Q&A: Mirco Focus FD on the company's interim results

Nick Bray, Micro Focus FD

You achieved your target of double-digit revenue growth and margins above 40%, so talk me through the key numbers for the first half.

It was another satisfactory six months of trading. We achieved total revenue growth in the order of 24%, of which half of that growth was from the organic business and half of that was through acquisition.

What drove that margin growth?

We’ve kept investing in sales, we’ve kept investing in research and development in the core areas of the business. And actually, what we’ve managed to do is we’ve managed to leverage our back office costs. So while in dollar terms those costs are increasing, as a percent of revenues they’re falling. And all of those things combined have led to an increase in the margin.

And given the strengthening dollar, is there still limited currency impact on your results?

This is something that we’ve spoken about before and with investors it was something they were keen to find out more about almost 18 months ago. What people are now hopefully starting to understand and starting to see is that, of our revenues, approximately 50% are in dollar billings. But of our costs, only 30% are billed in dollars. So almost by design and a little bit of good luck ­ the company’s been in existence now for more than 32 years ­ we have a situation where, almost mathematically, the way exchange rates move, if revenues go up by $5m (£3.44m) due to exchange rates, costs will go up by the same amount. If revenues fall by $5m ­ or whatever that figure is ­ costs will fall by the same amount. On the net profit level we’ve got this very well hedged.

But just how wise is it to increase the dividend by 25%, given that economic conditions could worsen?

Well, we’ve considered this very carefully and it really reflects two things. One is the absolute strength of the balance sheet of the company which, as I’ve said, we’ve got more than $40m in cash on the balance sheet; no debt; very, very secure; very, very stable. But perhaps more importantly, it’s the outlook and the confidence of the outlook for the business as a whole. So, having considered both those aspects, we feel entirely comfortable in increasing the dividend by 25%.

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