RNS Number : 4454J
AVEVA Group PLC
27 April 2022
AVEVA GROUP PLC
Trading Update and Notice of Results Date
Good FY22 performance, update on FY23 outlook and 5-year
financial targets confirmed
AVEVA Group plc ('AVEVA' or 'the Group'), a global leader in
industrial software, announces the following trading update for the
financial year ended 31 March 2022 (FY22); an update on its FY23
outlook with an acceleration in Annualised Recurring Revenue (ARR)
growth and re-affirms its 5-year targets.
AVEVA delivered a strong close to FY22. The Group achieved 18%
revenue growth in Q4 on a pro forma organic constant currency
basis(1) . This growth was driven by a very good performance from
PI System. T his resulted in overall Group revenue growth on the
same basis for FY22 of 7%, again with a strong contribution from PI
Group revenue growth was supported by point-in-time revenue
recognition relating to multi-year on-premise Subscription
contracts, with a corresponding increase in contract assets at 31
March 2022 to around GBP300m. It was also supported by continued
sales of Perpetual licences relating to PI System.
The Group expects adjusted EBIT margin to be consistent with the
previous year pro forma results at just below 30%. These factors
will result in an overall adjusted EBIT performance that is in-line
with market expectations.
ARR increased by 9%(2) . This rate of increase was below the
levels targeted in AVEVA's five-year plan. The majority of this ARR
growth was driven by the heritage AVEVA business, which grew ARR
significantly ahead of revenue. As expected, PI System's ARR growth
was behind revenue growth, ahead of its transition to a
subscription-based revenue model.
AVEVA's net debt at 31 March 2022 was c.GBP405m.
Outlook for FY23
AVEVA will drive an acceleration in ARR growth in FY23 to a
level of 15% to 20%. This growth will be underpinned by business
model transition, improving end market conditions, synergies
relating to the PI System integration, and price increases. For
example, we are starting to see contracts being renewed or
increased early as Energy markets recover; PI System will
accelerate its move to Subscription; the Group's Cloud transition
is being accelerated; and AVEVA implemented a substantial list
price increase on 1 April.
As ARR accelerates in FY23, reported revenue will be impacted by
the timing of revenue recognition. The Group expects contract
assets to remain broadly stable, impacting point-in-time revenue
recognition as AVEVA increasingly moves towards higher ARR value
contracts that have rateable revenue recognition.
In addition to this, revenue will be impacted by the war in
Ukraine and consequential sanctions on Russia. AVEVA has ceased new
business in Russia. The Group continues to support existing
non-sanctioned companies where there is no legal basis to terminate
contracts. Russia is a relatively small market in the context of
the Group, representing around 2% of revenue in FY22. Due to the
fixed nature of AVEVA's costs, loss of revenue will largely drop
through to adjusted EBIT.
Adjusted EBIT for FY23 will also be impacted by some additional
costs. These include wage inflation due to very competitive
software labour market conditions; increased travel and event costs
post-Covid; together with investment in Cloud R&D, sales and
operations. Wage inflation will be more than offset by pricing over
time; however, most salary increases feed through at the beginning
of the financial year, while list price increases only take effect
when contracts are renewed, or new business is signed. While the
additional investment in Cloud was planned, the Board has decided
to pull this investment forward to accelerate AVEVA's transition.
The impact of this acceleration will result in around GBP20m of
additional costs in the current financial year.
Taking all of these factors into account, revenue growth is
expected to be lower in FY23 than in FY22 and adjusted EBIT margin
is expected to reduce, before resuming growth in FY24. Cash
conversion is expected to significantly improve in FY23 and
Confirming financial targets to FY26
AVEVA reconfirms its previously announced financial targets for
the five financial years ending 31 March 2026 (FY26). These are
expressed on an organic constant currency basis. They are to
-- a revenue Compound Annual Growth Rate (CAGR) of around 10%
between FY21 and FY26, on a constant currency basis, supported by
revenue synergies relating to the OSIsoft acquisition, which are
expected to be at least $100 million in FY26;
-- recurring revenue at over 80% of total revenue in FY26 driven
by a continued transition to Subscription and the accelerated
adoption of Cloud by customers;
-- adjusted EBIT margin of at least 35% in FY26; and,
-- conversion of adjusted net profit to free cash flow of 100% across the target period .
To meet these targets AVEVA intends to grow ARR at a rate of 15%
to 20% per annum in the period to FY26. Management will present
details to support this objective later today (see below for call
The targets assume that the global economic outlook is stable to
moderately growing and that trends toward digitalisation continue
at current rates.
Conference call and notice of results
AVEVA will host a call for analysts and investors at 8.15am BST
today and expects to announce its full year results on 8 June
Conference call dial-in details:
UK: 020 3936 2999 / 0800 640 6441
USA : 1 646 664 1960 / 1 855 9796 654
All other locations: +44 20 3936 2999
Conference all code: 811471
Slides and a webcast are available via investors.aveva.com and a
replay of the call will be made available later in the day.
(1) Unaudited p ro forma results include results for both AVEVA
and OSIsoft for the 12 months to 31 March 2022 and the 12 months to
31 March 2021. In addition to this, the results have been adjusted
to exclude the effect of the deferred revenue haircut under IFRS 3
(Business Combinations), which reduces current year statutory
Organic constant currency revenue excludes a currency
translation reduction; and adjusts for the disposals of the Acquis
Software, Termis Software and Water Loss Management Software
businesses in June 2021 by removing the results of the disposals
from each reporting period.
(2) ARR makes it easier to track recurring revenue progression
by annualising revenue associated with Subscription, Cloud and
Maintenance contracts . It removes distortions caused by revenue
recognition standards by annualising the revenue associated with
contracts at a point in time. It is calculated on a constant
currency basis. Stated ARR growth is adjusted for the exclusion of
business in Russia in both the base and the end point .
AVEVA Group plc
Matt Springett, Head of Investor Relations Tel: 07789 818
FTI Consulting LLP
Edward Bridges / Dwight Burden Tel: 0203 727 1017
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