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RNS Number : 7936J
AVEVA Group PLC
16 April 2020
AVEVA GROUP PLC
Trading Update
AVEVA Group plc ('AVEVA' or 'the Group'), a global leader in
engineering and industrial software, provides a scheduled trading
update on its financial year ended 31 March 2020 and the impact of
the COVID-19 crisis to date.
Group focus
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.
AVEVA is safeguarding the wellbeing of its employees, through
responsible working practices that help suppress the spread of the
virus, while supporting its customers to drive greater efficiencies
in their operations.
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.
The financial year ended 31 March 2020 (FY20)
AVEVA had a satisfactory close to its financial year, despite
the challenges caused by global macro-economic disruption. The
Group's employees adapted quickly to remote working and key
contracts were still able to be negotiated and signed with
customers across diverse end markets. These included: consumer
packaged goods, food production, water processing, power
generation, shipbuilding and oil & gas.
Revenue growth is expected to be approximately 9% on a reported
basis for the full year, with recurring revenue exceeding the
medium-term target of 60% of total revenue, ahead of schedule.
Strong growth in Rental & Subscription revenue was partly
offset by significantly lower Initial & Perpetual licences and
Services, as intended. Overall Software revenue grew by over
10%.
Outlook and medium-term targets
AVEVA's customers are on a digital journey with its technology
helping to drive efficiency improvements across both the design and
operational lifecycle of industrial assets. AVEVA has a diversified
end market exposure, a high-quality customer base, significant
recurring revenues, strong cash generation and low customer
concentration. As such, the Board expects the Group to be
relatively resilient.
AVEVA set medium-term targets in September 2018 around revenue
growth, increasing recurring revenue as a proportion of overall
revenue and adjusted EBIT margin progression.
The Group's aim has been to grow medium-term revenue on a
constant currency basis at least in line with the blended growth
rate of the industrial software market. This target is maintained,
although we anticipate a period of lower growth across the overall
industrial software market during this period of economic
disruption.
Growing Rental & Subscription revenue remains a key focus
and further increases in recurring revenue as a proportion of
overall revenue are being targeted in FY21.
The Group continued to make progress during FY20 in increasing
adjusted EBIT margins towards a medium-term target of 30%. The
Board is maintaining this medium-term target, although the speed of
progress in FY21 may be impacted.
FY21 - First half
Notwithstanding AVEVA's expected resilience, revenue may be
impacted by disruption caused by the global macro-economic
downturn, particularly in the first six months of the financial
year from 1 April to 30 September 2020, especially set against a
strong comparative period.
Most notably, expected reductions in capital expenditure,
predominantly in the oil & gas sector, will lead to lower than
previously targeted revenue, particularly in AVEVA's Engineering
business area, while reduced GDP will impact demand for new
licences.
In the context of the challenging growth environment, 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, whilst significantly reducing costs to support
operating margin and cash generation.
Actions being taken include pay freezes, a freeze on recruitment
and reduced discretionary costs, including travel and physical
customer events. Overall these actions are expected to result in a
meaningful reduction in costs. At this point, AVEVA does not intend
to make staff reductions in response to the economic environment,
furlough any staff, or make use of government support
programmes.
Supporting AVEVA's communities
AVEVA's Action for Good commitment is to return 1% of its net
profit into the communities where employees live and work. This
initiative is even more important in the context of the COVID-19
crisis, when 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
members will donate 10% of base salary for a six-month period,
effective 1 April 2020, to further Action for Good's work.
Employees below this level remain on full salaries.
Balance sheet and dividend
AVEVA's business is cash generative and the Group has a strong
balance sheet with over GBP110m of cash at 31 March 2020 and no
debt. In addition to this, the Group has an undrawn GBP100m
revolving credit facility, which is available until early calendar
year 2023.
Notwithstanding this, the expected length and depth of the
global macro-economic disruption is unknown. The Board will
therefore continue to monitor the situation and will make a
decision on the FY20 final dividend as part of the full year
results announcement, which is expected to be in early June
2020.
Enquiries:
AVEVA Group plc
Matt Springett, Head of Investor Relations
Tel: 07789 818 684
FTI Consulting LLP
Edward Bridges / Dwight Burden
Tel: 0203 727 1017
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END
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