Aveva shines – but storm clouds loom

(By Philip Carnelley – Tuesday 26th May 2009 9:45am). CAD/CAM software company Aveva (formerly Cadcentre) revealed results (see here) in line with its recent trading update (see Aveva expects 30%+ licence revenue fall). Revenue as reported was up 29% to £164m due, in the main to a massive 42% hike in its recurring revenues, to £94m. Initial licence fees were up 9%. This reported growth, however, is due in substantial part to currency effects – we believe that less than 10% of Aveva’s revenues come from the UK. Still, however it arises, the outcome is a 32% rise in PBT, to £59m, and eps up 23%. Key growth came from the Asia Pacific region and the Central, Eastern and Southern European region – 32% and 40% respectively. We have seen no calculation of like-for-like, organic growth but we believe it will have been small, at best.

Currency effects notwithstanding, this was achieved against a difficult market – many of Aveva’s customers, particularly oil and gas, and mining, are feeling the pinch. Other international CAD/CAM players are struggling too: for example Autodesk (albeit with a somewhat different customer mix) last week revealed a 29% fall in revenues and a quarterly loss. So, this was a very creditable performance by Aveva, but life is going to remain tough for the foreseeable future.

Aveva has forecast that revenues from initial licence fees will decline this FY by 30%-40%, as the funding squeeze delays clients’ major capex projects; this in turn will start to feed through to maintenance and support, and no more currency windfalls are to be expected – possibly the reverse. Aveva would be wise to take a very conservative approach to business management over the next 12 months. “Restructuring” is already under way.