Interactive Investor

ii view: working from home boosts cyber security firm Avast

3rd March 2021 12:16

Keith Bowman from interactive investor

Loading

Share on

This cyber security software company has over 400 million active users. We assess prospects. 

Full-year results to 31 December 2020  

Chief executive Ondrej Vlcek said:

"The group delivered another strong year of top line organic growth, high levels of profitability and cash flow generation. 

"In a year when more people and businesses turned to technology to keep their lives and their work enabled, Avast has played a vital role in safeguarding our customers' digital data and privacy. 

"The core of the Avast business and our fundamental strengths remain unchanged as we continue to effectively leverage the scale and sophistication of our platform in consumer and SMB markets. We are confident in our ability to unlock new growth opportunities, with a commitment to continued product and technological innovation, and a stronger-than-ever customer experience."

ii round-up:

Cyber security company Avast (LSE:AVST) today reported rises in both sales and earnings as more people used its software products working from home during the pandemic. 

Customer numbers for its core consumer business rose by nearly 8% to 13.62 million, with average revenue per customer up by 4.5% to $53.34 (£38.40). Revenue forecasts for the year ahead of growth of up to 8% matched City expectations, although a slowing in billings growth over the second half marginally disappointed. 

Avast shares drifted over 1% lower in UK trading having gained by more than 10% over the last year. Shares for accounting software provider Sage Group (LSE:SGE) are down by more than 15%, but health software specialist Kainos (LSE:KNOS) is up over 60%.  

Avast claims to prevent over one billion malware security attacks every month. Its products include the popular Avast Free Antivirus software. Direct consumers account for the bulk of its business, with products to small and medium size businesses (SMB) generating around 5% of sales. 

Adjusted revenues for its core consumer desktop business rose by 11.3% to just under $700 million (£504 million). Revenues for SMB proved flat over the year. 

A spike in consumer installations and transactions in the first half of 2020, given the first government virus lockdowns, then normalised to pre-Covid levels early in the second half of the year. Organic billings growth, a lead indicator, of 5% over the second half proved slightly shy of analyst expectations. 

Group net debt fell by 18% to $725 million. A final dividend of 11.8 cents per share compared to 10.3 cents this time last year and equates to a near 9% increase for the 2020 payment compared to 2019.  

ii view:

Headquartered in Prague in the Czech Republic, cyber security software maker Avast claims to have the world’s largest global security network. Every month, a bank of around 11,000 servers help prevent over 300 million visits to malicious websites. Its key markets include the US, Canada, Brazil, Russia, France and Germany. Including its free Avast software, it has over 400 million active users. 

For investors, requirements to work from home under the pandemic have aided performance. But concerns regarding some slowing in growth given the rollout of vaccines and a potential return to the office are not to be dismissed. That said, a broader dependency on the internet and time spent surfing the net remains evident. Increased consumer numbers using its products and management forecasts for organic growth over 2021 offer reassurance, but trading on less than 20 times estimated earnings for 2022 suggests the shares are not obviously expensive. A dividend yield of around 2.5% is not unattractive in this low interest rate environment. The current analyst consensus fair value estimate stands at over 550p. For now, investor support looks likely to remain. 

Positives: 

  • Geographical and customer diversity
  • Total 2020 dividend of 16 cents, up from 9 cents per share in 2018

Negatives:

The average rating of stock market analysts:

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.

Get more news and expert articles direct to your inbox

Sign up for a free research account to get the latest news and discussion, and create your own virtual portfolio.

Free Sign Up