A2. Aveva Group plc is a leading global provider of engineering, design and info
ID: 2790656 • Letter: A
Question
A2. Aveva Group plc is a leading global provider of engineering, design and information management software. Given below is summarised information about their performance and financial position.
Share prices
At 31st March 2015
£14.80
At 31st March 2016
£15.75
Consolidated income statement for the year ended 31st March
2016
2015
£’000
£’000
Revenue
201,491
208,686
Cost of goods sold
(14,689)
(15,538)
Gross profit
186,802
193,148
Research and development costs
(32,128)
(32,696)
Selling & administrative expenses
(125,252)
(105,899)
Operating profit
29,422
54,553
Net finance revenue
7
309
Profit before tax
29,429
54,862
Taxation
(8,955)
(13,303)
Profit for the year
20,474
41,559
Basic earnings per share
32.03p
65.07p
Dividend per share for the year
36p
30.5p
Number of employees
1,703
1,597
Consolidated balance sheet as at 31st March
2016
2015
£’000
£’000
Non-current assets
Goodwill
51,697
50,589
Other intangible assets
24,841
27,506
Property, plant and equipment
7,101
7,595
Net deferred tax asset (note a)
-
2,320
83,639
88,010
Current assets
Trade and other receivables
98,395
97,908
Cash and cash equivalents
107,927
103,767
Net current tax asset
1,703
-
208,025
201,675
Current liabilities
Trade payables
(5,986)
(3,251)
Other payables
(78,084)
(78,362)
Current tax payable
-
(3,523)
Financial liabilities
(864)
(432)
(84,934)
(85,568)
Non-current liabilities
Net deferred tax liability (note a)
(570)
-
Retirement benefit obligations
(5,162)
(14,187)
(5,732)
(14,187)
Net assets
200,998
189,930
Equity
Share capital
2,274
2,274
Share premium
27,288
27,288
Other reserves
5,965
1,655
Retained earnings
165,471
158,713
200,998
189,930
Explanatory notes:
Deferred tax arises due to differences in how items are treated for accounts purposes and tax purposes. A deferred tax asset represents an amount of tax that will not need to be paid in the future, but cannot be re-claimed from the tax authorities. A deferred tax liability will become payable in the future via the corporation tax liability. It is not currently payable.
Required:
Write a report on Aveva Group plc analysing its performance, financial position and future prospects. This report should be supported by appropriate ratios. Workings for the ratios should be provided.
The question will be marked as follows:
Calculation of ratios
40%
Evidence of prior research on the company
10%
Comments on performance, financial position and future prospects of the company
45%
Structure of report and conclusions
5%
100%
At 31st March 2015
£14.80
At 31st March 2016
£15.75
Explanation / Answer
The peformance compnay has not been upto the mark when compared to year 2015.There has been substantial increase in admin and selling expenses which has really not translated into sales effectively. The company in its annual presentaion (basis study from company;s website) has indicated slowdown in key sectors like oil and gas whcih accounts to 30% of their revenues. The company is workign on new statergies like Saas and lease based models and is expecting recovery and better perfomance in coming financial years. Considering significant addition in employee count, there can be a expected rise in retirement benefits of the employees whcih may add to costs as well as long term liabilties.
From organic growth point of view, the company requires more new products and innovative offerings to cross sell its offerings. Considering slowdown additiona of manpower is questionable. From the given data the performance is deciling. However due to recovery in oil markets and petorchem and EPC segment in FY 2017, the resutls has been impresive (basis information on company's website). Hence the company needs to carry its momentum on wrt 2017 for attracting more equity investors.
Conclusion:
From investment point of view, the PE ratio is found to be still high and not supported with substantial earnigns growth. Also the company needs to tweak its credit policy as it is providing a much longer period for its debtors.
Given an option, performance is not at par when compared to other competitors like siemens, autodesk operating in similar segment.
Analysis Wrt to 2015 Increase / Decrease Revenue -3.45% COGS -5.46% Gross Profit -3.29% R&D COSt -1.74% Selling & Admin 18.27% Operating Profit -46.07% Net Fin Revenue -97.73% Proft Before Tax -46.36% Taxation -32.68% Profit for yr -50.74% Ratios 2016 2015 Quick Ratio 2.449 2.357 Current Ratio 2.45 2.36 Average Collection Period - days 178.24 171.24 Fixed Asset Turnover - times 2.41 2.37 Total Asset Turnover - times 0.69 0.72 Return on Total Assets 7.02% 14.35% Return on Equity 10.19% 21.88% Debt (Total) Ratio 0% 0% Profit Margin on Sales 10.16% 19.91% Equity Multiplier 0.689142301 0.655643 Price to Earnigns 46.22 51.64Related Questions
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