Strong share price momentum over the past year has seen Microgen (MCGN) enter the IC's coverage for the first time in a while. The software company had a good 2016, with acquisitions and new contract wins boosting constant currency revenue and operating profit by 29 per cent and 12 per cent, respectively.
The 260p level may be the highest at which the shares have traded for many years, but it's not an all-time high. With a London listing since 1974, Microgen was both a beneficiary and casualty of the dotcom bubble, its share price rising to almost 600p in early 2000 before crashing below 50p by 2003.
Since then, management has realigned the focus across the two operating divisions. In Aptitude Software the aim is to promote the annual licence fee model. This helped send recurring revenues up 40 per cent to £12.6m last year. In the Microgen Financial Systems division, which contributes roughly 38 per cent to group revenue, the focus is on increasing exposure to the trust and fund administration sector. While this boosted 2016 revenues by 9 per cent, the move away from the mature, high-margin application management business dented margins and adjusted operating profit stayed flat at £7.2m.
Broker Investec expects pre-tax profits of £10.3m for 2017, giving EPS of 12.6p (up from £9.2m and 11.6p in FY2016).
MICROGEN (MCGN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 260p | MARKET VALUE: | £156m | |
| TOUCH: | 258-262p | 12-MONTH HIGH / LOW: | 261p | 122p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 72p* | NET CASH: | £13.6m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 32.3 | 9.2 | 8.5 | 3.3 |
| 2013 | 29.8 | 8.7 | 7.9 | 3.3 |
| 2014 | 29.8 | 5.8 | 5.5 | 3.3 |
| 2015 | 32.0 | 4.9 | 6.0 | 4.2 |
| 2016 | 43.0 | 7.9 | 10.6 | 5.0 |
| % change | +35 | +61 | +77 | +19 |
Ex-div: 4 May Payment: 26 May *Includes intangible assets of £49m, or 82p a share | ||||
