Rapid technological change over recent years means companies often have a jumbled array of ancient mainframes and archaic servers together with shiny tablets and cloud-based applications. That's the raison d'être for Micro Focus (MCRO), which helps enterprises to modernise their computing systems and maximise the value of both old and new infrastructure. Investors face a comparable challenge in untangling these full-year results, which are muddled by the FTSE 250 software titan's $2.5bn (£1.6bn) takeover of US peer Attachmate in November.
Excluding currency movements, the group's underlying cash profit soared 85 per cent to $348m. That included an 11 per cent increase at the core Micro Focus business as higher maintenance sales offset lower licensing revenue, lukewarm sales through distributors in Asia Pacific and Japan and a tepid Japanese economy.
Management kept Attachmate separate as it mapped out a two-year restructuring plan. The group incurred $99m in exceptional charges in these results, and expects further costs to stem from its planned closure of around 36 of its 126 offices this financial year and a net headcount reduction of 7.5 per cent compared with November 2014.
Underlying sales at Attachmate were slightly down as strong demand for subscriptions failed to make up for declines of a tenth in both maintenance and licensing revenue. The bright spot was the SUSE business, which offers open-source Linux software, servers and cloud storage. Sales there rose 11 per cent to $222m.
Strong cash generation helped the group lower net debt to 2.6 times adjusted cash profit - down from 3.3 times at the time of the Attachmate deal. Once the ratio falls below 2.5 times, management will consider reinstating the group's chunky cash returns: it has returned over £554m via dividends, share buybacks and four cash returns since 25 March 2011.
Management expects constant-currency sales to fall by 2-4 per cent this financial year, but have pencilled in a return to top-line growth in the financial year to April 2018. Broker Numis Securities expects EPS of 134¢ in the year to April 2016 (from 144¢ in full-year 2015).
| MICRO FOCUS INTERNATIONAL (MCRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,367p | MARKET VALUE: | £3bn | |
| TOUCH: | 1,366-1,370p | 12-MONTH HIGH: | 1,393p | LOW: 819p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 36 | |
| NET ASSET VALUE: | 588¢* | NET DEBT: | 110% | |
| Year to 30 Apr | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 436 | 115 | 47.0 | 23.4 |
| 2012 | 435 | 149 | 65.8 | 31.6 |
| 2013 | 412 | 152 | 77.8 | 40.0 |
| 2014 | 433 | 148 | 84.8 | 44.0 |
| 2015 | 835 | 91 | 58.5 | 48.4 |
| % change | +93 | -38 | -31 | +10 |
Ex-div: 3 Sep Payment: 2 Oct *Includes intangible assets of $3.55bn, or 1,636¢ a share £1=$1.54 | ||||
