Micro Focus back in the doghouse and Amigo’s mounting problems

“It’s yet another bad day for the pound, continuing yesterday’s poor session triggered by the parliament suspension and fears over a Brexit no-deal.

“The pound fell another 0.17% against the dollar to trade at $1.2191, and slipped 0.15% against the euro to €1.1009. Sterling weakness is bad for the UK-focused FTSE 250 index which fell 0.3% to 19,151 on Thursday,” says Russ Mould, Investment Director at AJ Bell.

“The more internationally-focused FTSE 100 jumped 0.3% to 7,138 as investors turned to defensive sectors like pharmaceuticals and tobacco as well as gold miners."

Micro Focus

“Micro Focus manages older software for customers including banks and airlines, yet it cannot seem to manage its own business challenges effectively. The British IT firm has been struggling for nearly two years with various problems and the pains keep getting worse.

“Having suffered in early 2018 from issues connected with its £6.6bn acquisition of the software arm of Hewlett Packard, these problems continued to linger earlier this year.

“And now we’ve got the dreaded phrase ‘strategic review’ which means Micro Focus is preparing to make big changes to its business. This normally spells a long period of uncertainty for staff and shareholders as they wait to find out the new strategic direction of the business. One could even see Micro Focus put itself up for sale and private equity companies could be interested.

“Question marks certainly hang over the merits of the HP acquisition and the situation is a reminder that large acquisitions are inherently risky and businesses typically underestimate integration challenges.”

Amigo

“Loans provider Amigo seems to be doing everything it can to improve the quality of its business and adapt to the ever-changing regulatory landscape. Sadly the results have yet to convince the market with its share price taking yet another beating on its first quarter numbers.

“The outlook contains quite a few shocks including a warning that impairments are likely to remain at a higher level, the ratio of cost to income is going to rise, and there could be a hit to repeat lending.

“Amigo argues that it provides a valuable product that helps improve people’s lives yet the business is so far failing to reward shareholders. The latest update would suggest something is going very wrong given it is having problems within its collections business.

“The market was already worried about regulation becoming tighter for the guarantor loans market and today’s update from Amigo makes matters even worse, suggesting it has some very dark days ahead.”

These articles are for information purposes only and are not a personal recommendation or advice.