“Shares in the UK’s biggest tech firm, Micro Focus International, have halved after it warned of a sharper than expected fall in revenues and its chief executive resigned.
Shares in the company, whose customers include American Express and insurance giant AIG, sank 55% in early trade.
The problems stem from its purchase of Hewlett Packard Enterprise’s software business for £6.8bn.
Difficulties in integrating the business have hit revenues.
Micro Focus specialises in extending the life of clients’ older IT systems, saving them from having to buy new systems outright.
Its purchase of Hewlett Packard Enterprise saw it take over another former British computer business, Autonomy, which itself had been taken over by HP.
Micro Focus’s executive chairman, Kevin Loosemore, said: “We remain confident in Micro Focus’ strategy whilst recognising that operational issues have led to a disappointing short-term performance and outlook.”
The company’s statement added that its cost savings drive was ahead of schedule and its net debt was expected to be in line with expectations.
Micro Focus said chief executive Chris Hsu was leaving, partly to spend more time with his family, and would be replaced by chief operating officer Stephen Murdoch.”
Source – BBC News
Excerpt from Micro Focus RNS
“Since the interim results on 8 January 2018, the rate of year-on-year revenue decline has been greater than anticipated and accordingly the Group is issuing revised constant currency revenue guidance for the twelve months ending 31 October 2018 of minus 6% to minus 9% compared to the proforma 12 months ending 31 October 2017. This updates revenue guidance of minus 2% to minus 4% provided at the interim results on 8 January 2018. The impact of this on adjusted EBITDA margin percentage for the period is expected to be mitigated by the progress made in the cost reduction programme which is currently tracking ahead of schedule. The Board expects for the Group’s net debt position at 31 October 2018 to be broadly in line with market expectations.
Chris Hsu has submitted his resignation in order to spend more time with his family and pursue another opportunity. He will step down immediately as the CEO of the company. Stephen Murdoch, currently Micro Focus COO, becomes CEO and rejoins the Board with immediate effect.
The recent revenue performance is primarily due to lower than expected licence income and is a result of a number of factors, which management believe to be largely one-off transitional effects of the combination with HPE software, rather than underlying issues with the end market or the product portfolios. These factors include:
1. Issues relating to our new IT system implementation, which have impacted the efficiency of our sales teams, our ability to transact with partners and our cash collection;
2. Higher attrition of sales personnel due to both integration and system related issues;
3. Disruption of ex Hewlett Packard Enterprise global customer accounts as a result of the demerger of Hewlett Packard Enterprise; and
4. Continued sales execution issues particularly in North America.”
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