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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 month of August 19, 1998
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.)
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UK: 7:30 am BST Wednesday US: 2:30 am EDT Wednesday
August 19, 1998 August 19, 1998
Please contact:
Rick Van Hoesen US 650-404-7019
Senior Vice President UK 01635-32646
Chief Financial Officer
Giles Sanderson/Edward Bridges UK 0171-831-3113
Financial Dynamics
Micro Focus First Half Earnings Increase 112% on 35% Revenue Growth
================================================================================
London, England and Mountain View, California, August 19, 1998-Micro Focus Group
Plc (London Stock Exchange: MICF; NASDAQ: MIFGY) today announced a 35% revenue
increase to $97.0 million for the first half of its fiscal year compared with
$71.7 million for the comparable prior year period. Net income increased 112% to
$10.4 million and diluted earnings of $0.12 per ordinary share were double
earnings per ordinary share of $0.06 reported in the first half of fiscal 1998.
Earnings of $0.62 per American Depositary Share ("ADS") were also double the
$0.30 reported in the first half of fiscal 1998.
For the second quarter of fiscal 1999, revenue increased 23% to $48.4 million,
compared with $39.2 million in the second quarter of fiscal 1998. Net income for
the quarter grew more than 100% to $5.1 million compared with $2.5 million for
the second quarter of fiscal 1998 and diluted earnings per share were $0.06 per
share compared with $0.03 for the second quarter of fiscal 1998. Diluted
earnings per ADS were $0.31 compared with $0.15 for the second quarter of fiscal
1998. This represents the fifth consecutive quarter of greater than 100% year
over year earnings growth.
"We are pleased with our continuing strong operating performance while we made
significant progress on our key strategic objectives," said Martin Waters,
President and CEO. "During the second quarter of this year, we undertook a major
restructuring of our North American field organisation, launched more products
than in any other comparable period in the Company's history, completed the
acquisition of our distributor in Italy, and announced our intent to acquire
INTERSOLV, Inc. In addition, we delivered a particularly strong performance in
our international markets. The doubling of profits over last year's first half
again confirms Micro Focus' ability to grow our base business profitably while
continuing to pursue additional growth through strategic acquisitions."
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Rick Van Hoesen, Senior Vice President and CFO, said, "This performance reflects
a balance of contributions from our consulting business, our distributed
computing segment and our application transformation business. We also had a
strong cash quarter. We finished the quarter with $95.8 million in cash, a $3
million increase in a quarter in which we acquired our Italian distributor for
$4 million."
In conclusion, Mr. Waters said, "Your Board are confident about the prospects of
the merged group and the benefits to be obtained from the merger with INTERSOLV
and look forward to continued growth in the merged group's business. We expect
to post the Listing Particulars within a week and to have the Extraordinary
General Meeting of shareholders to approve the merger approximately 30 days
later."
In UK Sterling terms, net revenue for the first half of 1999 increased 42% to
GBP 58.6 million, from GBP 41.3 million for the first half of fiscal 1998. Net
income grew 96% to GBP 6.8 million versus GBP 3.5 million for the first half of
fiscal 1998. Diluted earnings per share were 8.3 pence per share in 1999
compared with 4.5 pence per share for the first half of 1998.
Net revenue for the second quarter of fiscal 1999 increased 29% to GBP 29.3
million, from GBP 22.8 million for the second quarter of 1998. Net income grew
61% to GBP 3.4 million versus GBP 2.1 million for the fiscal 1998 second
quarter. Diluted earnings per share were 4.1 pence per share in the second
quarter of fiscal 1999 compared with 2.7 pence per share for the second quarter
of 1998.
Summary financial results are as follows:
Second Quarter First Half
1998 1997 1998 1997
---- ---- ---- ----
US Dollars, US GAAP
Net revenue $48.4M $39.2M $97.0M $71.7M
Net income $5.1M $2.5M $10.4M $4.9M
EPS: Basic $0.06 $0.03 $0.13 $0.06
Diluted $0.06 $0.03 $0.12 $0.06
Diluted ADS equivalent $0.31 $0.15 $0.62 $0.3
UK Sterling, UK GAAP
Net revenue GBP29.3m GBP22.8m GBP58.6m GPB41.3m
Net income (loss) 3.4m 2.1m 6.8m 3.5m
EPS - Basic 4.2p 2.7p 8.5p 4.5p
Diluted 4.1p 2.7p 8.3p 4.5p
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Micro Focus (NASDAQ: MIFGY) provides solutions for developing and managing
enterprise applications that run on IBM (NYSE: IBM) mainframes. The
company's solutions allow enterprises to carry forward the value of the
legacy application base by transforming them for use with newer computing
technologies such as distributed computing and the Internet. The company's
products and services deliver outstanding value and shorten time-to-solution
through an analysis and understanding of legacy applications. Micro Focus
solutions include mainframe application development and maintenance
solutions, Year 2000 compliance solutions and distributed computing
solutions for UNIX, Microsoft (NASDAQ:MSFT) Windows NT(R) and the World Wide
Web. Micro Focus solutions integrate with technology offered by Unisys
(NYSE:UIS), PeopleSoft (NASDAQ:PSFT), Mercury Interactive (NASDAQ:MERQ) and
others. The Micro Focus customer and partner base includes many global 500
companies, including Hewlett Packard Company (NASDAQ:HWP), Microsoft
Corporation (NASDAQ:MSFT), Oracle Corporation (NASDAQ:ORCL), Sun
Microsystems Incorporated (NASDAQ:SUNW), The Boeing Company (NASDAQ:BA),
Computer Sciences Corporation (NASDAQ:CSC) and Bank of America Corporation
(NASDAQ:BAC), EDS and Andersen Consulting.
Micro Focus is located in the US at 701 East Middlefield Road, Mountain
View, California 94043 - telephone 650-938- 3700 and in the UK 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 http://www.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.
The figures for the year ended January 31, 1998 are based on the audited
financial statements 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. The Company intends to
publish its First Half Report in August, 1998, and distribute copies to all
shareholders of record as of July 31, 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. Copies of the Annual Report for the year
ended January 31, 1998 are available upon request to the Company Secretary
of Micro Focus at the Registered Office, The Lawn, 22-30 Old Bath Road,
Newbury, Berkshire, England, RG14 1QN. Following established Micro Focus
practice, the directors do not intend to recommend the payment of a
dividend.
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 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 net 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,
the ability of the Company to effectively manage its costs against uncertain
revenue expectations and the ability to manage and integrate recently
acquired businesses or other businesses that it may acquire in the future.
Further information on potential factors which could affect the Company's
financial results is included in the Company's Form 20-F for the fiscal year
ended January 31, 1998 and the Company's quarterly report on Form 6-K for
the quarter ended April 30, 1998, each as filed with the SEC, as they may be
updated or amended with future filings.
Micro Focus is a registered trademark of Micro Focus. All other companies
and products as they appear in this release are trademarks or registered
trademarks of their respective owners.
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MICRO FOCUS GROUP PLC - SECOND QUARTER ENDED JULY 31, 1998
CONSOLIDATED STATEMENTS OF INCOME - IN US FORMAT
(Unaudited)
(in thousands of US dollars except per share and ADS data)
- ----------------------------------------------------------------------
Three months ended Six months ended
July 31 July 31
1998 1997 1998 1997
- ----------------------------------------------------------------------
Net revenue
Product revenue $29,850 $23,898 $59,392 $41,790
Maintenance revenue 12,958 11,700 25,973 24,383
Service revenue 5,559 3,580 11,652 5,538
- ----------------------------------------------------------------------
Total net revenue 48,367 39,178 97,017 71,711
- ----------------------------------------------------------------------
Cost of revenue
Cost of product revenue 1,879 2,222 3,995 4,399
Cost of maintenance revenue 3,972 3,000 7,410 5,823
Cost of service revenue 4,759 3,392 9,002 5,702
- ----------------------------------------------------------------------
Total cost of revenue 10,610 8,614 20,407 15,924
- ----------------------------------------------------------------------
Gross profit 37,757 30,564 76,610 55,787
- ----------------------------------------------------------------------
Operating expenses
Research and development 8,499 8,481 16,877 17,008
Sales and marketing 18,237 15,392 37,454 27,379
General and administrative 4,456 3,884 8,723 6,062
- ----------------------------------------------------------------------
Total operating expenses 31,192 27,757 63,054 50,449
- ----------------------------------------------------------------------
Income from operations 6,565 2,807 13,556 5,338
Interest income, net 1,174 1,042 2,270 2,025
- ----------------------------------------------------------------------
Income before income taxes 7,739 3,849 15,826 7,363
Income taxes (2,630) (1,301) (5,380) (2,440)
- ----------------------------------------------------------------------
Net income $5,109 $2,548 $10,446 $4,923
- ----------------------------------------------------------------------
Net income per share: basic $0.06 $0.03 $0.13 $0.06
Net income per ADS: basic $0.32 $0.16 $0.65 $0.31
Weighted average number of
shares outstanding
(thousands): basic 80,133 78,750 79,808 78,259
Shares converted to ADS
equivalent (thousands) 16,027 15,750 15,692 15,652
- ----------------------------------------------------------------------
Net income per share: diluted $0.06 $0.03 $0.12 $0.06
Net income per ADS: diluted $0.31 $0.15 $0.62 $0.30
- ----------------------------------------------------------------------
Weighted average number of
shares outstanding
(thousands): diluted 83,449 83,290 83,820 82,023
Shares converted to ADS
equivalent (thousands) 16,690 16,658 16,764 16,405
======================================================================
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 the
close of business on March 13, 1998. The Company's American Depositary Shares
("ADSs") did not split, although the conversion rights of such ADSs have been
adjusted such that each ADS represents five ordinary shares. Per share earnings
are also shown on an ADS equivalent basis.
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MICRO FOCUS GROUP PLC - SECOND QUARTER ENDED JULY 31, 1998
CONSOLIDATED BALANCE SHEETS - IN US FORMAT
(in thousands of US dollars)
- ----------------------------------------------------------------------
July 31 January 31
1998 1998
(unaudited)
- ----------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $52,569 $48,174
Short-term investments 43,274 36,316
Accounts receivable, net 39,492 47,798
Inventories 448 519
Prepaid expenses and other assets 6,171 2,833
- ----------------------------------------------------------------------
Total current assets 141,954 135,640
- ----------------------------------------------------------------------
Fixed assets:
Property, plant and equipment, net 40,368 39,083
Goodwill, net 8,646 5,346
Software product assets, net 18,866 20,328
- ----------------------------------------------------------------------
Total assets $209,834 $200,397
- ----------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Bank loans 1,679 1,652
Accounts payable 6,506 6,957
Accrued employee compensation 8,010 12,383
Income taxes payable 15,174 10,459
Deferred revenue 27,134 32,848
Other current liabilities 13,894 12,085
- ----------------------------------------------------------------------
Total current liabilities 72,397 76,384
- ----------------------------------------------------------------------
Long-term debt and other liabilities - 20
Deferred income taxes 9,272 9,159
- ----------------------------------------------------------------------
Total liabilities $81,669 $85,563
- ----------------------------------------------------------------------
Shareholders' equity:
Ordinary shares 2,669 2,546
Additional paid-in capital 36,586 33,362
Unrealized gain on available-for-sale
securities, net of tax 39 44
Treasury stock (7,434) (7,769)
Retained earnings 99,465 89,019
Currency translation adjustment (3,160) (2,368)
- ----------------------------------------------------------------------
Total shareholders' equity 128,165 114,834
- ----------------------------------------------------------------------
Total liabilities and
shareholders' equity $209,834 $200,397
======================================================================
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MICRO FOCUS GROUP PLC - SECOND QUARTER ENDED JULY 31, 1998
CONSOLIDATED PROFIT & LOSS ACCOUNT - IN UK FORMAT
(Unaudited)
(in thousands of GB pounds except per share data)
- ----------------------------------------------------------------------
Three months ended Six months ended
July 31 July 31
1998 1997 1998 1997
- ----------------------------------------------------------------------
Revenue
Product revenue 18,072 14,007 35,886 24,106
Maintenance revenue 7,841 6,552 15,711 13,845
Service revenue 3,360 2,215 7,045 3,398
- ----------------------------------------------------------------------
Total revenue 29,273 22,774 58,642 41,349
- ----------------------------------------------------------------------
Cost of revenue
Cost of product revenue 1,136 1,433 2,414 2,917
Cost of maintenance revenue 2,403 2,047 4,480 3,336
Cost of service revenue 2,877 1,728 5,440 3,488
- ----------------------------------------------------------------------
Total cost of revenue 6,416 5,208 12,334 9,741
- ----------------------------------------------------------------------
Gross profit 22,857 17,566 46,308 31,608
- ----------------------------------------------------------------------
Operating expenses
Research and development 5,142 4,711 10,207 9,448
Sales and marketing 11,028 8,648 22,632 15,254
General and administrative 2,425 1,777 4,725 2,919
- ----------------------------------------------------------------------
Total operating expenses 18,595 15,136 37,564 27,621
- ----------------------------------------------------------------------
Operating profit 4,262 2,430 8,744 3,987
Interest income, net 712 686 1,313 1,184
- ----------------------------------------------------------------------
Profit before taxation 4,974 3,116 10,057 5,171
Taxation (1,617) (1,028) (3,269) (1,706)
- ----------------------------------------------------------------------
Profit after taxation 3,357 2,088 6,788 3,465
- ----------------------------------------------------------------------
Earnings per share: basic 4.2p 2.7p 8.5p 4.5p
Earnings per share: diluted 4.1p 2.7p 8.3p 4.5p
======================================================================
Note:
Earnings per share for all periods presented above reflects the 5-for-1
sub-division of the Company's ordinary shares, which took place as at the close
of business on March 13 1998.
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MICRO FOCUS GROUP PLC - SECOND QUARTER ENDED JULY 31, 1998
CONSOLIDATED BALANCE SHEET - IN UK FORMAT
- ----------------------------------------------------------------------
(in thousands of GB pounds) July 31 January 31
1998 1998
(unaudited)
- ----------------------------------------------------------------------
Fixed assets
Intangible fixed assets 14,076 12,394
Tangible fixed assets 24,615 23,836
Investment 4,682 4,886
- ----------------------------------------------------------------------
Total fixed assets 43,373 41,116
- ----------------------------------------------------------------------
Current assets
Stock 273 317
Trade debtors 24,080 29,145
Other debtors and prepaid expenses 3,704 1,728
Cash and bank deposits 58,441 51,518
- ----------------------------------------------------------------------
Total current assets 86,498 82,708
- ----------------------------------------------------------------------
Creditors: amounts falling due within one year
Bank loans and overdrafts 1,024 1,007
Trade creditors 3,967 4,241
Accrued employee compensation 4,884 7,481
Current corporation tax 9,252 6,428
Accrued expenses and
other current liabilities 8,472 7,326
Deferred revenue 16,545 20,030
- ----------------------------------------------------------------------
Total current liabilities 44,144 46,513
- ----------------------------------------------------------------------
Net current assets 42,354 36,195
- ----------------------------------------------------------------------
Total assets less current liabilities 85,727 77,311
Creditors: amounts falling due
after more than one year - 12
Provision for liabilities and charges:
Deferred taxation 6,408 6,407
- ----------------------------------------------------------------------
Net assets 79,319 70,892
- ----------------------------------------------------------------------
Capital and reserves
Called up share capital 1,685 1,588
Share premium account 32,137 30,196
Profit and loss account 45,497 39,108
- ----------------------------------------------------------------------
Total shareholders' funds 79,319 70,892
======================================================================
*** ENDS ***
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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 19, 1998 By: /s/ Richard Van Hoesen
---------------------------------------
Richard Van Hoesen
Senior Vice President, Chief Financial
Officer and Secretary
