<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, 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.)
<PAGE> 2
[LOGO]
MICRO FOCUS (R)
-------------------------------------------------------------------------------
FIRST HALF REPORT 1999
LETTER TO SHAREHOLDERS
Dear Micro Focus shareholder:
I am pleased to report Micro Focus' results for the first half ended July 31
1998, announced on August 19 1998, show a 35% revenue increase to $97,017,000
compared with $71,711,000 for the comparable prior year period. Net income
increased 112% to $10,446,000 and diluted earnings of $0.12 per ordinary share
were double earnings per ordinary share of $0.06 in the comparable prior year
period. Earnings of $0.62 per American Depositary Share ("ADS") were also double
the $0.30 in the first half of the prior year. The results of Micro Focus
Italia, s.r.l. which was acquired in May 1998, have been included in the current
period from the date of acquisition.
Our UK GAAP results show turnover for the first half increased 42% to GBP
58,642,000, from GBP 41,349,000 in the first half of the prior year. Profit
after taxation grew 96% to GBP 6,788,000 versus GBP 3,465,000 for the first half
of the prior year. Diluted earnings per share were 8.3 pence compared with 4.5
pence for the first half of the prior year. Revenue for the second quarter
increased 29% to GBP 29,273,000 from GBP 22,774,000 for the same period last
year. Profit after taxation grew 61% to GBP 3,357,000 versus GBP 2,088,000 in
last year's second quarter. Diluted earnings per share were 4.1 pence in the
current quarter compared with 2.7 pence for the second quarter of the prior
year.
Summary financial results are as follows:
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
U.S. Dollars, U.S. GAAP GB Pounds, U.K. GAAP
Six months ended July 31 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
Net revenue $97.0m $71.7m GBP58.6m GBP41.3m
Net income 10.4m 4.9m 6.8m 3.5m
Earnings per share: basic $0.13 $0.06 8.5p 4.5p
diluted $0.12 $0.06 8.3p 4.5p
diluted - ADS equivalent $0.62 $0.30 - -
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
I am pleased with our continuing strong operating performance whilst we made
significant progress on our key strategic objectives. During the second quarter
of this year we undertook a major restructuring of our North American field
organization, 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 intention 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 whilst continuing to pursue additional growth
through strategic acquisitions.
This performance reflects a balance of contributions from our consulting
business, our distributed computing segment and our application transformation
business. We also generated a strong cash surplus during the period, and
finished the half with $95.8 million in cash, an $11 million increase in a
period in which we acquired our Italian distributor for $4 million.
<PAGE> 3
Your Board is confident about the prospects of the Group and the benefits to be
obtained from the merger with INTERSOLV and looks forward to continued growth in
the merged group's business.
/s/ Martin Waters
Martin Waters
President and Chief Executive Officer
September 11 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, 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 located at
http://www.sec.gov.
The following statement is made in accordance with the U.S. Private Securities
Litigation Reform Act of 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 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.
1
<PAGE> 4
MICRO FOCUS(R) FIRST HALF REPORT 1999
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (IN UK FORMAT)
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<S> <C> <C> <C> <C> <C>
................................................................................................................................
Three months Three months Six months Six months Year
ended ended ended ended ended
July 31 1998 July 31 1997 July 31 1998 July 31 1997 January 31 1998
(unaudited) (unaudited) (unaudited) (unaudited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
- ---------------------------------------------------------------------------------------------------------------------------------
Revenue
Product revenue 18,072 14,007 35,886 24,106 60,480
Maintenance revenue 7,841 6,552 15,711 13,845 28,233
Service revenue 3,360 2,215 7,045 3,398 8,302
- ---------------------------------------------------------------------------------------------------------------------------------
Total revenue 29,273 22,774 58,642 41,349 97,015
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of revenue
Cost of product revenue 1,136 1,433 2,414 2,917 6,990
Cost of maintenance revenue 2,403 2,047 4,480 3,336 6,984
Cost of service revenue 2,877 1,728 5,440 3,488 8,861
- ---------------------------------------------------------------------------------------------------------------------------------
Total cost of revenue 6,416 5,208 12,334 9,741 22,835
- ---------------------------------------------------------------------------------------------------------------------------------
Gross profit 22,857 17,566 46,308 31,608 74,180
- ---------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Research and development 5,142 4,711 10,207 9,448 19,679
Sales and marketing 11,028 8,648 22,632 15,254 35,289
General and administrative 2,425 1,777 4,725 2,919 6,476
.................................................................................................................................
Total operating expenses 18,595 15,136 37,564 27,621 61,444
- ---------------------------------------------------------------------------------------------------------------------------------
Operating profit 4,262 2,430 8,744 3,987 12,736
Interest income, net 712 686 1,313 1,184 2,481
.................................................................................................................................
Profit before taxation 4,974 3,116 10,057 5,171 15,217
Taxation (note 4) (1,617) (1,028) (3,269) (1,706) (4,791)
- ---------------------------------------------------------------------------------------------------------------------------------
Profit for the period after taxation 3,357 2,088 6,788 3,465 10,426
- ---------------------------------------------------------------------------------------------------------------------------------
Earnings per share: basic 4.2p 2.7p 8.5p 4.5p 13.6p
Earnings per share: diluted 4.1p 2.7p 8.3p 4.5p 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.
</TABLE>
<PAGE> 5
CONSOLIDATED CASH FLOW STATEMENT
<TABLE>
<S> <C> <C> <C>
...............................................................................................................................
Six months Six months Year ended
ended ended January 31
July 31 1998 July 31 1997 1998
(unaudited) (unaudited)
GBP'000 GBP'000 GBP'000
- -------------------------------------------------------------------------------------------------------------------------------
Operating profit 8,744 3,987 12,736
Depreciation of fixed assets 2,554 2,144 4,534
Amortisation of software product assets and other intangibles 3,588 3,826 7,765
Changes in operating assets and liabilities (1,812) (1,972) (7,268)
...............................................................................................................................
Net cash inflow from operating activities 13,074 7,985 17,767
Returns on investments and servicing of finance 1,313 1,160 2,449
Taxation (444) (209) (861)
Capital expenditure and financial investment (5,656) (5,943) (12,756)
Acquisitions and disposals (3,018) (1,925) (1,039)
- -------------------------------------------------------------------------------------------------------------------------------
Cash inflow before use of liquid resources and financing 5,269 1,068 5,560
Management of liquid resources (2) (833) 942
Net cash inflow from financing 2,038 730 1,517
- -------------------------------------------------------------------------------------------------------------------------------
Increase in cash 7,305 965 8,019
- -------------------------------------------------------------------------------------------------------------------------------
Reconciliation of net cash flow to movement in net funds
- -------------------------------------------------------------------------------------------------------------------------------
Increase in cash, as above 7,305 965 8,019
Cash outflow from increase in liquid resources 2 833 (942)
- -------------------------------------------------------------------------------------------------------------------------------
Change in cash resulting from cash flows 7,307 1,798 7,077
Currency translation difference (399) (871) (1,226)
- -------------------------------------------------------------------------------------------------------------------------------
Movement in cash during the period 6,908 927 5,851
Net funds at beginning of period 50,493 44,642 44,642
- -------------------------------------------------------------------------------------------------------------------------------
Net funds at end of period 57,401 45,569 50,493
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 6
MICRO FOCUS(R) FIRST HALF REPORT 1999
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (IN UK FORMAT)
CONSOLIDATED BALANCE SHEET
<TABLE>
<S> <C> <C> <C>
...............................................................................................................................
July 31 1998 January 31 July 31 1997
(unaudited) 1998 (unaudited)
GBP'000 GBP'000 GBP'000
- -------------------------------------------------------------------------------------------------------------------------------
Fixed assets
- -------------------------------------------------------------------------------------------------------------------------------
Intangible fixed assets 14,076 12,394 13,488
Tangible fixed assets 24,615 23,836 21,317
Investment in own shares (note 6) 4,682 4,886 5,188
- -------------------------------------------------------------------------------------------------------------------------------
Total fixed assets 43,373 41,116 39,993
- -------------------------------------------------------------------------------------------------------------------------------
Current assets
Stock 273 317 419
Trade debtors 24,080 29,145 16,329
Other debtors and prepaid expenses 3,704 1,728 1,256
Cash and bank deposits and short term investments 58,441 51,518 46,646
...............................................................................................................................
Total current assets 86,498 82,708 64,650
...............................................................................................................................
Creditors: amounts falling due within one year
Bank loans 1,024 1,007 994
Trade creditors 3,967 4,241 3,774
Accrued employee compensation and commissions 4,884 7,481 4,289
Current corporation tax 9,252 6,428 4,060
Accrued expenses and other current liabilities 8,472 7,326 5,552
Deferred revenue 16,545 20,030 17,491
- -------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 44,144 46,513 36,160
- -------------------------------------------------------------------------------------------------------------------------------
Net current assets 42,354 36,195 28,490
- -------------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 85,727 77,311 68,483
Creditors: amounts falling due after more than one year - 12 14
Provision for liabilities and charges: deferred taxation 6,408 6,407 6,240
- -------------------------------------------------------------------------------------------------------------------------------
Net assets 79,319 70,892 62,229
- -------------------------------------------------------------------------------------------------------------------------------
Capital and reserves
Called up share capital 1,685 1,588 1,541
Share premium and other reserves 32,137 30,196 20,777
Profit and loss account (note 7) 45,497 39,108 39,911
- -------------------------------------------------------------------------------------------------------------------------------
Total shareholders' funds 79,319 70,892 62,229
- -------------------------------------------------------------------------------------------------------------------------------
</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 US
dollar rates are as follows:
....................................................................
July 31 January 31 July 31
1998 1998 1997
- --------------------------------------------------------------------
Closing rates: GPB 1= $1.64 $1.64 $1.63
Average rates (approx): GBP 1= $1.65 $1.64 $1.34
- --------------------------------------------------------------------
3. RESEARCH AND DEVELOPMENT
Research and development costs are stated after capitalizing GBP 2,879,000
(1998: GBP 2,818,000) of current costs as software product assets in compliance
with SFAS 86 (the US standard on accounting for software product costs) and
after charging amortization of software product assets amounting to GBP
3,452,000 (1998: GBP 3,826,000).
4. TAXATION
The charge for taxation includes the following:
......................................................
July 31 January 31 July 31
1998 1998 1997
GBP'000 GBP'000 GBP'000
- ------------------------------------------------------
UK taxation 1,620 3,163 1,126
Overseas taxation 1,649 1,628 580
- ------------------------------------------------------
3,269 4,791 1,706
- ------------------------------------------------------
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 Benefit 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 1998 1997
GBP'000 GBP'000
- --------------------------------------------------------------
Brought forward 39,108 41,536
Profit after taxation 6,788 3,465
Goodwill acquired - (4,157)
Currency translation (399) (933)
- --------------------------------------------------------------
45,497 39,911
- --------------------------------------------------------------
3
<PAGE> 8
MICRO FOCUS(R) FIRST HALF REPORT 1999
- --------------------------------------------------------------------------------
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 1998 Annual Report, except - in the case of the U.K.
format statements - for the change in accounting policy resulting from the
implementation of FRS 10 - "Goodwill and Intangible Assets", and should be read
in conjunction with the financial results contained therein. The taxation charge
is calculated by applying the directors' best estimate of the annual tax rate to
the profit for the period. Other expenses are accrued in accordance with the
same principles used in the preparation of the annual financial statements.
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 1998 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 1998 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 1998, 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 1998, except for
the change in accounting policy following adoption of FRS 10, as disclosed
above.
Ernst & Young
Reading, England
September 11 1998
- --------------------------------------------------------------------------------
<PAGE> 9
COMPANY INFORMATION
Registered Office and Shareholder Enquiries
- --------------------------------------------
Micro Focus Group Plc
The Lawn, 22-30 Old Bath Road,
Newbury, Berkshire, RG14 1QN, U.K.
Telephone: (01635) 32646
Registrars and Transfer Office
- -----------------------------
Lloyds Bank Registrars, The Causeway,
Worthing, West Sussex, BN99 6DA, 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 Shares ("ADSs") are listed on the NASDAQ
National Market System under the symbol MIFGY.
Stockbrokers
- ------------
SBC Warburg, 1 Finsbury Avenue,
London EC2M 2PA, U.K.
ADS Depositary
- --------------
Bank of New York, 101 Barclay Street,
22nd Floor, New York, NY 10286, U.S.A
Micro Focus Worldwide Web site:
- ------------------------------
http:\\www.microfocus.com
- --------------------------------------------------------------------------------
REGIONAL OFFICES
U.S.A
- -----
Micro Focus Inc.
701 East Middlefield Road
Mountain View, CA 94303
Tel: (+1) (650) 938 3700
Fax: (+1) (650) 404 7414
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, 7th Floor
New York, NY 10005
Tel: (+1) (212) 312 2200
Fax: (+1) (212) 312 2222
CANADA
- ------
Micro Focus (Canada) Ltd
3 Robert Speck Parkway
Mississauga, Ontario L4Z 2G5
Tel: (+1) (905) 306 7280
Fax:: (+1) (905) 306 7530
<PAGE> 10
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 106
Tel: (+81) 3 3486 7791
Fax: (+81) 3 3486 5055
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
Italy
- -----
Micro Focus Italia S.r.l.
Viale Erminio Spalla 41
00142 - Roma
Tel: (+39) 6 5153930
Fax: (+39) 6 51956598
Australia
- ---------
Advanced Software Engineering Pty Ltd
Level 1, 1104-1108 Toorak Road,
Camberwell, Victoria 3124
Tel: (+61) 3 809 0873
Fax: (+61) 3 809 2832
4
<PAGE> 11
MICRO FOCUS(R) FIRST HALF REPORT 1999
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (IN US FORMAT)
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<S> <C> <C> <C> <C> <C>
...............................................................................................................................
Three months Three months Six months Six months Year ended
In thousands of US dollars (except per share data) ended ended ended ended January 31
July 31 1998 July 31 1997 July 31 1998 July 31 1997 1998
(unaudited) (unaudited) (unaudited) (unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Net revenue
Product revenue $29,850 $23,898 $59,392 $41,790 $104,041
Maintenance revenue 12,958 11,700 25,973 24,383 49,648
Service revenue 5,559 3,580 11,652 5,538 13,620
- -------------------------------------------------------------------------------------------------------------------------------
Total net revenue 48,367 39,178 97,017 71,711 167,309
- -------------------------------------------------------------------------------------------------------------------------------
Cost of revenue
Cost of product revenue 1,879 2,222 3,995 4,399 10,309
Cost of maintenance revenue 3,972 3,000 7,410 5,823 12,055
Cost of service revenue 4,759 3,392 9,002 5,702 14,538
- -------------------------------------------------------------------------------------------------------------------------------
Total cost of revenue 10,610 8,614 20,407 15,924 36,902
- ------------------------------------------------------------------------------------------------------------------------------
Gross profit 37,757 30,564 76,610 55,787 130,407
- -------------------------------------------------------------------------------------------------------------------------------
Operating expenses
Research and development 8,499 8,481 16,877 17,008 35,040
Sales and marketing 18,237 15,392 37,454 27,379 62,214
General and administrative 4,456 3,884 8,723 6,062 15,559
...............................................................................................................................
Total operating expenses 31,192 27,757 63,054 50,449 112,813
- -------------------------------------------------------------------------------------------------------------------------------
Income from operations 6,565 2,807 13,556 5,338 17,594
Interest income, net 1,174 1,042 2,270 2,025 4,247
...............................................................................................................................
Income before income taxes 7,739 3,849 15,826 7,363 21,841
Income taxes (2,630) (1,301) (5,380) (2,440) (7,208)
- -------------------------------------------------------------------------------------------------------------------------------
Net income $5,109 $2,548 $10,446 $4,923 $14,633
- -------------------------------------------------------------------------------------------------------------------------------
Net income per share: basic $0.06 $0.03 $0.13 $0.06 $0.19
Net income per ADS: basic $0.32 $0.16 $0.65 $0.31 $0.93
- -------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding: basic 80,133 78,750 79,808 78,259 78,735
Shares converted to ADS equivalent 16,027 15,750 15,962 15,652 15,747
- -------------------------------------------------------------------------------------------------------------------------------
Net income per share: diluted $0.06 $0.03 $0.12 $0.06 $0.18
Net income per ADS: diluted $0.31 $0.15 $0.62 $0.30 $0.89
- -------------------------------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding: diluted 83,449 83,290 83,820 82,023 82,635
Shares converted to ADS equivalent 16,690 16,658 16,764 16,405 16,473
- -------------------------------------------------------------------------------------------------------------------------------
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 ADSs did not split. Instead, the conversion rights of
such ADSs were adjusted such that each ADS now represents five ordinary shares. Per share earnings are also shown on an ADS
equivalent basis.
</TABLE>
<PAGE> 12
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<S> <C> <C> <C>
...............................................................................................................................
In thousands of US dollars Six months Six months Year ended
ended ended January 31
July 31 July 31 1998
1998 1997
(unaudited) (unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Operating activities
Net income $10,446 $4,923 $14,633
Adjustments to reconcile net income to cash provided by operations
Depreciation of fixed assets 4,166 3,756 7,706
Amortization of software product assets and other intangibles 6,851 6,241 14,107
Changes in operating assets and liabilities 857 (593) (5,531)
Other items 25 - 207
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 22,345 14,327 31,122
- -------------------------------------------------------------------------------------------------------------------------------
Investing activities
Purchases of property, plant and equipment, net of
capital lease obligations incurred (5,463) (5,278) (13,782)
Software product assets and other intangibles (4,238) (4,602) (9,321)
Acquisition of subsidiary, net of cash acquired (4,451) (3,424) (3,437)
Own shares 335 710 1,190
Disposal of property, plant and equipment (20) - 570
Available-for-sale securities (6,958) (35,548) (33,639)
...............................................................................................................................
Net cash (used) by investing activities (20,795) (48,142) (58,419)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 3,354 4,292 2,518
- -------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (509) (208) (166)
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 4,395 (29,731) (24,945)
Cash at beginning of period 48,174 73,119 73,119
- -------------------------------------------------------------------------------------------------------------------------------
Cash at end of period $52,569 $43,388 $48,174
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 13
MICRO FOCUS(R) FIRST HALF REPORT 1999
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (IN US FORMAT)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C> <C>
...............................................................................................................................
In thousands of US dollars July 31 January 31 July 31
1998 1997
(unaudited) 1998 (unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $52,569 $48,174 $43,388
Short-term investments 43,274 36,316 35,444
Accounts receivable, net 39,492 47,798 28,376
Inventories 448 519 683
Prepaid expenses and other assets 6,171 2,833 5,028
...............................................................................................................................
Total current assets 141,954 135,640 112,919
...............................................................................................................................
Fixed assets:
Property, plant and equipment, net 40,368 39,083 35,441
Goodwill, net 8,646 5,346 6,315
Software product assets, net 18,866 20,328 21,986
- -------------------------------------------------------------------------------------------------------------------------------
Total assets $209,834 $200,397 $176,661
- -------------------------------------------------------------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Bank loans $1,679 $1,652 $1,620
Accounts payable 6,506 6,957 6,616
Accrued employee compensation and commissions 8,010 12,383 8,029
Income taxes payable 15,174 10,459 6,464
Deferred revenue 27,134 32,848 32,088
Other current liabilities 13,894 12,085 9,657
...............................................................................................................................
Total current liabilities 72,397 76,384 64,474
...............................................................................................................................
Long-term debt and other liabilities - 20 22
Deferred income taxes 9,272 9,159 8,936
Shareholders' equity:
Ordinary shares 2,669 2,508 2,467
Additional paid-in capital and other reserves 36,586 33,362 31,903
Unrealised gain on available-for-sale securities, net of tax 39 44 22
Treasury stock (note 5) (7,434) (7,769) (8,249)
Cumulative exchange (loss) (3,160) (2,330) (2,208)
Retained earnings (note 6) 99,465 89,019 79,294
- -------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 128,165 114,834 103,229
- -------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $209,834 $200,397 $176,661
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
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 US 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
1998 1998 1997
- --------------------------------------------------------------------
Closing rates: $1= GBP 0.610 GBP 0.610 GBP 0.613
Average rates (approx) $1= GBP 0.606 GBP 0.610 GBP 0.649
- --------------------------------------------------------------------
3. RESEARCH AND DEVELOPMENT
Research and development costs are stated after capitalizing $4,757,000 (1998:
$4,602,000) 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 amortization of software product assets amounting to $5,701,000
(1998: $6,241,000).
4. DIVIDENDS
Following established Micro Focus policy the Directors do not intend to
recommend payment of a dividend.
5. TREASURY STOCK
Treasury stock represents shares held by an Employee Benefit Trust which has
been formed to encourage ownership of Micro Focus shares by its employees. The
shares are valued at cost.
6. RETAINED EARNINGS
..............................................................
Six months ended July 31 1998 1997
(in thousands of U.S. dollars)
- --------------------------------------------------------------
Brought forward $86,689 $72,345
Net income for the period 10,446 4,923
Currency translation (830) (182)
- --------------------------------------------------------------
$96,305 $77,086
- --------------------------------------------------------------
6
<PAGE> 15
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: September 17, 1998 By: /s/ Martin Waters
---------------------------------------
Martin Waters
President and Chief Executive Officer
