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Merry Xmas for Micro Focus

Micro Focus outperformed as it continued to integrate US peer Attachmate
December 18, 2015

Investors sent shares in Micro Focus (MCRO) up 13 per cent after the FTSE 250 software group posted a 13 per cent rise in underlying operating profits to $264m (£175m) for the six months to 31 October. The strong showing reflected rapid sales growth at Attachmate - which the group acquired for $2.5bn in 2014 - as well as $42m in adjusted cost savings achieved in the integration of its US peer.

IC TIP: Hold at 1502p

Micro Focus has made its name modernising companies' aging IT systems and connecting them to the latest smartphones and apps. But pro forma turnover in the core business fell 5 per cent at constant currencies as the timing of deals, weaker demand for testing-related products and other factors reduced sales in four of the five subdivisions.

On the same basis, sales leapt 14 per cent in the new SUSE business, which provides open-source cloud solutions and accounts for a fifth of group revenues. The division also impressed analysts with a cash-profit margin of close to 37 per cent. And, although sales fell in Asia Pacific and Japan, strong demand for subscriptions fuelled 16 per cent growth in North America and the rest of the world.

Management continues to forecast a 2 to 4 per cent decline in underlying revenues in the year to April 2016. Yet broker Numis hiked its forecasts and now expects EPS of 144¢, flat on FY2015.

 

MICRO FOCUS INTERNATIONAL (MCRO)
ORD PRICE:1,502pMARKET VALUE:£3.3bn
TOUCH:1,499-1,502p12-MONTH HIGH:1,504pLOW: 1,017p
DIVIDEND YIELD:2.2%PE RATIO:36
NET ASSET VALUE:602¢*NET DEBT:111%

Half-yearto 31 OctTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
201420857.136.215.4
201560598.840.216.9
% change+190+73+11+10

Ex-div: 31 Dec

Payment: 22 Jan

*Includes intangible assets of $3.49bn, or 1,602¢ a share

£1=$1.51