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Misys considers £8m of cost cuts amid uncertainty at its banking customers

IT group puts in place contingency plans to cope with order delays in western Europe

IT group Misys is leading the FTSE 250 fallers after disappointing half year results and news of further cost cutting.

The company – whose products are used in the struggling banking and financial sector – said revenues grew 22% to £197m but this was below expectations, as was a 9% drop in operating profits to £30m. Misys said financial institutions in western Europe had been delaying purchase decisions – no big surprise in the current financial crisis. But it was picking up new customers in Asia, the middle east, Africa and eastern Europe. Chief executive Mike Lawrie said:

During the period out customers took longer over their purchase decisions as financial market conditions deteriorated.

Given the continuing uncertainty among our customers we have put in place contingency plans to eliminate £6m to £8m of operating costs to support our financial results over the rest of the financial year without impacting our product development investments or sales capacity.

The news has sent shares in Misys – which faced a failed £1.4bn offer from US group Fidelity National Information Services last year – down 24.2p to 301.3p. Singer Capital Market’s Tintin Stormont said:

The market is forecasting a significant profit improvement in the second half which may prove challenging given market conditions. Management maintained medium-term targets, but admitted it has contingency plans to take out £6m-£8m of costs. Shares have rallied over 39% in the last month and we believe it will give some of that back today.

Espirito Santo said revenues had come in 2% lower than forecasts, with earnings 8% below its estimates, while George O’Connor at Panmure Gordon cut his target price from 335p to 295p:

The outlook statement is negative with customers delaying decisions, and Misys taking remedial action to cut its operating costs. Takeover talks will keep the ‘pep’ in the share price and a good narrative on Bankfusion (8 new sales and 11 installs) should cheer investors but, following these results and associated downgrades, shares are coming down. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds