MARKET REPORT: Software firm Micro Focus shrugs off pandemic hangover

Shareholders cheered Micro Focus after the software group signalled that it was back on track after a shaky few months.

Boss Stephen Murdoch said a turnaround plan that started as Covid hit has began to bear fruit and that cutting costs has already helped margins and debt levels.

Micro Focus specialises in wringing profit out of old computer systems it acquires by selling software and maintenance services to banks and retailers which use them. 

Shares dived after a monster first-half loss earlier this year, when economic uncertainty triggered by the pandemic meant it had to write down the value of its assets by £730million.

All this followed a turbulent start to 2020, when long-running boss Kevin Loosemore left after a pay row and it launched a debt refinancing after turnover plunged. Its sales slumped during lockdown and it warned that Covid constraints were unlikely to improve in the second half. But in a full-year update it said the drop had in fact slowed.

It now forecasts revenues in the year to October were down by 10 per cent to £2.3billion on a constant currency basis. Dividends are still on hold for now, though investors may welcome the prudence.

Stock Watch – Innovaderma 

Beauty and skincare group Innovaderma has brought in a new chief executive who it says has a track record of turning around ailing brands.

Oxford-educated Blake Hughes has worked for haircare range Philip Kingsley, skincare group Murad and held roles with Elizabeth Arden and Marks & Spencer.

It comes after the former boss of Innovaderma, best known for its Skinny Tan fake tanning range, left abruptly in May. 

Shares in the group rose 5.2 per cent, or 3p, to 61p.

Shares barrelled to the top of the mid-cap index, adding 31.2 per cent, or 84.7p, to close at 356.4p.

Its surge helped pushed the FTSE 250 0.9 per cent higher, up 183.7 points, to close at 19,699.87.

The FTSE 100 was also on the front foot after Pfizer said its vaccine had been found to be 95 per cent effective, higher than the 90 per cent it announced last week. 

The index rose 0.3 per cent, or 19.91 points, to 6385.24, though gains were held back by a stronger pound weighing on the shares in big dollar-earning companies, including exporters Guinness-maker Diageo (down 0.6 per cent, or 18.5p, to 2977p) and Ben & Jerry’s-owner Unilever (down 0.9 per cent, or 43p, to 4522p).

Cruise firm Carnival sailed into the red, falling 0.8 per cent, or 9.5p, to 1200p, after its US arm offered £780million worth of equity to some of its creditors in exchange for lowering the amount it owes.

By doing it this way, Carnival doesn’t have to use up any cash, which it has haemorrhaged as the cruise industry has come to a grinding halt.

Shares in British Land fell 2.4 per cent, or 12.4p, to 498.6p, after the firm revealed an £840million hit to the value of its properties. Its portfolio dropped in value from £11.2billion to £10.3billion between March and September and revenues plunged from £328million to £255million.

But in a boost to cash-starved pension funds and savers, the landlord will resume its dividend after suspending it in March. It will pay 8.4p per share or about £78million overall. 

Chemicals group Croda’s £736million swoop on Spanish fragrance maker Iberchem was not entirely welcomed by investors as its shares fell 0.9 per cent, or 54p, to 6030p. It will fund it in part by selling £600million of shares to institutional investors.

Another slew of companies also put out updates and financial figures, in a busy week for corporate news. Storage group Safestore rose 0.3 per cent, or 2.5p, to 817p, after telling the market annual revenues and profits would be up compared with 2019.

Construction equipment rental group Speedy Hire advanced 4 per cent, or 2.6p, to 68.4p despite seeing an eye-watering 92 per cent fall in profits to £1.4million in the first half.

But housebuilding has taken off again and train project HS2 will give it a significant boost.

And business restructuring specialist Begbies Traynor was in demand – climbing 5.1 per cent, or 4.4p, to 90.8p – as earnings surged even though Government interventions have prevented sweeping insolvencies.