Embattled Aveva Group assures investors of improved prospects

Aveva Group has assured investors of encouraging trends within its key markets after swinging to a loss over the past year.

The Cambridge-based industrial software group’s loss from operations before tax was £6.5million, against a profit of £36.6million a year ago, primarily as a result of the amortisation of intangible assets of £226.1million.

Aveva shares fell to a four year low in April when it warned on its growth and earnings, but the firm told investors on Wednesday it was encouraged by positive trends within its key energy and power markets. 

The group reported a 7.1 per cent jump in full-year pro-forma revenue to £1.24billion for the year.

However, it reiterated its warning that revenue growth would be lower this year on an organic constant currency basis and its adjusted operating profit margin was expected to reduce due to higher costs.

The company is facing a multi-year transition to the cloud and a subscriptions-based model. 

Aveva provides software to control and monitor oil rigs and nuclear power stations, as well as sensors to ensure the smooth supply of energy for the national grid.

Aveva shares jumped today and were up 5.61 per cent or 125.00p to 2,355.00p in late morning trading, having fallen over 30 per cent in the past year.  

The group’s final dividend was announced as 24.5p a share, which would represent an increase of 4.3 per cent on a year ago. 

Boss Peter Herweck, said: ‘Aveva delivered a solid set of results in FY22 as the business recovered following disruption caused by the Covid pandemic. 

‘During the year we made good progress with the integration of OSIsoft and have recently launched integrated products that will drive further revenue synergies. 

‘I am excited about the opportunities ahead of us as Aveva enables the connection and digitalisation of the industrial world. We are focused on accelerating growth in annualised recurring revenue and expect Aveva’s growth rate on this metric to significantly improve.’

The company added in its results: ‘The ongoing digitalisation of the industrial world continues to drive demand for industrial software and Aveva is very well positioned with its broad integrated software portfolio to drive sustainable growth. 

‘Aveva’s end markets have recovered from the Covid crisis and several key markets are showing positive trends, such as energy, power, shipbuilding and infrastructure.’

Charlie Huggins, head of equities at Wealth Club, said: ‘Aveva’s destination is compelling, assuming the journey can be successfully charted. 

‘Similar moves from Adobe and Autodesk have made both far higher quality and more predictable businesses.’ 

‘So what’s the catch? The initial stages of transitions can be unsettling for investors, who tend to dislike jam tomorrow stories with higher upfront costs and uncertain future pay-offs. Investment in cloud initiatives will weigh on margins in the near term, while revenues will initially be held back by the move away from up-front, perpetual licenses.

‘Then there are the execution risks. Business model transitions are easier to plot on PowerPoint than they are to pull off in practice. 

‘Aveva has completed two major mergers in the last 5 years, the most recent of which, OSIsoft, is still being digested. This makes Aveva a much larger, more complex business than it was. The size of the task facing Aveva shouldn’t be underestimated.’