Predictably, the cost of Aveva’s (AVV) long-awaited merger with Schneider Electric has skewed the statutory results for the half-year – the first full period since the deal completed. However, the adjusted numbers paint a far rosier picture, with pre-tax profits climbing by more than 50 per cent to £60.5m and EPS up 41.4 per cent on a pro-forma basis.
The question is whether this growth can continue, and the initial signs are mixed. In September, management laid out medium-term goals for revenue growth, operating profit margins and recurring revenues. They have made good progress on all three, but the group noted that the cost control and synergies needed for its target margin of 30 per cent need more work.
Share price reaction to the half-year numbers has been positive, but management has been careful to add a note of caution. The group renewed some significant contracts earlier than expected, a positive development that nevertheless means the contract revenues will no longer appear in the second half as expected. What’s more, the group signed a multi-year contract extension in the last three months of the previous financial year, creating a tough comparator.
House broker Numis is forecasting adjusted EPS of 83.9p in the year to March 2019, rising to 96.3p in FY2020.
AVEVA (AVV) | ||||
ORD PRICE: | 2,722p | MARKET VALUE: | £4.39bn | |
TOUCH: | 2,716-2,728p | 12-MONTH HIGH: | 3,084p | LOW: 1,640p |
DIVIDEND YIELD: | 1.5% | PE RATIO: | 93 | |
NET ASSET VALUE: | 1,183p* | NET CASH: | £81.8m |
Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
2017 | 215 | 7.8 | 7.03 | nil** |
2018 | 337 | -5.5 | -3.61 | 14.00 |
% change | +56 | - | - | - |
Ex-div: | 3 Jan | |||
Payment: | 1 Feb | |||
*Includes intangible assets of £1.93bn, or 1,196p a share **No half-year dividend was paid due to the cash return of £10.15 per share in Mar 2018 |