AVEVA today announced results for the six months ended September 30 that were both true to the the upbeat tone of last month’s interim statement’s and cautiously optimistic about the future. The results mirror what we’ve come to expect in the engineering software world: slow, steady, reliable growth from the design products and less predictable but faster-when-it-happens growth from enterprise solutions. The trick for AVEVA will be to manage the growth while not taking its eyes off the design tools that generate the bulk of today’s revenue and profits.
Even though results came very close to meeting City analysts’ expectations, the share price was down about 4% on the London Stock Exchange.
- Total revenue for the first half of fiscal 2012 was £85.2 million, up 9% over last year (analysts had been expecting £86.4 million).
- Adjusted pretax profit for the period was £26.1 million (versus an expectation of £26.2 million, and up from £24.6 million a year ago). Profit before tax as reported was £23.8 million, up from £23.1 million last year, leading the company to declare a dividend of 4.0 pence per share, up 19% from last period.
- Earlier this year, AVEVA reorganized its operations into Engineering & Design Systems and Enterprise Solutions to enable the company to focus on what are fundamentally different products and users — PDMS and AVEVA Marine for engineering/design and AVEVA Net and other products for data management/collaboration, respectively.
- Revenue from Engineering & Design Systems was up 4% to £74.6 million on strong growth throughout Europe, Latin America and parts of Asia. Recurring revenue was £55.5 million (up 12%), or 74% of revenue.
- Enterprise Solutions’ revenue in the period grew 50% to £10.5 million, helped a full six months of revenue from ADB and Logimatic (acquired in 2010). On an organic basis, Enterprise revenue was up about 20%. The Enterprise part of the business currently has a backlog of deferred revenue and services of about £8 million. Not surprisingly, the company says that most of the uptake in H1 2012 was from oil and gas accounts — its traditional sweet spot. Of note, however, is that AVEVA is working with several systems integrators to boost its service capacity and with Capgemini in France to create solutions targeted at the nuclear industry.
- On a geographic basis, AVEVA reports that it saw strong uptake of its solutions in the oil and gas vertical in emerging markets such as Russia and Latin America and in pockets around the world. Revenue from EMEA was up 28% to £41.1 million with particular strength in Russia and Central Europe. Revenue from Asia Pacific was down 9% compared to the same period last year due primarily to a planned reorganization in China, though performance in South Korea (marine) was strong while the rest of Asia was “relatively flat”. Revenue from the Americas grew by 5% to £15.4 million as reported but grew by 11% on a constant currency basis. Much of this growth was from Latin America,with Brazil singled out but the company, as conditions in North America “remain tough competitively”.
- By vertical, performance was more or less in line with recent periods. Oil & gas represented 45% of revenue; marine, 25%; power 15%; and mining, petrochemical, chemical, pharmaceutical, and paper and pulp combining for about 15% of revenue.
- On the spend side (which I don’t normally cover), AVEVA increased its R&D investment by 18% to £15.2 million in the period — coincidentally, that’s 18% of revenue. AVEVA has been ramping up it’s R&D spend over the last 18 months to incorporate its acquired technologies into the mainstream portfolio and to build out its AVEVA NET platform. From what I could gather at last month’s user conference, customers are pleased with the results.
- AVEVA gave an update on the Z+F acquisition which Included the factoid that the actual price paid was “total consideration of £7.3 million” rather that the “net consideration of £6.3 million on a debt free/cash free basis” announced in October. At any rate, AVEVA reports that the “integration of the business has gone smoothly and the new team has settled in well”.
The company also said that it continues to explore further acquisitions.
CEO Richard Longdon said in a press release, “The fundamental growth drivers across our vertical markets remain strong, particularly in the emerging markets, and we are well positioned to continue to exploit those opportunities. We are pleased with our progress in the first half, especially the development of the Enterprise Solutions business and the continued growth in Latin America and Russia. In addition, we have reorganised the business in China and are now better placed to exploit the opportunities that market presents. We have also seen a strong performance in EMEA in the first half. As we enter the second half, we are well positioned to deliver the Board’s expectations for the full year.”