AVEVA Group PLC on Wednesday said profit rose in its first full financial year after its combination with France’s Schneider Electric SA.
The FTSE 250 engineering and industrial software firm posted a pretax profit of GBP46.7 million in its financial year ended March 31, up 35% from GBP34.5 million, as revenue rose 58% to GBP766.6 million from GBP486.3 million.
AVEVA and Schneider Electric agreed to combine AVEVA with Schneider’s industrial software businesses in September 2017, making this its first full financial year as a combined business. Adding to this, both businesses also experienced organic growth in the year.
The UK company raised its final dividend 7.4% to 29.0 pence per share from 27.0p per share. This took the total dividend to 43.0p per share from 27.0p per share the year before, as AVEVA did not pay an interim dividend in financial 2018. In place of an interim dividend, the company paid GBP10.15 per share in a GBP550 million cash return as part of the Schneider transaction.
Medium-term targets for AVEVA include revenue growth, at constant currency, that is at least in line with the blended growth rate of the industrial software market.
The target includes AVEVA’s expectation of growing its underling software business above market growth rates, though this will be hurt by a phased transition toward more rental and subscription revenue with a possible reduction in services revenue.
AVEVA is also targeting an adjusted earnings before interest and taxation margin of 30%, led by savings and revenue growth. In financial 2019, the company’s adjusted Ebit margin on pro-forma revenue - which includes results for heritage Schnieder and heritage AVEVA for the 12 months to March 2018 and excludes a GBP8.6 million negative adjustment - rose to 24% from 22%.
Another medium term target is to have 60% of total revenue be recurring. In financial 2019, 54% of reported revenue was recurring, up from 52% in financial 2018. For financial 2020, AVEVA has modified its sales incentives structures to favour recurring revenue and focus on rental and subscription revenue over initial and perpetual licences.
Chief Executive Craig Hayman said: “AVEVA delivered a strong performance in its first full year as a combined company and integration has progressed well across all functions of the business. Digitalisation is accelerating in the industries we serve, driving ongoing growth in demand for industrial software. AVEVA is well placed to capture this demand by working with its customers to turn opportunities into business value, delivering solutions across the asset and operations lifecycle. We remain confident in the outlook and in meeting our medium-term targets of delivering revenue growth at least in-line with the industrial software market, increasing recurring revenue as a percentage of overall revenue to 60% and improving AVEVA’s adjusted Ebit margin to 30%.”
Shares in AVEVA were up 1.1% at 3,472.00 pence on Wednesday morning.