Aferian plc (LON:AFRN) Chief Executive Officer Donald McGarva caught up with DirectorsTalk for an exclusive interview to discuss group performance in 2021, progress in its 2025 strategy goals, what we can expect in terms of M&A in 2022 and exciting opportunities ahead for the company.
Q1: Donald, this looks like a strong year for Aferian, how would you characterise the group’s performance through 2021?
A1: It’s been a really strong performance and that’s a credit to the whole team in what has been quite a challenging market particularly with some of the things thrown at us in the supply chain. We’re very much focussed on powering the growth of streaming across our traditional client base but also across a whole set of new client bases including some of these content and media companies coming to market.
There’s probably three takeaways from the year and from our results. One is that we’ve really aligned the company and our products and our solutions in what is very much a growing market opportunity in the streaming market. Secondly, our results are very good, double-digit growth across all of our key metrics but even more importantly is the visibility of revenue we’ve got is significantly enhanced. It’s the best we’ve ever had and that’s reflected by our ARR growing quite significantly, it’s also the fact that we’ve got a lot of contracted software now in the business.
Even though we’ve overcome these supply chain challenges, it’s meant we’ve had to work closer with customers to enable us to help them get security supply, they’ve given us much longer term commitments so we’re seeing some commitments well into 2023 for some customers so that they can be sure that they get the product and we managed to satisfy that in 2021 and we are able to satisfy and grow that in 2022.
Finally, we’ve really had good progress in the first full year of the 2025 strategy and you will be aware we announced back in December that we’d put in place a debt facility. It’s a $100 million debt facility, $50 million of that being available to us know and $50 million as an accordion which allows us to execute more effectively, more efficiently and much more quickly on any M&A opportunity we see ahead of us. So, all in all, a really good year.
If you look at the metrics themselves, revenue was up to $93 million, growth of 12%, our software and services now over 25% of the business, again good double-digit growth at 15% but the most encouraging & the most interesting number for us was our ARR. We saw 43% growth, 23% of that organic and some coming through the acquisition we did mid-year.
Finally, and for some investor very important, we managed to increase our dividend. They’ll be a dividend of 2.09p paid in April which is with an interim dividend late last year, and that sees a 10% growth year-on-year.
So, all very encouraging and operationally, all performing extremely well.
Q2: You mentioned that this is the first full year of your 2025 strategy, how did you progress against your goals this year?
A2: I think it’s been ana excellent start. If you look at it, it’s about building more predictable software revenues going forward and it’s about focusing on areas such as choice, convenience, and usability for consumers to help our customers address their needs.
We’ve really done a great job of building out our platform, of executing, we had the Nordija acquisition earlier this year which helped us build out our TV as a service platform and welcome to bring that team, those people and that capability, into the group.
As I’ve said, we’ve seen our key focus as being on exit ARR, giving us much more predictable and enhanced earnings and visibility on our revenue and that’s progressed well with that 43% growth in ARR, now $15.2 million, and we continue to see that grow at double-digits going forward.
So, it’s been a really good start, we’ve got that going well, and operationally executing well against that.
Q3: You mentioned that acquisition last year of Nordija, you’ve raised more debt recently, are seeing more targets? What can we expect from the company in 2022 as far as M&A goes?
A3: A key part of our strategy is obviously M&A, if we’re going to grow rapidly, obviously we’re growing at 15%-20% organically but we want to grow through some targeted M&A.
The pipeline, we’ve been working on for a number of years, actually, these are not things that come out of the blue, these are things that you work on, you develop on , you understand and then when the time is right and the valuations are right, we can execute effectively on that so we’ve got a very targeted pipeline.
It’s around three core areas, one is around emerging technologies and by that, I mean data and analytics, personalisation and recommendation and meta data and AI. Three areas that as individual components are modules to end-to-end platforms can help us but also across the platform can help us more effective and add more value for our customers.
The second area is about driving scale and about looking for revenue synergies and cost synergies and trying to build market presence.
The third area is really around some new verticals and some geographic intervention, getting involved in some new areas.
It’s no secret that we were disappointed not to progress with the MobiTV acquisition last year that we entered into, those bankruptcy proceedings and that would have been a good assets to be a part of the business. So, North America remains a key target for us and we think there’s opportunities to take advantage of that and expand our presence there.
So, those three areas help us build out that capability, that end-to-end capability, and enhance the value that we can deliver for our customers. Also, with the facility, we’re in a much better position as a public company to be able to participate in these opportunities, competing against the likes of private equity or other corporates that have already got money sitting in the balance sheet. So, it puts us in a an equal position to execute well on that strategy.
Q4: Your performance in 2021 must give you confidence for the year ahead, can you tell what excites about the opportunities ahead for Aferian through 2022?
A4: The big thing for me is just, again, the momentum behind us. We looked closely at our target market, now we’ve aligned the company in streaming and powering that growth in streaming, we see a great opportunity. Not only for our end-to-end platform, but we also see a large market opportunity growing at double-digits and particularly growing in that TV as a service opportunity.
Our device business is streaming devices, the kind of devices we’ve always produced, that’s we’ve always developed and provided the software for, is seeing significant growth and significant growth for many years going forward.
We’re operating well, operationally, we believe there’s a strategic opportunity and we’ve now got the resources and capabilities in place to go and execute against that. So, I go into the year really confident, a bit of momentum behind us, growing our recurring revenue, building our customer base and sticking close with those customers, and new customers, to achieve growth targets that we’ve set for the business so all good.
