Powering the digital economy Annual Report ... - Micro Focus

1 Powering the digital economyAnnual Report and Accounts 2020 Notes: All FY18 measures are for the 12 months ended 31 October Revenue and Adjusted EBITDA in FY18 and FY19 exclude discontinued operations. 2. Adjusted EBITDA and Free cash flow are defined in the Alternative Performance Measures of these financial Free cash flow and cash generated from operations include discontinued for all Our purpose02 Company overview05 Our purpose in actionStrategic report12 Non-executive Chairman s statement14 Chief Executive s Strategic review18 Our markets20 digital transformation case studies24 Our strategy28 Our business model32 Our impact44 Key performance indicators48 Chief Financial Officer s report59 Viability statement60 Principal risks and uncertainties74 Section 172

2 StatementCorporate governance76 Non-executive Chairman s introduction 78 Board of directors80 Corporate governance report92 Audit committee report100 Nomination committee report103 Directors Remuneration report123 Directors report130 Directors responsibilities in respect of the Annual Report and the financial statementsConsolidated financial statements132 Alternative Performance Measures 139 Independent auditor s Report to the members of Micro Focus International plc148 Consolidated financial statements and notes 233 Company financial statements and notesAdditional information245 Offices worldwide 249 Investor information 250 Company informationContentsADJUSTED EBITDA1,2$mFREE CASH FLOW2,3$m (LOSS)

3 /PROFIT BEFORE TAX$mREVENUE1$mCASH GENERATED FROM OPERATIONS3$m20191, , , , , , , , , , , , highlightsOur purposeTo deliver mission critical enterprise software that powers the digital provide the technology that powers the digital economy and serves a central role in thousands of core strategic and operational are committed to helping communities acquire the right skills to be successful in their digital lives, through our social responsibility programme, Micro Focus INSPIRE. 01 Micro Focus International plc Annual Report and Accounts 2020 OverviewStrategic reportCorporate governanceCompany financial statementsAdditional informationConsolidated financial statementsCompany overview02 Micro Focus International plc Annual Report and Accounts 2020 Micro Focus investment digital transformation portfolioMore than 300 product lines supporting critical use cases, with balanced revenue generation across four emerging themes of digital transformation.

4 Scale, global reach, global relevanceOne of the world s largest enterprise software companies supporting 40,000 customers Highly diversified and recurring revenue baseNo revenue concentration by end market, with approximately 70% recurring revenues. 4. Strong and consistent free cash flow generationOur strategy underpins sustainable cash flow generation. allocation of capitalMethodical approach to investment to deliver value to our customers and shareholders. Micro Focus International plc Annual Report and Accounts 2020 OverviewStrategic reportCorporate governanceCompany financial statementsAdditional informationConsolidated financial statements03 Company overviewWho we areWhat we doWe deliver mission critical technology that serves a central role in thousands of core strategic and operational functions such as testing, monitoring, delivery, analysis, engagement, security and compliance for our 40,000 a large software portfolio, backed by a deep inventory of advanced analytics that delivers insights, efficiencies, and automation.

5 We help customers bridge existing and emerging technologies to adapt and succeed in the evolving economy . We call that Smart digital Transformation. We aim to have an unwavering Focus on pragmatism, discipline, and customer-centric innovation. This helps our customers balance short-term business resiliency with long-term transformation, attain a high level of flexibility, future-proof investments in IT and related processes, and rest assured that they will be supported over time. We support10 out of the top 10 telecoms10 out of the top 10 pharmaceuticals10 out of the top 10 aerospace and defence companies10 out of the top 10 electric utilities9 out of the top 10 investment companiesWe help organisations find a balance between safeguarding existing revenue models and taking the necessary steps to compete in an evolving marketplace over the long run.

6 By delivering software that is open, flexible, and backwards compatible, we help bridge the existing and the emerging so customers can ultimately run and transform their business at the same time. The rules of business are quickly being rewritten as new technologies, engagement models, and customer expectations force organisations to rethink their IT strategies. Those who can quickly transform and expose new business opportunities are most likely to achieve long-term success. However, speed must be balanced with pragmatism as organisations grapple with changes to how and where we do business, which can pose organisational uncertainty and risk.

7 Our portfolio, backed by a deep inventory of advanced analytics and on-going innovations, helps deliver the four key outcomes required to succeed in the digital economy :What customers needHow we support themAccelerate Application DeliveryReliably scale Agile and DevOps across all environments, from mainframe to cloud quickly bringing innovative ideas to life at the pace of business IT TransformationSimplify the complexity of hybrid IT and transform into an agile, services-driven Cyber ResilienceIntelligently adapt security to respond to an ever-evolving threat landscape and protect the company s most important in Time to ActLeverage machine learning to transform unlimited volumes of data into accurate, actionable.

8 And automated Focus International plc Annual Report and Accounts 2020 For our customersMicro Focus helps customers run and transform so they can adapt to evolving market our employeesMicro Focus employees have adapted and overcome the challenges of the pandemic to support our customers, partners and their communities. For our communitiesMicro Focus helps equip communities with the right skills to be successful in the digital world. P. 0 6P. 0 8P. 10 Our purpose in actionPowering the digital economyMicro Focus International plc Annual Report and Accounts 2020 OverviewStrategic reportCorporate governanceCompany financial statementsAdditional informationConsolidated financial statements05 The rules of business are being rewritten as new technologies, engagement models, and customer expectations force organisations to rethink their IT strategies.

9 Those who can quickly transform and create new business opportunities are most likely to achieve long-term success. However, speed must be balanced with pragmatism as organisations grapple with changes to how and where we do business, which can pose organisational uncertainty and risk. Run and TransformMicro Focus helps customers run and transform their business at the same time, so they balance today s needs with tomorrow s opportunities. By bridging existing and emerging technologies organisations can leverage what they already have to run their business today, while also transforming it to ensure it is flexible enough to respond to new realities as they emerge in the future.

10 We minimise the drama associated with operating a modern business and deliver our customers a broad portfolio of solutions that are tailored to the four critical outcomes of successful transformation: Accelerating Application Delivery, Simplifying IT Transformation, Strengthening Cyber Resilience and providing the ability to Analyse in Time to Act. This breadth is supplemented with a deep inventory of advanced analytics, a powerful innovation engine, and a deep ecosystem of experts, to help optimally position our customers for success in the digital economy . Our purpose in action Powering the digital economyFor our customers Run Running your organisation keeps the lights on and achieves your immediate goals.