Micro Focus’s (MCRO) half-year numbers need context, not only in that the infrastructure software group has moved its year-end from April to October, but also that the figures bear the imprint of the ongoing integration of Hewlett Packard’s (HPE) software arm, which was acquired for $8.8bn (£6.6bn) in 2017. In March, we learnt that the process was proving challenging. Management cut its full-year sales guidance, and chief executive Chris Hsu, who had joined from HPE, resigned - and the market value duly plummeted.
Against this backdrop, the latest results offer glimmers of hope, even though the group swung into the red on a statutory basis due to a massive rise in R&D commitments, administrative expenses, and other costs relating to the consolidation of the acquired business. Management highlighted “an improved momentum” in the integration process, and a slowdown in the rate of revenue decline, with the expected rate at 6-9 per cent for the full-year. Pro-forma, constant currency revenues fell by just 8 per cent to $1.97bn, while pro-forma cash profits increased by 6.4 per cent to £711m, on a 4.2 percentage point increase in the underlying margin.
Broker Numis forecasts adjusted pre-tax profits of $1bn with EPS of 178¢ for the year to October 2018 (FY2017: $716m and 192¢).
| MICRO FOCUS (MCRO) | ||||
| ORD PRICE: | 1,183p | MARKET VALUE: | £ 5.16bn | |
| TOUCH: | 1,181-1,183p | 12-MONTH HIGH: | 2,749p | LOW: 782p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 1,869¢* | NET DEBT: | 53% | |
| Half-year to 30 Apr | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2017 | 0.70 | 83.1 | 29.3 | 58.33 |
| 2018 | 1.97 | -68.5 | 142 | 58.33 |
| % change | +184 | - | +385 | - |
| Ex-div: | 02 Aug | |||
| Payment: | 24 Aug | |||
| *Includes intangible assets of $14.9bn or 3,404¢ per share. £1 = $1.33 | ||||
