May 29, 2019 / 6:20 AM / 4 months ago

UK software firm AVEVA profit surges, shares hit record high

LONDON (Reuters) - Software provider AVEVA said it was confident of meeting its medium-term targets after a 20% rise in annual earnings, driven by demand for the British firm’s technology to improve the efficiency of industrial processes.

Shares in AVEVA, which is on course to join the FTSE 100 index next month, rose to a record high of 3,530 pence on Wednesday, before falling 1.7% to 3,374 by mid-morning.

The company, which reported its first full year since buying Schneider Electric’s industrial software business in late 2017, reported adjusted earnings of 184.5 million pounds ($234 million), in line with a forecast of 183 million pounds, on revenue up 12% to 775.2 million pounds.

The Schneider deal gave AVEVA a bigger presence in sectors such as food and beverages and pharmaceuticals as well as its strongholds in oil and gas, mining and marine.

Chief Executive Craig Hayman said AVEVA was growing across all business sectors, including oil and gas, marine, chemicals and packaged goods, and in all three geographies.

“The industrial sector was the first to use digital technology but the last to use it at scale, and we see that as our opportunity,” he said in an interview.

The company is targeting revenue growth at least in line with the market, improving its adjusted earnings margin to 30% - from 23.8% last year - and increasing its percentage of recurring revenue to 60% in the medium-term, he said.

AVEVA has not specified a time frame for medium, but analysts put it as 3-4 years.

Analysts at J.P.MorganCazenove, who rate AVEVA stock “overweight”, said “valuation still has more to go - driven by consistent execution, consensus outperformance and earnings upgrades”.

They noted that AVEVA traded on a 2019 price-earnings multiple of about 36 times against 38 times for European peer Dassault Systemes.

($1 = 0.7898 pounds)

Reporting by Paul Sandle; editing by Kate Holton and Emelia Sithole-Matarise

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