Interactive Investor

ii view: Aveva shows why it's a leader in its field

28th May 2021 15:17

Keith Bowman from interactive investor

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Growing by acquisition and helping its customers improve efficiency. We assess prospects. 

Full-year results to 31 March

  • Revenue down 1.6% to £820 million
  • Profit from operations down 61% to £36.6 million
  • Final dividend of 23.5 pence per share

Chief executive Peter Herweck said:

"The last year has been transformational for Aveva. The Group reacted quickly to the Covid crisis, so that despite a challenging first half, the second half saw double-digit revenue growth. At the same time, our transition to Subscription continues at pace.

"The acquisition of OSIsoft has established Aveva as a clear global leader in operational industrial software, further enhancing our ability to lead the digital transformation of the industrial world, with a more diversified customer base, supporting their energy transition and sustainability journeys.

"Initial customer feedback on the combination of Aveva and OSIsoft has been extremely positive and I look forward to capturing the significant value opportunity over the coming years. Although early in the financial year, trading has started we for the enlarged Aveva Group and it is performing in-line with our expectations."

ii round-up:

Aveva (LSE:AVV) is a major engineering and industrial software provider. Its products help drive efficiency gains for the industries it serves such as energy, mining and food production.

Customers include BP (LSE:BP.), the Abu Dhabi National Oil Company, Veolia Water and food giant Danone (EURONEXT:BN)

In March, Aveva completed its $5 billion acquisition of OSIsoft, a leader in real-time industrial data software - data which allows customers to optimise operations, make better decisions and drive digital transformation.

For a round-up of these latest results, please click here

ii view:

Aveva operates across the four areas of engineering, monitoring & control, asset performance management and planning & operations. A previous merger with Schneider Electric’s industrial software business helped add customer industry diversity. 

Now its takeover of OSIsoft further expands its offering and customer diversity. OSIsoft works with over 1,000 of the world's leading power and utilities companies, 38 of the global fortune top 40 oil & gas companies, along with numerous mining, petrochemical and pharmaceutical companies.

For investors, tough first halves for both Aveva and OSIsoft, because of cash conservation and freezes in spending during the height of the pandemic, should not be forgotten. Management clashes and tensions can also arise following an acquisition. But the combined company's goal to improve the productivity of its industrial customers remains an attractive one. A move away from licence fees to subscription fees should also enhance its predictability, helping to underwrite shareholder returns. In all, and with the shares sat comfortably below analysts’ current fair value target of £41.65 per share, this looks to be a UK software company to own for the long-term. 

Positives: 

  • Diversity of customers and geographical locations
  • Purchase of OSIsoft expected to enhance earnings

Negatives:

  • Ongoing Covid-19 uncertainty
  • Acquisition risks

The average rating of stock market analysts:

‘Strong buy’

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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