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Aveva stung by weak energy and marine demand

The challenges faced by engineering data and design software group show few signs of abating
November 8, 2016

Don't be fooled by headline gains at Aveva (AVV): adjust for currency movements and underlying sales slid 6 per cent at the engineering data and design systems group, driving underlying pre-tax profit down 36 per cent to £5.9m. The declines reflect tepid demand from oil and gas companies and shipbuilders, which have downsized and delayed investments in the face of low energy prices and widespread economic uncertainty.

IC TIP: Hold at 1784p

Trading conditions were mixed across the group's geographic footprint, although activity in Europe, the Middle East and Africa was "generally stable". However, the slowdown in Brazil, combined with delays in contract renewals, pushed rental licence fees down 13 per cent to £29.4m. The bright spot was North America, where a flurry of customer wins tripled initial licence fees, lifting revenue by a third.

Sales of AVEVA Everything3D nearly doubled to over £9m as the flagship product's user base swelled to 500 customers. Management also sold additional software tools and diversified the business: sales of schematics and revenue in the fabricators business both rose a fifth, and it signed US utility giant Southern Company.

Broker Numis raised its forecasts to reflect currency benefits. It now expects adjusted pre-tax profit of £55.7m for the March 2017 year-end, giving EPS of 66.8p, up from £51.2m and 62p in 2016.

AVEVA (AVV)
ORD PRICE:1,784pMARKET VALUE:£1.1bn
TOUCH:1,781-1,785p12-MONTH HIGH:2,350pLOW: 1,221p
DIVIDEND YIELD:2.4%PE RATIO:42
NET ASSET VALUE:300p*NET CASH:£124m**

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201582.0-0.8-4.06.0
201684.35.56.513.0
% change+3--+117

Ex-div: 5 Jan

Payment: 3 Feb

*Includes intangible assets of £77.7m, or 121p a share **Includes £59.4m in treasury deposits