Engineering software supplier AVEVA (AVV) maintained its dividend despite swinging to a surprise first-half loss as revenues fell on delays in closing new business.

The UK’s largest listed software company saw operating profit slump £23.2 million into the red having reported a £25.5m profit a year ago as it refused to turn off the investment taps in areas such as Cloud and AI in the face of the pandemic.

The company also saw two subscription deals in its Engineering unit slip into the second half as clients in markets such as energy and mining continue to adjust to the global coronavirus outbreak.

That saw AVEVA stock slump more than 7% on Thursday to £40.87, its lowest since mid-July, topping the FTSE loser board.

AVEVA saw double-digit top line declines as it posted a 15% fall in revenue to £332.6 million, missing consensus forecasts of £350 million.


In the short-term this will jam the brakes on a couple of its key medium-term targets, of closing in on 30% adjusted earnings before interest and tax (EBIT) margins, and to grow above the wider industrial software market growth, although the company has remained tight-lipped on more detail.

EBIT margins were 16.9% in the half, sharply down from last year’s 26%, the same ballpark implied by full year to 31 March 2021 estimates.

That said, AVEVA impressed on another important measure, recurring revenue, where the half’s 64.2% is well ahead of the company’s medium-run target of 60%, underlining the positive Cloud subscription momentum behind the scenes.

Although a weak cash performance and the 15.5p per share dividend depleted its cash balance, AVEVA expects a much stronger second half performance, boosted by upcoming renewals, signing the slipped deals, and a positive pipeline.

‘The strong second half order pipeline underpins the board's confidence in its outlook for the full year’, the company said.


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Issue Date: 05 Nov 2020