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Weak energy demand is hurting Aveva's software sales

The engineering data and design software group suffered weak trading in multiple markets
May 25, 2016

Faced with tepid economic growth and a plunging oil price, energy companies and shipbuilders spent less on engineering and design systems from Aveva (AVV) in the reported period. The software group also wasted five months working on an ultimately unsuccessful takeover by French energy giant Schneider Electric. The upshot was an 18 per cent slide in adjusted pre-tax profits to £51.2m, which prompted investors to send the group's shares down 5 per cent.

IC TIP: Hold at 1513p

Stunted demand in Brazil, South Korea and the US offset growth in China and steady trading elsewhere. Statutory earnings were also hit by about £15m in one-off restructuring and deal costs. But Aveva's top products showed resilience, and management made valuable strides into more buoyant markets. For instance, sales of Aveva Everything 3D, its flagship design platform, almost doubled, and now make up around a tenth of group turnover. It also posted strong growth in non-3D products such as laser modelling and schematics. And a major food-processing technology company is now using its software to design a wide range of production plants.

Broker Numis expects pre-tax profits of £53.3m in the year to March 2017, giving EPS of 64.8p (up from £51.2m and 62p in FY2016).

AVEVA (AVV)
ORD PRICE:1,513pMARKET VALUE:£968m
TOUCH:1,511-1,514p12-MONTH HIGH:2,350pLOW: 1,221p
DIVIDEND YIELD:2.4%PE RATIO:47
NET ASSET VALUE:314p*NET CASH:£108m**

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201219657.758.921.0
201322063.566.824.0
201423769.078.127.0
201520954.965.130.5
201620129.432.036.0
% change-3-46-51+18

Ex-div: 30 Jun

Payment: 5 Aug

*Includes intangible assets of £76.5m, or 120p a share

**Includes £43.3m in treasury deposits