TIDMMCRO
RNS Number : 0714I
Micro Focus International plc
19 March 2018
19 March 2018
Micro Focus International plc
Trading Update and Management Change
The Board of Micro Focus International plc ("Micro Focus" or
"the Group", LSE: MCRO.L, NYSE: MFGP), the international software
product group, is today issuing a trading update for the twelve
months ending 31 October 2018.
Since the interim results on 8 January 2018, the rate of
year-on-year revenue decline has been greater than anticipated and
accordingly the Group is issuing revised constant currency revenue
guidance for the twelve months ending 31 October 2018 of minus 6%
to minus 9% compared to the proforma 12 months ending 31 October
2017. This updates revenue guidance of minus 2% to minus 4%
provided at the interim results on 8 January 2018. The impact of
this on adjusted EBITDA margin percentage for the period is
expected to be mitigated by the progress made in the cost reduction
programme which is currently tracking ahead of schedule. The Board
expects for the Group's net debt position at 31 October 2018 to be
broadly in line with market expectations.
Chris Hsu has submitted his resignation in order to spend more
time with his family and pursue another opportunity. He will step
down immediately as the CEO of the company. Stephen Murdoch,
currently Micro Focus COO, becomes CEO and rejoins the Board with
immediate effect.
The recent revenue performance is primarily due to lower than
expected licence income and is a result of a number of factors,
which management believe to be largely one-off transitional effects
of the combination with HPE software, rather than underlying issues
with the end market or the product portfolios. These factors
include:
1. Issues relating to our new IT system implementation, which
have impacted the efficiency of our sales teams, our ability to
transact with partners and our cash collection;
2. Higher attrition of sales personnel due to both integration and system related issues;
3. Disruption of ex Hewlett Packard Enterprise global customer
accounts as a result of the demerger of Hewlett Packard Enterprise;
and
4. Continued sales execution issues particularly in North America.
Management has identified additional actions to address each of
these points, including further investment in additional field
sales reps, a renewed focus on top global accounts, and continuing
to strengthen the sales management team in North America.
The impact of the system issues is now under better control as
we are seeing improvements in stability, throughput and accuracy.
The November 2018 timing of the second phase (of moving heritage
Micro Focus systems to the new IT system) is under review.
As a consequence of the factors set out above, for the six-month
period ending 30 April 2018 the Group expects revenues to decline
on a constant currency basis at minus 9% to minus 12% compared with
the proforma comparable prior period and DSOs to remain at a
temporarily elevated level.
As a result of better progress on the cost reduction program
than anticipated, management believe that, at the midpoint of the
revenue guidance range, the cost reductions will enable the company
to achieve Adjusted EBITDA margin percentage of approximately 37%
in the 12 months to 31 October 2018
Despite the integration challenges, the Board believes that the
fundamental thesis of the HPE software acquisition remains intact.
Micro Focus' strategy, dividend policy, leverage target, and Return
of Value approach remain unchanged.
Kevin Loosemore, Executive Chairman of Micro Focus International
commented: "We remain confident in Micro Focus' strategy whilst
recognising that operational issues have led to a disappointing
short term performance and outlook. We believe that Micro Focus is
well positioned to help our customers with the increasing pace of
change across their Hybrid IT environments and to deliver customer
centred innovation."
"I would like to thank Chris Hsu for his leadership, tireless
energy and enthusiasm over the past 15 months and wish him well in
his new venture. Chris was instrumental in achieving the carve out
of the HPE Software business in order that it be merged with Micro
Focus. He has led a repositioning of the HPE Software portfolio to
the needs of today's market and put in place a plan to increase our
effective product investment as we integrate the companies. I look
forward to working with Stephen to address the current performance
issues and fulfil Micro Focus' potential."
An analyst conference call will be at 8.30am this morning.
Details are as follows:
UK Toll-Free Number 0808 109 0700
Standard International
Access +44 (0) 20 3003 2666
Password: Micro Focus
Enquiries:
Micro Focus Tel: +44 (0)1635 32646
Kevin Loosemore, Executive Chairman
Stephen Murdoch, CEO
Tim Brill, IR Director
Powerscourt Tel: +44 (0)20 7831 3113
Victoria Palmer-Moore
Elly Williamson
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 organizations 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 Micro Focus (which included HPE Software from
completion) and SUSE. Within Micro Focus our solution portfolios
are COBOL Development and Mainframe Solutions, Host Connectivity,
Identity and Access Security, IT Development and Operations
Management Tools, and Collaboration and Networking. Within HPE
Software our solution portfolios are IT Operation Management,
Application Delivery Management, Enterprise Security Product,
Platform, and Information Management Business. With effect from 1
November 2017 the Micro Focus solution portfolios are Security, IT
Operations Management, Application Delivery Management, Information
Management & Governance and Application Modernization &
Connectivity. For more information, visit: www.microfocus.com.
SUSE, a pioneer in Open Source software, provides reliable,
interoperable Linux, Software Defined Infrastructure and
Application Delivery platforms that give customers greater control
and flexibility while reducing cost. For more information, visit:
www.suse.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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