There is increasing confidence that UK software infrastructure company Micro Focus (MCRO) can successfully get back on the total returns pathway that has enriched its shareholders for years.
Today’s multi-stranded news lays out firm trading during the second half to 31 October that means full year revenue will be at the ‘better end of guidance’. Micro Focus has also appointed a new chief finance officer and extended its share buyback programme to $400m.
Bear in mind that revenues are set to decline for the full year just closed, but the steer is that the fall will be closer to the -6% of the range, rather than -9%.
OPTIMISM ONCE MORE
This sends a decently upbeat message out to investors, reflected by the stock’s 1.4% rise today to £12.48.
That’s a relief after the company became bogged down by operational problems after merging with the HPES business. That caused a huge sell-off in the share price earlier this year.
Which makes the potential recovery of total returns star status particularly welcome. Total return is when investors benefit from both a rising share price plus receive dividends and other benefits, such as share buybacks.
CASH KING
Between 2011 and 2017 Micro Focus handed back close on 600p per share of cash to shareholders via special and ordinary dividends. That’s before the effect of share buybacks.
In that same timeframe the firm’s share price soared from below 400p to more than £26.00.
If the numbers crunched by analysts at Numis Securities are right, investors could be looking at capital returns worth $2bn in the coming 12 months, or 370p. That alone would imply a yield of 30%. Total capital returns could top $3bn out to 2020, adding another 185p per share.
