Aveva reveals 22% profit growth – is this a FTSE 100 recovery play worth buying? (AVV)

By Richard Mason


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Software giant Aveva (LSE:AVV) has reported strong year-end 2020 results showing profit growth of 22% while leaving its final dividend of 29p unchanged.

Software giant Aveva (LSE:AVV) has reported strong year-end 2020 results showing profit growth of 22% while leaving its final dividend of 29p unchanged.

Aveva’s market-leading anti-virus software Avast and its associated VPN, have been downloaded 435 million times.

More than 45% of FTSE companies reduced or stopped dividends entirely in the wake of the coronavirus-induced economic stop, so this news will be a boost to investors.

The FTSE 100 company revealed it would spend £60m less than planned this year, without cutting jobs or taking government loans.

Across the 12 month period pre-tax profits rose from £175.4m to £213.8m, with revenue up 8.8% to £833.8m.

Aveva has been a slow-and-steady investor’s dream for some time. Despite its high P/E ratio of 44 times earnings, and a limited dividend yield of 1.03%, it has no debt and cash of £114.6m to play with. It was promoted from the FTSE 250 to the UK’s top 100 companies by market cap alongside sports fashion empire JD Sports (LSE:JDS) in June 2019.

CEO Craig Hayman noted how recurring revenue from multi-year contracts put Aveva in “a strong position” with the company “well-placed to navigate through the challenges of the current environment”.

While the Aveva share price has clawed back some of its value, rising 41% since the March bottom, the FTSE 100 firm has not returned back to where it was pre-crash. This report could be the catalyst to put it back on top.

Aveva shares were up nearly 4% to 4,178p in early Monday trading.

I believe there remains significant upside potential for investors who like their growth a little less volatile and a little more predictable.

Recurring revenue growth is key to this.

With the UK economy now looking towards reopening, investors have been betting on recovery plays like leading drinks brand owner C&C Group (LSE:CCR). In recent days value investors who loaded up on historically cheap FTSE 100 firms have been rewarded, for example with oil and gas supermajor Royal Dutch Shell (LSE:RDSB) and insurance behemoths Legal & General (LSE:LGEN) and Aviva (LSE:AV) — two strong candidates for recovery we picked as a top tips back in March.

The pharma minnow Covid-19 test bubble appears to have burst, and all investor eyes are now focused firmly beyond the effects of the pandemic.

The FTSE 100 has regained 29% of its value since the coronavirus crash low of 4,993 on Monday 23 March.


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Author: Richard Mason

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

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