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Make mine an old-fashioned. Perpetual licence sales save Micro Focus results for first half of its fiscal 2021

Talking up AWS deal as market says: Yes, OK

Good old fashioned perpetual licence sales helped Micro Focus turn an unexceptional six months worth of trading figures into something more acceptable by moderating declines in group revenue.

In preliminary results for the six months ended 30 April 2021, the company reported revenues of $1.4bn, down 5 per cent year-on-year in constant currency, this was "ahead of market expectations".

Earning before income tax, depreciation and amortisation (EBITDA) margin was 36 per cent, in line with forecasts, due to the licence growth and "cost savings". Micro Focus didn't reveal pre-tax or net profit.

According to the unaudited numbers, licence sales went up 10 per cent due to "sales execution improvements" - something the business has wrestled with - and "includes a small number of deals closing earlier in FY21 than initially forecast and performance in the comparable period being impacted by the onset of COVID-19".

Maintenance was down 8 per cent, due to a "reduction in licence volume" in the prior financial year "combined with attrition rates for a small subset of products. Corrective actions continue to be implemented, however the improvement of maintenance trends remains a multi-year initiative with improvements forecast to be weighted to the outer years."

Software-as-a-Service and other trendy recurring revenue fell 5 per cent and consulting revenue was down 9 per cent, the prelim data shows.

It has been a challenging few years since Micro Focus swallowed HPE's much larger software business for $8.8bn in 2016. There have been amid integration woes, with sales sliding, modernising internal systems being updated, and then the company selling profitable unit SUSE for $2.5bn in 2018. This was all topped off by long-serving boss Kevin Loosemore quitting in April 2020. Then COVID-19 hit the bottom line, hard. The company lost over $1bn in the first half of fiscal 2020.

The latest turnaround strategy was hatched by CEO Stephen Murdoch in early 2020 and involves smoothing Micro Focus' routes to market, ploughing money into product development, hiring personnel, updating training programmes, driving more subscription sales and delving deeper into the world of big data and security.

"The product investments and operational changes we are making are beginning to deliver performance improvements," claimed Murdoch today, "and our value propositions are resonating with customers and partners."

Micro Focus pointed out it has signed a formal commercial agreement with AWS to try to "accelerate the modernisation of mainframe applications and workloads of large public and private enterprise to the AWS Cloud."

The idea is for AWS to deploy Micro Focus wares to move customers' stuff to the Bezos cloud.

Murdoch added:

"Our recovery programme and specifically our systems transformation is progressing as planned despite the challenges of executing his within the constraints of a global lockdown.

"Whilst there is a great deal to do, we are encouraged by our progress and reman committed to delivering revenues stabilisation and sustainable cash flow generation for our shareholders."

The City seemed to agree and shares in Micro Focus were up a little over 4 per cent in this morning's trades. ®


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