February 4, 2020 / 9:46 AM / 15 days ago

UPDATE 1-Micro Focus chairman Loosemore steps down after 'challenging' year

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LONDON, Feb 4 (Reuters) - Micro Focus International Executive Chairman Kevin Loosemore will step down this month, the British IT company said on Tuesday, after a “challenging” year in which its revenue and core earnings fell short of expectations.

Loosemore, who built Micro Focus into a company with revenue of more than $3 billion in 15 years, will stand down on Feb. 14, when IT industry executive Greg Lock will take up the role of non-executive chairman, it said.

Revenue for the year to Oct. 31 fell 7.3% to $3.35 billion and adjusted core earnings declined 2.6% to $1.36 billion, it said on Tuesday.

Shares in the company, which focuses on legacy software that companies need to run core operations, were trading down 14% at 846 pence in early trade. The stock has lost 43% of its value in the last 12 months.

Loosemore’s successful record in finding value in software sidelined by its owners was tarnished by the acquisition of $8.8 billion of assets from Hewlett-Packard in 2017.

It has struggled to integrate the assets and launched a review to tackle the problems last year.

CEO Stephen Murdoch said it had been a “challenging year”, but the company had identified the actions required to deliver on its potential.

He paid tribute to Loosemore, saying he had grown Micro Focus into “a multi-billion dollar software business supporting more than 40,000 customers globally and from 2005 to January 2020 delivered compound annual returns to shareholders of approximately 20%”.

Analysts at Citi said the initial findings of the strategic review were steps in the right direction, they were hoping for more concrete action regarding the portfolio and more definitive timelines on the turnaround.

They also said they struggled to see evidence to reassure on the mid-term ambition of flat-to-low-single-digit growth and a mid-40s adjusted earnings margin.

“Lastly, we do believe the departure of the chairman will likely elicit a mixed investor response,” they said.

Micro Focus said it expected revenue in its current financial year to fall by 6% to 8% before the benefits of additional investment start to come through in the next year.

Higher investment would impact its adjusted earnings margins this year and next, it said, by which time it expected to see an improvement in its growth prospects and revenue quality.

Reporting by Paul Sandle; editing by James Davey

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