The UK software sector’s FTSE 100 membership is about to jump by 50% presuming indicative changes are confirmed at the end of today’s stock market trading.
Computer-aided design software supplier AVEVA (AVV) is one of two new entrants to the UK’s blue-chip index (insurer Phoenix Group (PHNX) is the other). The pair will replace gaming firm GVC (GVC) and Wood Group (WG.), the oil services firm, which are both set to be kicked out and demoted to the mid cap FTSE 250 index.
Confirmation will come after the close of trading on Wednesday, 27 February.
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AVEVA will join IT infrastructure and refresh specialist Micro Focus (MCRO), currently the UK’s largest quoted software company worth approximately £7.6bn, and £7.2bn Sage (SGE). It supplies small and medium-sized businesses with accounting, human resources and other enterprise applications.
You can read more about Micro Focus and Sage by checking through the Shares archive.
Engineering software designer AVEVA should become the FTSE 100’s number third software stock. Currently valued at £4.8bn, AVEVA sells computer-aided design tools used by engineers to plan, design and build large infrastructure projects, such as huge oil rigs, massive transporter ships and nuclear power stations.
It has enjoyed a strong share price run so far this year, rallying 25% from the £24.20 levels at which it ended 2018. Now changing hands at £30.22 (the stock hit £30.50 during the past few days).
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What is particularly interesting about this run is that it takes the share price beyond the £28.86 highs of roughly a year ago, just before the stock level was rebased.
AVEVA's share price went through a planned readjustment about a year ago following a rough £10 per share return of surplus cash that had been sloshing about on AVEVA’s balance sheet.
So this implies an underlying 67% share price jump in a year, spectacular by any standards but especially so for such a large and seemingly mature business. AVEVA has been around for 30-odd years.
That cash return came after AVEVA completed its £3bn or so merger with the software arm of French engineer Schneider Electric, effectively doubling the original AVEVA’s size.
Read more about AVEVA here.
