Micro Focus share price nosedives as group warns on revenue

19 March, 2018, 15:11 | Author: Regina Silva
  • Micro Focus acquired Hewlett Packard Enterprise Software but is having trouble integrating the businesses

The company, however, moved to reassure investors that the impact on its adjusted earnings before interest, taxes, depreciation and amortisation was expected to be mitigated by the progress made in the cost reduction programme which was now tracking ahead of schedule.

Shares in the UK's biggest technology firm, Micro Focus International, have plunged after it warned of a sharper than expected fall in revenues and its chief executive resigned. Micro Focus is now expecting revenue over the twelve months to October 31 to fall between 6 percent and 9 percent, compared to previous guidance of a drop of 2 percent to 4 percent.

The FTSE 100 group said revenues were declining more sharply than expected, thanks to problems stemming from its £6.6bn acquisition past year of the software arm of Hewlett Packard.

Chris Hsu joined from HPE after the deal completed in September but is now leaving with immediate effect, "to spend more time with his family and pursue another opportunity".

It said on Monday it had had issues with the implementation of a new IT system which had affected the running of its sales team, particularly in North America.

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Stephen Murdoch, now Micro Focus chief operating officer, becomes chief executive and rejoins the board. Analysts were expecting a 38% adjusted EBITDA margin.

"We remain confident in Micro Focus' strategy whilst recognising that operational issues have led to a disappointing short term performance and outlook", said executive chairman Kevin Loosemore. "We believe that Micro Focus is well positioned to help our customers with the increasing pace of change across their hybrid IT environments and to deliver customer centred innovation". That compares to consensus forecasts for revenues of US$4.2bn and EBITDA of US$1.6bn.

The FTSE 100 company, which manages older software for customers including banks and airlines, also reported lower than expected licence income, wiping 4.6 billion pounds ($6.4 billion) off its market value in a matter of hours.

Micro Focus has seen its shares collapse and CEO depart after it issued a sales warning to investors this morning.

It blamed "one-off" effects from the Hewlett Packard deal but said that the "fundamental thesis" of the acquisition was still sound.

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