Aveva revenue hit by Covid-19, transition to subscription model

Aveva Group said it delivered “strong growth” in recurring revenue during the first quarter on Wednesday, although its overall revenue was down amid the Covid-19 crisis, and as it transitioned its business model.

The FTSE 100 industrial software company said subscription revenue was up 30% for the three months ended 30 June, while as expected, maintenance revenue was broadly flat and perpetual licences and services revenue reduced “substantially”.

That reduction was partly due to its ongoing transition to a subscription business model, and partly due to disruption caused by the coronavirus pandemic, the board said.

Overall group organic constant currency revenue declined 3.5%.

“Despite the Covid-19 related disruption, demand for Aveva’s software has been robust … with particularly good demand for cloud solutions,” the board said in its statement.

“The first quarter included substantial order wins in the power generation, marine, water, food and life sciences end markets, together with wins in oil and gas across a wide range of customers.”

As it had previously indicated, Aveva said it faced a “tough comparative period” in the first half of the 2021 financial year, particularly in the Asia-Pacific region, partially due to the early renewal of a large contract in the prior year.

“Notwithstanding the short-term challenges, the Covid-19 crisis is expected to accelerate the digitalisation of the industrial world as efficiency, flexibility and sustainability become increasingly urgent requirements for customers.

“The order pipeline for the remainder of the financial year is solid and is expected to benefit from large contract renewals in the second half of the financial year.”

Aveva said it had maintained a strong balance sheet, and had net cash and treasury deposits of £109.7m as at 30 June.

The firm said it would pay a full year dividend for the financial year ended 31 March on 11 August.

“The group has made no redundancies in respect of Covid-19 and has not furloughed any staff.”

At 0803 BST, shares in Aveva Group were down 0.96% at 4.119.9p.