Micro Focus expects H1 performance ahead of views, shares rally

Micro Focus shares surged on Tuesday after the software company said its first-half performance was set to be ahead of market views.

In an update for the six months to 30 April, the group said it expects to report revenue of around $1.4bn, down 5% from the first half of 2020 at constant currency but ahead of market expectations.

Licence revenue is expected to rise by about 10% from the first half of 2020, "demonstrating the continuation of sales execution improvements delivered in the second half of FY20". Meanwhile, revenue in the maintenance segment is expected to decline 8%, impacted by a reduction in licence volume in the previous financial period combined with elevated attrition rates for a small subset of products.

SaaS and other recurring revenue is forecast to drop around 5%, in line with expectations, while consulting revenue is expected to fall 9% but is now broadly in line with the revenue generated in the second half of last year.

The company expects an adjusted EBITDA margin of around 36% for the first half, which is also ahead of consensus views. This reflects strong licence revenue performance and cost savings from back office simplification, partially offset by the planned product investment, it said.

Chief executive officer Stephen Murdoch said: "We are pleased with a period of further solid progress in most areas of our business. The product investments and operational changes we are making are beginning to deliver performance improvements, and our value propositions are resonating with customers and partners, as demonstrated by the signing of the significant, long term commercial agreement with AWS."

At 0835 BST, the shares were up 10% at 518.59p.