<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-15 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the First Half Year ended July 31, 1997
Micro Focus Public Limited Company
(Translation of Registrant's Name into English)
The Lawn, Old Bath Road, Newbury, England RG14 1QN
(Address of Principal Executive Offices)
(Indicate by check mark whether the Registrant files or will file annual
reports under the cover of Form 20-F or Form 40-F.)
Form 20-F ___X__ Form 40-F ______
(Indicate by check mark whether the Registrant by furnishing the
information contained in this form is also thereby furnishing the information to
the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes ___X__ No ______
(If "Yes" is marked, indicate below the file number assigned to the
Registrant in connection with Rule 12g3-2(b):82-795.)
<PAGE> 2
[LOGO]
MICRO FOCUS(R)
- --------------------------------------------------------------------------------
FIRST HALF REPORT 1997
LETTER TO SHAREHOLDERS
Micro Focus Group Plc announces its unaudited first half report. Net revenue for
the first half ended July 31 1997 was $67,440,000 (GBP 41,349,000) as compared
to $52,257,000 (GBP 34,140,000) recorded in the first half of 1996, a 29 percent
increase. Net income for the half was $5,262,000 or $0.33 per share (GBP
3,465,000 or 22.7 pence per share). In the first half of 1996 the Company
incurred a net loss of $14,302,000 or $.94 per share (GBP 9,416,000 or 62.2
pence per share), with the prior year including a restructuring charge of
$8,000,000 (GBP 5,195,000). Results for the first half of 1997 include
Millennium UK Limited, a Year 2000 consulting firm, acquired at the end of April
in a transaction accounted for as a purchase, the impact of which was not
material for the first half.
The following is a summary of results for the first half:
- --------------------------------------------------------------------------------
U.S. DOLLARS GB POUNDS
Six months ended July 31: 1997 1996 1997 1996
- --------------------------------------------------------------------------------
Net revenue $67.4m $52.3m GBP 41.3m GBP 34.1m
Net income (loss) 5.3m (14.3m) 3.5m (9.4m)
Net income (loss) per share $0.33 ($0.94) 22.7p (62.2p)
- --------------------------------------------------------------------------------
Product licensing revenue for the first half was 34 percent above the first half
of 1996.
In the second quarter ended July 31, 1997, the Company reported revenue of
$37,326,000 (GBP 22,774,000) as compared to $28,088,000 (GBP 18,284,000)
recorded in the second quarter of 1996. Net income for the quarter was
$2,975,000 or $0.18 per share (GBP 2,088,000 or 13.8 pence per share). In the
second quarter of 1996 the Company incurred at net loss of $1,207,000 or $0.08
per share (GBP 801,000 or 5.3 pence per share). In the first quarter ended April
30, 1997, the Company reported net revenue of $30,114,000 (GBP 18,575,000) and
net income of $2,287,000 or $0.15 per share (GBP 1,337,000 or 9.1 pence per
share).
"We are pleased with the progress the company has made and the growth we are
experiencing," said Martin Waters, President and CEO. "Our investments are
beginning to provide returns and we are pleased with the market reception of
SoftFactory/2000 following its introduction during the most recent financial
quarter. The significant growth in new license revenue for the first half
demonstrates that our strategy of providing complete solutions to our customers
is being well received."
"Micro Focus' growth and improved financial results follow the changes we have
continued to make in responding to customer needs," added Anthony R. Muller,
Senior Vice President and Chief Financial Officer. "New products, broadening of
our service offerings, the addition of many talented people, and upgrading our
infrastructure have all contributed to our progress. We intend to continue to
invest in moving Micro Focus forward."
On July 17 1997 the Company appointed Martin Waters, President and Chief
Executive Officer and as a member of the Board of Directors upon the resignation
of Marcelo Gumucio from those roles.
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, in the interest of serving our U.S. shareholders in a manner consistent
with other U.S. investments, beginning in June 1997, the Company began to
furnish 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. The Company invites its UK shareholders to review these
materials as well, which may be obtained from the SEC website http/www.sec.gov.
/s/ Martin Waters
Martin Waters
President and Chief Executive Officer
August 14 1997
<PAGE> 3
Note: The following statement is made in accordance with the U.S. Private
Securities Litigation Reform Act 1995: This first half report 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
extent to which recently released products earn rapid market acceptance with
customers, the ability of Micro Focus to develop and release to the market
products and services that meet the needs of the Company's customers in the
highly dynamic market for application development tools, the potential need for
development tools to shift based on changes in underlying technology standards
coming into use, the potential for a decrease in revenue which may be caused by
delays in the timing of the delivery of products or services, the effect of
competitors' efforts to enter the Company's markets, and the ability of the
Company to effectively manage its costs against uncertain revenue expectations.
Further information on potential factors which could affect the Company's
financial results are included in the Company's Form 20-F for the fiscal year
ended January 31, 1997, and the Company's Form 6-K for the quarter ended April
30 1997, both as filed with the SEC, as they may be updated or amended with
future filings.
1
<PAGE> 4
MICRO FOCUS(R) FIRST HALF REPORT 1997
-------------------------------------------
FINANCIAL STATEMENTS (IN UK FORMAT)
<TABLE>
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<CAPTION>
.........................................................................................................................
Three months Three months Six months Six months Year
ended ended ended ended ended
July 31 1997 July 31 1996 July 31 1996 July 31 1996 January 31 1997
(unaudited) (unaudited) (unaudited) (unaudited)
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
========================================================================================================================
<S> <C> <C> <C> <C> <C>
Revenue
Product revenue 14,007 10,625 24,106 19,076 42,020
Service revenue 8,767 7,659 17,243 15,064 31,069
- ------------------------------------------------------------------------------------------------------------------------
Total revenue 22,774 18,284 41,349 34,140 73,089
- ------------------------------------------------------------------------------------------------------------------------
Cost of revenue
Cost of product revenue 1,433 2,013 2,917 3,222 6,406
Cost of service revenue 3,775 3,159 6,824 6,284 11,892
- -----------------------------------------------------------------------------------------------------------------------
Total cost of revenue 5,208 5,172 9,741 9,506 18,298
- -----------------------------------------------------------------------------------------------------------------------
Gross profit 17,566 13,112 31,608 24,634 54,791
- -----------------------------------------------------------------------------------------------------------------------
Operating expenses
Research and development 4,711 5,056 9,448 13,203 24,299
Sales and marketing 8,648 7,081 15,254 15,771 30,146
General and administrative 1,777 2,344 2,919 5,996 7,854
- -----------------------------------------------------------------------------------------------------------------------
Total operating expenses 15,136 14,481 27,621 34,970 62,299
- -----------------------------------------------------------------------------------------------------------------------
Operating profit/(loss) 2,430 (1,369) 3,987 (10,336) (7,508)
Investment income 707 448 1,207 884 1,720
Interest expense (21) (3) (23) (11) (21)
.......................................................................................................................
Profit/(loss) before taxation 3,116 (924) 5,171 (9,463) (5,809)
Taxation (1,028) 123 (1,706) 47 (1,472)
- -----------------------------------------------------------------------------------------------------------------------
Profit/(loss) for the period after taxation 2,088 (801) 3,465 (9,416) (7,281)
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share 13.8p (5.3p) 22.7p (62.2p) (48.0p)
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
<TABLE>
CONSOLIDATED BALANCE SHEET
<CAPTION>
....................................................................................................
July 31 1997 January 31 July 31 1996
(unaudited) 1997 (unaudited)
GBP '000 GBP '000 GBP '000
====================================================================================================
<S> <C> <C> <C>
Fixed assets
Software product assets 13,488 14,590 16,265
Tangible fixed assets 21,317 20,543 22,885
Investment in own shares (note 6) 5,188 5,634 5,634
- ----------------------------------------------------------------------------------------------------
Total fixed assets 39,993 40,767 44,784
- ----------------------------------------------------------------------------------------------------
Current assets
Stock 419 484 1,413
Trade debtors 16,329 12,672 9,141
Other debtors and prepaid expenses 1,256 1,556 1,691
Cash and bank deposits and short term-investments 46,646 44,725 34,412
....................................................................................................
Total current assets 64,650 59,437 46,657
....................................................................................................
Creditors: amounts falling due within one year
Bank loans 994 - -
Trade creditors 3,774 3,054 3,391
Accrued employee compensation and commissions 4,289 3,632 3,335
Current corporation tax 4,060 2,590 2,316
Accrued expenses and other current liabilities 5,552 6,904 7,196
Deferred revenue 17,491 16,646 9,910
- ----------------------------------------------------------------------------------------------------
Total current liabilities 36,160 32,826 26,148
- ----------------------------------------------------------------------------------------------------
Net current assets 28,490 26,611 20,509
- ----------------------------------------------------------------------------------------------------
Total assets less current liabilities 68,483 67,378 65,293
- ----------------------------------------------------------------------------------------------------
Creditors: amounts falling due after more than one year 14 15 24
Provision for liabilities and charges: deferred taxation 6,240 6,239 5,452
- ----------------------------------------------------------------------------------------------------
Net assets 62,229 61,124 59,817
- ----------------------------------------------------------------------------------------------------
Capital and reserves
Called up share capital 1,541 1,517 1,516
Share premium and other reserves 20,777 18,071 18,023
Profit and loss account (note 7) 39,911 41,536 40,278
- ----------------------------------------------------------------------------------------------------
Total shareholders' funds 62,229 61,124 59,817
- ----------------------------------------------------------------------------------------------------
2
</TABLE>
<PAGE> 6
MICRO FOCUS(R) FIRST HALF REPORT 1997
----------------------------------------
FINANCIAL STATEMENTS (IN UK FORMAT)
<TABLE>
CONSOLIDATED CASH FLOW STATEMENT
<CAPTION>
............................................................................................................
July 31 1997 January 31 July 31 1996
(unaudited) 1997 (unaudited)
GBP '000 GBP '000 GBP '000
============================================================================================================
<S> <C> <C> <C>
Operating profit/(loss) 3,987 (7,508) (10,336)
Depreciation charges 2,144 5,655 3,151
Amortisation charges 3,826 8,012 4,161
Changes in operating assets and liabilities (1,972) 5,976 2,342
............................................................................................................
Net cash inflow/(outflow) from operating activities 7,985 12,135 (682)
Returns on investments and servicing of finance 1,160 1,782 907
Taxation (209) (18) 404
Capital expenditure and financial investment (5,943) (7,212) (4,194)
Acquisitions and disposals (1,925) - -
- ------------------------------------------------------------------------------------------------------------
Cash inflow/(outflow) before use of liquid resources and financing 1,068 6,687 (3,565)
Management of liquid resources (833) - -
Net cash inflow from financing 730 7 3
- ------------------------------------------------------------------------------------------------------------
Increase/(decrease) in cash 965 6,694 (3,565)
- ------------------------------------------------------------------------------------------------------------
Reconciliation of net cash flow to movement in net funds
- ------------------------------------------------------------------------------------------------------------
Increase/(decrease) in cash, as above 965 6,694 (3,562)
Cash outflow from increase in liquid resources 833 - -
- ------------------------------------------------------------------------------------------------------------
Change in cash resulting from cash flows 1,798 6,694 (3,562)
Currency translation difference (871) (941) (998)
- ------------------------------------------------------------------------------------------------------------
Movement in cash during the period 927 5,753 (4,560)
Net funds at beginning of period 44,725 38,972 38,972
- ------------------------------------------------------------------------------------------------------------
Net funds at end of period 45,652 44,725 34,412
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
NOTES
1. BASIS OF PREPARATION
The basis of preparation of the financial information in this statement is set
out on page 4.
2. TRANSLATION OF FOREIGN CURRENCIES
Assets and liabilities denominated in currencies other than GB pounds are
translated at exchange rates ruling at the balance sheet date. Revenues, costs
and expenses are translated using average rates. The relevant GB pound to U.S.
dollar rates are as follows:
.................................................................
July 31 January 31 July 31
1997 1997 1996
- -----------------------------------------------------------------
Closing rates: GBP 1 = $1.63 $1.60 $1.56
Average rates (approx): GBP 1 = $1.64 $1.58 $1.54
- -----------------------------------------------------------------
3. RESEARCH AND DEVELOPMENT
Research and development costs are stated after capitalising GBP 2,818,000
(1996: GBP 2,846,000) of current costs as software product assets in compliance
with SFAS 86 (the U.S. standard on accounting for software product costs) and
after charging amortisation of software product assets amounting to GBP
3,826,000 (1996: GBP 4,161,000).
4. EXCEPTIONAL ITEMS
In the first half of 1996 Micro Focus announced a restructuring of its
operations. Costs directly attributable to the restructuring activities were
charged against profit as follows:
...................................................
Six months ended July 31 1997 1996
GBP '000 GBP '000
- ---------------------------------------------------
Cost of product revenue - 13
Research and development - 1,476
Sales and marketing - 591
General and administrative - 3,115
- ---------------------------------------------------
- 5,195
- ---------------------------------------------------
5. DIVIDENDS
Following established Micro Focus policy the Directors do not intend to
recommend payment of a dividend.
6. INVESTMENT IN OWN SHARES
Investment in own shares represents shares held by an Employee Share Ownership
Trust which has been established to encourage ownership of Micro Focus' shares
by its employees. The shares are valued at cost.
7. PROFIT AND LOSS ACCOUNT
..............................................................
Six months ended July 31 1997 1996
GBP '000 GBP '000
- --------------------------------------------------------------
Brought forward 41,536 50,737
Profit/(loss) after taxation 3,465 (9,416)
Goodwill acquired (4,157) -
Currency translation (933) (1,043)
- --------------------------------------------------------------
39,911 40,278
- --------------------------------------------------------------
3
<PAGE> 8
MICRO FOCUS(R) FIRST HALF REPORT 1997
-----------------------------------------
FINANCIAL STATEMENTS - BASIS OF PREPARATION
For the benefit of U.K. and U.S. based shareholders, the financial statements
are presented separately in U.K. and U.S. formats.
These financial statements have been prepared in accordance with both U.K. and
U.S. generally accepted accounting principles on the basis of the accounting
policies set out in the 1996 Annual Report and should be read in conjunction
with the financial results contained therein.
The financial information contained in this report does not constitute statutory
accounts as defined in section 240 of the U.K. Companies Act 1985. The figures
for the year ended January 31 1997 are based on the audited financial statements
which have been filed with the U.K. Registrar of Companies; the auditors'
reports on both the U.K. and U.S. financial statements for the year ended
January 31 1997 were unqualified.
- --------------------------------------------------------------------------------
REPORT OF THE AUDITORS TO MICRO FOCUS GROUP PLC
We have reviewed the interim financial information set out on pages 2 and 3 in
respect of the six months ended July 31 1997, which is the responsibility of,
and has been approved by, the directors. Our responsibility is to report on the
results of our review.
Our review was carried out having regard to the Bulletin, Review of interim
financial information, issued by the Auditing Practices Board. This review
consisted principally of obtaining an understanding of the process for the
preparation of the interim financial information, applying analytical procedures
to the underlying financial data, assessing whether accounting policies have
been consistently applied, and making enquiries of the group's management
responsible for financial and accounting matters. The review excluded audit
procedures such as tests of controls and verification of assets and liabilities
and was therefore substantially less in scope than an audit performed in
accordance with Auditing Standards. Accordingly we do not express an audit
opinion on the interim financial information.
On the basis of our review:
- - we are not aware of any material modifications that should be made to the
interim financial information as presented; and
- - in our opinion the interim financial information has been prepared using
accounting policies consistent with those adopted by Micro Focus Group Plc in
its financial statements for the year ended January 31 1997.
Ernst & Young
Chartered Accountants
Reading, England
August 14 1997
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
Registered Office & Shareholder Enquiries
Micro Focus Group Plc
The Lawn, 22-30
Old Bath Road, Newbury, Berkshire, RG14 1QN, U.K.
Telephone: (01635) 32646
Registrars & Transfer Office
Lloyds Bank Registrars, The Causeway,
Worthing, West Sussex, BN99 6DA, U.K.
Stockbrokers
SBC Warburg, 1 Finsbury Avenue,
London EC2M 2PA, U.K.
Stock Market symbols
The Company's ordinary shares are listed on the London Stock Exchange under the
symbol MICF.
The Company's American Depositary Receipts ("ADRs") are listed on the NASDAQ
National Market System under the symbol MIFGY.
ADR Depositary
Bank of New York, 101 Barclay Street,
22nd Floor, New York, NY 10286, U.S.A.
<PAGE> 9
Micro Focus on the Internet
Micro Focus' home page on the Internet's Worldwide Web provides access to a wide
range of information about the Company, its products and services. Financial
data, including an electronic version of this Report, is also available on the
Worldwide Web.
The Micro Focus home page is accessible at http:\\www.microfocus.com
- --------------------------------------------------------------------------------
REGIONAL OFFICES
U.S.A.
Micro Focus Inc.
2465 East Bayshore Road
Palo Alto, CA 94303
Tel: (+1) (650) 856 4161
Fax: (+1) (650) 856 6134
Micro Focus Inc. (Philadelphia)
500 East Swedesford Road, 2nd Floor
Wayne, PA 19087.
Tel: (+1) (610) 263 3400
Fax: (+1) (610) 263 3700
Micro Focus Inc. (New York)
2 Wall Street
New York, NY 10005
Tel: (+1) (212) 312 2200
Fax: (+1) (212) 312 2222
U.K.
Micro Focus Ltd.
The Lawn, 22-30 Old Bath Road,
Newbury, Berkshire, RG14 1QN
Tel: (+44) 1635 32646
Fax: (+44) 1635 33966
Japan
Micro Focus Japan Ltd
Nishiazabu Mitsui Building 4F
4-17-30 Nishiazabu, Minato-Ku, Tokyo 10
Tel: (+81) 3 3486 7791
Fax: (+81) 3 3486 5055
Canada
Micro Focus
3 Robert Speck Parkway
Mississauga, Ontario L4Z 2G5
Tel: (+1) (905) 306 7280
Fax:: (+1) (905) 306 7530
Germany
Micro Focus GmbH
Am Moosfeld 11, 81829 Munchen
Tel: (+49) 89 42094-0
Fax: (+49) 89 42094-211
France
Micro Focus SARL
Tour Franklin, Defense 8
92042 Paris - La Defense Cedex
Tel: (+33) 1 47 75 75 75
Fax: (+33) 1 47 75 75 80
Spain
Micro Focus S.A.
Corsega 541, 4a Planta
08025 Barcelona
Tel: (+34) 3 435 70 01
Fax: (+34) 3 435 67 33
India
Micro Focus (I) Pvt. Ltd.
47/6, M.G. Road
Mittal Towers, B-1217-19
Bangalore 560 001
Tel: (+91) 80 559 2647
Fax: (+91) 80 551 1019
4
<PAGE> 10
MICRO FOCUS(R) FIRST HALF REPORT 1997
-----------------------------------------
FINANCIAL STATEMENTS (IN U.S. FORMAT)
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data)
<CAPTION>
.........................................................................................................................
Three months Three months Six months Six months Year
ended ended ended ended ended
July 31 1997 July 31 1996 July 31 1997 July 31 1996 January 31
(unaudited) (unaudited) (unaudited) (unaudited) 1997
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Net revenue
Product revenue $22,937 $16,349 $39,287 $29,240 $66,466
Service revenue 14,389 11,739 28,153 23,017 48,943
- -----------------------------------------------------------------------------------------------------------------
Total net revenue 37,326 28,088 67,440 52,257 115,409
- -----------------------------------------------------------------------------------------------------------------
Cost of revenue
Cost of product revenue 2,457 2,786 4,861 4,911 10,016
Cost of service revenue 6,192 4,907 11,145 9,600 18,580
- -----------------------------------------------------------------------------------------------------------------
Total cost of revenue 8,649 7,693 16,006 14,511 28,596
- -----------------------------------------------------------------------------------------------------------------
Gross profit 28,677 20,395 51,434 37,746 86,813
- -----------------------------------------------------------------------------------------------------------------
Operating expenses
Research and development 7,721 8,729 15,420 17,860 34,544
Sales and marketing 14,188 11,429 24,914 23,189 45,884
General and administrative 3,324 2,200 5,182 4,406 9,442
Non-recurring charges - - - 8,000 8,000
- -----------------------------------------------------------------------------------------------------------------
Total operating expenses 25,233 22,358 45,516 53,455 97,870
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from operations 3,444 (1,963) 5,918 (15,709) (11,057)
Investment income 1,031 688 1,973 1,352 2,706
Interest expense (34) (4) (37) (17) (32)
.................................................................................................................
Income (loss) before income taxes 4,441 (1,279) 7,854 (14,374) (8,383)
Taxation (1,466) 72 (2,592) 72 (2,125)
- -----------------------------------------------------------------------------------------------------------------
Net income (loss) $2,975 ($1,207) $5,262 ($14,302) ($10,508)
- -----------------------------------------------------------------------------------------------------------------
Net income (loss) per share $0.18 ($0.08) $0.33 ($0.94) ($0.69)
- -----------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 16,270 15,153 16,017 15,149 15,234
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
<TABLE>
CONSOLIDATED BALANCE SHEETS (In thousands)
<CAPTION>
...................................................................................................................
July 31 1997 January 31 July 31 1996
(unaudited) 1997 (unaudited)
===================================================================================================================
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $40,589 $71,560 $53,682
Short-term investments 35,444 - -
Accounts receivable, net 26,616 20,275 14,259
Inventories 683 774 2,205
Prepaid expenses and other assets 2,047 2,490 2,638
...................................................................................................................
Total current assets 105,379 95,099 72,784
...................................................................................................................
Fixed assets
Property, plant and equipment, net 34,747 32,868 35,701
Goodwill, net 6,315 - -
Software product assets, net 21,986 23,344 25,373
- -------------------------------------------------------------------------------------------------------------------
Total assets $168,427 $151,311 $133,858
- -------------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Bank loans $1,620 $- $-
Accounts payable 6,151 4,886 5,291
Accrued employee compensation and commissions 6,992 5,811 5,203
Income taxes payable 6,464 4,142 3,613
Deferred Revenue 28,509 26,635 15,459
Other current liabilities 9,062 11,047 11,225
...................................................................................................................
Total current liabilities 58,798 52,521 40,791
...................................................................................................................
Long-term debt and other liabilities 22 24 37
Deferred income taxes 10,173 9,983 8,505
Shareholders' equity:
Ordinary shares 2,429 2,389 2,388
Additional paid-in capital and other reserves 31,903 27,468 27,391
Unrealised gain on available-for-sale securities, net of tax 22 -
Treasury stock (note 6) (8,249) (8,959) (8,959)
Cumulative exchange (loss) (2,208) (2,391) (2,691)
Retained earnings (note 7) 75,537 70,276 66,396
- -------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 99,434 88,783 84,525
- -------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $168,427 $151,311 $133,858
- -------------------------------------------------------------------------------------------------------------------
5
</TABLE>
<PAGE> 12
MICRO FOCUS(R) FIRST HALF REPORT 1997
-----------------------------------------
FINANCIAL STATEMENTS (IN U.S. FORMAT)
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOW (In thousands)
....................................................................................................................................
Six months ended Year ended Six months ended
July 31 1997 January 31 July 31 1996
(unaudited) 1997 (unaudited)
====================================================================================================================================
<S> <C> <C> <C>
Operating activities
Net income (loss) $5,262 ($10,508) ($14,302)
Adjustments to reconcile net income (loss) to cash provided by operations
Depreciation of fixed assets 3,497 9,459 4,835
Amortization of software product assets and other intangibles 6,241 12,690 6,383
Changes in operating assets and liabilities (627) 11,341 4,083
Other items - 1,374 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 14,373 24,356 999
- ------------------------------------------------------------------------------------------------------------------------------------
Investing activities
Purchases of property, plant and equipment, net of
capital lease obligations incurred (5,172) (2,988) (2,022)
Software product assets and other intangibles (4,602) (8,261) (4,344)
Goodwill (3,424)
Own shares 710 - -
Available-for-sale securities (35,444) - -
....................................................................................................................................
Net cash (used) by investing activities (47,932) (11,249) (6,366)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 2,792 (18) 6
- ------------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (204) (377) 195
- ------------------------------------------------------------------------------------------------------------------------------------
(Decrease) in cash (30,971) 12,712 (5,166)
Cash at beginning of period 71,560 58,848 58,848
- ------------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $40,589 $71,560 $53,682
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
NOTES
1. BASIS OF PREPARATION
The basis of preparation of the financial information in this statement is set
out on page 4.
2. TRANSLATION OF FOREIGN CURRENCIES
Assets and liabilities denominated in currencies other than U.S. dollars are
translated at exchange rates ruling at the balance sheet date. Revenues, costs
and expenses are translated using average rates. The relevant U.S. dollar to GB
pound rates are as follows:
................................................................
July 31 January 31 July 31
1997 1997 1996
- ----------------------------------------------------------------
Closing rates: $1 = 0.613p 0.625p 0.641p
Average rates (approx): $1 = 0.610p 0.633p 0.649p
- ----------------------------------------------------------------
3. RESEARCH AND DEVEOPMENT
Research and development costs are stated after capitalizing $4,602,000 (1995:
$4,344,000) of current costs as software product assets in compliance with SFAS
86 (the standard on accounting for software product costs) and after charging
amortization of software product assets amounting to $6,240,000 (1996:
$6,383,000).
4. NON-RECURRING CHARGES
In the first half of 1996 Micro Focus announced a restructuring of its
operations. Costs directly attributable to the restructuring activities are
designated as non-recurring charges.
5. DIVIDENDS
Following established Micro Focus policy the Directors do not intend to
recommend payment of a dividend.
6. TREASURY STOCK
Treasury stock represents shares held by an Employee Share Ownership Trust which
has been formed to encourage ownership of Micro Focus shares by its employees.
The shares are valued at cost.
7. RETAINED EARNINGS
........................................................
Six months ended July 31 1997 1996
$'000 $'000
- --------------------------------------------------------
Brought forward 67,885 76,790
Net income (loss) for the period 5,262 (14,302)
Currency translation 182 1,217
- --------------------------------------------------------
$73,329 $63,705
- --------------------------------------------------------
6
<PAGE> 14
SIGNATURES
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, thereunto duly authorized.
Micro Focus Group Public Limited Company
(Registrant)
Date: August 21, 1997 By: /s/ Loren E. Hillberg
---------------------------------
Loren E. Hillberg
Vice President and General Counsel
