Q&A: Nick Bray, CFO at Micro Focus on the firm's performance

Nick Bray, CFO at Micro Focus

Q: All the key numbers are up by about a third. So what is driving
that performance?

A: Well, you’re right. Our revenue growth was 33%. Our adjusted EPS was up by
32%. And if we look at those areas of growth, we really need to break it down to
the organic growth and the growth through acquisition. In terms of the organic
growth, again, we had a very encouraging year in which we saw constant currency
over 15% growth.

By geographic area, we saw good growth from North America, Europe and rest of
the world. It’s particularly pleasing to see the growth in North America of
slightly above 20%. But also, by the types of revenue, so our licence, our
maintenance and consulting. Again, licence fees grew almost 20%, maintenance by
10%, consulting 44%. And that growth in licence fees we all recognise as a
driver of future maintenance and future consulting. So again, all very positive.
So on the organic side of the business, which is the primary focus, we saw some
excellent growth rates.

On top of that, we’ve also identified, through the strategy review, the
potential to accelerate growth through targeted, true acquisitions. AcuCorp
being the major acquisition, added about $26m (£13m) of revenues. So when you
take that strength in the organic business, plus the strength of the
acquisitions that we’ve acquired delivered slightly in excess of 30% revenue
growth.

Q: And in terms of your high proportion of predictable and recurring
revenues, so the licensing and the maintenance ­ how much new maintenance
revenue did you achieve in the second half, as opposed to that from existing
customers?

A: That’s a good point because, again, we do have a very good high level of
maintenance – almost half of our revenue streams, which is very robust, very
predictable, very repeatable. And of that maintenance, the key drivers of
maintenance are obviously keeping our existing customers happy.

Q: So in terms of targeting larger clients, which is one of your
focuses, what is the average contract size that achieved in the second
half?

A: Well predominantly, the business is still a high-volume, low-value
transaction business. Again, very predictable, very robust, very secure. And
we’ve seen some good growth in that underlying high-volume, low-value business.

Q: How confident are you that you’ll sustain double-digit organic
growth in the coming year?

A: We’ve been very clear that our ambition is to continue to achieve
double-digit organic growth at constant currency. So again, there’s no
complacency whatsoever in the organisation. But we have the resources. We have
the opportunity. We have the company to achieve that but we have to focus and we
have to execute.

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