Endava plc

Endava plc Annual Report - Investor-Friendly Summary

Let’s break down how Endava, the tech modernization expert, performed this year—plain insights for everyday investors.

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1. The Big Picture

Endava helps companies upgrade with AI, cloud systems, and custom software. Growth continued this year, but economic uncertainty and rising costs created challenges.

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2. Financial Performance

• Revenue: Increased year-over-year, though slower than the post-pandemic boom.
• Profits: Margins dipped slightly due to hiring and global expansion (e.g., new Latin America offices).
• Bottom Line: Steady growth, but higher costs are squeezing profitability.

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3. Wins & Challenges

What Worked:

• Landed major contracts in healthcare and fintech.
• Grew expertise in AI and data analytics—high-demand areas.
• Kept clients loyal despite economic turbulence.

What Didn’t:

• European clients cut spending due to recession fears.
• Rising wages (up 8% in some regions) outpaced price hikes to clients.
• New Risk: Struggling to pass rising costs (labor, office rent) to clients.

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4. Financial Health Check

• Cash Reserves: Enough to cover operations and surprises.
• Debt: Low compared to rivals—reduces risk.
• Dividends: None. Profits reinvested in growth.
• Tax Risks:
  • UK reviewing £18.5 million in R&D tax credits—could hurt profits if disputed.
  • Operating in 29 countries complicates tax compliance.

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5. Key Risks to Know

• Economic Sensitivity: Over 50% of revenue from Europe/U.S. Slowdowns or conflicts (e.g., Ukraine, Middle East) could delay projects.
• Inflation Squeeze: Costs rising faster than client pricing.
• Currency Swings: Revenue split across GBP (29%), USD (30%), EUR (25%)—exchange shifts hit profits.
• Workforce Hurdles: Visa delays and labor laws (e.g., UK’s IR35 rules) may raise costs.
• Regulatory Traps: GDPR, sanctions, and anti-bribery laws vary globally—fines or lost clients if mishandled.

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6. Competitive Edge

• Strength: Focuses on premium tech (AI, cloud) vs. generalist competitors.
• Weakness: Smaller than giants like IBM, limiting pricing power.

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7. Leadership & Strategy

• No leadership changes: CEO stayed—strategy remains consistent.
• Focus Areas: AI projects, digital transformation, and renewable energy tech.

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8. What’s Next?

• 2024 Outlook: Slower growth (single-digit %) but better margins as hiring stabilizes.
• Big Bets: Banking on AI demand and Southeast Asia expansion.
• Watch Out: If inflation stays high, clients may cut budgets further.

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Should You Invest?

Consider If:

• You want exposure to tech modernization trends with a stable player.
• You’re okay with global risks (currency swings, geopolitics).

Be Cautious If:

• Profit margins matter more than growth—cost pressures may linger.
• ESG compliance uncertainty worries you (new EU/UK rules could raise costs).

Red Flags:

• Tax disputes and regulatory risks across 29 countries.
• Europe’s economic weakness already slowed 2023 growth—could worsen.

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Final Takeaway
Endava is growing in a tech-driven market but faces profit pressures and global risks. If you believe in long-term AI and digital trends—and can handle short-term turbulence—it’s worth watching. For cautious investors, monitor how they manage costs in 2024.

Note: The company didn’t disclose exact revenue or profit figures, which limits transparency.