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Micro Focus Announces Third Quarter Profit.

LONDON and PALO ALTO, Calif.--(BUSINESS WIRE)--Nov. 25, 1996-- Micro Focus (NASDAQ: MIFGY) today announced a net profit of $1,080,000 or $0.07 per share (GBP 679,000 or 4.5 pence per share) for the quarter ended October 31, 1996. In the third quarter of 1995 the Company reported a net loss of $516,000 or $0.03 per share (GBP 299,000 or 2.0 pence per share). Net revenue for the quarter was $28,285,000 (GBP 18,131,000) compared with $27,841,000 (GBP 17,693,000) reported in the third quarter of 1995.

For the nine months ended October 31, 1996, revenue was $80,542,000 (GBP 52,271,000); the Company reported a net loss of $13,222,000 or $0.87 per share (GBP 8,737,000 or 57.7 pence per share). The nine months results include a restructuring charge of $8,000,000 (GBP 5,195,000). In the comparable period of 1995, the Company reported net revenue of $86,671,000 (GBP 54,495,000) and a net loss of $7,812,000 or $0.51 per share (GBP 4,814,000 or 32.6 pence per share). The prior year's nine months results included a restructuring charge of $5,031,000 (GBP 3,125,000).

Cash and short term investment balances were $58,727,000 (GBP 36,029,000) at the end of the third quarter, an increase of $5,045,000 (GBP 1,617,000) above such balances at July 31, 1996.

The Company has continued to focus its efforts on improving profitability and increasing revenue growth. The reductions in staff and expenditures undertaken earlier in the year were more fully reflected in the Company's third quarter. Costs of revenues, sales and marketing expenses and product development expenses were lower in the third quarter of 1996 than in the prior calendar quarter. In addition, there was a further decline in the number of employees during the quarter.

"We are pleased that the focus on cost control has begun to show results in financial performance," noted Marcelo Gumucio, Chief Executive Officer. "While we are not yet satisfied with our rate of profitability, we see many growing segments in our markets where we feel the market position and financial strength of Micro Focus provide opportunities for productive investments."

Anthony R. Muller, Chief Financial Officer added, "We have adjusted our cost base to match our revenue expectations. Now we can reinvigorate our efforts to increase revenue growth by concentrating our efforts on market opportunities that Micro Focus is uniquely positioned to exploit."

Micro Focus provides tools and technology to meet changing business requirements. The Company's state-of-the-art programming solutions allow application developers to manage and extend their enterprise applications for: Client/Server computing -- Developing and deploying production systems in distributed environments; Legacy Solutions -- Moving application development and maintenance off of the mainframe; and Year 2000 assessment and implementation -- Providing solutions for reengineering systems to handle the millennium date change. Micro Focus is located in the UK at The Lawn, 22-30 Old Bath Road, Newbury, Berkshire, RG14 1QN - telephone 01635 32646 and in the US at 2465 East Bayshore Road, Palo Alto, Calif. 94303 - telephone: 415-856-4161. For additional information on Micro Focus and its products, visit Micro Focus' Web site at http://www.microfocus.com.

The following statement is made in accordance with the U.S. Private Securities Litigation Reform Act 1995: This Third Quarter Announcement contains forward-looking statements that involve a number of risks and uncertainties. There are certain important factors that could cause results to differ materially from those anticipated by the statements made herein. Factors that could cause actual results to differ materially are the following: the ability of the Company to develop and release to the market products and services that meet the needs of the Company's customers in the highly dynamic market for application development tools, the potential need for development tools to shift based on changes in underlying technology standards coming into use, the potential for a decrease in revenues which may be delayed due to the timing of the delivery of products or services, the effect of competitors' efforts to enter the Company's markets, the ability of the Company to effectively manage its costs against uncertain revenue expectations and the various items under the heading "Factors that may influence future operating results" contained within the Micro Focus Annual Report for the period ended January 31 1996, a copy of which may be obtained from the Company. The financial information contained in this report does not constitute statutory accounts as defined in section 240 of the UK Companies Act 1985. The figures for the year ended January 31 1996 are based on the audited financial statements which have been filed with the UK Registrar of Companies the auditors' reports on both the UK and US financial statements for the year ended January 31 1996 were unqualified. -0-

MICRO FOCUS GROUP PLC - 1996 THIRD QUARTER REPORT
CONSOLIDATED STATEMENTS OF INCOME - IN US FORMAT
----------------------------------------------------------------------
(unaudited) Three months ended Nine months ended
in thousands of US dollars October 31 October 31
(except per share data) 1996 1995 1996 1995
----------------------------------------------------------------------
Net revenue 28,285 27,841 80,542 86,671
Costs and expenses
 Cost of revenue 2,156 2,785 7,067 9,192
 Research and development 8,167 8,614 26,027 25,780
 Sales and marketing 14,462 15,932 47,251 50,988
 General and administrative 2,399 1,710 6,805 5,988
 Restructuring charges - - 8,000 5,031
----------------------------------------------------------------------
Total costs and expenses 27,184 29,041 95,150 96,979
----------------------------------------------------------------------
Income (loss) from operations 1,101 (1,200) (14,608) (10,308)
Interest income 626 733 1,978 2,683
Interest expense (12) (44) (29) (110)
----------------------------------------------------------------------
Income (loss) before taxes 1,715 (511) (12,659) (7,735)
Income taxes (635) (5) (563) (77)
----------------------------------------------------------------------
Net income (loss) 1,080 (516) (13,222) (7,812)
----------------------------------------------------------------------
Net income (loss) per share
 (in US dollars) 0.07 (0.03) (0.87) (0.51)
----------------------------------------------------------------------
Weighted average number of shares
 outstanding (thousands) 15,162 15,143 15,162 15,143
======================================================================

MICRO FOCUS GROUP PLC - 1996 THIRD QUARTER REPORT
CONSOLIDATED BALANCE SHEETS - IN US FORMAT
----------------------------------------------------------------------
in thousands of US dollars October 31 January 31
 1996 1996
 (unaudited)
----------------------------------------------------------------------
Assets
Current assets:
 Cash and short-term investments 58,727 58,848
 Accounts receivable, net 11,859 17,462
 Inventories 1,711 2,573
 Prepaid expenses and other assets 3,638 3,379
----------------------------------------------------------------------
Total current assets 75,935 82,262
----------------------------------------------------------------------
Fixed assets:
 Property, plant and equipment, net 35,388 37,615
 Software product assets, net 24,588 26,964
----------------------------------------------------------------------
Total assets 135,911 146,841
----------------------------------------------------------------------
Liabilities and stockholders' equity
Current liabilities:
 Accounts payable 3,646 8,038
 Accrued employee compensation
 and commissions 5,156 6,733
 Income taxes payable 4,162 3,022
 Customer payments in advance
 of delivery 14,353 16,173
 Other current liabilities 12,306 7,065
----------------------------------------------------------------------
Total current liabilities 39,623 41,031
----------------------------------------------------------------------
Long-term debt and other liabilities 25 100
Deferred income taxes 8,881 8,236
Stockholders' equity:
 Ordinary shares 2,389 2,386
 Additional paid-in capital
 and other reserves 27,438 27,257
 Treasury stock (8,959) (8,959)
 Retained earnings 66,514 76,790
----------------------------------------------------------------------
Total liabilities and
 stockholders' equity 135,911 146,841
======================================================================

MICRO FOCUS GROUP PLC - 1996 THIRD QUARTER REPORT
CONSOLIDATED PROFIT AND LOSS ACCOUNT - IN UK FORMAT
----------------------------------------------------------------------
(unaudited) Three months ended Nine months ended
in thousands of GB pounds October 31 October 31
(except per share data) 1996 1995 1996 1995
----------------------------------------------------------------------
Revenue 18,131 17,693 52,271 54,495
----------------------------------------------------------------------
Costs and expenses
 Cost of revenues 1,382 1,910 4,604 5,945
 Research and development 5,231 5,330 18,434 17,172
 Sales and marketing 9,271 9,970 31,326 33,629
 General and administrative 1,542 1,220 7,538 4,132
----------------------------------------------------------------------
Total costs and expenses 17,426 18,430 61,902 60,878
----------------------------------------------------------------------
Operating profit / (loss) 705 (737) (9,631) (6,383)
Interest income 401 466 1,285 1,683
Interest expense (8) (28) (19) (69)
----------------------------------------------------------------------
Profit/(loss) before taxation 1,098 (299) (8,365) (4,769)
Taxation (419) - (372) (45)
----------------------------------------------------------------------
Profit/(loss) after taxation 679 (299) (8,737) (4,814)
----------------------------------------------------------------------
Earnings/(loss) per share 4.5p (2.0p) (57.7p) (32.6p)
======================================================================

MICRO FOCUS GROUP PLC - 1996 THIRD QUARTER REPORT
CONSOLIDATED BALANCE SHEET - IN UK FORMAT
----------------------------------------------------------------------
in thousands of GB pounds October 31 January 31
 1996 1996
 (unaudited)
----------------------------------------------------------------------
Fixed assets
 Intangible fixed assets 15,085 17,857
 Tangible fixed assets 21,711 24,910
 Investment 5,634 5,634
----------------------------------------------------------------------
Total fixed assets 42,430 48,401
----------------------------------------------------------------------
Current assets
 Stock 1,049 1,704
 Trade debtors 7,276 11,564
 Other debtors and prepaid expenses 2,232 2,238
 Cash and bank deposits 36,029 38,972
----------------------------------------------------------------------
Total current assets 46,586 54,478
----------------------------------------------------------------------
Creditors: amounts falling due within one year:
 Trade creditors 2,237 5,323
 Accrued employee compensation
 and commissions 3,163 4,459
 Current corporation tax 2,553 2,001
 Accrued expenses and
 other current liabilities 7,551 4,678
 Customer payments in
 advance of delivery 8,805 10,711
----------------------------------------------------------------------
Net current assets 22,277 27,306
----------------------------------------------------------------------
Total assets less current liabilities 64,707 75,707
Creditors: amounts falling due
 after more than one year 15 66
Deferred taxation 5,449 5,454
----------------------------------------------------------------------
Net assets 59,243 70,187
----------------------------------------------------------------------

Capital and reserves
 Called up share capital 1,517 1,514
 Share premium and other reserves 18,053 17,936
 Profit and loss account 39,673 50,737
----------------------------------------------------------------------
Total shareholders' funds 59,243 70,187
======================================================================




CONTACT: Mike Marwick (MPM) Group Financial Analyst

Group Finance, The Lawn, Newbury

Tel: +44 (0)1635 56 5493 Fax: +44 (0)1635 56 5451

or

Marcelo Gumucio, US 415 843 7077

Chief Executive Officer

or

Anthony Muller, 415 843 7070

Senior Vice President

Chief Financial Officer

or

Ron Forbes, UK 01635-32646

Vice President

International Finance
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