Micro Focus' half-year results were well flagged in its November trading update, with the headline numbers held back by goodwill and restructuring write-offs relating to its two recent acquisitions, notably Acucorp. And earnings suffered from higher US tax exposure following the Acucorp deal.
Still, management appears to be doing a good job at cutting costs and extracting double-digit growth out of a mature segment of the IT sector - the provision of software for mainframe computers. And organic growth is picking-up - 13 per cent during the period in North America, where it does just under half of its business, and 21 per cent organic growth for the group as a whole.
But Micro Focus is likely to be relying on further acquisitions to maintain that growth rate and that raises the risk profile. Moreover, while Acucorp has bedded down well, the latest acquisition, HAL KS, proved a slight disappointment in the first-half. Still brokers are maintaining their forecast of full-year pre-tax profits of $80.1m, giving EPS of 29.8¢.
MICRO FOCUS (MCRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 289p | MARKET VALUE: | £579m | |
| TOUCH: | 287-290p | 12-MONTH HIGH: | 357p | LOW: 181p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 25p* | NET CASH: | $50.7m | |
| Half-year to 31 Oct | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Net div per share (¢) |
|---|---|---|---|---|
| 2006 | 79.0 | 31.4 | 12.0 | 3.0 |
| 2007 | 109 | 32.6 | 11.4 | 3.6 |
| % change | +38 | +4 | -5 | +20 |
Ex-div: 2 Jan Payment: 31 Jan *Includes intangible assets of $107m, or 53¢ per share £1 = $2.03 | ||||
