Micro Focus’ share price collapsed in early trading today as it issued a dramatic revenue warning to investors, saying sales could fall by double the previous forecast.
The British IT company blamed macro factors such as Brexit uncertainty and economic concerns for its woes as customers held off from buying new technology kit.
Read more: Micro Focus chairman dumps £11.6m in shares
The business had guided to between a four per cent and six per cent fall in revenue for the full year to the end of October.
Today Micro Focus warned the revenue drop could now double to minus eight per cent compared to the previous year.
Micro Focus’ share price sank 26 per cent lower as markets opened this morning, with investors selling out of the business in their droves.
That left shares languishing under 1,200p, compared to a 2019 high of 2,156p in July.
“Weak sales execution has been compounded by a deteriorating macro environment resulting in more conservatism and longer decision making cycles within our customer base,” the company said.
The forecast drop has prompted Micro Focus to initiate a full strategic review of operations in a bid to improve the business.
Chief executive Stephen Murdoch said: “Following the recent disappointing trading performance, we have determined that it is appropriate to accelerate the undertaking of a strategic review of the group’s operations with a view to determining where performance can be improved and how the business can be better positioned to optimise shareholder value.
“Whilst the review is taking place management will continue to drive previously targeted improvements in business performance and execute the operational initiatives already in place.”
Today’s trading update comes after revenue slipped 7.5 per cent in the first half of Micro Focus’ financial year to $1.65bn (£1.35bn).
“There remains a significant pipeline of business opportunity being pursued,” Micro Focus added. “But to be within the current guidance range a highly challenging percentage of this pipeline would need to close prior to year end.”
The firm’s end of year coincides with the UK’s Brexit departure date. Prime Minister Boris Johnson has committed to leaving the EU with or without a deal rather than considering an extension to the deadline.
Yesterday the Queen approved his request to suspend parliament for five weeks between September and October, leaving less time for MPs to attempt to prevent a no-deal scenario.
Main image credit: Getty