24th Aug 2009 10:31
24 August 2009
Annual Financial Report
Publication of the Micro Focus International plc Annual Report and Accounts
Micro Focus International plc (the "Company") announces that it has published the following documents on its website at www.microfocus.com:
Annual Report and Accounts for the year ended 30 April 2009 ("2009 Annual Report")
Chairman's Letter and Notice of Annual General Meeting for 2009
The Company has also submitted to the UK Listing Authority two copies of the documents listed above and the Proxy form for the Annual General Meeting 2009, in compliance with Listing Rule 9.6.1.
Copies of the above documents will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility:
Financial Services Authority
25 The North ColonnadeCanary Wharf
London E14 5HS
Telephone: 020 7066 1000
The Annual General Meeting will be held on 24 September 2009 in Newbury at 3pm (UK time). The 2009 Annual Report and Notice of Annual General Meeting 2009 are also available on the Company's website at www.microfocus.com.
Jane Smithard
Company Secretary
24 August 2009
Information to be disclosed in accordance with DTR 6.3.5
In accordance with Rule 6.3.5 of the Disclosure and Transparency Rules, extracted below from the 2009 Annual Report is a management report which contains a statement of directors' responsibility, Group risk factors and details of related party transactions. Page numbers refer to those in the 2009 Annual Report. The Company announced its final results on 25 June 2009, which included a condensed set of financial statements.
A - Statement of Directors' Responsibility
The following information has been reproduced from page 49 of the 2009 Annual Report:
Each of the directors, whose names and functions are listed below confirm that, to the best of their knowledge:
the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the group; and
the directors' report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
Directors:
Kevin Loosemore, Non-executive Chairman
Stephen Kelly, Chief Executive Officer
Nick Bray, Chief Financial Officer
David Maloney, Non-executive senior independent director
Paul Pester, Non-executive director
Tom Skelton, Non-executive director
B - Risk Management
The following information has been reproduced from pages 17 and 18 of the 2009 Annual Report:
Group risk factors
The Group in common with all businesses could be affected by risks not completely within its control which could have a material effect on its short- and longer- term financial performance. These risks could cause actual results to differ materially from forecasts or historic results.
The following are the key risks that are relevant to the Group as a provider of enterprise application management solutions. Please also refer to the section on internal controls within the corporate governance report on page 40.
Employees
The retention and recruitment of highly skilled and motivated employees is critical to the success and future growth of the Group in all countries in which it currently operates and in which it is likely to expand into in the future.
The Group has policies in place to help achieve these objectives and ensure that it is able to attract and retain employees with the required skills.
Timing of concluding contracts
In common with other software companies, the recognition of revenue is dependent upon obtaining signed contracts from customers and delivery of product. With a high proportion of costs being fixed, mainly people related, failure to conclude sales contracts could result in a material decrease in margin. Failure to conclude at any time would have the same impact.
However, the Group has a growing diverse mix of customers with a high proportion of predictable and recurring revenue which reduces this exposure.
Acquisitions
Acquisitions could provide profitable revenue growth. Concluding further acquisitions is dependent on a number of factors such as the global economic position, the availability of finance and suitable target companies. There are also risks associated with successfully integrating future acquisitions; for example the loss of key personnel, system integration issues and other problems not identified prior to acquisition.
The Group has a successful track record to-date in integrating acquisitions into the Group's business model and has strengthened its management team to assist in this process. It has also secured a three-year revolving $215m loan facility agreement to fund announced acquisitions and associated integration costs.
Bank loan facility
The $215m loan facility agreement, to the extent drawn down by the Group may limit the operational and financial flexibility of the Group and may increase the exposure of the Group to interest rate fluctuations. The loan facility agreement contains covenants which may negatively impact the ability of the Group to operate and grow its business. To the extent drawn down, the loan facility agreement will create an amount of indebtedness for the Group together with debt service obligations which may impair the operational and financial flexibility of the Group.
The directors believe that the strength of the business means that any funds drawn down to fund acquisitions will be repaid together with any accrued interest within the three-year term of the loan facility agreement minimising the effect of any restrictive covenants contained therein.
Research and development
The Group has expanded its various R&D facilities through organic growth and through acquisitions. The success of the R&D function in enhancing existing products and developing new products, which are relevant to customer requirements is critical to the ongoing success of the Group. If new products or enhancements do not meet customer requirements, or competitors introduce products which better meet the requirements of customers, this may have a material impact on revenues and profits.
The successful integration of the R&D functions of acquired companies together with the effective management of existing facilities is key to mitigating these risks.
Foreign exchange and treasury
The Group is not exposed to significant foreign exchange transactional exposure as generally its subsidiaries trade in their own currency. The Group's principal exposure to foreign currency is the translation of overseas profits into US$. Due to its limited exposure, the Group does not hold any financial instruments such as derivatives.
The Group is also exposed to foreign currency translation risk on the translation of its net investment overseas into US$ where the functional currency of those subsidiaries is not the US$. This is partially mitigated by the overseas subsidiaries incurring costs denominated in their local currency.
Economic risks
The Group's business may be subject to inherent risks arising from the general and sector specific economic conditions in the markets in which they operate. The performance of the Group may be affected by changes in economic or market conditions. The growth and development of the markets in which the Group operates depend on numerous factors many of which are beyond their control and the exact effect of which cannot accurately be predicted. Such factors include general economic and political activities including the extent of any governmental regulation, legislation and taxation.
The Group has demonstrated that it can grow and perform well on both sides of the economic cycle. The relevance of the customer proposition and resilience of the Group business model continues to encourage that the outlook is positive. The group benefits from having a business model with a high proportion of predictable and recurring revenue.
Intellectual property
The Group depends on its intellectual property and rights to such intellectual property may be challenged or infringed by others or otherwise prove insufficient to protect its business. The Group relies on trade secret, trade mark and copyright law to protect its intellectual property. Failure to protect, maintain and enforce the Group's existing intellectual property or pursue registrations for new rights may result in the loss of the Group's exclusive right to use technologies which are included in their respective software products or are otherwise used in their respective businesses. Most of the Group's intellectual property is not covered by a patent or patent application and includes trade secrets and other know-how that is not considered patentable.
In addition, some of the Group's intellectual property includes technologies and processes that may be similar to the technologies and processes of third parties that are protected by patent, copyright
or trade secret law.
The Group takes appropriate steps to enforce its intellectual property rights particularly in international markets including litigation where appropriate.
Note 3 to the summary of significant accounting policies, on page 60 of the 2009 Annual Report, gives additional information on additional financial risks that the Group could be exposed to.
C - Related Party Transactions
The following information has been reproduced from note 28 on page 78 of the 2009 Annual Report:
The Group has taken advantage of the exemption available under IAS 24, "Related Party Disclosures", not to disclose details of transactions with subsidiary undertakings.
As described in the remuneration report, the former non-executive directors David Dominik and Prescott Ashe are directors in Golden Gate Capital. Golden Gate Capital was a shareholder until 23 February 2009 when it disposed of its remaining shareholding in the Company.
There were no related party transactions with this company during the year ended 30 April 2009 or with any other third party.
END
Enquiries:
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Micro Focus |
Tel: +44 (0)1635 32646 |
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Stephen Kelly, Chief Executive |
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Nick Bray, Chief Financial Officer |
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Tim Brill, Head of Corporate Communications & IR |
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Financial Dynamics |
Tel: +44 (0)20 7831 3113 |
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Charles Palmer/Haya Herbert-Burns/Nicola Biles |
Notes to editors:
About Micro Focus
Micro Focus, a member of the FTSE 250, provides innovative software that allows companies to dramatically improve the business value of their enterprise applications. Micro Focus Enterprise Application Modernization and Management software enables customers' business applications to respond rapidly to market changes and embrace modern architectures with reduced cost and risk. For additional information please visit www.microfocus.com.
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