Micro Focus reports $1bn loss due to economic uncertainty caused by the pandemic

The firm has been struggling since buying HPE's software business in 2017

British software giant Micro Focus on Tuesday posted a pre-tax loss of $1.03 billion (£822 million) for the first six months of the fiscal 2020, ending 30^th April.

The company said it had to write down the value of its assets by $922.2 million [pdf] due to heightened economic uncertainty caused by Covid-19 pandemic.

For the same period a year ago, the firm had reported a profit of $1.4 billion.

Micro Focus said it took a goodwill impairment charge of $922.2 million in the first half of the year due to disruption to new sales, an increase in the pre-tax discount rate, and timing pressure on renewals.

Revenue in the first half dropped by 12.2 per cent to $1.45 billion, with declines reported across all business areas.

Licence revenue declined by 21.3 per cent to $268 million on a constant currency basis. Maintenance revenue dropped by 7.4 per cent to $966 million, led by losses within Application Delivery Management (ADM) and IT Operations Management (ITOM) business units, which declined by 12.3 per cent and 20.5 per cent, respectively.

Consulting declined 14.8 per cent to $96.1 million, while SaaS was down 12.4 per cent to $125 million.

The company said that its customers began delaying software licence renewals and regular maintenance in April.

"The group identified a slowdown in customer buying behaviour in April 2020 resulting in a deferral of projects involving new licence and service revenues as well as delays to some maintenance renewals," said CEO Stephen Murdoch.

"The impact of this is estimated to be at least 2 per cent on revenues in the period."

The company also stated that sales were in line with earlier expectations.

Once valued at nearly £12 billion, Micro Focus has been struggling since buying HPE's software business for $8.8 billion in 2017. The deal covered all software acquisitions that Hewlett-Packard had made over a number of decades, including Autonomy, ArcSight, Peregrine Systems and Mercury Interactive.

The merger tripled Micro Focus' size overnight, but also created an integration headache that analysts believe will take many years to overcome.

Since the start of the year, Micro Focus has lost nearly 60 per cent of its value.

In August last year, the company issued a profits warning, resulting in a big drop in its share price. The company had already warned investors that it was expecting revenues to drop by four to six per cent for the financial year to the end of October.

Micro Focus also described the situation as "highly challenging", attributing it partly to its own execution shortcomings and partly to the "deteriorating macro environment".