Software maker Micro Focus swings to $1bn half-year loss
BRITISH software provider Micro Focus swung to a heavy loss in the first half of the year as Covid-19 wreaked havoc with the troubled business.
The FTSE 250 company, which buys legacy software and then boosts profits through slashing costs, posted a pretax loss of $1.03bn (£824m) for the six months to the end of April, down from a $1.4bn profit reported in the same period last year.
Much of the swing in profitability was due to a sizeable goodwill impairment charge of $922.2m, which was due to the “increased economic uncertainty” as a result of Covid-19.
Shares fell by a fifth to end at 352.8p, down 85.9p, adding to a miserable year for the company’s stock price.
Revenue during the pandemic remained relatively resilient, slipping 2pc in April due to the deferral of new sales. Cash and cash equivalents at the end of April stood at $808.1m.
The company had already drawn ire from shareholders who have been frustrated with its struggle to absorb Hewlett Packard’s software division, following a £7bn deal two years ago.
Revenue from continuing operations dropped 12.2pc to $1.45bn, which the company attributed to pandemicinduced “disruption” to sales.
Stephen Murdoch, chief executive, said: “Going forward, we see significant opportunities to improve our business and we will continue to progress initiatives to strengthen and simplify our business operations, and stand ready to take further actions if required in these uncertain times.”
Micro Focus said the pandemic had led to a “slowdown” in customer buying behaviour in April, which led to projects being deferred.
The company did not pay out a dividend as it had flagged in March. The resultant $190m payout was cancelled to conserve cash, with around $143m being used to reduce the gross debt of its refinancing agreement from May. The refinancing of its $1.4bn term loan means that Micro Focus’ next maturity date is not until 2024.
The refinancing agreement was oversubscribed and Micro Focus said it had materially de-risked the business.
A dividend for 2020 could still be paid out, however. The Micro Focus board said it was its “intention” to propose a final dividend for the year as long as it was “prudent to do so”.
Micro Focus said it did not expect macro-economic conditions to improve in the second half of the year, and that “as a minimum” it was appropriate to be prepared for “further disruption” to sales.
Mr Murdoch faced intense scrutiny around his reappointment last year. Influential shareholder advisory group Pirc had recommended that shareholders vote against his re-election to the board. It had flagged the company’s “excessive” pay structure and outlined “serious concerns” about its sustainability policies.
The company had planned to sell part of the business after conducting a strategic view, although it failed to attract suitors.
In February, Micro Focus chairman Kevin Loosemore agreed to step down amid an investor revolt over a bonus scheme. He departed to become chairman at banknote printer De La Rue.