Shares in Micro Focus International tumble

As Micro Focus International updates the market, Graham Spooner, our Investment Research Analyst, explains what it means for investors.

Article updated: 20 March 2018 5:00pm Author: Graham Spooner

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Speed of change took market by surprise, resulting in shares falling 54%

Shares in FTSE 100 company Micro Focus International collapsed this morning, down 54% in early morning trading, following an uninspiring trading update and the subsequent resignation of its Chief Executive with immediate effect. The group said Chris Hsu gave his notice in order to ‘spend more time with his family and pursue another opportunity’ and he will be replaced by the company’s Chief Operating Officer, Stephen Murdoch.

In regards to the numbers, the IT software producer stated that, since its last update in January, revenue decline has been greater than anticipated. It has consequently had to revise down its guidance for the year and now expects revenue to fall to 6%-9%, down from the previous 2%-4%. Investors should also appreciate that it expects falls of between 9%-12% for the first six months.

Disappointing performance from HPE acquisition and problems with new IT system

The speed of this change has unsurprisingly spooked the market, this was despite management stating that there are a number of, what they believe to be, one-off factors to blame for the poor showing. These include a disappointing performance from the HPE software assets and problems with the implementation of a new IT system. It should be noted that the group’s management will now be addressing the problems, resulting in further investment.

The Share Centre is placing its ‘buy’ recommendation under review

Today’s news follows a disappointing January update and it’s more than likely that investors will now be raising questions over how the group is run and particularly over the success of the Hewlett Packard acquisition, and their ability to integrate it successfully. As a result, we have taken the decision to put our current ‘buy’ recommendation of Micro Focus International under review.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

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Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FSA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.