Micro Focus shares plunge after group misses expectations
The group was down more than 13% in morning trading on the London Stock Exchange.
Shares in Micro Focus International have plunged after the software group’s half-year results missed expectations and it forecast future revenues to fall.
The group was down more than 13% in morning trading on the London Stock Exchange, with half-year revenues slipping 2.9% to $664.7 million (£491.3 million) once its tie-up with Hewlett Packard Enterprise (HPE) Software was set aside.
Taking into account the $8.8 billion (£6.5 billion) reverse takeover of HPE Software, revenues surged 80% to $1.2 billion (£886.9 million) over the six-month period to the end of October.
Pre-tax profits also soared following the deal, climbing 29% to $145.7 million (£107.7 million) over the period.
However, it said group revenues would fall between 2% to 4% for the year to October 2018.
The half-year update came as the FTSE 100 firm announced a boardroom shake-up, with ex ARM Holdings and easyJet executive Chris Kennedy joining as chief financial officer.
Mike Phillips, the company’s current CFO, has been shifted to director of mergers and acquisitions, while Ian Fraser has been recruited as chief human resources officer.
In his first set of results since being appointed in September, chief executive Chris Hsu said: “The period from announcement to completion of the HPE Software transaction is the longest of any of the Micro Focus mergers and acquisitions.
“This was a period of uncertainty for customers, partners, investors and employees which came to an end as we brought the two companies together at the beginning of November.
“We have achieved a great deal over the last 12 months and enter the new financial year with stronger foundations than a year ago.”
Adjusted earnings, the firm’s preferred measure of performance, rose 66% to $530.1 million (£391.8 million) for the half year.
Dividend per share also lifted 16% to 34.6 cents over the period.
Focusing on the shake-up, executive chairman Kevin Loosemore said the new position for Mr Phillips came in response to conversations with shareholders about how it can scale its approach to M&A.
He added: “Both Chris and Ian bring recent relevant experience in functional terms and also in dealing with listed businesses of scale in the UK and the US, and we welcome them to the team.”
On the share price fall, Graham Spooner, investment research analyst at The Share Centre, said: “It’s likely that investors are also reacting negatively to the group now forecasting a decline in revenue of 2% to 4% for the year at its core business as a result of the declines in the existing Micro Focus Product Portfolio.
“This has been a recent concern for the market as it focused on the longer-term growth picture, which in turn has seen a bumpier ride for investors and the share price over the last year.”