Geo Week News

January 28, 2014

Major U.S. EPC contractor inks multi-year deal with AVEVA



AVEVA: negative forex impact ‘more likely’ for FY2014

3D engineering and IT management software firm AVEVA Group plc said Monday it continued to “perform well” in the third quarter without “any noticeable shift in the trends” it reported in November.

The Cambridge, U.K.-based company, primarily serving the process plant, power and marine industries, said in an interim management statement that it maintains a strong balance sheet and saw “solid” cash generation in the third quarter ended Dec. 31.

AVEVA develops and markets engineering and design software to the oil and gas, power, marine, chemical and pharmaceutical, metals and mining and pulp and paper industries. The company sells its proprietary software by licensing rights to use the software directly to engineering contractors, plant owner operators, and shipbuilding companies.

The company uses a subscription-based license business model, meaning EPC (engineering, procurement, and construction) customers pay a fee for ongoing access to its software. The recurring revenue represents about 70 percent of AVEVA’s total revenue.

Engineering & Design Systems (EDS)
AVEVA’s Engineering & Design Systems (EDS) division, offering software for the design and construction of assets in the plant, power and marine industries, represents approximately 90 percent of company revenue.

AVEVA said EDS “continued to perform well” in the third quarter of FY2014, “with good demand for our design software and a number of strategic contract wins.”

AVEVA lands major EPC deal
AVEVA said it continues to target large engineering, procurement and construction (EPC) companies. Most notably, AVEVA said it recently entered into a new multi-year contract with one of the largest U.S. EPC contractors, changing from a project-specific customer to one that is “corporately funded,” facilitating faster adoption of AVEVA tools. AVEVA did not disclose the EPC firm.

AVEVA also said two of its big global EPC customers in the third quarter began using AVEVA Everything 3D (E3D), new plant design software with enhanced laser scanning capabilities for both new build and revamp projects, in their license agreements.

E3D software eliminates rework on-site by allowing comparison of the original design against the as-built plant, regardless of which scanner system captures the data.

AVEVA Everything3D – Plant Design for Lean Construction

Geographic sales
AVEVA said while the Americas region has been weighed down by “soft market conditions” in Latin America, business in the United States and Canada has made “good progress.”

The Asia Pacific region is growing at a “steady pace,” with a strong South Korean market more than offsetting the generally weaker Chinese market, AVEVA said.

The company’s EMEA region has been impacted in FY2014 by lower than expected revenue growth in Enterprise Solutions, as well as some continued weakness in Russia and the Middle East.

Currency woes
AVEVA benefited on a reported basis in the first half of FY2014 thanks to the sterling weakening against the Euro and Korean Won, partially offset by a strengthening against the Yen. But, the second half of the period saw a significantly strengthened sterling “making a negative foreign exchange translation impact more likely for the full year.”

First half of FY2014
For the first half of FY2014, AVEVA reported in November an 11 percent increase in revenue to £108.5 million (US$174.8 million), mainly due to strength in the global oil and gas markets. Adjusted profit before tax grew 13 percent during that period to £32.3 million ($52 million), and profit before tax increased by 6 percent to £27.3 million ($44 million).

In the first six months of FY2014, EDS saw strong growth with revenue up 12 percent driven by further growth in demand from EPC customers. The company said it is “aggressively pursuing” business in China and India’s power markets, forecast to hold strong demand for new-build nuclear construction.

AVEVA also said at the time “aging infrastructure in developed Western economies” was bearing additional growth opportunities “for replacement and lifecycle extensions.”
Rental fees in the first half were up 14 percent during the six-month period, compared to the 11 percent expansion in initial license fees. That continued to drive AVEVA’s recurring revenue, which grew by 13 percent during the first half.

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