Key highlights
Like for like revenue in line with previous guidance, down 3.2% on a Constant Currency Basis ("CCY")
o Licence fee revenues excluding Niche grew by 1.5% year on year
o Maintenance revenues on a like for like basis are flat year on year
o Consultancy revenues lower as planned
o Recurring revenue stream now 64% of total revenues (2012: 61%)
Adjusted EBITDA margin of 45.4% (2012: 41.4%)
o Second half Adjusted EBITDA improved on first half ($95.9m v $92.2m)
o Underlying Adjusted EBITDA margin of 44.9% (2012: 39.8%)
Strong cash conversion in the period
o Cash generated from operations was $194.5m (2012: $196.7m) representing 103.4% (2012: 108.0%) of Adjusted EBITDA less exceptional items
o Net debt at 30 April 2013 increased by $64.5m to $177.7m (2012: $113.2m) following payment of dividends of $57.2m (2012: $46.3m), Return of Value of $128.8m (2012: $129.0m) and acquisition consideration and costs of $15.6m (2012: $Nil)
o Net debt to Adjusted EBITDA multiple of 0.94x (2012: 0.63x)
Enhanced returns for shareholders
o Return of 50 pence per share in cash to shareholders (equivalent to 78.50 cents per share) (the "Return of Value") completed in November 2012
o Proposed Final dividend increased by 20.1% to 28.1 cents per share (2012: 23.40 cents per share)
o Proposed Total dividend increased by 26.6% to 40.0 cents per share (2012: 31.60 cents per share)
Statutory results
Operating profit of $161.3m (2012: $155.8m)
Profit before tax of $153.4m (2012: $149.3m)
Basic earnings per share of 78.72 cents (2012: 65.77 cents) increased by 19.7%
Kevin Loosemore, Executive Chairman of Micro Focus, commented: -
"Following last year's stabilization and focus on product management, the current year has been one of solid progress in a challenging market, with our focus turning to channels to market, marketing effectiveness and sales execution.
On a like for like basis our revenues in the current financial year at constant currency were down 3.2% compared with the prior period and were in line with our guidance of a reduction of between 2% and 4%. Of our like for like revenue decline of $13.6m, $16.1m was in Niche and a further $5.4m in planned reductions in consulting revenues (a total of $21.5m). Licence and maintenance revenues from our core product portfolios grew $7.9m.
It was particularly pleasing that maintenance revenues were flat against the comparable period. Licence fee revenues were marginally down, which was a significant achievement given the shutdown in US Federal spending and second half economic weakness in Japan. Within this our COBOL business was strong and we saw growth in Enterprise Server in the second half. As a result of this mix of revenues and our continued management of costs as we streamline our processes, our Adjusted EBITDA was ahead of market expectations. Cash conversion was 103.4%. In February 2013, we added to our existing business through the completion of the acquisition of the CORBA assets from Progress Software.
As we look to FY2014 our priority is to ensure that we invest in the organic development of the business. We have embarked on hiring 50 new trainee sales representatives in the first half of the year and upgrading our CRM system to assist with improving sales force effectiveness.
Having consolidated the business and met market expectations for nine consecutive quarters we are also ready to consider appropriate acquisition opportunities that would provide enhanced financial returns, accelerate our organic growth, consolidate our market positions or deliver technical functionality offsetting development costs and delivering speed to market for key product features.
The board's intention remains to move to a net debt to Adjusted EBITDA multiple of approximately 1.5 times. This will be done through planned returns of value and/or acquisitions should they be more value enhancing.
In line with the Company's dividend policy the proposed final dividend for the year is 28.1 cents per share (2012: 23.4 cents per share) giving an increase in total dividend per share for the year of 26.6% to 40.0 cents (2012: 31.6 cents). Combined with the return of value this final dividend, if approved, will bring the total cash return to shareholders attributable to FY2013 of 118.8 cents (2012: 101.0 cents) per share.
We believe we have now laid the foundations on which Micro Focus can grow in the second half of the year ending 30 April 2014 ("FY2014").
