Micro Focus results above expectations after acquisitions

Software company Micro Focus announced its audited preliminary results on Thursday, which were at the high end of management expectations for the year to 30 April, with reported operating profit doubling year-on-year and the final dividend increasing by 50.7%.

The FTSE 250 firm did point out that the results included the its combination with The Attachmate Group (TAG), which was announced in September 2014 and completed in November for that year.

It said trading results for TAG were included for the year to 30 April 2016, as well as from the date of completion to 30 April 2015.

Reported operating profit doubled on reported revenues increasing 49.2%, while total revenues were up 54.9% to $1.25bn on a constant currency basis.

Adjusted EBITDA improved 59% to $546.8m at constant exchange rates, with underlying adjusted EBITDA increasing 59.1% to $532.5m, at a margin of 42.8%.

Micro Focus reported growth in adjusted diluted earnings per share of 13.3% to 146.7 cents.

Cash generated from operations was $455.7m, up from $288.7m, with free cash flow of £238.1m up from $173.7m.

Net debt as at 30 April reduced to $1.078bn, from $1.404bn, benefiting from the net proceeds of the $222.7m placing announced on 22 March.

The acquisition of Serena, completed after year-end on 2 May, increased pro-forma debt however to $1.625bn.

Net debt-to-pro-forma facility EBITDA for the year was 1.9x, increasing to 2.51x after the acquisition of Serena, just outside the target of 2.5x.

Micro Focus’ board proposed a final dividend increase of 50.7% to 49.74 cents per share, up from 33 cents, resulting in a full-year dividend of 66.68 cents per share, compared with 48.4 cents last year.

“The board is delighted with the progress that has been made with the integration of the TAG business, the acquisition of Serena and the opportunities being presented as the infrastructure software market continues to mature,” said Micro Focus executive chairman Kevin Loosemore.

“Our staff continue to work diligently to realize the value opportunities from this consolidating market space.”

Loosemore said the company was looking forward to the coming year with optimism and excitement about the opportunities to come.

“We remain absolutely focused on growing shareholder returns which we see as the true measure of growth.

“In that context we are delighted to have announced a return to a policy of twice covered dividend,” Loosemore said.