It is less than three months since Micro Focus International PLC (LSE:MCRO) unveiled its latest strategic grand view but the market is already getting impatient.
Shares in the legacy software giant were down 13% at 396p after this morning’s full-year results statement, which showed revenues remain on a downward path.
The company has been out of favour with investors since its September 2017 acquisition of the software segment of the Hewlett Packard Enterprise Company (HPE) despite a prolonged share buyback programme.
Supposedly, the integration of HPE is now substantially complete and there will be minimal integration costs henceforth, which is good news for Micro Focus shareholders because this morning’s results statement revealed that US$136.4mln in the year to the end of October 2021 was spent on integrating HPE further into the group.
That pales into insignificance compared to the goodwill impairment of US$2.8bn the year before, which was driven by changes in the group’s trading performance and the overall environment when compared to the original projections produced at the time of the HPE Software acquisition.
The suspicion remains that management of Micro Focus bit off more than it could chew when it bought HPE Software. If the teething troubles are truly behind the group then the market is expecting management to deliver on its promise to generate medium-term revenue growth of 1%-2%.
If that sort of growth rate seems underwhelming, it appears the City agrees with you, judging by today’s share price reaction.
Micro Focus stuck with its existing target of exiting fiscal 2023 “with a flat or better year-on-year revenue trajectory”, a phrase the company seems to have stored as an auto-text macro.
With two years to go to hit that target, Micro Focus clearly has its work cut out, with revenues in the year to 31 October 2021 down 5.3% on a constant currency basis at U$2.90bn, although this was a shade ahead of expectations of turnover of US$2.89bn.
Earnings per share of 144.93 cents were ahead of consensus forecasts of 142 cents.
A conference call with analysts is scheduled for 1.30pm (GMT) today, which may be a chance for management to accentuate the positive.