AVEVA Group last week gave more details on its performance for the six months ended September 30 2010. The company last month hinted that its end-markets are still recovering from the global economic meltdown, and that progress to a more normal economic state is uneven. The details provided on November 10 caution that even though conditions continued to improve over the last six months, “markets remain subdued … some customers may still be carrying enough seat capacity to see them through the early recovery stages without the need to increase usage under their existing licence.”
• Revenue for the first half of fiscal 2011 was up 12% to £78.47 million.
• Recurring revenue, an important indicator for AVEVA, increased 11% to £53.3 million. License rental revenue was up 12% to £31 million and maintenance was up 12% to £22.1 million. The company reports that it is seeing “robust” software renewal rates.
• Perpetual license revenue grew by 19% to £19.2 million.
• AVEVA saw a shift in its geographic split in the six months ended September 30. A year ago, 34% of revenue came from Asia, 49% from EMEA and 17% from the Americas. For the period just ended, this split was 40%/41%/19%, respectively. AVEVA attributes this to strong repeat business from existing customers and growth from its power plant business in Asia (mainly China) and the Americas (mainly Brazil).
• AVEVA has struggled in North America in recent years, but appears to be stabilizing the situation under new regional management, helped by the booming Brazilian oil industry. Revenue from the Americas was up 23% over last year to £14.7 million. AVEVA also sees opportunities around South America’s mining industry.
• Revenue declines in Asia Pacific, due to the lagging marine market, may have turned the corner during the last six months. Revenue from Asia was up 34% to £31.6 million due to successes in the power and oil and gas markets. AVEVA’s marine business in the region still remains subdued as few new ships are contracted, but as we’ve seen from PLM suppliers, manufacturers are using this downturn to improve efficiency and throughput which offers some opportunities for AVEVA’s solutions.
• One interesting factoid gleaned from the half-year report: AVEVA reported a 74% increase in revenue from rental fees in Asia. A year ago, rental fees accounted for 23% of the region’s revenue; this period, rentals were 30% of revenue. This region has traditionally preferred a perpetual model (for tax and ownership reasons) but it is possible that these customers, too, see the advantage of a rental model that requires a lower cash outlay at a time when large purchases may be hard to justify.
• AVEVA repots that its Europe, Middle East and Africa region “is still suffering from the recent economic turmoil” and notes softness in central Europe. Revenue from the region declined 7% to £32.1 million, as revenue from rental fees was down 18% to £11.5 million.
• AVEVA made two acquisitions during the period, and the half-year reports gave more details about the deals. The Logimatic Software A/S acquisition closed on June 30; the total cash consideration paid was £9.3 million. From the date of acquisition to the end of this reporting period (September 30) Logimatic contributed £1.1 million to revenue; had it been acquired before the start of the period, it would have contributed £2.1 million in revenue. On an annualized basis, therefore, it is possible that AVEVA paid somewhere around 2x revenue.
• Also closed on June 30 was the deal for certain assets of ADB’s Oil and Gas business for a total cash consideration of £4.1 million. This business contributed £0.7 million to revenue during the period. Since AVEVA bought part of a larger, ongoing business, the company cannot determine what ADB’s revenue would have been for the entire period — and we can’t guess at an acquisition multiple.
• AVEVA reports that the integration of both acquisitions is going well and seeing customers interest. The MARS suite, intended to add material control and production planning to AVEVA NET for the shipbuilding industry, brought more than 50 reference accounts to AVEVA. The acquisition of ADB’s Oil and Gas business brought the WorkMate suite of integrity management solutions. In total, the acquisitions contributed revenue of £1.8 million and incurred a loss before taxes of £0.5 million.
• One important, positive metric: AVEVA increased its investment in R&D to £12.9 million or 16% of revenue in the first half of fiscal 2011, up from under 15% of revenue a year ago. AVEVA’s closest competitors in plant and ship design is Intergraph, which spent typically 10% of revenue on R&D (but on a much larger total). Bentley Systems reports spending close to 20% per year on plant design and other applications for the AEC market, again from larger total — but for a more diverse product set.
AVEVA also announced that Group Finance Director, Paul Taylor is leaving his post as of January 1, 2011 and will be replaced by James Kidd as Chief Financial Officer. Mr. Kidd has been AVEVA’s Head of Finance since 2006.
AVEVA never gives concrete guidance for future periods but the company did say that “[t]he timing of a general return to higher growth rates globally is difficult for us to predict, but specific markets and geographies are providing near-term opportunities for AVEVA to maintain its progress in these challenging times.”