approximately 10%.
These initiatives will be implemented to ensure resources remain focussed on customers' needs together with increased emphasis and investment in the AVEVA NET operations. The Company will also continue to invest in growth markets, particularly in South America and CIS.
These initiatives will result in annualised cost savings of approximately £5 million. The exceptional costs of implementing these initiatives will be around £3.5 million, which will all be incurred in the first half of 2009/10.
The Company's market leading technology, industry knowledge, geographical presence, understanding of its customers' developing requirements and strong net cash position provide a sound operating and financial platform for it to continue to deliver its strategy in more uncertain trading conditions.
AVEVA NET
AVEVA NET has a good pipeline of potential contracts reflecting increasing demand for Project Lifecycle Management ("PLM") as operators focus on maintenance efficiency. The Company has a market leading offering in its end markets in this high growth market. In order to fully exploit these opportunities, resources will be increased to support enhanced sales capabilities and customer service. It is anticipated that AVEVA NET will achieve significant growth in 2009/10.
Commenting on the announcement Richard Longdon, Chief Executive, said: "AVEVA is a highly profitable and cash generative business and is continuing to execute well. 2008/09 has been a record year for the Company despite increasingly difficult trading conditions. The re-shaping of the business is designed to ensure that we have an appropriate structure for more difficult market conditions whilst continuing to invest for the future."
There will be an investor and analyst conference call at 8.00am this morning. Please contact Hugo Jenkins at Hudson Sandler on 0044 207 796 4133 for details.
For further information, please consult the AVEVA website: www.aveva.com
Enquiries:
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AVEVA Group plc |
Tel: 01223 556 611 |
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Richard Longdon, Chief Executive |
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Paul Taylor, Finance Director |
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Hudson Sandler |
Tel: 020 7796 4133 |
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Andrew Hayes / Wendy Baker / James White |
Related Shares:
AVV.L