UPDATE 1-Software firm Micro Focus jumps over 20% on upbeat outlook

(Adds details on forecast, turnaround plan, background)

Nov 18 (Reuters) - Shares of Micro Focus International surged 24% to the top of UK’s mid-cap index on Wednesday after the software firm forecast annual margins at the upper end of its expectations and signalled progress around its turnaround plan.

The company’s sales declines slowed in the second half of the year, led by improvements in the licensing and consulting divisions, after having previously warned that constraints seen in the first half due to the COVID-19 pandemic were unlikely to improve later in the year.

Micro Focus, which helps customers maintain and integrate legacy IT technology, said it now expects adjusted core earnings margin of about 39% on revenue of about $3 billion for the year ended Oct. 31 as it cut costs.

“We are now nine months into our three-year turnaround plan ... Cash generation and working capital management remain strong, the investments we’ve made are showing encouraging early results,” said Chief Executive Officer Stephen Murdoch.

Micro Focus’ shares rose 21.3% to 329.8 pence by 0850 GMT, having hit a four-month high of 337.4 pence earlier in the session. The stock has lost over two-third of its value so far this year.

The company is still reviewing its final dividend as it looks to shore up cash to cushion blows from some customers deferring projects and delaying renewals, and reiterated that the broader market conditions remained uncertain.

Reporting by Pushkala Aripaka in Bengaluru; editing by Uttaresh.V