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Grand designs at Aveva

Aveva delivered a resilient first-half performance as it diversified away from oil and gas markets
November 13, 2015

Tepid demand from oil and gas and marine clients weighed on Aveva (AVV) in the six months to 30 September. Organic, constant-currency initial licence fees slumped 18 per cent at the engineering data and design software group, driving underlying pre-tax profit down a fifth to £13.7m.

IC TIP: Hold at 2036p

On the bright side, management hopes to cement the proposed deal with Schneider Electric by December, and complete it next summer. The complex transaction would see the French energy giant acquire a majority stake in Aveva in return for its software business, and promises a windfall for Aveva's shareholders of 885p in cash per share. Operationally, the result should be a business "without compare" that offers a full range of design, simulation, construction and operational feedback tools, the group's directors claim.

Half-year sales flatlined in South Korea and Japan as major shipyards deferred offshore projects, while demand in China was hit by the economic slowdown. Aveva has responded by selling different products, such as schematics software, and targeting alternative markets such as food processing, nuclear power and chemicals. Management says the group's software caters to any customers with "lots of equipment crammed into a very small space".

Broker Credit Suisse expects pre-tax profit of £62.4m in the year to March 2016, giving EPS of 75.0p (from £62.1m and 74.3p in FY2015).

AVEVA (AVV)
ORD PRICE:2,036pMARKET VALUE:£1.3bn
TOUCH:2,039-2,052p12-MONTH HIGH:2,344pLOW: 1,186p
DIVIDEND YIELD:1.5%PE RATIO:46
NET ASSET VALUE:272p*NET CASH:£69.4m†

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201485.914.216.85.5
201582.0-0.8-4.06.0
% change-5--124+9

Ex-div: 31 Dec

Payment: 29 Jan

*Includes intangible assets of £80.3m, or 125p a share †Excludes £36.3m in treasury deposits