Don't pay too much attention to the double-digit growth in sales and profit at Micro Focus International (MCRO) in the reported period. Adjusting for currency movements and assuming the acquired Serena had always been part of the group, revenue inched up 1 per cent. However, management's cost-cutting and restructuring served to widen margins, boosting comparable cash profit by 8 per cent to $333m (£262m).
Licensing and consultancy sales from the group's flagship COBOL solutions, which help organisations squeeze value out of older computers and IT equipment, surged more than 30 per cent. But both revenue streams shrunk in the other four subdivisions of the core Micro Focus business, meaning its underlying turnover slid 4 per cent. More positively, strong subscription growth drove underlying sales and operating profit up more than a fifth in the SUSE division, which provides technical support and updates for its open source solutions.
The big development was the agreed merger with Hewlett Packard's enterprise division. Management expects to double the segment's margins and boost overall EPS by a quarter in time. It also plans to return around $400m to investors, or 174¢ a share. Broker Numis expects adjusted pre-tax profit of $565m in the year to April 2017, giving EPS of 180¢ (from $434m and 147¢ in FY2016).
| MICRO FOCUS INTERNATIONAL (MCRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 2,215p | MARKET VALUE: | £5.1bn | |
| TOUCH: | 2,214-2,216p | 12-MONTH HIGH: | 2,400p | LOW: 1,295p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 38 | |
| NET ASSET VALUE: | 689¢* | NET DEBT: | 102% | |
| Half-year to 31 Oct | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2015 | 605 | 99 | 40.2 | 16.94 |
| 2016 | 685 | 113 | 39.6 | 29.73 |
| % change | +13 | +15 | -1 | +76 |
Ex-div: 5 Jan Payment: 27 Jan *Includes intangible assets of $4.01bn, or 1,750¢ a share £1=$1.27 | ||||
