Unaudited Preliminary Results For Year Ended 30 April Kevin Loosemore, Mike Phillips, Stephen Murdoch, Nils Brauckmann 12 July 2017

Transcription

1 Unaudited Preliminary Results For Year Ended 30 April 2017 Kevin Loosemore, Mike Phillips, Stephen Murdoch, Nils Brauckmann 12 July 2017

2 Safe Harbour Statement The following presentation is being made only to, and is only directed at, persons to whom such presentation may lawfully be communicated ( relevant persons ). Any person who is not a relevant person should not act or rely on this presentation or any of its contents. Information in the following presentation relating to the price at which relevant investments have been bought or sold in the past or the yield on such investments cannot be relied upon as a guide to the future performance of such investments. This presentation does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire securities in Micro Focus International plc (the Company ) or any company which is a subsidiary of the Company. The release, publication or distribution or this presentation in certain jurisdictions may be restricted by law, and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about, and observe, such restrictions. Certain statements contained in this presentation constitute forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company s financial condition, business strategy, plans and objectives, are forwardlooking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, anticipates, expects, intends, may, will, or should or, in each case, their negative or other variations or comparable terminology. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company s present and future business strategies and the environment in which the Company will operate in the future. Such risks, uncertainties and other factors include, among others: the level of expenditure committed to development and deployment applications by organisations; the level of deployment-related turnover expected by the Company; the degree to which organisations adopt web-enabled services; the rate at which large organisations migrate applications from the mainframe environment; the continued use and necessity of the mainframe for business critical applications; the degree of competition faced by the Company; growth in the information technology services market; general economic and business conditions, particularly in the United States; changes in technology and competition; and the Company s ability to attract and retain qualified personnel. These forward-looking statements speak only as at the date of this presentation. Except as required by the Financial Conduct Authority, or by law, the Company does not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. 2

3 Agenda Overview Financial Review Micro Focus Product Portfolio Update SUSE Product Portfolio Update Questions and Answers 3

4 Overview Kevin Loosemore Executive Chairman

5 Strategy Infrastructure Software Market is mature and consolidating Key to performance is operational efficiency and scale Micro Focus is well positioned to be a leader 5 Financial discipline Target returns of 15% - 20% per annum (29.3% compound since 2005) Efficient Balance Sheet 2.5x net debt to Facility EBITDA Return cash Value enhancing acquisitions Customer centered innovation Solve real problems today Deliver incremental and sustainable value

6 Business Performance Solid performance given all that we are doing Revenues in middle of guidance range driven by overall portfolio approach Continued progress on SUSE growth charter, revenue up 21.7% YoY Adjusted Diluted EPS increased 19.7% to cents (2016: cents) Dividend per share increased by 32.1% to cents (2016: cents) Underlying Adjusted EBITDA increased by 20.4% to $640.9m (2016: $532.5m) Pro-forma CCY growth of 4.2% YoY, growth of 4.5% YoY excluding the impact of in year acquisitions YoY growth impacted by decisions to slow down change while planning HPE Software integration Net debt better than expected $1.4 billion Net debt to Facility EBITDA at 2.1 times 6

7 HPE Software Transaction Key Milestones completed Formal legal and shareholder approval process on track All Competition clearances received Micro Focus shareholder approval obtained with % in favour UK Prospectus and US F-4 filing on track for issue by end of July Financing completed on more favourable terms On track to complete 1st Sept 17 New financial year to operate from 1st Nov 17 31st Oct 18 7

8 Miscellaneous Questions Submitted in Advance Investment in product development Targeted at delivering innovation that matters to customers Autonomy Former Autonomy products less than 10% of HPE Software revenues, mainly SaaS COBOL Continued innovation; in part being driven by Cloud Survey consistency External Consultants view in

9 Going Forward Two Product Portfolios Micro Focus and SUSE Capital Markets Day on 7 th September 2017 in London Focus will be on the new Micro Focus Portfolio products not numbers SUSECON, 25 th - 29 th September 2017 in Prague Jan 18 Interim Results Announcement for 1st May 31st October months Micro Focus and SUSE 2 months HPE Software Chris Hsu s Management team 9

10 Kevin Loosemore Executive Chairman Chris Hsu Chief Executive Officer Chris Hsu s Management team Sue Barsamian Sales & Marketing John Delk Chief Product Officer & Security Product Group Stephen Murdoch Chief Operating Officer Mike Phillips Chief Financial Officer Robert Makheja Micro Focus Government Solutions Jerome Labat Chief Technology Officer Paul Rodgers Business Operations & Integration Jane Smithard Group General Counsel & Company Secretary Michael Steinmetz Support, Customer Services, Professional Services Tom Goguen IT Operations Management Product Group Lalit Singh FAST Karen Geary Chief Human Resources Officer (Interim) Swavek Bialkiewicz Strategy, Operations & Pricing Raffi Margaliot Application Delivery Management Product Group Martin Taylor CIO Mike Sullivan SaaS, IDOL & Information Management Product Group Chris Livesey CDMS, HC, CORBA Product Group Key: HPE Micro Focus 10 Colin Mahony Big Data

11 Outlook Micro Focus business in 6 months to 31 st October 2017 Revenue broadly flat No unnecessary changes given significant change on 1 st November 2017 No outlook for HPE Software in period to 31 st October 2017 Interim Results in January 2018 Guidance will be given for FY 1 st November st October

12 Financial Review Mike Phillips CFO

13 Results at a Glance Year ended 30 April 2017 Year ended 30 April 2016 Change Total Revenue Pro-forma Constant Currency 1, ,392.7 (0.9%) - Licence (7.4%) - Maintenance (4.5%) - Subscriptions % - Consultancy (11.4%) Total Reported Revenue 1, , % NON GAAP MEASURES Adjusted EBITDA - Pro-forma Constant Currency % - Reported % Underlying Adjusted EBITDA - Pro-forma Constant Currency % - Reported % STATUTORY MEASURES Pre-tax profit - Pro-forma Constant Currency (29.4)% - Reported % Net debt 1, , % Earnings per share (cents) Cents Cents Diluted (7.1)% Adjusted diluted % Dividend per share (cents) % 13

14 Key Highlights On a pro-forma CCY basis to provide a better comparison of performance Total revenues of $1,380.7m (2016: pro-forma CCY $1,392.7m), a reduction of 0.9%, middle of management s guidance Growth in SUSE revenues Offset by anticipated declines in Micro Focus revenues Adjusted EBITDA of $651.1m (2016: pro-forma CCY $629.9m), an increase of 3.4% Underlying Adjusted EBITDA of $640.9m (2016: pro-forma CCY $615.3m), an increase of 4.2% Growth in Adjusted diluted earnings per share of 19.7% to cents (2016: cents) Growth in Dividend per share of 32.1% to cents (2016: cents) Completion of the acquisition of Serena Software Inc. ( Serena ) took place on 2 May Purchase price of $540.0m on a cash and debt free basis Funded by existing and extended revolving credit facility of $375m and a placing of 10.9m shares at a price of 1,455 pence raising 158.2m ($225.7m) gross and 156.1m ($222.7m) net

15 Profitability by Portfolio Year ended 30 April 2017 Reported Micro Focus SUSE Group Year ended 30 April 2016 Pro-forma CCY Micro Focus SUSE Group Year ended 30 April 2016 Reported Micro Focus SUSE Group Segment revenue 1, , , , ,245.0 Directly managed costs (564.1) (178.5) (742.6) (633.0) (143.2) (776.2) (566.4) (145.1) (711.5) Allocation of centrally managed costs 26.2 (26.2) (27.3) (28.9) - Total Adjusted Operating Costs (537.9) (204.7) (742.6) (605.7) (170.5) (776.2) (537.5) (174.0) (711.5) Adjusted Operating Profit Margin 50.1% 32.5% 46.2% 47.0% 31.9% 44.3% 45.8% 31.4% 42.9% Adjusted Operating Profit Depreciation of property, plant and equipment Amortization of software intangibles Adjusted EBITDA Foreign exchange credit (2.9) (2.0) (4.9) (3.0) (0.3) (3.3) (2.6) (0.3) (2.9) Net capitalization of development costs (5.3) - (5.3) (11.3) - (11.3) (11.4) - (11.4) Underlying Adjusted EBITDA Margin 50.3% 32.6% 46.4% 46.7% 32.5% 44.2% 45.5% 32.1% 42.8% 15

16 Adjusted Operating Costs and Adjusted Operating Profit Reported Amortisation of Purchased Intangibles Actual - Year ended 30 April 2017 Pro-forma CCY - Year ended 30 April 2016 Share Based Compensation Exceptional Items Adjusted Operating Costs Reported Amortisation of Purchased Intangibles Share Based Compensation Exception al Items Adjusted Operating Costs Cost of goods sold (69.1) (3.0) (75.2) (2.8) Selling and distribution (143.8) (5.5) (106.7) (3.8) Research and development (6.8) (5.8) Administrative expenses (34.5) (82.0) (1.7) (30.2) (12.5) 95.9 Total operating costs 1,087.3 (212.9) (34.5) (97.3) ,014.9 (183.6) (30.2) (24.9) Revenue 1, , , ,392.7 Cost of goods sold 17.2% 12.0% 18.1% 12.5% Selling and distribution 33.8% 23.0% 31.7% 23.7% Research and development 13.0% 12.6% 13.0% 12.6% Administrative expenses 14.7% 6.3% 10.1% 6.9% Operating Profit/Adjusted Operating Profit Margin 21.3% 46.2% 27.1% 44.3% 16 Income Statement cost classification presentation changed to provide consistency between US and UK markets

17 Currency Impact The revenue and cost profiles of the main currencies are: FY17 FY16 (Pro-forma) FY16 Revenue Cost Revenue Cost Revenue Cost USD 62.4% 50.7% 62.8% 53.4% 61.6% 51.9% EUR 21.2% 19.6% 20.4% 18.4% 20.9% 18.9% GBP 4.5% 12.2% 5.0% 12.8% 5.0% 12.7% YEN 3.6% 1.7% 3.4% 1.6% 3.6% 1.6% USD to EUR USD to GBP USD to JPY H1 15 H2 15 H1 16 H2 16 H1 17 H H1 15 H2 15 H1 16 H2 16 H1 17 H H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Average exchange rate movements from in H217 vs H117 and H217 vs H216: In H217 average exchange rate for EUR:USD is weaker by 4.6% compared with H117 and 3.1% weaker compared to H216. In H217 average exchange rate for GBP:USD is weaker by 7.2% compared with H117 and 14.6% weaker compared to H216. In H217 average exchange rate for JPY:USD is weaker by 7.5% compared with H117 and 3.5% stronger compared to H

18 Exceptional Costs 6m ended 31-Oct-16 Reported 6m ended 30-Apr-17 Reported Year ended 30-Apr-17 Reported Year ended 30-Apr-16 Reported Reported within Operating profit: Integration costs Acquisition costs Pre-acquisition costs Property costs Severance and legal costs 4.0 (0.5) 3.5 (4.8) Royalty provision release - (3.0) Total $56.3m of exceptional costs incurred in H2 17 against an estimate of $80m given at the interims. This would leave $83.7m of original estimate of exceptional costs to completion of the HPE Software transaction to be incurred. Revised estimate for exceptional costs is $65.0m for the period from 30 April to 1 September 2017 Post completion exceptional costs have not yet been quantified. 18

19 Key Highlights (continued) Improved cash generation in the period Cash generated from operations was $564.8m (2016: $456.1m) representing 102.0% (2016: 87.9%) of Adjusted EBITDA less exceptional costs. Full Year target of 90% to 95% with weighting to six months ended 30 April due to seasonal working capital factors Net debt at 30 April 2017 increased in the period to $1,410.6m (30 April 2016: $1,078.0m). Underlying in year reduction of $214.4m taking account of completion of Serena acquisition on 2 May 2016 $202.0m of this reduction in six months ended 30 April Proposed change in Year end to 31 October will give more balance to debt reduction due to shift in bonus and dividend payments Free cash flow in the period of $409.2m (2016: $238.5m) Net debt to Facility EBITDA at 2.1 times New debt facilities raised and existing debt re-priced and rescheduled 19 Total facilities of $5 billion in term loans and $0.5 billion revolving credit facility raised from existing and new lenders on better than expected terms utilising the US and EUR term loan markets Existing term loans of $1.5 billion (included in $5 billion) saw 125 bps margin improvement with 2 year extension on tenor and reduced amortisation on $0.4 billion of these loans

20 Days Sales Outstanding Cash Conversion Changes in Working Capital (50) (100) (150) 6m-Apr 15 6m-Oct 15 6m-Apr 16 6m-Oct 16 6m-Apr 17 Provisions Movement (non Cash) Changes in Working Capital (including cash movements on Provisions) 140% 130% 120% 110% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% (20) (40) (60) (80) (100) (120) (140) (160) $(110.8)m $(17.0)m $(106.4)m $28.5m $59.5m 6m-Apr 15 6m-Oct 15 6m-Apr 16 6m-Oct 16 6m-Apr Net cash generated from operating activities before changes in working capital and provisions Cash Conversion % Trade Debtors Deferred Income Provision (cash element) Creditors TAG Acq Costs Others DSO Cash Flow generated from operations (CFFO) divided by (Adjusted EBITDA less exceptional costs) has been used consistently by the Company as its cash conversion metric with a target range of 90% to 95%. FY2017 metric of 102.0% and cumulative metric over 12 years as a listed company of 101.1%. Specific issues impacted FY2016 cash conversion metric related to TAG acquisition with FY2016 metric of 87.9%. Alternative metrics are available using a combination of Adjusted EBIT, Adjusted Net Income, Net CFFO and Total Capex. Company also tracking Free Cash Flow being CFFO less Interest, bank loan costs, taxation and Capex (intangible and tangible) 20

21 Free Cash Flow Cash Conversion and Free Cash Flow Metrics % % % % % % % % % % Free Cash Flow Alternative Methodology 2 (Net CFFO less CAPEX)/(Adjusted Net Income) Alternative Methodology 1 (Net CFFO less CAPEX)/(Adjusted EBIT) Company Methodology Cash Conversion - CFFO/(AEBITDA - Exceptionals) 21

22 Summary Balance Sheet 30 April April 2016 Non-current assets 4, ,681.3 Inventories Trade and other receivables Current tax receivables Cash and cash equivalents Assets classified as held for sale Total assets 4, ,635.7 Liabilities Current liabilities Trade and other payables Borrowings Provisions Current tax liabilities Deferred income Non-current liabilities Deferred income Borrowings 1, ,470.0 Retirement benefit obligations Long-term provisions Other non-current liabilities Deferred tax liabilities Total liabilities 3, ,042.0 Net assets 1, ,

23 Taxation Year ended 30 April 2017 ETR Year ended 30 April 2016 ETR Profit before tax (PBT) Share based compensation Amortization of purchased intangibles Exceptional costs Adjusted PBT Tax charge as reported (38.5) 19.6% (32.4) 16.6% Tax on adjusted items (85.5) (67.8) Adjusted tax charge (124.0) 22.9% (100.2) 23.1% 23

24 Taxation Reported effective tax rate ( ETR ) in the period is 19.6% (2016: 16.6%) Increase due to allocation of profits to higher tax territories in response to OECD transfer pricing developments and disallowable exceptional costs in the current year relating to HPE Software transaction Adjusted ETR in the period is 22.9% (2016: 23.1%) in line with guidance range of 23% to 27% Cash tax payments in period were $24.6m (2016: $79.3m) Overpayments in the US in prior year have reduced payments required in current year; prior year also included one-off payment re historic UK tax issue Post completion of HPE Software transaction, guidance for Adjusted ETR is 33% and Cash tax is forecast (on average over medium term) at 30% of Cash Profits (Underlying Adjusted EBITDA less exceptionals, capex and interest) 24

25 HPE Software Transaction UK Prospectus and US F-4 documents targeted to be finalised by 31 July 2017 F-4 filings expected to become public when HPE file their Form 10 UK Prospectus not public until stamped by UKLA Cost classifications changed to provide consistency between US and UK markets Target completion date remains 1 September 2017 Consideration shares listed on LSE and ADS listed on NYSE Return of Value of $500m together with share consolidation to be effective the day before completion Consideration shares will represent 50.1% of fully diluted shares on completion Based on 2198 pence share price, 1:$1.29 exchange rate and m issued shares today, consolidation ratio is 92.32%, so issued shares becomes m Add 8.70m options to get representing 49.9% of enlarged group share capital. Consideration Shares representing 50.1% would be giving m fully diluted share at completion 25

26 Micro Focus Product Portfolio Update Stephen Murdoch CEO, Micro Focus

27 Micro Focus Product Portfolio Overall: Continued progress in challenging circumstances Positives CDMS revenue growth Maintenance ahead of expectations Customer centred innovation approach continues to build momentum Serena & GWAVA integration 27 Challenges Host Connectivity revenue impacted by loss of team Identity Access and Security product transition Managing impact of delay to change agenda required to better deliver the long term opportunity with HPE Software

28 HPE Software Integration Planning Update On track for 1st Sept 17 completion and 1st Nov 17 combination Joint working groups with single governance structure to manage execution across 32 work streams with more than 10,000 individual tasks being tracked New Operating Model design well advanced Go To Market broadly complete Product Portfolios well advanced Support Functions underway Systems work advanced but a significant undertaking Overall plan in place with milestones for full integration established New systems stack ( FAST ) scheduled for November 2017 implementation Comprehensive launch & communications plan Senior leadership team announced Kick off engagement sessions scheduled Customer communication plans, Websites and other key customer engagement vehicles on track Capital Markets Day in September will provide deeper dive on products 28

29 FY 17 SUSE Portfolio Update Nils Brauckmann CEO, SUSE

30 FY17 A Successful Year For SUSE The SUSE growth charter: Sustainable, Profitable Revenue Growth Above Market Rate All relevant KPIs showed growth Revenue of $303.4m with YoY growth of 21.2% Deferred revenue balance of $372.1m with YoY growth of 15.4% TCV of $339.1m with YoY growth of 11.6% ACV of $220.1m with YoY growth of 15.7% Open source business with market leading profitability Underlying Adjusted EBITDA of $98.9m YoY increase of 21.7% Profit margin of 32.5% with y/y improvement of 0.4% 30

31 FY17 Progress and Expansion Completed two technology led acquisitions during the year OpenStack Infrastructure as a Service ( IaaS ) and Cloud Foundry Platform as a Service ( PaaS ) technology and talent from HPE Distributed storage management technology and talent from openattic Continued focus on bringing to market and increasing market share of new technologies Distributed Storage, Open Stack Cloud, Application Container Platform as a Service Continued expansion of headcount across different business functions and geographies net increase of 325 heads in the year Ongoing strengthening of SUSE business through alignment of critical supporting organizations within the direct control of the SUSE business. 31

32 Questions and Answers

33 Appendix

34 Group Pro-forma Revenue by Product Portfolios at CCY () H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 SUSE Micro Focus

35 Revenue by Portfolio Group Year ended 30 April 2017 Reported Year ended 30 April 2016 Pro-forma CCY Growth/ (Decline) Year ended 30 April 2016 Reported Micro Focus Product Portfolio Licence (7.4%) Maintenance (4.5%) Consultancy (12.0%) , ,142.3 (5.7%) SUSE Product Portfolio Licence Maintenance Subscription % Consultancy (4.1%) % Total Revenue Licence (7.4%) Maintenance (4.5%) Subscription % Consultancy (11.4%) 46.8 Revenue 1, ,392.7 (0.9%) 1,

36 Group Pro-forma Revenue at CCY by Half Year Revenue by product portfolio () Revenue by type () H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 CDMS Host Connectivity IAS Development & ITOM Collaboration & Network SUSE 0.0 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Maintenance Subscription Licence Services 36

37 Group Pro-forma Revenue by Portfolio at CCY 100% 90% 15.1% 14.7% 17.7% 18.3% 21.5% 22.4% 80% 70% 14.9% 12.4% 12.1% 10.6% 10.2% 10.7% 60% 24.7% 24.0% 22.8% 22.6% 20.6% 20.7% 50% 40% 30% 20% 15.7% 11.8% 14.5% 15.0% 15.8% 14.6% 15.3% 16.3% 15.3% 13.1% 13.5% 11.9% 10% 0% 17.7% 18.1% 17.2% 19.7% 19.5% 19.0% H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 CDMS Host Connectivity IAS Development and ITOM Collaboration and Network SUSE 37

38 Group Pro-forma Revenue at CCY by Type () COBOL Development & Mainframe Solutions Host Connectivity H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Maintenance Licence Services 0.0 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Maintenance Licence Services

39 Group Pro-forma Revenue at CCY by Type () Identity & Access Security H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Maintenance Licence Services 39 Development & IT Operations Management Tools H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Maintenance Licence Services

40 Group Pro-forma Revenue at CCY by Type () Collaboration & Networking SUSE H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Maintenance Licence Services 0.0 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Subscription Services 40

41 Micro Focus Product Portfolio Pro-forma Revenue at CCY Year ended 30 April 2017 As reported Year ended 30 April 2016 Pro-forma CCY (Decline)/Growth Year ended 30 April 2016 As reported 41 % CDMS Licence % Maintenance % Consultancy % % Host Connectivity Licence (22.2%) 89.9 Maintenance (0.8%) Consultancy (35.7%) (11.0%) Identity, Access & Security Licence (6.0%) 52.4 Maintenance (0.4%) Consultancy (16.4%) (3.4%) Development & IT Operations Management Tools Licence (14.0%) 33.9 Maintenance (8.5%) Consultancy (10.3%) (9.7%) Collaboration & Networking Licence % 23.9 Maintenance (13.4%) Consultancy (19.3%) (8.1%) Micro Focus Product Portfolio Licence (7.4%) Maintenance (4.5%) Consultancy (12.0%) , ,142.3 (5.7%) 991.2

42 Micro Focus Regional Revenue Performance 42 Micro Focus Product Portfolio Year ended 30 April 2017 As reported Year ended 30 April 2016 Pro-forma CCY (Decline)/Growth % Year ended 30 April 2016 As reported North America (5.7%) Licence (8.4%) Maintenance (4.7%) Consultancy (3.5%) 18.2 International (6.1%) Licence (8.7%) Maintenance (4.1%) Consultancy (14.6%) 20.5 Asia Pacific & Japan (4.0%) 89.0 Licence % 32.3 Maintenance (4.2%) 53.5 Consultancy (45.8%) 3.2 Total 1, ,142.3 (5.7%) Licence (7.4%) Maintenance (4.5%) Consultancy (12.0%) 41.9

43 Micro Focus P&L vs pro-forma CCY Micro Focus Product Portfolio Year ended 30 April 2017 Reported Year ended 30 April 2016 Pro-forma CCY Year ended 30 April 2016 Reported Segment revenue 1, , Directly managed costs (564.1) (633.0) (566.4) Allocation of centrally managed costs Adjusted Operating Costs (537.9) (605.7) (537.5) Adjusted Operating Profit Depreciation of property, plant & equipment Amortization of software intangibles Adjusted EBITDA Foreign exchange credit (2.9) (3.0) (2.6) Net capitalization of development costs (5.3) (11.3) (11.4) Underlying Adjusted EBITDA Underlying Adjusted EBITDA margin 50.3% 46.7% 45.5% 43

44 Consolidated Income Statement Before Exceptional items Year ended 30 April 2017 Year ended 30 April 2016 Exceptional items Total Before Exceptional items Exceptional items Total $ 000 Revenue 1,380,702-1,380,702 1,245,049-1,245,049 Cost of sales (234,220) (2,949) (237,169) (228,002) (2,172) (230,174) Gross profit 1,146,482 (2,949) 1,143,533 1,017,047 (2,172) 1,014,875 Selling and distribution costs (461,605) (5,479) (467,084) (411,961) (4,372) (416,333) Research and development expenses (173,312) (6,792) (180,104) (163,388) (1,258) (164,646) Administrative expenses (120,864) (82,038) (202,902) (118,911) (20,051) (138,962) Operating profit 390,701 (97,258) 293, ,787 (27,853) 294,934 Analyzed as: Adjusted Operating profit 638, , , ,514 Share based compensation (34,506) - (34,506) (28,793) - (28,793) Amortization of purchased intangibles (212,861) - (212,861) (181,934) - (181,934) Exceptional items - (97,258) (97,258) - (27,853) (27,853) Operating profit 390,701 (97,258) 293, ,787 (27,853) 294,934 Share of results of associates (1,254) - (1,254) (2,190) - (2,190) Net finance costs (95,845) - (95,845) (97,348) - (97,348) Profit before tax 293,602 (97,258) 196, ,249 (27,853) 195,396 Taxation (50,174) 11,633 (38,541) (39,259) 6,835 (32,424) Profit for the year 243,428 (85,625) 157, ,990 (21,018) 162,972 44

45 Consolidated Income Statement (continued) Before Exceptional items Year ended 30 April 2017 Year ended 30 April 2016 Exceptional items Total Before Exceptional items Exceptional items Profit for the year 243,428 (85,625) 157, ,990 (21,018) 162,972 Other comprehensive income Actuarial gain on pension liabilities schemes ,697-2,697 Actuarial gain on non-plan Pension assets ,104-3,104 Deferred tax movement on pensions (325) - (325) (1,745) - (1,745) Currency translation differences (5,953) - (5,953) (3,458) (3,458) Other comprehensive (expense)/ income for the year (5,746) - (5,746) Total comprehensive income for the year Total $ ,682 (85,625) 152, ,588 (21,018) 163,570 Attributable to: Equity shareholders of the parent 237,785 (85,625) 152, ,510 (21,018) 163,492 Non-controlling interests (103) (103) Total comprehensive income for the year 237,682 (85,625) 152, ,588 (21,018) 163,570 Earnings per share expressed In cents per share -basic diluted Earnings per share expressed In pence per share -basic diluted

46 Consolidated Statement of Financial Position As at 30 April 2017 $ 000 As at 30 April 2016 $ ASSETS Non-current assets Goodwill 2,828,604 2,436,168 Other intangible assets 1,089, ,555 Property, plant and equipment 40,956 40,867 Investments in associates 11,457 12,711 Long-term pension assets 22,031 22,272 Other non-current assets 3,093 4,002 Deferred tax assets 208, ,757 4,203,764 3,681,332 Current assets Inventories Trade and other receivables 289, ,186 Current tax receivables 1,637 18,016 Cash and cash equivalents 150, ,178 Assets classified as held for sale , ,361 TOTAL ASSETS 4,645,957 4,635,693 LIABILITIES Current liabilities Trade and other payables 170, ,090 Borrowings 71, ,256 Provisions 20,142 10,545 Current tax liabilities 42,679 22,426 Deferred income 640, , ,697 1,061,797 Non-current liabilities Deferred income 223, ,483 Borrowings 1,490,352 1,469,953 Retirement benefit obligations 30,773 31,669 Long-term provisions 11,937 14,354 Other non-current liabilities 4,191 3,671 Deferred tax liabilities 326, ,038 2,087,770 1,980,168 TOTAL LIABILITIES 3,032,467 3,041,965 NET ASSETS 1,613,490 1,593,728

47 Consolidated Statement of Financial Position (continued) As at 30 April 2017 $ 000 As at 30 April 2016 $ 000 EQUITY Share capital 39,700 39,573 Share premium account 192, ,293 Merger reserve 338, ,104 Capital redemption reserve 163, ,363 Retained earnings 902, ,344 Foreign currency translation deficit (22,959) (17,006) TOTAL EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT 1,612,536 1,592,671 Non-controlling interests 954 1,057 TOTAL EQUITY 1,613,490 1,593,728 47

48 Cash Generated from Operations Year ended 30 April 2017 $ 000 Year ended 30 April 2016 $ 000 Cash flows from operating activities Profit after tax 157, ,972 Adjustments for: Net interest 95,845 97,348 Taxation 38,541 32,424 Share of results of associates 1,254 2,190 Operating profit 293, ,934 Research and development tax credits (2,998) (2,041) Depreciation 11,794 11,419 Loss on disposal of property, plant and equipment Amortization of intangibles 236, ,313 Share-based compensation 34,506 28,793 Exchange movements (4,890) (2,915) Provisions movements 47,266 12,985 Changes in working capital: Inventories Trade and other receivables 10,224 (49,175) Payables and other liabilities (33,252) 30,923 Provision utilization (43,476) (55,639) Deferred income 15,375 (16,603) Pension funding in excess of charge to operating profit (183) (18) Cash generated from operations 564, ,113 48

49 Consolidated Cash Flow and Net Debt Position Year ended 30 April 2017 $ 000 Year ended 30 April 2016 $ 000 Cash generated from operations 564, , Interest paid (81,115) (91,807) Bank loan costs (6,654) (1,805) Tax paid (24,644) (79,282) Net cash generated from operating activities 452, ,219 Cash flows from investing activities Payments of intangible assets (31,438) (34,488) Purchase of property, plant and equipment (11,727) (10,281) Interest received 979 1,009 Payment for acquisition of business (299,061) (9,960) Repayment of bank borrowings on acquisition of businesses (316,650) Net cash acquired with acquisitions 68, Net cash used in investing activities (589,724) (53,614) Cash flows from financing activities Investment in non-controlling interest (2) - Proceeds from issue of ordinary share capital 1, Purchase of own shares by the Employee Benefit Trust (7,678) - Proceeds from share capital placement - 225,720 Costs associated with share placement - (2,979) Repayment of bank borrowings (372,062) (157,750) Proceeds from bank borrowings 180, ,000 Dividends paid to owners (177,535) (105,159) Net cash (used in)/generated from financing activities (375,298) 205,800 Effects of exchange rate changes (3,552) (9,551) Net (decrease)/increase in cash and cash equivalents (516,195) 425,854 Cash and cash equivalents at beginning of year 667, ,324 Cash and cash equivalents at end of year 150, ,178 Debt outstanding at end of year (1,561,536) (1,745,209) Net debt at end of year (1,410,553) (1,078,031)

50 FY16 CCY Revenue and Underlying Adjusted EBITDA Revenue Costs Underlying Adjusted EBITDA Micro Focus Group Year Ended 30 April , Serena Year Ended 31 January Micro Focus Pro-forma at Actual Exchange Rates 1, Restated Pro-forma CCY at 2017 Exchange Rates 1, Currency Impact (1.0)% (2.1)% (0.3)% 50

51 Metrics Being Provided SUSE Total Contract Value ( TCV ) The value of the invoiced amount on any contract ( Billings ) Weighted Average Contract Period For the contracts signed and/or invoiced in the period the weighted average invoice period in months Annual Contract Value ( ACV ) The first 12 months value of the TCV in the period. Billings less than 12 months are included in full SUSE and Micro Focus Subscription and maintenance contract renewal rates are not being provided Our methodology is still being refined in order to accommodate data from our multiple systems Trending the maintenance revenues provides the best guidance for those revenue streams 51

52 EBITDA Reconciliation Year ended 30 April 2017 $000 Year ended 30 April 2016 $ 000 Operating profit 293, ,934 Exceptional items 97,258 27,853 Share-based compensation charge 34,506 28,793 Amortization of purchased intangibles 212, ,934 Adjusted Operating Profit 638, ,514 Depreciation of property, plant and equipment 11,794 11,419 Amortization of purchased software intangibles 1,175 1,864 Adjusted EBITDA 651, , EBITDA 541, ,666 Amortization and impairment of development costs (22,398) (19,515) Share-based compensation charge 34,506 28,793 Exceptional items 97,258 27,853 Adjusted EBITDA 651, ,797 Adjusted EBITDA less Exceptional items 553, ,944 Cash generated from continuing operations 564, ,113 Cash conversion ratio = Cash generated from continuing operations Adjusted EBITDA less Exceptional items 102.0% 87.9%

53 Group Pro-forma Revenue by Geography Year ended 30 April 2017 at CCY As reported 53 Micro Focus Year ended 30 April 2016 Pro-forma CCY North America International Asia Pacific & Japan Total 1, ,142.3 SUSE North America International Asia Pacific & Japan Total Group North America International Asia Pacific & Japan Total revenue 1, ,392.7

54 Pro-forma Revenues by Geography at Constant Currency Geographic Analysis Revenue (at constant currency) Year ended 30 April 2017 Year ended 30 April 2016 Pro-forma CCY % % CDMS North America % % International % % Asia Pacific % % Total % % Host Connectivity North America % % International % % Asia Pacific % % Total % % IAS North America % % International % % Asia Pacific % % Total % % Development & ITOM North America % % International % % Asia Pacific % % Total % % Collaboration & Network North America % % International % % Asia Pacific % % Total % % Micro Focus North America % % International % % Asia Pacific % % Total 1, % 1, % SUSE North America % % International % % Asia Pacific % % Total % % TOTAL North America % % International % % Asia Pacific % % TOTAL 1, % 1, % 54

55 Proportion of Revenue by Portfolio Year ended 30 April 2017 As reported Year ended 30 April 2016 Pro-forma CCY COBOL Development & Mainframe Solutions 19.2% 18.5% Host Connectivity 12.7% 14.1% Identity, Access & Security 15.0% 15.4% Development & IT Operations Management Tools 20.6% 22.7% Collaboration & Networking 10.5% 11.3% Micro Focus Portfolio 78.0% 82.0% SUSE Portfolio 22.0% 18.0% Micro Focus Group 100.0% 100.0% 55

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