AVEVA bosses donate 10 per cent of their pay to support workers’ communities
Engineering and industrial software specialist AVEVA Group plc is instituting pay freezes, a freeze on recruitment and reducing discretionary expenditure including travel and physical customer events to trigger what it calls “a meaningful reduction in costs” during the coronavirus pandemic.
But the Cambridge UK technology business does not intend to make staff reductions in response to the economic environment, furlough any staff, or make use of government support programmes at this point.
Executives are also donating 10 per cent of base salary to inject into the communities where staff work or live.
AVEVA’s share price headed slightly north on the news, which was included a scheduled trading update for the year to March 31. AVEVA’s market cap is currently £5.66 billion.
The Anglo-French world leader says it has entered the global COVID-19 crisis in a strong position. It reports a satisfactory close to its financial year, despite the challenges caused by global macro-economic disruption.
It adds that employees adapted quickly to remote working and key contracts were still able to be negotiated and signed with customers across diverse end markets. These included: consumer packaged goods, food production, water processing, power generation, shipbuilding and oil & gas.
AVEVA expects revenue growth to be approximately nine per cent on a reported basis for the full year, with recurring revenue exceeding the medium-term target of 60 per cent of total revenue, ahead of schedule.
Strong growth in Rental & Subscription revenue was partly offset by significantly lower Initial & Perpetual licences and Services, as intended. Overall Software revenue grew by more than 10 per cent.
AVEVA’s customers are on a digital journey with its technology helping to drive efficiency improvements across both the design and operational lifecycle of industrial assets.
The group has a diversified end market exposure, a high-quality customer base, significant recurring revenues, strong cash generation and low customer concentration. As such, the board expects the group to be relatively resilient.
Despite this confidence in the overall strength of the business, AVEVA concedes that revenue may be impacted by disruption caused by the global macro-economic downturn, particularly in the first six months of the financial year (April 1 to September 30) especially set against a strong comparative period.
Most notably, expected reductions in capital expenditure, predominantly in the oil & gas sector, will lead to lower than previously targeted revenue, particularly in AVEVA’s Engineering business area, while reduced GDP will impact demand for new licences.
In the context of the challenging growth environment, AVEVA will manage its cost base appropriately, without damaging the longer-term growth prospects of the group.
This includes protecting investments in strategic areas such as Cloud and Artificial Intelligence, whilst significantly reducing costs to support operating margin and cash generation.
The company’s exemplary ‘Action for Good’ commitment is to return one per cent of its net profit into the communities where employees live and work.
It says this initiative is even more important in the context of the COVID-19 crisis with the focus on supporting medical care, medical workers, food and education.
Each of AVEVA’s chairman, CEO, deputy CEO and CFO, non-executive directors and executive leadership team members will donate 10 per cent of base salary for a six-month period, effective April 1, 2020 to further Action for Good’s work. Employees below this level remain on full salaries.
AVEVA’s business is cash generative and the group has a strong balance sheet with over £110 million of cash at March 31 and no debt. It also has an undrawn £100m revolving credit facility, which is available until early calendar year 2023.
The board will therefore continue to monitor the situation and make a decision on the FY20 final dividend as part of the full year results announcement, which is expected to be in early June.