A 50-year history may be a source of pride for Aveva (AVV), but the software group's heritage has actually caused it difficulties recently. Nearly two-thirds of group revenue comes from the oil and gas and marine markets, which have been experiencing a period of downturn. The result is less development work, which means weaker demand for Aveva's software.
Stripping out foreign exchange movements, an acquisition-related one-off credit of £1.8m and exceptional costs from the group's failed takeover by Schneider Electric (which plagued comparative numbers) reveals the extent to which Aveva has been hurt by poor end markets. Like-for-like revenue and pre-tax profits fell by 4 per cent and 9 per cent, respectively. Broker Numis has therefore downgraded forecasts for the year to March 2018 and now expects EPS of 69.9p (65.4p in FY2017).
But it's not all doom and gloom. A number of contract wins in the US helped boost sales there by almost a fifth. This more than offset continued difficulties in Brazil, where revenue is "no longer material to the group". US expansion, particularly in the power supply market, is key to Aveva's strategy as it attempts to limit its reliance on the oil and gas and marine sectors. An 11 per cent increase in revenue from power contracts means that division now contributes close to a fifth of the overall top line.
AVEVA (AVV) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,960p | MARKET VALUE: | £1.25bn | |
| TOUCH: | 1,959-1,961p | 12-MONTH HIGH / LOW: | 2,149p | 1,481p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 33 | |
| NET ASSET VALUE: | 345p* | NET CASH: | £131m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 220 | 63.5 | 66.8 | 24.0 |
| 2014 | 237 | 69.0 | 78.1 | 27.0 |
| 2015 | 209 | 54.9 | 65.0 | 30.5 |
| 2016 | 201 | 29.4 | 32.0 | 36.0 |
| 2017 | 216 | 46.9 | 59.5 | 40.0 |
| % change | +7 | +59 | +86 | +11 |
Ex-div: 6 Jul Payment: 4 Aug *Includes intangible assets of £76.2m, or 119p a share | ||||
