Considering the $22m restructuring it has undergone and the aftermath of the will it/won’t it be sold distraction, Micro Focus did not have too bad a year, ending with results that were in line with guidance and better than last year (see here).
In terms of the numbers that meant total revenue was down year on year (-0.3% to $434.8m), impacted by a 25% (constant currency) decline in consultancy as the company sought to move away from “loss making revenues” , and a 3% drop in maintenance revenue. Consultancy is now profitable. The declines were anticipated so there were no unwelcome surprises. More maintenance and consultancy losses are expected in 2013 but the company is looking for a rise in licence revenue, and an increase in overall revenue in the 1% to 3% range, despite uncertainty in Europe. During 2012 International revenue (which includes Europe) was down 8%.
Pre-tax profit was an impressive $149.8m, a 30% increase, while adjusted EDITDA was a welcome 13% and $197.3m cash was generated from operations, so investors will be smiling.
Having taken the decision to focus on software, licence revenue is a key performance indicator and 2012 license sales were up 5.3% (cc), reserving the decline of 2011. Rising licence sales were presaged in trading statements during the year so the growth was good to see. The company has reorganised product management and development in order to deliver a better roadmap to customers and pumped $58.3m (33% of licence fee sales) into R&D, which bodes well for future licence revenue increases.
With enterprises preparing their applications for operation in a mobile and cloud world there are growth opportunities - providing Micro Focus can grasp them. That is the question hanging over the company. Having worked on the product roadmaps the company is now looking to improve its channel strategy and marketing and lead generation plans. The market it there, background work has been put in, now it is a question of execution.