Micro Focus slashes its revenue target

Steve Dinneen
Follow Steve
Micro Focus International was forced to slash its full-year revenue target after underlying growth stalled in the first quarter, with customers delaying contracts and low-value deals remaining weak.

The firm’s shares fell 31 per cent to a 16-month low yesterday after the company, which upgrades legacy mainframe applications for companies like Boeing and Tesco, updated the market.

The company said it now expected low single-digit like-for-like revenue growth in the year to the end of April 2011, instead of mid-single digit growth. However, it expected no change to earnings guidance after cost cuts helped margins.

Analysts at Numis believe the market overreacted, adjusting their recommendation to “buy”. David Toms said: “Our view is that the underlying performance is fairly consistent. It was clearly a disappointment and has refreshed investor concerns but in our view these are overdone.”

Chief executive Nigel Clifford said: “We still expect to meet our previous expectations for full year 2011 adjusted Ebitda and to achieve double-digit revenue growth over the medium term.”