Micro Focus, one of the leading vendors of test automation software, was at the centre of unfavourable publicity this weekend. The Mail on Sunday newspaper claimed that institutional investors, led by Aviva, were objecting to an ‘extraordinary’ change that would allow four senior executives more time to hit bonus targets worth a combined £110m. But despite the weekend battering in the press, Micro Focus shares had traded upwards, 1.30% from opening at noon on Monday, January 7, compared to an easing of 0.50% in the FTSE 100 index, in which it is a constituent. 2018 was a difficult year for Micro Focus. In May 2017 it paid $8.8 billion cash for HP’s software businesses, but in March last year issued a profit warning which led to its share price halving in value. A specialist in buying legacy software businesses, reducing costs and milking cash, Micro Focus finally seemed to be suffering from indigestion. The share price fall also undermined the £268 million incentive scheme that Micro Focus had created for its border team of senior managers following the HP deal. But since November the underlying trend in its price has been improving, thanks to the company’s announcement of extended share buy-back plans and the prospect of a $2.54 billion cash inflow from its sale of its SUSE enterprise Linux subsidiary. Brokers, including Goldman Sachs, have been upgrading Micro Focus stock on the belief that the worst of its HP integration worries are behind it. Aviva holds 1.7 million shares in Micro Focus and is reported to be planning to object to Micro Focus’s plan to extend the bonus targets end-date from September 2019 to September 2020.
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