Investment Column: Aveva may be strong but it is also pricey

Innovation; Hogg Robinson


Our view: Hold

Share price: 1,581p (+10p)

Aveva is not the best-known software company in the world. The man on the street, as we have remarked before, is more likely to confuse it with Aviva, the insurance group, than tell you that it is worth more than a £1bn.

The reason is that instead of cultivating home consumers, it focuses on big companies with its expertise in engineering software. In particular, it has an enviable position in the oil, gas and power markets.

Its strengths were plain to see in yesterday's full-year results. Revenues were up 17 per cent at £174m, while adjusted pre-tax profits came in at £54.7m, up from £50.7m last year.

The group said it had seen a particularly strong performance in emerging markets, and the oil and gas sector was the main driver of growth, accounting for around 45 per cent of total revenues.

Looking ahead, management struck a justifiably optimistic note, saying that the company was well placed to exploit opportunities both in emerging markets and in the more mature economies in the West. It was, then, no surprise when Aveva upped its dividend by 7 per cent.

The last time we looked at the group, we held back from buying, citing the somewhat expensive valuation of more than 25 times forward earnings. Numis now puts the stock on under 25 times, which is an improvement. There is also little doubt that this a strong business, with stellar prospects. There was nothing in yesterday's statement that would justify a sell recommendation.

But equally, while the results underscored the scope for long-term growth, they did not point to the kind of short-term catalyst that would make us buy despite the high multiples. We would, needless to say, not think twice about rushing in if the share price suffers a pullback in the coming months. For now, however, keep holding.

Innovation

Our view: Buy

Share price: 18.5p (+1p)

Yesterday's half-yearly results prompted plenty of bullishness at Innovation.

The last financial year saw the small-cap software group radically reshape its business, and the figures certainly suggest that the strategy is working – and working well.

Beating analysts' expectations, the company's pre-tax profits for the period grew to £6.3m, a year-on-year rise of more than 150 per cent, while its revenues advanced about 12 per cent.

Innovation is built around its software for the insurance sector, with one part of its operations focused on selling those products. Another division is focused on winning outsourcing work from insurers, and it is this arm that appears to hold more promise.

After a multi-million pound investment in the software, the company seems to be reaping the dividends. In the past six months it has not only struck deals with Ford and Tesco but signed an agreement with an unnamed US insurer.

Innovation already operates in a number of countries around the world, and there is a strong belief that opportunities for organic growth are strong. Acquisitions are also seen as likely.

As we said earlier, the results certainly seem to validate the new team's approach, and although there is still a lot of work to do, Innovation looks like it's on the right track. That makes it a good bet, in our view.

Hogg Robinson

Our view: Hold

Share price: 59.25p (+1.25p)

Hogg Robinson has been a star for this column, with our last buy recommendation in December working out well over the last couple of months. The question now is whether the business travel company will continue to glow.

To be sure, the strong interim performance has continued through to the full year. Full-year pre-tax profits were up 16 per cent to £33m on revenue of £358m, up 10 per cent. Debt is down, so is the pension deficit, while the dividend is up 25 per cent.

Second-half margins are off a bit – though they are up year on year – because the company took on staff to maintain service levels. But productivity has improved.

Hogg's business is still very much centred on Europe. However, it has the financial clout to expand, and management are targeting America and Asia, if suitable "bolt-on" acquisition opportunities arise.

Trading on just over seven times next year's forecast full-year earnings, the shares remain keenly priced and business travel is still growing into a recovering global economy. Hold for now but buy again on any weakness.

Voices
A Russian hunter at the Medved bear-hunting lodge in Siberia
Save the tigerWildlife charities turn to those who kill animals to help save them
News
Davis says: 'My career has been about filling a niche - there were fewer short actors and fewer roles – but now I'm being offered all kinds of things'
PeopleWarwick Davis on Ricky Gervais, Harry Potter and his perfect role
News
i100
Sport
Frank Lampard will pass Billy Wright and equal Bobby Charton’s caps tally of 106 caps against
sportFormer Chelsea midfielder in Etihad stopgap before New York contract
PROMOTED VIDEO
Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
Arts and Entertainment
A scene from Aladdin is performed at the Tony Awards in New York in June
theatreBrit producer Lythgoe makes kids' musical comedy a Los Angeles hit
Sport
Usain Bolt of Jamaica smiles and shakes hands with a competitor after Jamaica won their first heat in the men's 4x100m relay
sport
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
Life and Style
A small bag of the drug Ecstasy
Health
Life and Style
Floral-print swim shorts, £26, by Topman, topman.com; sunglasses, £215, by Paul Smith, mpaulsmith.co.uk
FashionBag yourself the perfect pair
News
news
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Netherlands' goalkeeper Tim Krul fails to make a save from Costa Rica's midfielder Celso Borges during a penalty shoot-out in the quarter-final between Netherlands and Costa Rica during the 2014 FIFA World Cup
newsGoalkeepers suffer from 'gambler’s fallacy' during shoot-outs
News
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmReview: A week late, Secret Cinema arrives as interactive screening goes Back to the Future
Extras
indybest
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Financial Analyst - Forecasting - Yorkshire

£300 - £350 per day: Orgtel: Financial Analyst, Forecasting, Halifax, Banking,...

Business Architect - Bristol - £500 per day

£500 per day: Orgtel: Business Architect - Banking - Bristol - £500 per day A...

Regulatory Reporting-MI-Bank-Cardiff-£300/day

£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Save the Tiger: Meet the hunters tasked with protecting Russia's rare Amur tiger

Hunters protect Russia's rare Amur tiger

In an unusual move, wildlife charities have enlisted those who kill animals to help save them. Oliver Poole travels to Siberia to investigate
Transfers: How has your club fared in summer sales?

How has your club fared in summer sales?

Who have bagged the bargain buys and who have landed the giant turkeys
Warwick Davis: The British actor on Ricky Gervais, how the Harry Potter set became his office, and why he'd like to play a spy

'I'm a realist; I know how hard this business is'

Warwick Davis on Ricky Gervais, Harry Potter and his perfect role
The best swim shorts for men: Bag yourself the perfect pair and make a splash this summer

The best swim shorts for men

Bag yourself the perfect pair and make a splash this summer
Has Ukip’s Glastonbury branch really been possessed by the devil?

Has Ukip’s Glastonbury branch really been possessed by the devil?

Meet the couple blamed for bringing Lucifer into local politics
Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup