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Aveva accelerates towards merger

The software group, soon to merge with Schneider Software, saw positive sales momentum and a good net cash position in the first half
November 14, 2017

Aveva (AVV) achieved encouraging revenue growth and a 13 per cent rise in underlying half-year profits in the group’s first results since announcing its merger with French peer Schneider’s software business. Management says the deal is likely to complete on or around the end of 2017, creating “a global leader in engineering and industrial software”, but no additional updates on the merger’s cost synergies have been released. The tie-up is deemed "transformational", an overworked term, but the deal will expand Aveva's capabilities into some of the fastest growing digital segments. 

IC TIP: Hold at 2,565p

Trading looks broadly positive ahead of the merger, with particularly strong sales growth (22.7 per cent) in the Asia-Pacific region - buoyed by new orders from marine customers. Marine constitutes the group's second-largest market behind oil and gas; industry troubles there have been well documented, but Aveva said that business activity there has stabilised, though industry budgets remain constrained.

Sales in the Americas fell 13 per cent at constant currencies due to lower initial licence fees. However, another plus point of the Schneider combination is that it's expected to bring a more even revenue distribution by region, including a much greater footprint in North America.

Analysts at Numis forecast pre-tax profits of £71.2m and EPS of 69.9p for the year ending March 2018, up from £55m and 66.8p in 2017. This will rise to £156.3m and 69.8p in 2019, after incorporating Schneider’s business.

AVEVA (AVV)    
ORD PRICE:2,565pMARKET VALUE:£1.64bn
TOUCH:2,562-2,566p12-MONTH HIGH:2,619pLOW: 1,655p
DIVIDEND YIELD:1.1%PE RATIO:77
NET ASSET VALUE:301p*NET CASH:£133m
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201684.35.56.513.0
201793.9-12.4-19.9nil
% change+11---
Ex-div:na   
Payment:na   
*Includes intangible assets of £74m or 115p per share