Companies: AVCT    AVV    MRM    VDS   

AVEVA - a global player and a global winner, by Leslie Copeland

Software group AVEVA appeals to me for an array of compelling reasons. It’s growing fast, has lots of cash, is run by committed and entrepreneurial experts and – perhaps most importantly – is one of the few British firms in the software space to dominate a lucrative niche.

The group’s software technology assists in the design, build and ongoing operation of large engineering projects such as ships, power plants (conventional and nuclear) and oil rigs.

In all, the business is equally split between all three sectors and a few weeks back AVEVA reported interim results showing sales surging 58 per cent to £45.9 million, profits leaping 149 per cent to £13.7 million and earnings soaring 168 per cent to 15.19p. Net cash almost doubled to £30 million.

‘We’ve never had it so good,’ said chief executive Paul Taylor, explaining that every area of interest to his firm is booming. ‘The oil and gas sector is surging globally and project sizes are growing. The power industry is equally robust while ship-building demand is high – and so is interest in our products here.’

After flagging up that recurring revenues in the first half accounted for 53 per cent of income, Taylor was quick to point out that every area in the world where AVEVA operates is showing growth – with Asia, the centre of the world ship-building industry, particularly strong.

‘We witnessed 92 per cent growth in Asia-Pacific in the first half. We are very close to both Hyundai and Daewoo who have taken their largest orders ever. Shipbuilding is now a hectic industry with a new-build schedule running to past 2010. You can’t order a new ship at present, you can only order a place in the queue.’

Aveva has a strong position in the nuclear power market (all new nuclear power stations in Europe utilise its software claims Taylor) while the oil sector’s demand for ‘mega’ products plays into the strength of AVEVA’s integrated suite of products.
For the full year, the market is expecting profits of £25 million on sales of £89 million, which, given the excellent cash flow and booming markets, fully justifies the £489 million market cap. Buy and lock away.

Avacta’s seriously cerebral prospects, by James Crux

I’m backing Yorkshire-based biophysics business Avacta, the University of Leeds
spin-out led by the youthful Professor Alastair Smith. Listed on AIM by way of a
reverse takeover of cash shell Readybuy in August with an initial £14.5 million valuation, it now commands a market value north of £43 million.

Investors are warming to its ‘pain to gain’ model that spots market needs in sectors such as defence, security and the potentially huge pharmaceuticals market, then generates the technology to address them.

Areas of know-how include spectroscopy, nanotechnology, chemical analysis and instrumentation engineering. The group’s technology also deals with biological hazard detection, as well as portable, rapid detection of pathogens. Technology that could save pharmaceutical giants billions by sifting through early stage drug candidates, assessing which ones are most likely to succeed, gives the shares further appeal.

De-risking the business is a profitable analytical services arm that generates revenues through the likes of GlaxoSmithKline and UCB Celltech.

Further exciting news flow should drive the price in the short term, and longer term the company could even tempt larger predators.

Gambling on Metrodome, by Robert Tyerman

If you fancy a flutter on a company which has lost 97 per cent of its value in 11 years but has now changed direction, then AIM-quoted audiovisual entertainment group Metrodome is worth considering. The company had lost money on high-risk feature films and internet ventures and owed £3.5 million last year when TV producer Peter Urie, who had previously sold his own Media Merchants children’s TV company for £14 million, took the helm.

He switched the emphasis from speculative theatrical release films to more dependably cash-generating home entertainment projects, stopped selling future rights for cash and set up a film marketing division. Urie, who cites an investment in 9/11 film Flight 93 as ‘an immediate hit’, organised a £1 millon private placing and persuaded a key creditor to convert a £1 millon loan into equity.

In the process, German children’s animation group TV Loonland cut its stake from 83 per cent to 71 per cent. Urie, credible to creative people and ‘suits’ alike, is determined to cut this again by raising institutional money to buy overseas film rights.

Making these changes saw the company lose an interim £445,000, but that should be reversed before too long. At 4.75p, the shares are a recovery gamble.

Vividas setting online video standards, by Oliver Haill

I believe internet video play Vividas has a breakthrough year ahead of it as its technology becomes (hopefully) one of the standard tools for showing video online. Vividas's expertise is concerned with the 'streaming' of video content over the internet and it has a number of routes to market and a host of exciting names on the
books already.

Current clients include blue chips Ford Motors, Zurich, Honda and Goldman Sachs – not to mention Sony Pictures and United International. Thus far it has one client in the potentially money spinning 'adult entertainment' sector. And of its 200-strong customer base, the top 20 revenue generators are all repeat users.

With shrewd new CEO Paul Neville in charge – and plenty of cash in the coffers – Vividas has adopted a channel partner strategy to widen its sales net. The first half of the year was spent training these new channel partners so they can sell the products properly and the coming half should see the fruits of this labour.

Based on present contracts, house broker Teather & Greenwood foresees losses almost halving next year, before a swing to profits of £1 million and 3.1p of earnings in 2008. So, although still a speculation, Vividas not only trades at a pretty cheap price, but with the speed things move in the internet, I feel the next 12 months could be huge in terms of new contract wins as the technology rapidly builds recognition.