Slow revenue climb for Aveva as the IT firm grapples with higher costs
Revenues for software firm Aveva Group were slightly ahead of consensus at £1.24bn for its full year results this morning, while EBIT was in line at £365m.
The firm reported EPS of 99.6p, slightly below at 1.042 reflecting in-part the company’s investment in accelerating its transition to a recurring cloud model.
The group reiterated its warning that revenue growth would be lower this year on an organic constant currency basis and its adjusted operating profit margin was likely to be hit by higher costs.
Commenting on the results, Chief Executive Officer, Peter Herweck said: 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.”
Dan Ridsdale, Managing Director of TMT & Platform at Edison Group said success with this transition will be the “key valuation driver for Aveva”.
He did add however: “There is nothing particularly new in the outlook, but as we have seen many times, the transition to a subscription revenue model is both suppressing growth (as contracts are drawn out over a longer period) and margins (due to lower revenues and increased investment)”.
Analysts at UBS and Numis also backed the firm’s results, giving the stock a ‘Buy’ rating, while shares were up over seven per cent this afternoon.