Earnings release Sorry about the cut and paste...too long to edit!
LONDON and MOUNTAIN VIEW, Calif.--(BUSINESS WIRE)--Nov. 30,1998--
Micro Focus Group Plc (London Stock Exchange: MICF; Nasdaq:MIFGY)
today reported results for the period ended October 31, 1998.
Revenues for the quarter ended October 31, 1998 were $87.2
million compared with $91.3 million for the quarter ended October 31,
1997. Excluding one-time charges associated with the acquisition of
INTERSOLV, Inc., net income was $1.1 million compared with $7.7
million in the comparable prior year period, diluted earnings per
ordinary share were $0.01 compared with $0.05 and earnings per
American Depositary Share ("ADS") were $0.04 compared with $0.27.
Including the effect of one-time charges ($49.7 million pre-tax, $43.4
million after tax; $0.30 per share; and, $1.51 per ADS) associated
with the acquisition of INTERSOLV, Micro Focus' net loss for the
quarter was $42.3 million, net loss per ordinary share was $0.29 and
net loss per ADS was $1.47.
During the quarter, Micro Focus had strong increases in its
international operations across all its product lines. In North
America, the company experienced weakness across several business
segments, especially in its year 2000 business. The weakness in North
America was caused by the residual effects of the company's
reorganisation of its sales force during the summer months,
merger-related integration issues and delays in major purchases by
financial institutions. The year 2000 business also was affected by
increased competition and customers moving to the later stages of
their remediation processes, for which the company did not have the
appropriate products until November.
Separately, Micro Focus today announced the appointment of Gary
Greenfield as the company's president and CEO.
Commenting on the results Gary Greenfield said, "Our revenue
performance across most of the business lines in North America was
below our expectations, particularly in our Year 2000 products and
services sector. However, we believe these overall results are not
indicative of the long-term performance of which the company is
capable. We had a strong performance in our international territories,
which we are confident demonstrates the underlying strength of our
products, services and strategy. During the quarter we made
significant progress on a number of operational fronts. We completed
the merger with INTERSOLV and we began the integration of the two
companies. As part of the integration, we are focusing on improving
our sales processes in North America and getting back to the growth
that we are confident our market leadership can support. We expect the
integration activities to be largely completed between now and the end
of April. We are optimistic about the prospects for success in our
core markets, and we are continuing to invest for growth."
Rick Van Hoesen, Senior Vice President and CFO, said, "In light
of the revenue performance, we were pleased that the company was able
to deliver a small operating profit. In addition, we generated
substantial operating cash. We increased net cash by $1.5 million
during the quarter, even though we incurred non-operating cash outlays
of nearly $9 million on deal-related costs and the acquisition of our
Australian distributor. We have a healthy balance sheet and a strong
financial foundation on which to grow the business. We have begun
already to achieve some of the savings in our operational cost
structure from the INTERSOLV acquisition, and are focusing our
investments on the areas that will help drive our long-term growth and
success in a financially prudent manner."
US GAAP Results
The INTERSOLV acquisition was accounted for as a
pooling-of-interests under U.S. generally accepted accounting
principles (GAAP). Accordingly, all U.S. financial data presented
herein, including the results announced above, include the results of
INTERSOLV. During the quarter, Micro Focus also acquired its
Australian distributor in a transaction accounted for as a purchase.
The contribution made by this acquisition in the quarter was not
significant.
Micro Focus also reports that it has elected to change its fiscal
year end and accounting reference date to April 30 from January 31.
Consequently, the Company is today reporting under US GAAP results for
the first six months of the fiscal year beginning May 1, 1998 and
ending April 30, 1999. Revenue for the two quarters to date increased
7% to $182.4 million from $171.1 million for the comparable six-month
period ended October 31, 1997. Excluding one-time charges, net income
for the half year was $8.4 million compared with $10.9 million for the
comparable period of fiscal 1998 and diluted earnings per ADS were
$0.28 compared with $0.38 in the comparable prior-year period. Diluted
earnings per ordinary share were $0.06 per share compared with $0.08
for the comparable prior year period.
UK GAAP Results
In accordance with UK GAAP, the INTERSOLV transaction has been
accounted for as an acquisition. Accordingly, the UK format results
incorporate the results of INTERSOLV from September 24, 1998, the date
of the completion of its acquisition. Goodwill arising from the
acquisition, which totalled 140.1 million GBP, will be charged
against income over a four-year term. Net revenue for the quarter
increased 58% to 40.1 million pounds, from 25.4 million GBP for the
quarter ended October 31, 1997. Excluding one-time charges associated
with the acquisition of INTERSOLV, Inc., and amortisation of goodwill
arising on the acquisition, profit after taxation was 3.0 million
GBP compared with 2.7 million GBP in the prior year period and
diluted earnings per ordinary share were 3.1 pence compared with 3.3
pence. Including the effect of those charges, loss after taxation was
8.8 million GBP and loss per share was 10.8 pence compared to a
profit after taxation of 2.7 million GBP and earnings per share of
3.3 pence for the corresponding prior year period.
The results of the quarter include a non-recurring pre-tax charge
of 11.8 million GBP which arose in connection with the acquisition.
Excluding this pre-tax charge, but after providing for amortisation of
3.6 million GBP against goodwill arising from the acquisition, the
loss after taxation for the quarter was 0.7 million GBP and loss
per share was 0.7 pence.
Pursuant to the change in the Company's fiscal year-end and
accounting reference date, the UK format financial statements will
report the results for the fifteen-month period ending April 30, 1999.
Net revenue for the nine months ended October 31, 1998 increased 48%
to 98.8 million GBP from 66.7 million GBP for the comparable prior
year period. Profit after taxation, excluding the non-recurring
charges and amortisation of goodwill associated with the INTERSOLV
acquisition, increased by 58% to 9.7 million GBP from 6.2 million GBP
for the comparable prior year period; and diluted earnings per share
were 10.7 pence for the nine-month period compared with 7.8 pence for
the comparable prior year period.
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Summary financial results are as follows:
US Dollars, US GAAP (excluding one-time charges)
Three months ended Six months ended
October 31 October 31
1998 1997 1998 1997
---- ---- ---- ----
Net revenue $87.2m $91.3m $182.4m $171.1m
Net income $1.1m $7.7m $8.4m $10.9m
EPS : Basic $0.01 $0.05 $0.06 $0.08
Diluted $0.01 $0.05 $0.06 $0.08
Diluted ADS
equivalent $0.04 $0.27 $0.28 $0.38
Basis of presentation: under US GAAP, the INTERSOLV acquisition
has been accounted for as a pooling-of-interests, and accordingly all
periods presented in US format disclose the combined results of Micro
Focus and INTERSOLV
GB Pounds, UK GAAP
Three months Nine months
ended ended
Oct. 31 Oct. 31
1998 1997 1998 1997
---- ---- ---- ----
Revenue 40.1m 25.4m 98.8m 66.7m
(Loss) profit before taxation,
merger costs and 4.6m 3.8m 14.6m 9.0m
amortisation of goodwill
(Loss) profit before taxation &
merger costs 1.0 3.8 11.0 9.0
(Loss) profit after taxation,
before merger costs (0.7m) 2.7m 6.1m 6.2m
(Loss) profit after taxation &
merger costs (8.8m) 2.7m (2.0m) 6.2m
EPS: Basic (10.8p) 3.5p (2.3p) 8.1p
Diluted (10.8p) 3.3p (2.3p) 7.8p
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Basis of presentation: under UK GAAP, the INTERSOLV transaction
has been accounted for as an acquisition, and accordingly the UK
format results include the results of INTERSOLV from September 24,
1998, the date of its acquisition.
Micro Focus (Nasdaq: MIFGY; London Stock Exchange: MICF) is a
leading software solutions vendor that enables corporations to
accelerate the development and delivery of applications designed to
run in today's distributed enterprise computing environments. The
Company's solutions allow its customers to leverage their existing IT
investments in applications and people; to access information quickly
and easily; to build applications that integrate existing information
assets across the enterprise; and to manage the development and
deployment process to ensure quality applications. Founded in 1976,
Micro Focus is known as a leading provider of enterprise application
development and maintenance solutions for MVS, UNIX, Windows, NT and
Web environments. With its recent acquisition of INTERSOLV, a global
market leader in software configuration management and open data
connectivity products and services, Micro Focus is now a leader in
helping its customers respond quickly to business and technological
change.
Micro Focus products include the PVCS line of application life
cycle management products, the DataDirect line of standards-based data
access and connectivity products, and the Micro Focus line of
applications development and transformation solutions. In the U.S.,
Micro Focus is located at 701 East Middlefield Road, Mountain View,
California 94043 -- telephone 650/938-3700. In the UK, the Company is
located at The Lawn, 22-30 Old Bath Road, Newbury, Berkshire, RG14 1QN
-- telephone 01635 32646. For additional information on Micro Focus
and its products, visit the Micro Focus Web site at
microfocus.com.
The financial information contained in this report does not
constitute statutory accounts as defined in section 240 of the UK
Companies Act 1985. Prior year figures are based on the audited
financial statements of the Company for the year ended January 31,
1998, which have been filed with the UK Registrar of Companies; the
auditors' reports on both the UK and US financial statements for the
year ended January 31, 1998 were unqualified. Copies of the Company's
second Interim Report, which incorporates the results included in this
announcement, will be distributed to all shareholders in December,
1998.
As a foreign private issuer in the United States, Micro Focus is
not required to file quarterly reports with the U.S. Securities and
Exchange Commission ("SEC"). However, beginning in 1997, the Company
commenced furnishing to the SEC on a voluntary basis quarterly reports
on Form 6-K which include the Company's results for the applicable
quarter in a format similar to that of a Form 10-Q. These materials
are available on the SEC web site located at sec.gov.
Copies of the Annual Report for the year ended January 31, 1998 are
available upon request to the Company's offices in Mountain View and
Newbury.
The following statement is made in accordance with the U.S.
Private Securities Litigation Reform Act of 1995: This announcement
contains forward-looking statements that involve a number of risks and
uncertainties. There are certain important factors that could cause
results to differ materially from those anticipated by the statements
made herein. Factors that could cause actual results to differ
materially include, among others, the ability of the Company to
effectively manage its costs against uncertain revenue expectations,
the ability to manage and integrate recently acquired businesses or
other businesses that it may acquire in the future, the potential for
a decrease in net revenue which may be caused by delays in the timing
of the delivery of products or services, the ability of Micro Focus to
develop, release and sell products and services to customers in the
highly dynamic market for enterprise software solutions, the potential
need for enterprise software solutions to shift based on changes in
underlying technology standards coming into use, and the effect of
competitors' efforts to enter the Company's markets. Further
information on potential factors which could affect the Company's
financial results is included in the Registration Statement on Form
F-4 relating to the INTERSOLV acquisition, Micro Focus' Annual Report
on Form 20-F for the year ended January 31, 1998 and Quarterly Reports
on Form 6-K for the quarters ended April 30, 1998 and July 31, 1998,
and INTERSOLV's Annual Report on Form 10-K for the year ended April
30, 1998 and Quarterly Report on Form 10-Q for the quarter ended July
31, 1998, each as filed or submitted (as the case may be) with the
SEC, as they may be updated and amended with future filings.
Note to Editors: Micro Focus is a registered trademark of Micro
Focus Limited, and INTERSOLV is a registered trademark of INTERSOLV,
Inc. All other trademarks as they appear in this announcement are the
property of their respective owners.
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MICRO FOCUS GROUP PLC - QUARTER ENDED OCTOBER 31, 1998
CONSOLIDATED STATEMENTS OF INCOME - IN U.S. FORMAT
(in thousands of U.S. dollars, except share, per share and ADS data)
(unaudited)
Three months Three months Six months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
1998 1997 1998 1997
Net revenue
Product revenue $ 42,878 $ 51,489 $ 93,604 $ 93,392
Maintenance revenue 25,203 20,944 49,711 41,119
Service revenue 19,078 18,896 39,119 36,638
Total net revenue 87,159 91,329 182,434 171,149
Cost of revenue
Cost of product
revenue 2,942 3,355 5,704 5,775
Cost of maintenance
revenue 6,427 4,969 12,630 10,247
Cost of service revenue 16,517 16,457 33,833 29,923
Total cost of revenue 25,886 24,781 52,167 45,945
Gross profit 61,273 66,548 130,267 125,204
Operating expenses
Research and
development 15,249 15,024 30,729 30,656
Sales and marketing 37,722 34,187 73,798 66,691
General and
administrative 8,137 6,557 15,984 13,235
One time charges 49,662 176 49,662 176
Total operating
expenses 110,770 55,944 170,173 110,758
(Loss) income from
operations (49,497) 10,604 (39,906) 14,446
Interest income, net 1,619 894 3,029 1,831
(Loss) income before
income taxes (47,878) 11,498 (36,877) 16,277
Income taxes 5,574 (3,789) 1,802 (5,415)
Net (loss) income ($ 42,304) $ 7,709 ($ 35,075) $ 10,862
Net (loss) income
per share: basic ($ 0.29) $ 0.05 ($ 0.25) $ 0.08
Net (loss) income
per ADS: basic ($ 1.47) $ 0.27 ($ 1.23) $ 0.39
Shares used in
computing basic
net (loss) income
per share (thousands) 143,642 140,560 143,130 138,125
Shares used in
computing basic
net (loss) income
per ADS (thousands) 28,728 28,112 28,626 27,625
Net income per
share: diluted ($ 0.29) $ 0.05 ($ 0.25) $ 0.08
Net income per
ADS: diluted ($ 1.47) $ 0.27 ($ 1.23) $ 0.38
Shares used in
computing diluted
net (loss) income
per share (thousands) 143,642 144,676 143,130 143,141
Shares used in
computing diluted
net (loss) income
per ADS (thousands) 28,728 28,935 28,626 28,628
Excluding one time charges:
Income before income
taxes 1,784 11,498 12,785 16,277
Net income 1,123 7,709 8,352 10,862
Net income per
ADS: diluted $ 0.04 $ 0.27 $ 0.28 $ 0.38
Note: Shares and per-share data for all periods presented above
reflect the 5-for-1 stock split of the Company's ordinary shares,
which was effective as of close of business on March 13, 1998. Each
American Depository Share ("ADS") represents five ordinary shares.
MICRO FOCUS GROUP PLC - QUARTER ENDED OCTOBER 31, 1998
CONSOLIDATED BALANCE SHEETS - IN U.S. FORMAT
(in thousands of U.S. dollars)
October 31, April 30,
1998 1998
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 83,256 $ 82,256
Short-term investments 45,909 36,316
Accounts receivable, net 102,543 110,571
Inventories 1,535 1,038
Prepaid expenses and other assets 13,111 22,483
Total current assets 246,354 252,664
Fixed assets:
Property, plant and equipment, net 49,585 51,071
Goodwill, net 12,744 5,346
Software product assets, net 18,681 24,512
Total assets $ 327,364 $ 333,593
Liabilities and shareholders' equity
Current liabilities:
Bank loans $ 5,588 $ 5,126
Accounts payable 15,631 15,781
Accrued employee compensation 21,277 30,675
Income taxes payable 7,057 13,116
Deferred revenue 58,067 59,117
Other current liabilities 55,532 22,112
Total current liabilities 163,152 145,927
Long-term debt and other liabilities 6 650
Deferred income taxes 15,192 14,423
Total liabilities $ 178,350 $ 161,000
Shareholders' equity:
Ordinary shares 4,809 4,640
Additional paid-in capital and other reserves 152,903 151,802
Unrealised (loss) gain on available-for-sale
securities, net of tax 16 44
Treasury stock (7,434) (7,769)
Retained earnings 2,307 32,045
Currency translation adjustment (3,587) (8,169)
Total shareholders' equity $ 149,014 $ 172,593
Total liabilities and shareholders' equity $ 327,364 $ 333,593
Note: Pursuant to US GAAP, balance sheet information at April 30,
1998 is restated to include the balance sheet of Micro Focus at
January 31, 1998 and INTERSOLV at April 30, 1998.
MICRO FOCUS GROUP PLC - QUARTER ENDED OCTOBER 31, 1998
CONSOLIDATED PROFIT & LOSS ACCOUNT - IN U.K. FORMAT
(pound)'000
Three Months Nine Months Year
ended ended ended
ended ended
Ended Ended Ended
Oct. 31, Oct. 31, Jan. 31,
1998 1997 1998 1997 1998
(unaudited)(unaudited)(unaudited)(unaudited)
Revenue
Product revenue 21,735 16,200 57,621 40,306 60,480
Maintenance revenue 10,871 6,265 26,582 20,110 28,233
Service revenue 7,532 2,901 14,577 6,299 8,302
Total revenue 40,138 25,366 98,780 66,715 97,015
Cost of revenue
Cost of product
revenue 1,665 1,820 4,079 4,737 6,990
Cost of maintenance
revenue 5,328 1,713 9,809 5,049 6,984
Cost of service
revenue 2,992 2,650 8,431 6,138 8,861
Total cost of revenue 9,985 6,183 22,319 15,924 22,835
Gross profit 30,153 19,183 76,461 50,791 74,180
Operating expenses
Research and
development 6,405 5,049 16,612 14,497 19,679
Sales and marketing 16,620 9,527 39,252 24,781 35,289
General and
administrative 7,121 1,395 11,847 4,314 6,476
Total operating
expenses 30,146 15,971 67,711 43,592 61,444
Operating profit 7 3,212 8,750 7,199 12,736
Exceptional items (11,831) - (11,831) - -
(Loss)/profit before
interest and taxation(11,824) 3,212 (3,081) 7,199 12,736
Interest income, net 972 628 2,286 1,812 2,481
(Loss)/profit
before taxation (10,852) 3,840 (795) 9,011 15,217
Taxation 2,025 (1,132) (1,244) (2,838) (4,791)
(Loss)/profit for
the period after
taxation (8,827) 2,708 (2,039) 6,173 10,426
Earnings per
share: basic (10.8p) 3.5p (2.3p) 8.1p 13.6p
Earnings per
share: diluted (10.8p) 3.3p (2.3p) 7.8p 13.0p
Note: Earnings per share data for all periods presented above
reflects the 5-for-1 sub-division of the Company's ordinary shares,
which took effect as at the close of business on March 13 1998.
MICRO FOCUS GROUP PLC - QUARTER ENDED OCTOBER 31, 1998
CONSOLIDATED BALANCE SHEET - IN U.K. FORMAT
October 31 January 31
1998 1998
(Unaudited)
(pound)'000 (pound)'000
Fixed assets:
Intangible fixed
assets 151,401 12,394
Tangible fixed assets 29,515 23,836
Investment 4,425 4,886
Total fixed assets 185,341 41,116
Current assets:
Stock 914 317
Trade debtors 61,038 29,145
Other debtors and prepaid expenses 7,804 1,728
Cash and bank deposits 76,884 51,518
Total current assets 146,640 82,708
Creditors: amounts falling due within one year
Bank loans and overdrafts 3,326 1,007
Trade creditors 9,304 4,241
Accrued employee compensation 12,665 7,481
Current corporation tax 5,490 6,428
Accrued expenses and other current
liabilities 33,055 7,326
Deferred revenue 34,564 20,030
Total current liabilities 98,404 46,513
Net current assets 48,235 36,195
Total assets less current liabilities 233,576 77,311
Creditors: amounts falling due after
more than one year 4 12
Provision for liabilities and charges:
deferred taxation 9,043 6,407
Net assets 224,529 70,892
Capital and reserves
Called up share capital 2,948 1,588
Share premium account and other
reserves 185,116 30,196
Profit and loss account 36,465 39,108
Total shareholders' equity 224,529 70,892
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CONTACT: Micro Focus Group Plc
Rick Van Hoesen, (Senior Vice President & CFO)
650/404-7019 (US) or 01635-32646 (UK)
or
Financial Dynamics
Giles Sanderson/Edward Bridges, 0171-831-3113 (UK)
or
Abernathy MacGregor Frank
Kathryn Akers, 212/371-5999 (US) |
