Revenue at IT services group Computacenter (LSE: CCC) rose by 9% during the final quarter of 2016. This helped to push the firm's full-year sales up by 6%, in line with forecasts of about £3.2bn.
Computacenter expects full-year adjusted profits to be in line with current expectations, and reported year-end net cash of £144.5m. That's £23.8m -- or about 20% -- more than at the end of 2015. Such strong cash generation suggests to me that another special dividend may be on the cards in 2017.
What about 2017?
Computacenter operates in France, Germany and the UK. But Brexit doesn't seem a big concern for the company, at least not yet. In today's statement, management confirmed previous guidance for "another year of progress" in 2017.
The latest consensus forecasts indicate adjusted earnings of 52.8p per share for 2016, rising by 6% to 55.8p for 2017. There's nothing in today's statement to alter that view, which puts Computacenter stock on a 2016 P/E of 15, falling to a P/E of 14 for 2017.
Management has previously indicated that it will continue to return excess cash through special dividends, and the firm has an excellent record in this regard.
I expect its forecast yield of 2.9% to be boosted by an additional cash return this year. With strong management, stable growth and an attractive valuation, it remains a Brexit buy in my book.
Profits could rise fast
One potential alternative is software group Micro Focus International (LSE: MCRO), which specialises in supporting and developing complex systems for corporate customers.
Micro Focus caused a stir last September, when it announced plans to merge with the software division of HP's Enterprise business (HPE). The $8.8bn deal is expected to complete this year and should create a company with annual revenues of $4.5bn. That's about three times larger than Micro Focus's existing business.
The firm's shares performed strongly after the deal was announced. But if you look at broker forecasts, you'll find that the Micro Focus still looks affordable, with a 2017/18 forecast P/E of about 14.
I'd exercise some caution here though. This deal is a genuine merger and will result in HPE shareholders receiving new shares that will give them a 50.1% stake in the combined group. The acquired entity will also take on $2.5bn of new debt in order to fund a payment to HP. Existing Micro Focus shareholders will also receive a $400m cash return before the merger completes.
All of this means that the financial profile of this business is likely to change significantly in 2017. I expect earnings guidance to change also, once the timing of the HPE merger is finalised.
However, Micro Focus has a track record of improving the profitability of acquisitions, and the group's shares have risen by 242% over the last five years. This growth has been overseen by executive chairman Kevin Loosemore, who has pledged to remain in the role until at least April 2018.
Based on what we know now, I'd rate Micro Focus as a solid hold ahead of the HPE merger.
A clear buy?
In reality, the big gains may already be in for shareholders of Micro Focus. But our top analysts have recently identified a FTSE 250 firm they believe could rise by up to 200% over the next few years.
The company concerned operates in the consumer sector and is currently expanding fast. Management is focusing heavily on markets outside the EU, so Brexit doesn't seem a big risk here either.
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Roland Head has no position in any shares mentioned. The Motley Fool UK has recommended Micro Focus. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.