Soft­ware maker Mi­cro Fo­cus swings to $1bn half-year loss

The Daily Telegraph - Business - - Business - By Michael Cog­ley

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.

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