Welcome to the new morningstar.co.uk! Learn more about the changes and how our new features help your investing success.

Moody's Affirms Micro Focus Ratings But Upgrades Outlook To Positive

(Alliance News) - Moody's Investor Service no Tuesday affirmed Micro Focus International PLC's B1 ...

Alliance News 9 July, 2019 | 4:38PM
Email Form

(Alliance News) - Moody's Investor Service no Tuesday affirmed Micro Focus International PLC's B1 ratings but upgraded the FTSE 100-listed software firm's outlook to positive from stable.

The credit ratings agency affirmed Micro Focus' B1 corporate family rating as well as the B1 rating on the company's senior secured bank facilities.

Moody's said the affirmation reflects Micro Focus' "solid" interim results, released earlier Tuesday, and the "further" progress made in the integration of HPE Software.

"For fiscal 2019, ending October 2019, Moody's expects further integration progress, revenue stabilisation, Ebitda growth and solid free cash flow generation. However, some execution risk related to integration and cost saving efforts remains as the company is in the second year of a three-year integration plan, with continued substantial cash costs expected for fiscal 2019, leading to migration of the full business to common IT platform in 2020," Moody's explained.

For the six months ended April 30, Micro Focus revenue came in at USD1.66 billion, down 7.5% from USD1.79 billion the year before.

The drop in revenue was offset by a reduction in administrative expenses to USD366.7 million from USD448.4 million and a slight fall in research and development expenses to USD250.5 million from USD254.4 million.

Profit for the period after tax surged to USD1.40 billion from USD619.7 million the year before, following the sale of its SUSE software business.

More broadly, Moody's said the ratings reflects the "ongoing challenges to generate stable or improving revenue and resulting need to continuously improve profitability in the context of the company's product portfolio of mainly mature software applications."

Moody's noted the company's resulting need to maintain "good cash flow" due to these ongoing revenue challenges.

The positive outlook, Moody's said, reflects the "continued improvement" in Micro Focus' credit metrics and "further revenue stabilisation and Ebitda growth".

Shares in Micro Focus ended 5.1% lower in London in afternoon trade at 1,991.00 pence each, Tuesday's worst performing FTSE 100-listed stock.

By Paul McGowan; paulmcgowan@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

Email Form

Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Micro Focus International PLC 1,012.20 GBX -0.02 -

About Author

Alliance News

Alliance News provides Morningstar with continuously updating coverage of news affecting listed companies.

Audience Confirmation

By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites