Aveva issues profit warning over war in Ukraine and rising costs

UK technology group Aveva has warned of slower revenue growth and margins for this financial year because of the war in Ukraine and rising costs caused by the battle for talent in the software industry.

The FTSE 100 company said on Wednesday it had ceased new business in Russia, which represented 2 per cent of its revenue in the fiscal year ended in March 2022. It “continues to support existing non-sanctioned companies where there is no legal basis to terminate contracts”, it said.

Cambridge-based Aveva is an industrial software company that has sought in recent years to expand its client base outside of its traditional strengths in the oil and gas industry.

The company said adjusted earnings before interest and tax would be affected by “wage inflation due to very competitive software labour market conditions” as well as increased investment into research and development of cloud technology.

“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,” it said.

Aveva’s shares tumbled 20 per cent following the profit warning in early morning trading before partially regaining some of its losses.

Aveva is one of Britain’s oldest technology companies, having been spun out of Cambridge university in the 1960s. It acquired OSIsoft, its SoftBank-backed US rival in 2021 in a deal that was one of the largest struck by a UK technology group. The company is majority owned by France’s Schneider Electric following a £3bn reverse takeover in 2017.

It is one of the most successful technology companies to come out of the area known as “Silicon Fen”, alongside the semiconductor companies Arm Holdings and CSR, the software developer Autonomy, and Domino Printing Sciences.

The company said its revenue growth for the fiscal year reached 7 per cent on a pro forma basis, an adjusted gauge that includes results from OSIsoft. It said it expected the adjusted ebit margin to come in just below 30 per cent, which would “result in an overall adjusted ebit performance that is in-line with market expectations”.

The company’s annual recurring revenue grew 9 per cent in the year ended in March, “below the levels” set out in the company’s plans. But it maintained its financial targets for the next five years, believing continued strong growth would be achieved through revenue synergies related to the OSIsoft acquisition.