Investors in software developer and IT consultancy Microgen had few causes for complaint in 2011 after the company paid a 5p a share special dividend in December, while still increasing its overall cash pile. However, the upheaval in the financial services industry, which is the bed-rock of sales, makes the performance for 2012 much harder to predict and management sounded a more cautious note.
Microgen's two operating divisions delivered strong sales and profits growth. Expansion into treasury, retail banking, and particularly the US market, helped Microgen Aptitude Solutions (MASD) deliver a 28 per cent sales rise to £21.8m, with operating profits doubling to £4.2m. However, management cautioned that MASD's first half this year will be lower as it tries to switch sales to recurring software royalties, rather than simply relying on consultancy fees for growth; analysts forecast that divisional sales could fall by 16 per cent, before recovering in the second half. That diversification process is already well-entrenched at the financial systems division, where 78 per cent of revenues are recurring. Sales there climbed by a more sedate 2 per cent to £17m, but the division remains highly profitable, with an operating margin of 47 per cent.
Broker Investec sees little impact from the changes in Microgen's business mix this year, and expects pre-tax profits and EPS to remain flat at £9.7m and and 8.4p.
MICROGEN (MCGN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 149p | MARKET VALUE: | £121m | |
| TOUCH: | 147-150p | 12-MONTH HIGH: | 177p | LOW: 123p |
| DIVIDEND YIELD: | 2.2% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 74p* | NET CASH: | £27m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 33.3 | 4.23 | 2.6 | 2.0 |
| 2008 | 26.6 | 4.59 | 5.6 | 2.1 |
| 2009 | 29.0 | 2.27 | 9.8 | 2.3 |
| 2010 | 33.7 | 7.85 | 7.7 | 3.0 |
| 2011^ | 38.8 | 9.60 | 8.9 | 3.3 |
| % change | +15 | +22 | +16 | +10 |
Ex-div: 18 Apr Payment: 11 May *Includes intangible assets of £42m, or 52p a share ^Excludes 5p special dividend paid in December | ||||
