Ansys expects stellar growth to slow in tough environment

After an exceptional performance in the 2017 financial year, Ansys expects moderate growth in 2018 due to the tough economic environment.

The technology group’s headline earnings per share trebled to 14.71c.

Revenue rose 70% to R806m, lifted by the demand for its products from the defence and cyber security, mining and industrial as well as the telecommunications industries. The performance also includes the 12-month financial results of Parsec, which was bought in 2015. Total net profit was up 239.2% to R67.8m.

CEO Teddy Daka said the challenging environment was expected to increase margin pressure within most of Ansys’ local businesses.

Internationally, the outlook appeared “more favourable but is only expected to contribute meaningfully over the medium-term”.

Ansys develops, produces, distributes and integrates technology-driven solutions for rail, mining and industrial, defence and information security, as well as telecommunications. Ansys’s telecoms segment increased revenue by 109.8% to R428.8m, helped by the accelerated roll-out of fixed-line fibre optic infrastructure by telecommunications companies.

Profit increased to R82.2m, from R6.1m in 2016. In 2016, telecommunications companies invested about R26bn in broadband infrastructure.

The continued investment in fibre infrastructure is expected to remain healthy as many companies have increased their capital expenditure for 2017.

The mining and industrial business remained strong, despite the depressed market conditions.

Revenue was up by 109.9%, to R89.3m, while profit nearly doubled to R7.7m.

Daka said the focus on mine safety and health obligations as well as the need to improve operational efficiencies at mines through automation, contributed to the growth.

The defence and cyber security segment recorded revenue growth of 108.1%, to R187.6m, largely from the higher than expected sales volumes outside SA as well as the recognition of the full benefit of the acquisition of Parsec.

However, the effect of budget constraints locally led to fewer opportunities, changes in product mix and reduced margins.

The performance of the rail segment was disappointing and the business is expected to remain under pressure.

However, Daka said, investments in existing and new intellectual property products “are expected to contribute positively as we take advantage of the digital transformation in the railways sector”.

Ansys, which is celebrating 10 years on the JSE’s small-cap index AltX, is eyeing acquisitions to boost its growth.

The company’s share price has fallen about 16% so far in 2017, in line with the AltX overall drop of 12.81%.

MINING AND INDUSTRIAL BUSINESS REMAINED STRONG, DESPITE THE DEPRESSED MARKET CONDITIONS