The incessant march of mobile and cloud technology has left companies with little choice but to revamp their creaking IT infrastructure. They've increasingly turned to Micro Focus International (MCRO), which modernises and maintains computer systems for the likes of Tesco and Barclays. Rising demand and a tight grip on costs drove a 7 per cent rise in its underlying cash profits to $196m (£115m) for the year ended 30 April.
Both Micro Focus’s licensing and maintenance divisions recorded high single-digit growth in the year to 30 April. But the key takeaway for investors may be the company's return to like-for-like organic sales growth of 2 per cent in the second half, from a 3 per cent decline in the preceding six months. It has also made longer-term gains, widening its underlying cash profit margin by almost 10 percentage points to 45 per cent in just over three years.
Buoyed by steady sales, cash generation and margin growth, Micro Focus returned over 137¢ a share to investors last year. "We don’t have to strain any sinew to make the model work," says executive chairman Kevin Loosemore, likening the stock to a high-yield bond.
Broker Panmure Gordon expects adjusted pre-tax profits of $193m this year, giving EPS of 102.4¢.
| MICRO FOCUS INTERNATIONAL (MCRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 866p | MARKET VALUE: | £1.2bn | |
| TOUCH: | 865-869p | 12-MONTH HIGH: | 886p | LOW: 665p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 17 | |
| NET ASSET VALUE: | * | NET DEBT: | $261m | |
| Year to 30 Apr | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2010 | 433 | 98 | 37.5 | 21.8 |
| 2011 | 436 | 115 | 47.0 | 23.4 |
| 2012 | 435 | 149 | 65.8 | 31.6 |
| 2013 (restated) | 412 | 152 | 77.8 | 40.0 |
| 2014 | 433 | 148 | 84.8 | 44.0 |
| % change | +5 | -2 | +9 | +10 |
Ex-div: 3 Sep Payment: 3 Oct *Negative shareholders funds £1=$1.70 | ||||
