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Micro Focus jumps as it forecasts margins at upper end of expectations

The software group also reported a smaller revenue fall in the second half of its last financial year compared to the first, which gave it confidence that its actions are "beginning to improve" its revenue trends

Micro Focus International plc - Micro Focus jumps as it forecasts margins at upper end of expectations

Micro Focus International plc (LON:MCRO) shares jumped on Wednesday as the software group said it expects earnings margins for its last financial year will be “towards the upper end of management expectations”.

In a trading update for the 12 months to October 31, the FTSE 250 firm said it expected to report an adjusted earnings (EBITDA) margin of around 39%, while revenues are expected to fall 10% year-on-year to US$3bn, in line with its forecasts.

The company said revenues fell by around 9% in the second half of the year, an improvement on an 11% decline in the first six months. Micro Focus said this performance was “encouraging” and combined with an improvement in its underlying operations gave it “confidence that the actions being taken are beginning to improve the overall revenue trends”.

However, the company said the macro-economic environment “remains uncertain” and the long-term impact was continuing to be evaluated. As a result, the company said the status of its final dividend “remains under review”.

"We are in extraordinary times as a result of COVID-19 and I must take this opportunity to express my sincere thanks to our employees for how they have adapted to the challenges presented and ensured we stay focused on delivering for our customers. We are now nine months into our three year turnaround plan for the Group and whilst there remains a great deal to do I am pleased with progress in both overall operational effectiveness and in the delivery of our key strategic objectives”, Micro Focus chief executive Stephen Murdoch said in a statement.

“Cash generation and working capital management remain strong, the investments we've made are showing encouraging early results and we continue to see a clear, ongoing customer need for our solutions and approach to digital transformation. I am confident we are making the changes and building the foundations necessary to continue to make progress in the delivery of our plan", he added.

The company’s shares rose 21.6% to 330.3p in early deals.

Quick facts: Micro Focus International plc

Price: 430.763 GBX

LSE:MCRO
Market: LSE
Market Cap: £1.49 billion
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