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Aveva flags challenges to oil sector demand

That followed a year when pre-tax profits almost doubled
June 9, 2020

Aveva (AVV) flagged a tougher start to the 2021 financial year as its oil and gas clients grapple with a sharp reduction in demand following the outbreak of coronavirus pandemic. The software group expects a knock-on impact on some of its engineering procurement and construction (EPC) customers, as oil companies cut their capital expenditure budgets.

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Most of its EPC clients have signed multi-year subscription contracts in the past two years, with a minimum level of spend, which should offer some shelter. Nevertheless, it has taken action to reduce costs this year by around £50m-£60m compared to its pre-Covid planned spend. This will further strengthen its balance sheet, which is already clear of debt and has net cash and treasury deposits of £115m, excluding lease liabilities. 

Last year the group delivered 23 per cent growth in adjusted operating profits, which rose to £217m. It continued to progress with its transition to a software-as-a-service (SaaS) model, with recurring revenue rising by more than a quarter. Growth in its cloud business also accelerated with an increase of more than double in total contract value.

Numis forecasts operating profit of £201m and EPS of 97.6p for the year to March 2021, rising to £227m and 110p the following year. 

AVEVA (AVV)    
ORD PRICE:4,195pMARKET VALUE:£ 6.78bn
TOUCH:4,189-4,195p12-MONTH HIGH:5,350pLOW: 2,636p
DIVIDEND YIELD:1.1%PE RATIO:98
NET ASSET VALUE:1,202p*NET CASH:£45m**
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201620129.432.036.0
201743351.440.040.0
201848634.539.927.0†
201976746.721.043.0
202083492.043.044.5
% change+9+97+105+3
Ex-div:09 Jul   
Payment:11 Aug   
*Includes intangible assets of £1.8bn, or 1,121p a share
**Netted against lease liabilities of £70m †No interim dividend paid