Hewlett Packard Enterprises is showing encouraging signs early after the takeover was first announced last year.
Companies: Hewlett Packard Enterprise Co., Micro Focus International plc
Micro Focus (LON: MCRO) has released a trading update and Q3 results for its recently-acquired HPE Software which shows early positive signs after the deal was finalised last week.
The £6.8bn deal makes Micro Focus the UK's largest tech company with a market cap of £9.7bn.
The Q3 results are highlighted by Saas revenue and License revenue increases of 7% and 2% respectively, and operating profit of $179m, an improvement of 25% compared to 18% growth over Q3 last year. This was driven in part by a reduction in operating expenditure.
Third quarter reported revenue was, however, down 3% YOY, with Professional Services revenue also declining 23% YOY.
The update went on to say:
It is currently anticipated that the total adjusted revenue for the HPE Software business for the 12 months ending 31 October 2017 will be in the range of $2,890m to $2,960m. The reduction in adjusted revenue from the 12 months ended 31 July 2017 is driven by the active reduction of less profitable professional services in sub-scale service lines and geographies together with lower licence revenue offset by increasing SaaS revenue and support revenue being broadly flat."
Micro Focus, who specialises in helping organisations in industries such as banking and retail modernise their outdated IT systems, have added HPE Software to their group of subsidiaries that also include companies like Attachmate, SUSE Linux, Borland, COBOL, NetIQ, Novell, Progress, and Serena.
Against an industry median of 18x, Micro Focus currently trades at a PE ratio of 15x. They have enjoyed a revenue CAGR of 26% in the five years to 2016, whilst operating profit had a CAGR of 5% during the same five years.
Consensus predicts FY18 revenue growth to be minimal but operating profit is expected to grow 165%.
