UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the
Month of: November 2022
Commission
File Number: 001-38187
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MICRO FOCUS INTERNATIONAL PLC
(Exact name of registrant as specified in its charter)
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The Lawn, 22-30 Old Bath Road
Newbury, Berkshire
RG14 1QN
United Kingdom
+44 (0) 1635-565-459
(Address of principal executive office)
Indicate
by check mark whether this registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form
20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule
101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K
in paper as permitted by Regulation S-T Rule
101(b)(7): ☐
CONTENTS
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Exhibit No.
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Exhibit Description
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99.1
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Micro
Focus International plc Trading Update, dated 14 November
2022
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14 November 2022
Micro
Focus International plc
Trading
Update
Overview
The Board of Micro Focus
International plc ("Micro Focus" or "the Group", LSE: MCRO.L, NYSE:
MFGP), the global enterprise software group, today issues an
unaudited trading update (1) for
the 12 months ended 31 October 2022 ("FY22").
●
Revenue
of $2.5bn (FY21: $2.9bn), representing a year-on-year decline of
approximately 7% on a constant currency
("CCY") (2) basis
when excluding Digital Safe (3) from
both periods, but including approximately 1% impact from the
suspension of our operations in Russia in Q1 FY22. On a reported
basis, including Digital Safe in both
periods,
revenue declined by
13%.
●
Adjusted
EBITDA (4) of
$0.9bn (5) (FY21
CCY: $1.0bn (5))
at a margin of approximately 35% (FY21 CCY: 36%). The Group's
cost saving programmes generated approximately $200m of annualised
gross cost savings partially mitigating the Adjusted EBITDA impact
of the decline in revenues.
●
The
Group generated free cash flow (6) of
more than $300m, ahead of our expectations, reflecting tight
control of operating and exceptional costs.
●
Net
debt of c.$3.5bn as of 31 October 2022, with cash in excess of
$500m.
●
On 25 August 2022, the Group
announced it had reached agreement with the board of OpenText on
the terms of a recommended cash acquisition to be made by OpenText
of the entire issued and to be issued share capital of Micro Focus
at a price of 532 pence per Micro Focus share. The Group expects
the acquisition to complete during the
first
calendar quarter of 2023, subject
to competition and national security clearances following
shareholder approval on 18 October 2022.
Stephen Murdoch, Chief Executive Officer, commented:
"In FY22 we continued to make significant progress against our
strategic objectives. As a result, Micro Focus has become
increasingly customer centric, building growth in key portfolios,
whilst delivering cost savings and improving cash
generation.
To date, demand has remained robust in the face of an
increasingly volatile market backdrop, demonstrating the importance
of our solutions to customers.
The acquisition by OpenText will create one of the world's largest
software and cloud businesses with marquee customer base, global
scale and comprehensive go-to-market platform. OpenText not only
shares our values but will offer new opportunities for both our
customers and employees."
Financial Performance
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Y-o-Y unaudited revenue trajectory on
a CCY basis (excluding Digital Safe) (2)
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FY22 versus FY21
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Licence
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(9)
%
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Maintenance
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(7)
%
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SaaS
and other recurring
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9%
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Consulting
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(3)
%
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Total revenue trajectory
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(7) %
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The Group expects to report a revenue decline of
approximately 7% on a CCY basis (2) when
excluding Digital Safe (3) from
both periods. This includes approximately 1% decline due to the
suspension of our operations in Russia. As a US dollar
reporter, foreign exchange rates in the period created a headwind
of c. 4% to reported FY22 revenue
performance.
Licence
revenue is expected to decrease by approximately 9% when compared
to FY21 with new licence sales impacted by the challenging
macro-economic environment. The Group continues to make progress
within our key sub-portfolios in CyberRes and Mainframe
modernisation (within AMC) which delivered another six-month period
of growth.
Maintenance
revenue is expected to decline by approximately 7%, representing
another period of sequential improvement in the underlying trend.
The actions we have taken in improving maintenance have had a
meaningful effect since FY21 and have improved the trajectory
overall in FY22 with our exit run rate c. 2ppts better than H2 in
FY21.
SaaS
and other recurring revenues are expected to increase by
approximately 9%. The SaaS revenue performance is continuing to
accelerate with both bookings and consumption trends improving in
the period.
Consulting
revenue declined by approximately 3% and is now increasingly
focussed on mainframe modernisation projects.
Profitability and Cash
The
Group's Adjusted EBITDA margin is expected to be approximately 35%
in FY22 (FY21: CCY: 36%) reflecting the revenue decline and the
suspension of our Russia operations, partially offset by the
in-year impact of our cost reduction programme.
Free cash flow (6) for
the Group is expected to be in excess of $300m demonstrating a
significant improvement year-on-year (FY21:
$56m).
The
Group ended the period with cash balances in excess of $500m and
net debt of approximately $3.5bn. Net debt has continued to
reduce from $3.7bn as reported on 30 April 2022, due to the Group's
free cash flow generation and favourable foreign exchange movements
on our Euro term debt.
Notes:
1. As a Group listed on the London Stock Exchange
with American Depositary Shares listed on the New York Stock
Exchange, it is considered a Foreign Private Issuer and as such
financial information is produced using accounting policies in
accordance with International Financial Reporting Standards
("IFRSs") as
issued by the International
Accounting Standards Board. These accounting
policies are detailed in the Annual Report and Accounts for the
year ended 31 October 2021 apart
from standards, amendments to or interpretations of published
standards adopted since 31 October 2021 which have not had a
material impact. This unaudited
financial information has been prepared
in
accordance with the
recognition and measurement principles of these accounting
policies, and it does not include all information required for a
complete set of financial statements prepared in line with
IFRSs.
2.
"CCY basis" defined as restating the Group results for the
comparable period at the same average exchange rates as those used
in reported results for the current period.
3.
Digital Safe was disposed of on 31 January 2022.
4.
The Group defines Adjusted EBITDA as EBITDA, adding back
exceptional items including the profit on disposal of discontinued
operations, share-based compensation and foreign exchange
(gains)/losses. EBITDA is defined as net earnings before finance
costs, finance income, taxation, depreciation of property, plant
and equipment, right-of-use
asset
depreciation and amortisation of intangible
assets.
5.
Adjusted EBITDA for FY22 includes $13m in relation to Digital Safe
(FY21: $51m).
6.
Free cash flow defined as cash generated from operations less
interest payments, bank loan costs, tax payments, purchase of
intangible assets, purchase of property, plant and equipment and
interest and capital payments in relation to leases.
Enquiries:
Micro
Focus
Tel: +44 (0)1635 32646
Stephen
Murdoch, CEO
Investors@microfocus.com
Matt
Ashley, CFO
Ben
Donnelly, VP of FP&A and Investor Relations
Brunswick
Tel: +44 (0) 20 7404 5959
Sarah
West
MicroFocus@brunswickgroup.com
Jonathan
Glass
Notes
to Editors:
About
Micro Focus
Micro
Focus (LSE: MCRO.L, NYSE: MFGP) is a global enterprise software
company supporting the technology needs and challenges of the
Global 2000. Our solutions help organisations leverage
existing IT investments, enterprise applications and emerging
technologies to address complex, rapidly evolving business
requirements while protecting corporate information at all times.
Our product portfolios are Security, IT Operations Management,
Application Delivery Management, Information Management &
Governance and Application Modernisation & Connectivity. For
more information, visit: www.microfocus.com
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereto duly authorized.
Date:
14 November 2022
Micro
Focus International plc
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By:
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/s/
Matt Ashley
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Name:
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Matt
Ashley
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Title:
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Chief
Financial Officer
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