Energy and engineering companies can rarely afford to build prototypes of big projects, instead opting to test designs using software supplied by Aveva (AVV). Even so, currency shifts, economic uncertainty and oil price volatility conspired to halve the group's first-half operating profit to under £14m.
Sales tumbled 22 per cent at Aveva’s core engineering and design division, reflecting project delays in Brazil and South Korea and depressed spending in the oil and gas industry. Aveva also warns that recent sanctions on Russia’s energy industry may dampen spending, while the global shipbuilding industry is likely to remain "flat at best."
But this was all well trailed in a September profit warning, so that Aveva's shares actually rose 6 per cent on these dismal numbers. Investors were perhaps cheered by the company's annual usage fees - those it charges for ongoing use of its software - which rose 12 per cent at constant currencies to £32m. That partially reflected the success of the company's latest modelling tool, Everything 3D, which has attracted the likes of Shell and KBR.
Aveva plans to offset tepid energy spending by targeting the burgeoning US shale industry. It is also cutting back on hiring and slashing sales commissions and bonuses, which is expected to save £10m this half.
Broker Numis slashed its full-year pre-tax profit and EPS forecasts by 10 and 8 per cent respectively, to £60.7m and 71.9p.
| AVEVA (AVV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,465p | MARKET VALUE: | £936m | |
| TOUCH: | 1,464-1,468p | 12-MONTH HIGH: | 2,626p | LOW: 1,317p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 268p* | NET CASH: | £116m | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 108 | 27.3 | 29.6 | 5.0† |
| 2014 | 86 | 14.2 | 16.8 | 5.5 |
| % change | -21 | -48 | -43 | +10 |
Ex-div: 4 Jan Payment: 2 Feb *Includes intangible assets of £55m, or 86p a share †Excludes special dividend of 147p paid in August 2013 | ||||
