(Alliance News) - Micro Focus International PLC on Tuesday recorded a pretax loss for 2020 but insisted that its business model remains "resilient" in the face of Covid-19.
The Newbury, England-based software and information technology business reported a pretax loss for the year ended October 31 of USD2.94 billion, widening from USD34.1 million loss in 2019.
Administrative expenses for the year were USD3.34 billion compared to USD620.8 million the previous year. This was a result of Micro Focus recording a total impairment charge of USD2.8 billion for 2020, which related solely to goodwill and impacted its pretax loss.
Revenue for the year was USD3.00 billion, down 10% from USD3.35 billion the year prior on both an actual and constant currency basis.
Micro Focus said this decrease was in line with expectations and is starting to reflect the progress in its three-year turnaround plan to evolve its business model and improve operational effectiveness. The plan involves delivering stable revenues, adjusted earnings before interest, tax, depreciation and amortisation margins towards the 45% mark, and being able to generate at least USD700 million of free cash flow annually.
Micro Focus said it remains "profitable and highly cash generative", delivering USD1.2 billion in adjusted Ebitda at a margin of 39%, compared to USD1.4 billion adjusted Ebitda at a 41% margin in 2019. Free cash flow was USD511.2 million, down from USD563.3 million the year prior.
Both the adjusted Ebitda and free cash flow were towards the upper end of its expectations in financial 2020, Micro Focus said, with "enhancing cash flows through cost control measures and strong working capital management remaining a primary focus area for management."
Micro Focus declared a final dividend of 15.5 US cents. It did not pay a final 2019 dividend and suspended its interim 2020 one as a result of adapting plans to protect the business due to the impact of Covid-19.
"The operational headwind and macro uncertainty resulting from the pandemic required us to be agile in adapting our approach and the sequencing of priorities as we executed multiple programmes that comprise the transformation of our business to deliver against the objectives we set. Our business model remains resilient in the face of Covid-19, underpinned by high levels of recurring revenues and long-term customer relationships," said Chief Executive Stephen Murdoch.
"We are now 12 months into our three-year turnaround plan and whilst there remains a great deal to do, we have made solid progress in delivery of our key strategic objectives and improvements in operational effectiveness. We continue to work closely with our customers around the world enabling them to build on their existing IT investments with the latest innovations to help accelerate their digital transformation programmes," he added.
Looking ahead, Micro Focus said it is focused on delivering the objective of revenue stabilisation as its exits financial 2023, and continues to "target incremental improvements in revenue trajectory annually in order to achieve this goal."
Shares in Micro Focus were up 4.1% at 512.00 pence in London on Tuesday.
By Zoe Wickens; zoewickens@alliancenews.com
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