AVEVA CFO on empowering Britain’s biggest tech firm

AVEVA has emerged as Britain’s biggest technology group by providing industrial software for complex industries such as oil and gas, construction and utilities.

As rivals such as tech Arm Holdings and Autonomy have been taken over in recent years, AVEVA’s market value has surpassed that of  FTSE-100 peer Sage, making the Cambridge-based group the largest UK technology group.

AVEVA’s 3D computer-aided design and simulation offer to industrial companies has seen it grow steadily since its launch in 1967, when it was known as Computer Aided-Design Centre, with small bolt-on acquisitions. But the group announced its arrival as a serious player when it merged with the industrial software business of French giant Schneider Electric two years ago.

Over the years, demand for the AVEVA has grown from large industrial companies using digitalisation to make major projects more efficient, safer and more competitive. At the same time, the opportunity to digitalise the operations of major projects such as power plants, chemical refineries and water treatment facilities provided by the Schneider business, has pushed the enlarged business into the big league.

It has also moved away from one-off licence sales to a more stable and predictable pattern of monthly subscription payments in the 44 countries it operates in across EMEA, Asia Pacific and the Americas. AVEVA is now worth nearly £8bn, having made an adjusted pre-tax profit of £184m on revenues of £766.6m in its financial year to the end of March 2019.

For James Kidd, who has been at the tech firm 16 years, Aveva’s journey has aligned with his own personal development – that has seen him become CFO and then CEO, and more recently taking on a combined role of CFO and deputy CEO in the new entity.

Model approach

Kidd’s decision to work in a finance role was sparked by recognition that his farmer parents worked closely with their accountants, leading him to think the profession “would be quite interesting to get into”, although he eventually plumbed for business studies at Aberdeen’s Robert Gordon University.

A sandwich year at local accountancy firm Ritson Smith prompted Kidd to start there, qualifying after working on clients in the oil and gas sector, and owner-managed businesses such as  farmers and shop owners, he describes as “a very good experience, as it gave me the right grounding”.

A move to Arthur Andersen’s Cambridge office “for the bigger company plc experience”, provided an environment that was “very dynamic, very challenging, but also very rewarding. They really did push you, it pushed you out of your comfort zone into areas that you wouldn’t typically get involved in,” he adds.

The portfolio included larger clients such as windscreen repair specialists Autoglass, but also a growing number of small but fast-growing tech companies, that Cambridge was being increasingly recognised for producing. One client was AVEVA, that he worked on the IPO of in 1996. “I became the audit manager on AVEVA and that’s where that connection started,” he advises.

After the collapse of Andersens in 2002 following its relationship with US power firm Enron, Kidd like many Andersen staff moved to Deloitte before he was hired by AVEVA in 2004, which struck him then as a firm with “interesting technology and a good customer base.”

“Even at that point it was a global business and was actually making money, compared to most of my other clients at the time, which was the dotcom boom- start-ups were not making any money but raising capital left, right and centre.”

Having forged a strong relationship with the then CFO Paul Taylor, through having  worked on both the IPO and then as audit manager to AVEVA, Kidd’s arrival was shortly followed by close involvement in the £20m acquisition of Tribon, at the time a major a deal representing roughly a third of the market value of the company. “They had little or no experience in being able to handle what was a class one transaction, so I got taken on to manage the acquisition from the AVEVA side,” he informs.

Having successfully delivered the acquisition and integration of the new business, a period in which Kidd was given plenty of exposure to the board including CEO Richard Longdon, he was made head of finance in 2006, effectively the finance number two.

That acquisition set in train a pattern for deal-making that AVEVA has successfully applied again and again. “We like to partner with companies first, get close to them in some sort of commercial relationship, because it’s a two way thing, they get to know us, we get to know them. Ultimately it leads to getting the two businesses together. It’s quite a well-trodden path of how we approach it,” says Kidd.

As the group continued to grow, acquiring small firms for complimentary talent and intellectual property (IP), Kidd became CFO following the retirement of Taylor, adding the external facing part of the role. “That was where I needed more training, coaching to help me in terms with how we deal with analysts, investors. How we portray the company was a key part of getting up to speed,” he readily admits.

To hone his presentation skills, Kidd was given plenty of guidance from  Taylor and Longdon and shadowed them at City meetings, “so it wasn’t like coming into it without knowing what’s involved,” he says. “the key is to prepare, prepare, prepare. One thing that really stood out for me, is that you need to rehearse your presentation multiple times, as analysts are always looking for an angle, for a weaknesses in your arguments, so you need to prepare yourself for those difficult questions,” advises Kidd.

Running the show

The next chapter in Kidd’s career was kickstarted by the retirement announcement of Longdon in mid-2016 which prompted a six-month hand-over period in which the CFO was made deputy CFO, and then CEO in January 2017.

The decision for Kidd to step up was driven by tough markets in the group’s end markets- principally the oil and gas industry. His experience and finance leader’s approach were considered vital for stabilising the group during a choppy period. “Bearing in mind I knew the business really well, I thought this is an opportunity to make sure that we navigate through this next phase,”

“Although the business was in good shape, our end markets were very challenged so we had to work our way through that, and thankfully from where we are today, that was entirely the right decision,” he says.

Everything changed again when the reverse takeover of Schneider’s industrial software arm was executed in the Summer of 2017, two years after an initial tie-up fell through. “It was a very complex deal structure that took the markets some time to get their heads around but ultimately has been very successful,” says Kidd.

Given the challenge of merging two similarly sized entities, a decision was taken to hire a new CEO in Craig Hayman from software giant PTC. Kidd became CFO and deputy CEO and his counterpart at Schneider Dr Ravi Gopinath became COO, an elegant solution for a situation that Kidd says “can be fraught with difficulty”.

The Schneider deal gave Kidd the opportunity to push through a finance transformation programme featuring a new ERP system using Oracle Fusion. “AVEVA had never really used outsourced office functions before, but now we’re using a third party to provide basic transaction processing. We were never previously big enough to justify that, but the scale we are now at means we can do that,” he says.

“Part of this transformation is to make more use of AI and other tools to help provide insight from data, enabling us to support the business in areas such as integrating acquisitions much quicker,” adds Kidd.

Another important step forward in raising the performance of the group has been increasing the use of finance business partnering. “We have finance business partners allocated to each of the functions. We have teams that are supporting the business on the ground, as well as corporate functions around the main disciplines of finance, FP&A, tax, treasury, financial reporting and consolidation,” Kidd explains.

The ultimate aim is to develop a finance function that can support the group’s ambitions to rapidly grow its global footprint, using the end-to-end offer created by the Schneider deal to capture business in lucrative markets such as the US and Asia.

“Everyone’s looking at digitalisation, but when you look at it in terms of how the industrial world has adopted digitalisation technology it’s still pretty immature, in terms of that growth. Retail, finance, IT, telecoms, have all gone through digitalisation, but if you look at oil and gas, energy, chemicals, those industries we serve, they still have a long way to go, so we have a big opportunity ahead of us,” says Kidd.

With being a FTSE-100 member, a higher profile means a greater chance of attracting talent needed to expand, although Kidd calls for greater government support to ensure UK tech companies can maintain the best people and IP. “We create great IP but often it gets hoovered up by strategics at too early a stage, before it gets the chance to mature and stand on its own two feet,” he says.

“From where we came from, to where we are now, is quite a story. But this is not the end, this is the beginning. We’re entering the next phase of what the new AVEVA is. We have very ambitious plans to continue to grow and be the market leader in this space,” he adds.

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