Micro Focus

BUY

08/12/2011 Ben Jaglom

Software group Micro Focus (MCRO) has declared a 19.9% rise in pre-tax profits as its range of products continues to win ground.

The fully-listed concern reported pre-tax profits of $75.8m on sales of $219.1m (2010: $215.6m) for the six months to October. Earnings per share climbed from 26.6 cents to 35.53 cents while net debt rose from $40.4m to $47.6m. The interim dividend increased by 13.9% to 8.2 cents. Micro is also to reward shareholders with the payment of a special dividend of 45p a share.

The results were driven by strong performance in its 'International' (which includes Europe, the Middle East, Latin America and Africa) and 'Asia Pacific' geographies, which saw sales climb by 3.7% and 8.5%, respectively. Sales to the North America region fell by 2% to 101.5m.

Across its operations 'CD', its software development division saw revenues power ahead to $52.1m (2010: $51.4m) while 'MM' - which provides upgrades to key solutions, slumped from $14.3m to $12.8m. Meanwhile Its testing operation powered ahead from $10m to $15.2m.

Analysts at Numis are forecasting pre-tax profits of $156m (EPS: 63.3 cents) on sales of $437.3m for the year to April 2012. A dividend of 16.7p is also pencilled in.

Recommended by Growth Company Investor this August at 301.5p amidst its attempts to look for a buyer, we advised existing shareholders to hold on. Having gained 30% since, the shares currently trade at 392p. Offering a yield of 4%, with some impressive organic growth prospects, we think the shares represent good value. Buy.