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Aveva emerges anew

The industrial software group has achieved critical mass, but it may take time to appreciate the benefits that come with scale
June 14, 2018

Aveva (AVV) helpfully provided pro-forma comparisons for its March year-end, following its recent tie-up with the software arm of France's Schneider Electric SA. The combined group would have delivered aggregate revenues of £705m, an 8.6 per cent rise year on year, with adjusted operating profits up by a similar margin. Reported returns were held in check by costs associated with the reverse acquisition, but a 1.8 percentage point increase in the adjusted margin points to solid underlying trading. Presumably, unit profitability will receive additional support from the £25m in synergy cost savings targeted by 2020.

IC TIP: Hold at 2,840p

The combination involved a transfer of Schneider Electric software assets and a payment of £550m – £10.15 a share – to the UK group’s shareholders in exchange for a 60 per cent holding. Aside from the cash return, the strategic rationale for the deal is easy to appreciate. The addition of the Schneider portfolio augments Aveva’s ‘Digital Twins’ offering – digital replicas of physical assets and systems – a type of technology with myriad industrial applications. And it has also resulted in a much stronger position in the lucrative North American market, while reducing proportional exposure to the upstream oil & gas market.

Numis has ratcheted up its aggregate estimates, giving adjusted profits of £171m for March 2019, with EPS of 78.4p, against £166m and 75.6p in FY2018.

AVEVA (AVV)    
ORD PRICE:2,840pMARKET VALUE:£ 4.58bn
TOUCH:2,838-2,842p12-MONTH HIGH:2,960pLOW: 1,195p
DIVIDEND YIELD:1.0%PE RATIO:60
NET ASSET VALUE:1,193p*NET CASH:£96.1m
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201423769.078.127.0
201520954.965.030.5
201620129.432.036.0
201743351.440.040.0
201849946.947.027†
% change+15-9+17-33
Ex-div:05 Jul   
Payment:03 Aug   
*Includes intangible assets of £1.95bn, or 1,211p a share. †No interim dividend was paid FY2018 due to the cash return of £10.15 per share in Mar 2018.