Proactive Investors - Run By Investors For Investors

Micro Focus shares drop as says running about "one year behind" its original plan since HPE Software acquisition

Micro Focus's results for the six months to the end of April saw revenue on a constant currency basis fall by 8.0% year-on-year, which was a little better than the guidance for a fall of 9%-12% which the company issued before it announced a licensing deal in May
Software code
Micro Focus, which issued a profit warning back in March, reiterated guidance for a full-year decline in revenue of 6%-9%

Micro Focus International PLC (LON:MCRO) saw its shares slump on Wednesday after the blue-chip software firm's boss revealed it is running about "one year behind" plan and reiterated that current year revenues will be substantially lower than anticipated at the time of its transformational takeover of HPE Software.

The comment came as the FTSE 100-listed firm posted results for the six months to the end of April, in which it said that on a constant currency basis, revenue dropped by 8.0% year-on-year, which was a little better than the guidance for a fall of 9%-12% which the company issued before it announced a licensing deal in May.

READ: Micro Focus to sell SUSE business to private equity firm EQTVIII for US$2.5bn

The group, which issued a profit warning back in March, reiterated guidance for a year-on-year decline in revenue of 6%-9% for the 12 months ended 31 October 2018 on a pro-forma basis.

Micro Focus said its half-year adjusted underlying earnings (EBITDA) rose by 6.4% to US$710.5mln, up from US$667.8mln a year earlier, while the adjusted EBITDA margin improved to 36.0% from 31.8% the year before.

The group's net debt had ballooned to US$4.34bn as at the end of April, up from US$1.41bn the before, but earlier this month, Micro Focus agreed to sell its Linux business, SUSE, for US$2.54bn in cash which will be used to cut borrowings. The firm held its interim dividend at 58.33 US cents.

HPE software acquisition set the group back

Kevin Loosemore, Micro Focus's executive chairman said: "I am pleased to report that since March there has been an improved momentum in the HPE Software integration process and a slowdown in the rate of revenue decline. This has led to revenues for the period being at the better end of management guidance."

But, he added: “Due to initial challenges in the integration of the HPE Software assets, we believe that we are running approximately one year behind our original plan and as communicated in March, we expect that on exiting the current financial year revenues will be substantially lower than anticipated at the time of the transaction.

"By the year ending 31 October 2020, we expect the business (excluding SUSE) to have stabilised revenue declines and be delivering adjusted EBITDA margins in the mid-40's%." 

In early afternoon trading, Micro Focus shares were down 12.7% at 1,238p.

 -- Releads, updates share price --

View full MCRO profile View Profile

Micro Focus Timeline

Related Articles

man with mobile biometric tracking device
March 20 2019
Ipsidy has seen the market for its proprietary biometric technology explode after the hacks of Equifax Inc, Target Corp and Home Depot
Internet address bar
February 15 2019
In a February trading update, the firm said it had delivered a “strong” performance in 2018 with revenues for the year expected to be around £42.5mln compared to £24.3mln the year before
lock
October 18 2018
Managed services revenue jumped 52% in the first half of 2018 with the order book standing at £2.4mln.

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use