News Column

Micro Focus Raises Total Dividend As Profit Cut By Higher Costs

June 19, 2014

Hana Stewart-Smith

LONDON (Alliance News) - Micro Focus International PLC upped its total dividend for the year to end-April, as it saw pretax profit decline slightly despite revenue growth, hampered by higher operating costs.

The software company proposed a total dividend per share of 44.0 cents, up 10% from 40.0 cents in the previous year. The company reiterated that its core objective is to deliver long-term consist returns to shareholders of at least 15% to 20% per year.

In November 2013, it additionally returned USD140.2 to shareholders at 93.3 cents per share.

Micro Focus posted a pretax profit of USD147.8 million, down slightly from a restated USD151.5 million in the previous year, despite seeing revenue rise to USD433.1 million from EUR412.2 million, as profit was damped by higher administrative expenses.

The company's results for the previous year were restated due to a misstatement of revenue caused by invalid orders in its sales network in India. This restatement led to a reduction of USD1.8 million in revenue and earnings before interest, tax, depreciation and amortisation in the previous period.

Administrative costs rose to USD68.9 million from USD48.5 million in the previous year, primarily due to aborted acquisitions, patent box applications, higher bonuses and costs related to resolving the revenue restatement issues in India.

Revenue growth was 6.4%, which was marginally about the guidance range of 3% to 6% that Micro Focus gave at its interim results in December. Growth was boosted by the company's acquisitions of AccuRev Inc, SoforTe GmbH and assets from PrismTech Group Ltd during the year.

Excluding acquisitions, revenues rose 4.9%, as growth in licence and maintenance fee revenues offset declines in consultancy revenues.

Micro Focus said that during the recent financial year it began to re-skill its sales force through improved training, and launched its Sales Academy graduate scheme. The company hired over 50 graduate sales trainees in its International and North America regions.

It invested USD3.5 million in the scheme and already has received a financial return on it, allowing it reduce the average age and average cost of its sales force. The company said it has already begun another academy in the new year, recruiting 30 further graduates. It has also hired 16 graduate level trainees for its development segment.

It said it continues to believe there is "significant room for improvement in sales productivity". Micro Focus is focusing particularly in North America, and is focused on replacing sales management and representatives who do "not have the right attitude or approach to delivering sustainable results for the long-term."

Micro Focus said it was confident it can achieve low single-digit revenue growth in the medium term.

Micro Focus is targeting a net debt to retained cash flow EBITDA ratio of 2.5 times, it said, which it plans to achieve through returns to shareholders or acquisitions.

"We believe that by continuing to execute our business strategy and financial model Micro Focus is positioned to continue to provide shareholders with returns in the coming years," said Executive Chairman Kevin Loosemore in a statement.

Shares in Micro Focus were trading up 4.6% at 872.50 pence Thursday morning.

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Source: Alliance News

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