Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email [email protected] to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found here.
Read next Investors approve Micro Focus’ $8.8bn software deal Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save 11 HOURS AGO by: Nicholas Megaw Revenues at the software business Micro Focus is buying from HP Enterprise dropped sharply at the start of the year, but the company made better than expected progress in improving margins at the unit ahead of the $8.8bn deal’s completion. Micro Focus had previously told investors to expect HPE Software’s revenues to decline around 10 per cent year on year in the three months to April 30, a warning which sent its shares down more than 5 per cent. In an update on Thursday, however, the company said the decline was not quite as severe as expected: revenues fell 9 per cent after adjusting for previous disposals. Importantly, the business also reported a 160 basis points (1.6 percentage points) improvement in its operating profit margin on a reported basis. Micro Focus said that if the effect of one-off benefits such as divestitures in the previous year are excluded, margins improved more than 1000bps. Analysts at Barclays said they have some questions over the extent of the improvement in profitability given the decline in profitable licence revenues, but said “clearly the trend on profitability is becoming very encouraging”. Micro Focus specialises in wringing greater profit out of older software assets, and is aiming to lift margins at the HPE unit from their current levels around 26 per cent to the more than 40 per cent enjoyed by the rest of its business. Shares in Micro Focus gained 1.3 per cent at the start of trading, making it the third-best performer on the FTSE 100.