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