a6484f
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 2020
Commission
File Number: 001-38187
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
Exhibit No.
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Exhibit Description
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99.1
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Trading
Statement, dated 18 November 2020
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18 November 2020
Micro Focus International plc
Trading Statement
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 a trading update for the 12 months ended 31
October 2020 ("FY20").
Micro
Focus expects to report:
●
Revenue
of approximately $3.0bn for FY20, which is in line with management
expectations. This represents a decline of approximately 10% on a
constant currency ("CCY") basis when compared to FY19.
●
Adjusted
EBITDA margin* of approximately 39% for FY20 which was towards the
upper end of management expectations, following the execution of
operational improvement and cost initiatives.
●
Cash
of $0.7bn and Net debt* of $4.2bn as at the 31 October 2020, with a
continuation of strong cash generation and working capital
management achieved in the first half of FY20.
Stephen Murdoch commented: "We are in extraordinary times as a
result of COVID-19 and I must take this opportunity to express my
sincere thanks to our employees for how they have adapted to the
challenges presented and ensured we stay focused on delivering for
our customers.
We are now nine months into our three year turnaround plan for the
Group and whilst there remains a great deal to do I am pleased with
progress in both overall operational effectiveness and in the
delivery of our key strategic objectives. Cash generation and
working capital management remain strong, the investments we've
made are showing encouraging early results and we continue to see a
clear, ongoing customer need for our solutions and approach to
digital transformation.
I am confident we are making the changes and building the
foundations necessary to continue to make progress in the delivery
of our plan."
Financial Performance
In
light of COVID-19 and the current macro-economic environment, the
Board has provided additional information in this announcement to
compare the trajectory of the core revenue streams of the business
in the second half of FY20 with those delivered in the first half
of FY20.
Y-o-Y revenue trajectory (on a CCY basis)
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H1 FY20
versus
H1 FY19
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H2 FY20
versus
H2 FY19
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FY20
versus
FY19
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Licence
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(21)%
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(17)%
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(19)%
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Maintenance
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(7)%
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(5)%
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(6)%
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SaaS
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(12)%
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(11)%
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(12)%
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Consulting
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(15)%
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(10)%
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(12)%
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Total revenue trajectory
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(11)%
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(9)%
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(10)%
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In
the second half of FY20, revenue declined by approximately 9%
versus the second half of FY19 representing an improvement in
the revenue trajectory of 2 percentage points compared to the
first half of the financial year. Set against the
context of continued challenging market conditions, this
performance is encouraging and combined with improvement in the
underlying operational metrics gives management confidence that the
actions being taken are beginning to improve the overall revenue
trends.
Licence revenue declines moderated by approximately 4 percentage
points, driven by more consistent execution. Within this, IT
Operations Management ("ITOM"), Application Delivery Management
("ADM") and Information Management and Governance ("IM&G") all
improved in the second half but Security and Application
Modernisation and Connectivity ("AMC") did not. Period to period
volatility is not unusual in AMC driven by the timing of large
scale modernisation projects and this is an example of that
dynamic. In Security, the second half had a challenging compare and
the full year performance does show rates of decline moderating.
Maintenance
revenue declines moderated by approximately 2 percentage points.
Within this, Security and IM&G delivered good improvement, AMC
was broadly consistent but trends in ITOM and ADM remain below
Management's expectations. We are continuing to redirect resources
and execute operational plans to deliver sustained improvements in
overall performance in this revenue stream.
SaaS
and other recurring revenue declines moderated slightly and we saw
encouraging growth in our Security portfolio. We are confident the
actions being taken will better position this revenue stream for
growth in the medium term as targeted.
Consulting
revenue trajectory also improved and this revenue stream is now
expected to be broadly stable.
Profitability and Cash
The
Group's Adjusted EBITDA margin* of approximately 39% in the 12
months ended 31 October 2020 was towards the upper end of our
expectations. The Group has continued to balance targeted
investment in Go-to-Market and Product Groups against the ongoing
management of discretionary costs and operational improvement
initiatives.
The
Group's cash flow performance was strong and underpinned by
effective working capital management. The Group ended the period
with cash balances of approximately $0.7bn billion and net debt* of
approximately $4.2bn, reducing by approximately $0.4bn from 31
October 2019, excluding the impact of IFRS16.
In
total, the Group had $1.1 billion of available liquidity as at 31
October 2020 and, following the successful refinancing, the next
facility maturity date is June 2024.
The macro-economic environment remains uncertain and the potential
long- term impact this has on the Group continues to be evaluated
by the Board. As a result, the decision in respect of the Group's
final dividend remains under review, as does the carrying value of
goodwill and intangible assets. We will provide a further update as
part of our full year results.
Progress on business transformation plan
The
Group is now nine months into the three year turnaround plan and
has made solid progress in the strategic focus areas of
transforming our go-to-market model, delivering more complete and
focused solutions by product area and simplifying core
operations.
In
go-to-market, changes and new recruitment to the leadership team,
supported by training programmes and new tools, are beginning to
deliver improved execution discipline which over time will deliver
better predictability and performance across the key operational
metrics.
Progress
in Security and Vertica has been encouraging. In Security,
new leadership talent has been added, new SaaS offerings have been
delivered, and a technology focused acquisition has been completed
to add key new capabilities. In Vertica, the transition to
subscription is now underway supported by product enhancements and
the refocus of the sales organisation.
The
Group is executing multiple programmes to deliver improved
operational efficiency and agility. Key within this is the project
to migrate to one set of core IT systems. The challenges presented
by COVID-19 have required this project to be transitioned from a
highly intensive, onsite mode of working to a fully remote
operating model. Despite these challenges the project is on
track to be able to move a significant number of employees onto the
new infrastructure during the first quarter of FY21 with the rest
of the team moving later in FY21.
There
remains a great deal to do, but overall, the progress made provides
a stronger foundation from which to build and provides increased
confidence in our ability to execute the remainder of our 3 year
plan.
*Adjusted
EBITDA and Net debt are stated after the impact of IFRS 16 which
has been newly adopted from 1 November 2019. IFRS 16 increased
Adjusted EBITDA by approximately $75m for the 12 months ended 31
October 2020 and net debt by approximately $230m at 31 October
2020.
This
announcement contains information that was previously Inside
Information, as that term is defined in the Market Abuse Regulation
(Regulation (EU) No 596/2014 of the European Parliament and of the
Council of 16 April 2014) and successor UK
legislation.
Enquiries:
Micro
Focus
Tel: +44 (0)1635 32646
Stephen Murdoch, CEO
Investors@microfocus.com
Brian McArthur-Muscroft, CFO
Ben Donnelly, Head of 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:
18 November 2020
Micro
Focus International plc
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By:
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/s/
Brian McArthur-Muscroft
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Name:
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Brian
McArthur-Muscroft
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Title:
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Chief
Financial Officer
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