* First-half sales rise 24 percent
* Lowers guidance on H2 revenue
* Says year EBITDA forecasts of $110-112 "very sensible"
* Shares rise 1.2 percent
(Adds chief executive comments, analyst reaction, shares)
By Paul Sandle
LONDON, Dec (Reuters) - British software specialist Micro Focus Plc reported a 37 percent rise in first-half pretax profit on Tuesday, as its low-cost IT solutions found favour, and reiterated its year guidance despite guiding down second-half revenue.
The group, which upgrades customers' existing software packages, said lower-than-expected second-half revenue, partly due to currency, would not impact the bottom line, and its trading outlook remained in line with management expectations.
"There is a currency headwind, but we are naturally well hedged," Chief Financial Officer Nick Bray told Reuters in an interview.
"Fifty percent of billings are in dollars but only 30 percent of costs are in dollars," he said.
Shares in the company fell as much as 7.7 percent on the lower sales guidance, before rallying to be up 1.2 percent at 263 pence by 1108 GMT, as Bray said he expected analysts to nudge up full-year forecasts.
Piper Jaffray analyst Rajeev Bahl said the results were slightly ahead of expectation, driven by margins reaching 42 percent, and the currency headwind was not a surprise.
"From an earnings perspective, Micro Focus' cost base has a greater European/UK mix than the revenue line, suggesting that dollar strength will have an equal impact on costs, protecting margin, " he said in a note.
"With pipeline and sales conversion rates holding up well, we believe Micro Focus goes into H2 well placed."
Bray told Reuters he expected analysts to upgrade their full-year forecast slightly in light of the higher margins.
"Analysts are nudging up to $110 to $112 million dollars (from consensus of $107 million for earnings before interest, tax, depreciation and amortisation), Bray said.
"That feels very sensible."
MAKE DO AND MEND
Micro Focus said it was continuing to benefit from companies, such as Tesco and Boeing, prolonging the life of existing software rather than buying new.
"Financial officers are asking tough questions on spending," Chief Executive Stephen Kelly told Reuters. "There is zero tolerance for shiny new things."
He said there was clearly a slowdown across the board, but companies that would do well would take costs down. "We are helping companies take costs out of IT," he said, stressing the group's "make do and make better" sales pitch.
Micro Focus' strategy remained focused on organic growth, he said, but he was also keen to do deals when he saw an opportunity to boost margins.
"We are getting targets into the margin model as soon as possible, of 42.7 percent at a group level." Kelly said. "But organic growth is the mother ship."
Micro Focus reported adjusted pretax profit of $57.2 million for the six months to end-October, on sales of $135.6 million, up 24 percent.
Adjusted EBITDA rose 38 percent to $57.9 million, resulting in an adjusted EBITDA margin of 42.7 percent, it said, and it increased its interim dividend by 25 percent to 4.5 cents a share. (Editing by Andrew Macdonald)