AVEVA releases periodic updates, really little more than place holders, to tell investors how things are going and what they can expect to hear in the upcoming formal earnings release. Today, AVEVA’s Trading Update said that the fiscal year ended March 31 was “in line with market expectations”.
Let’s be clear: AVEVA doesn’t give guidance so it’s not saying that sales for fiscal 2015 met any particular target the company had itself set. This isn’t like PTC, which recently announced that March quarter revenue would be at the midpoint of guidance; UK companies are much more reticent and rarely give that kind of detailed outlook.
AVEVA’s statement is that results meet market expectations, where consensus seems to be annual revenue of £208.5 million and adjusted profit before tax of £61.8 million. If you recall, revenue for the first half (H1) was £85.9 million (down 21% year/year), meaning that second half revenue has to be around £123 million, down 4% year/year given what we know but perhaps as good as flatish given that we don’t have a real number yet. Profit before taxes was £17.1 million in H1 (versus £32.2 million in fiscal 2014) so getting to £62 million or so shows quite a reversal and solid cost containment — though it is still down quite a bit from the £78.3 million reported for last year.
That happened to get to this more positive picture for H2? We won’t know until May 19, when AVEVA gives its full take on it, but we can presume a couple of things (and could be completely, totally wrong about it all):
- recurring revenue from rentals and subscriptions held up in H2
- AVEVA E3D is starting to see more paying customers, and they’re paying premium prices for this new product
- foreign exchange (which accounted for maybe 6% of the H1 revenue decline) wasn’t as big a factor in H2
- the company’s sales force restructuring into One AVEVA has shaken out and people are now on the ground, selling rather than settling in, and
- this led to a deal or two for the Enterprise Solutions part of the business, which has been struggling.
One thing AVEVA can’t do anything about is the health of its end-markets. We all know that the price for oil is crazy right now, with oversupply, slowing demand, and strong statements from OPEC and others. Many of you have gotten in touch to ask what this means for engineering software suppliers: as project work slows down, what will happen to sales of engineering software? We’re about to find out as companies start announcing March quarter results but early indications are that, yes, there may be some slowdown. But we need to remember that the engineering companies (EPCs) supplying the oil and gas world are hugely diverse, and offer services from conceptual design through project planning and operations, and across many industries besides upstream oil exploration.
AVEVA will formally announce results on May 19, while Hexagon (Intergraph’s parent company) releases earnings on May 6.