Micro Focus Share Discussion Threads

[scepticalinvestor] 17/2/2021 16:41

whole mkt is down, ugh

[rochdae] 17/2/2021 14:22

Yes roger, I agree. You could express it as relative improving revenue or rate of revenue decline improving. It's a moot point. Are margins improving or has the rate of decline reduced. It's all aspectual. But the company is recovering and the industry is transforming. So it's all a state of flux.

On margins though, the company did say they didn't expect much of an improvement in margins this year. But that is taking end of year margins of 40% as a base case. So the comparatives will look pretty good come the interims.

Anyway, I continue to buy a few here and there as I'll take the divi, and I actually believe the company and their 700 million fcf by 2023 which should see dividends at more than 12% a year by (on today's price) then as a conservative estimate.

Roch

[scepticalinvestor] 17/2/2021 14:16

I would say with almost 100 pct conviction that the hedge fund hordes have stopped shorting the S&P to focus on the FTSE

[rogerrail] 17/2/2021 13:42

Well either the analysts have got it wrong or the company have misreported the facts. Momentum is momentum, H2 revenue was 6% higher than H1. Hence if we get the same momentum we should expect revenue in H1 21 to be only 2% lower than H2 20. Even if the company imply that revenue will continue at the same prorata rate as H2 20, then we should still expect FY 21 revenue at $3028m

[sr2day] 17/2/2021 12:16

sceptic,shut it.you called it wrong,stop pontificating.

[planit2] 17/2/2021 11:55

@markbelluk
At -3.2% compound that makes 2023 revenue 10% less than 2020. So no revenue growth expected from the bad Covid year.(-6% 2021,-3% 2022,-1% 2023 would achieve this)

@RogerRail
If you are correct then I would have thought the analysts would have been more positive and it would have been more clear in the results.


The forecast (with recovering FCF and net income) requires the margin improvements we have seen to continue.

[rochdae] 17/2/2021 11:49

It can move just as quickly to the upside.

[scepticalinvestor] 17/2/2021 11:40

Will probably see this floating down to the 400p region until May update.Aimho

[markbelluk] 17/2/2021 11:10

Depends on your view of the chart...ive only ever had 514 and 380 as levels

[scepticalinvestor] 17/2/2021 10:55

Very similar to the fall from the 390s to 205 imoEvery lvl of support being trashed

[scepticalinvestor] 17/2/2021 10:52

Lower lows - damn 420 def on the cards today

[gerardp] 17/2/2021 10:16

Vertica news :

Jaguar Racing welcomes Micro Focus as its official Digital Transformation, Business Resiliency and Analytics partner :

[markbelluk] 17/2/2021 09:51

The bottom line is from 2020-2023 revenue CAGR is -3.2% BUT more importantly net income 2020-2023 CAGR forecast to rise 0.7% and thats even Barclays

[rogerrail] 17/2/2021 09:26

No, FY revenue decline was -10% against FY2019, so comparing H1 21 with H1 19 then yes -7%, but the "continuing momentum" statement suggest -7% against H1 19 , but circa +4% against H1 20, which does mean revenue decline has been reversed.

[planit2] 17/2/2021 08:57

@purchaseatthetop
If the revenue decline had reversed they definitely would have mentioned it. It was -11% first half and -9% second half to make the overall -10%.

The margins improving was very good and shows their cost cutting is working and at least part of their plan is working. If they start to lower margins to arrest the sales decline then that would worry me a lot (unless the sales started increasing).

Good to know about May although that is quite a while away, I am not sure what would stop this drifting in the mean time.

From the results "The second half of FY20 saw a sequential improvement in revenue performance and we have continued this momentum into the first quarter of FY21"
So it looks like the continued momentum would be a sales decline of -7%. Obviously, if this was against the already reduced Covid H1 2020 then it would not be a very good performance but on the other hand if they beat H1 2020 it would be a revenue increase which I don't think we are expecting. They have left this very open.


I agree that they would want to under promise and over deliver. Not many director buys though which is odd if it is so undervalued.

[scepticalinvestor] 17/2/2021 08:37

as I keep emphasising, I am not a day trader but these daily movements seem co-ordinated, manipulation mist be rife.

[scepticalinvestor] 17/2/2021 08:16

yes ridiculous

[texaschaser] 17/2/2021 08:10

No bags left. No point. Only purpose of ramping is to allow rampers to sell to you.

[purchaseatthetop] 17/2/2021 06:40

planit2, rochdae, dr knowledge.....good to know we are all on the same logic path.
The next news will be around 20th May 2021 with the 6 month trading update. Then we will finally get a definitive answer to the existential question over revenue and margins.

The parts of the RNS from Feb 21 that I read carefully about the future were:

"We made encouraging progress during the year in re-engineering our Go-To-Market approach, simplifying core operations and sharpening our focus on delivering product innovation in support of our customers' digital transformation programmes. This contributed to the improvement in the second half of the fiscal period despite the broader macro context, when we were able to deliver a moderation in the rate of revenue decline when compared to the first half of the year. Considering the year as a whole, the performance varied across the Product Portfolios."

"The majority of our revenues are contractual and recurring in nature and management is targeting initiatives to increase this mix. The resilience this high level of recurring revenue affords can be seen in the company's ability to generate cash and manage costs as required even within a challenging macro environment. We have made significant progress in cost rationalisation and will continue to focus on this area in order to maximize the potential profit and cash flow that our revenue streams represent."

Most important:

"The second half of FY20 saw a sequential improvement in revenue performance and we have continued this momentum into the first quarter of FY21."

To me these words (no figures) clearly highlight that the revenue fall (10% last year and potentially terminal decline) is being slowed/reverse. The word sequential means that it is made up of many small individual items that present an overall picture. Also it shows a margin improvement.

Lots of people looked at the write-offs but that is like riding a bicycle looking backwards. IMO an excellent decision to clear the table of write-offs. I think we are all 100% aware that HPE was overpaid for!

Each month I am adding to my holding as it is such an opportunity at sub-500p. When I started buying at 218p the future of the company was really in question. The repayment of the $175m loan and Director buys indicated to me that actually all was well. Now we have much more certainty and even a good yield that should rise rapidly as the target is dividend covered 5 times by earnings.

Anyway...lovely company. Great prospects. Low relative risk (worst case is strong free cash flow anyway!).

[dr knowledge] 16/2/2021 23:07

planit2 - With MCRO's recent track record, I would far rather they under-promised and over delivered as opposed to the other way around! ;-)

[planit2] 16/2/2021 21:41

@rochdae
Revenue is not rising into 2021. Its the speed of the decline that is moderating.

Agree with your other points.

@purchaseatthetop
I agree with your points, no argument there. I was just trying to say why other people are not investing which I am happy with as it means I have picked up a cheap share

@Dr Knowledge
I agree there there is potential and am really hopeful that they can leverage the things that they say. Also see the comment above. I do feel that if there is as much potential as they say then perhaps their target should be revenue growth by 2022 rather than stopping the revenue decline by 2023. Their target just seems to be set at a very low bar.

[rochdae] 16/2/2021 20:43

Debt is being reduced rapidly. I don't know why everyone is referring to the revenue decline. The results reported a sequential rise in revenue into 2021. So basically 3 quarters of revenue acceleration. Margins come the next trading update should show a 3% rise since last year's interims. Plus up to 10p as an additional interim divi imo. That divi will be around 5% a year soon.

Mcro has always been a very volatile stock. I would stop trying to guess end of day prices and next day prices as it's a pointless exercise. Zoom out on the chart and the daily moves aren't that relevant to the overall trend.

Roch