Revenue, including a two-month contribution of US$569.8mln from the HPE software unit, jumped 80.7% at constant currency to US$1.2bn in the six months to 31 October 2017, compared to the same period a year earlier.
Excluding HPE software, however, revenue dropped 2.7% at constant currency to US$664.7mln, reflecting a weak performance in the company’s existing product portfolio.
The company, which completed the takeover of HPE software in September last year, said pre-tax profit for the period grew 33.8% to US$145.7mln and adjusted underlying earnings (EBITDA) increased 67.7% to US$530.1mln, both at constant exchange rates.
Full year revenue to decline
However, the company warned that the integration of HPE software could delay the division's return to revenue growth and impact its overall results for the year.
It expects the HPE software revenue trend to "continue its historical decline until the transformation has been fully executed and the benefits take hold". The last set of results from the business showed a 3% drop in third quarter revenue to US$718mln.
Susequently, Micro Focus anticipates total revenue to fall 2-4% in the year to 31 October.
The acquisition of HPE also saw net debt widen to US$4.1bn at 31 October from US$1.4bn at 30 April.
Shares fell 14.7% to 2,201p in morning trading.
Micro Focus confident on outlook as it hikes dividend
Executive chairman Kevin Loosemore said the board is still confident that medium-term "low single digit" revenue growth, industry leading margins and strong cash conversion will ensure that Micro Focus can deliver on its strategy.
“These returns can be further enhanced by appropriate deployment of capital in value enhancing acquisitions," he said.
Micro Focus is targeting long-term shareholder returns of 15% to 20% per year.
The interim dividend was lifted 16.4% to 34.6 cents per share, in line with the group’s policy of the full year dividend being twice covered by adjusted earnings.
Lower US tax rate expected
The company expects US President Donald Trump's sweeping tax reforms will result in a tax rate of 25% in the future, compared to expectations of more than 30%.
It estimates a US$600mln to US$700mln one-off credit to its income statement for the period to 30 April 2018.
Numis cut its rating on Micro Focus to 'add' from 'buy' but raised its target price to 2,980p from 2,800p, saying the company's interims missed the broker's expectations but its guidance implies a lower-than-expected US tax rate.
"Micro's six months to Oct-17 is, on a pro-forma basis, about 1-2% behind our expectations, but guidance indicates a materially lower tax rate (25% vs 30-33%) than we had forecast, which gives about 9% earnings per share and 5% free cash flow upgrades despite downgrading our operating forecasts consistent with the 1-2% 2017 shortfall".
It added: "Overall the operating underperformance is modestly disappointing but more than offset by tax, and the building blocks are clearly in place for delivery of the long term strategy."
Former ARM executive appointed as CFO
In a separate announcement, the group said chief financial officer Mike Phillips will move to the role of director of mergers and acquisitions. Chris Kennedy, the former CFO of ARM Holdings PLC (LON:ARM) and group finance director of easyJet (LON:EZY), will assume the position.
The company also announced the appointment of Ian Fraser as chief human resources officer.
“Both Chris and Ian bring recent relevant experience in functional terms and also in dealing with listed businesses of scale in the UK and US and we welcome them to the team,” said Loosemore.