The return of £90m to shareholders (60p/share) demonstrates good operational cash generation and will keep Micro Focus shareholders happy but the company still needs to work on its growth metrics. It is still early in the financial year, but according to its Q1 interim statement, revenue and adjusted EDITDA were in line with management expectations and revenue guidance for the current year (to April 30 2014) is unchanged at 0% to +5% (constant currency). It ended last year with revenue of £414m, a yoy decline of 4.8% as reported, 2.4% constant currency. Having spent last financial year sorting its portfolio, which included acquiring software assets from Progress Software (see here) that at the time of the acquisition were expected to deliver $14m revenue in the year to April 2014, Micro Focus is overdue for a return to growth.
With organisations still engaged in modernising mainframe environments there is on-going demand for its products but the company also has to prepare for the time when this business line start to close down. Its Corba and portfolio management and analysis software ranges provide a foundation that acquisitions would strengthen and with CA Technologies CEO Mike Gregoire talking of the company needing to go on a diet (see TechWeek Europe) Micro Focus could pick up some complementary new assets if CA starts to divest software.