<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 30, 1998
Micro Focus Group 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 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
UK: 9:16 pm GMT Monday US: 4:16 pm EST Monday
November 30, 1998 November 30, 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
Kathryn Akers US 212-371-5999
Abernathy MacGregor Frank
MICRO FOCUS REPORTS RESULTS FOR THE QUARTER ENDED OCTOBER 31, 1998
London, England and Mountain View, California, November 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
<PAGE> 3
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 GPB 140.1
million, will be charged against income over a four-year term. Net revenue for
the quarter increased 58% to GBP 40.1 million, from GBP 25.4 million 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 GBP 3.0 million compared with GBP 2.7
million 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
<PAGE> 4
charges, loss after taxation was GBP 8.8 million and loss per share was 10.8
pence compared to a profit after taxation of GBP 2.7 million 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 GBP 11.8
million which arose in connection with the acquisition. Excluding this pre-tax
charge, but after providing for amortisation of GBP 3.6 million against goodwill
arising from the acquisition, the loss after taxation for the quarter was GBP
0.7 million 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 GBP 98.8 million from GBP 66.7 million
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 GBP 9.7 million from GBP 6.2 million 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.
Summary financial results are as follows:
<TABLE>
US Dollars, US GAAP (excluding one-time charges) Three months ended Six months ended
October 31 October 31
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
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 ended Nine months ended
October 31 October 31
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue GBP 40.1m GBP 25.4m GBP 98.8m GBP 66.7m
(Loss) profit before taxation, merger costs and GBP 4.6m GBP 3.8m GBP 14.6m GBP 9.0m
amortisation of goodwill
(Loss) profit before taxation & merger costs GBP 1.0 GBP 3.8 GBP 11.0 GBP 9.0
(Loss) profit after taxation, before merger costs (GBP 0.7m) GBP 2.7m GBP 6.1m GBP 6.2m
(Loss) profit after taxation & merger costs (GBP 8.8m) GBP 2.7m (GBP 2.0m) GBP 6.2m
EPS: Basic (10.8p) 3.5p (2.3p) 8.1p
Diluted (10.8p) 3.3p (2.3p) 7.8p
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.
</TABLE>
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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
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. 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 http://www.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.
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.
<PAGE> 6
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)
<TABLE>
Three months Three months Six months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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.
</TABLE>
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MICRO FOCUS GROUP PLC - QUARTER ENDED OCTOBER 31, 1998
CONSOLIDATED BALANCE SHEETS - IN U.S. FORMAT
(in thousands of U.S. dollars)
<TABLE>
October 31, April 30,
1998 1998
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
</TABLE>
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MICRO FOCUS GROUP PLC - QUARTER ENDED OCTOBER 31, 1998
CONSOLIDATED PROFIT & LOSS ACCOUNT - IN U.K. FORMAT
<TABLE>
Three months Three months Nine months Nine months Year
ended ended ended ended ended
October 31 October 31 October 31 October 31 January 31
1998 1997 1998 1997 1998
(unaudited) (unaudited) (unaudited) (unaudited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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.
</TABLE>
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MICRO FOCUS GROUP PLC - QUARTER ENDED OCTOBER 31, 1998
CONSOLIDATED BALANCE SHEET - IN U.K. FORMAT
<TABLE>
October 31 January 31
1998 1998
(Unaudited)
GBP'000 GBP'000
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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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: December 1, 1998 By: /s/ Richard Van Hoesen
---------------------------------------
Richard Van Hoesen
Senior Vice President, Chief Financial
Officer and Secretary
