Half year profits slumped 36% for the engineering design software company once very favourable currency oscillations are stripped out. Based in Cambridge, that's where most of AVEVA's (AVV) costs are, so the plunging pound has had a hugely positive effect on headline numbers.
Reported figures show revenues up 3% at £84.3m, pre-tax profit showing a bounce back into the black at £5.5m, although the adjusted figure is about 2% off, at £9.1m. Reacting to a troubled trading backcloth management sliced 5% off underlying R&D and managed to shave 1% off admin costs.
Investors get the pros and cons, so the shares stay flat at £17.85.
The company's big problem is two of its three key markets are retrenching, and thus spending less on new projects. Relatively low oil prices have hurt the upstream parts of that industry, while Marine markets are just as pinched. That leaves Power as its sole big market on the front foot.
'It has been wrestling with this situation for some time and has diversified into adjacent markets, such as downstream and onshore areas of Oil & Gas, Petrochemicals & Chemicals, Infrastructure & Buildings and Mining & Metals in search of growth,' explains Angela Eager, analyst at IT business website TechMarketView.
'It is hard going despite bright spots, such as its Fabricators business and the owner operator segment within Oil & Gas,' Eager adds.
Rob Warensjo, of technology analysis boutique Megabuyte sees a few other boxes ticked.
'This includes maintaining strong cash flows, increasing revenue from owner operators (first half revenue was up by more than 20%), sell additional engineering software tools into its 3D installed base, and extend its SaaS footprint (recently launched AVEVA Connect and AVEVA NET Connect cloud offerings),' the analyst says.
These are the first figures since AVEVA walked away from merger talks (for the second time) with French engineering giant Schneider Electric (SCHN:PA), and the last for long-standing CEO Richard Longdon, who leaves at the end of December. He'll be replaced by the capable CFO James Kidd and he'll have his hands full, his chief challenge to overcome - how to diversify AVEVA's revenues far more meaningfully.
We think the answer could well be to reignite merger talks with Schneider or AN Other, or perhaps encourage an outright takeover of the UK company. If the pound stays this low versus the dollar, AVEVA will presumably be an attractive leveraged buyout for several overseas players.