Misys recovery gathers pace

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The recovery at Misys gathered speed on Wednesday, as the UK banking and healthcare software group’s new chief executive said he was happy with cost-cutting progress even though “performance remains poor” in its health unit.

Mike Lawrie, appointed last October after an abortive buyout attempt by the previous management team, said: “We have a lot to do. It is still early days in the turnaround we talked about in March.”

“This is a three to five year process. There is no silver bullet,” said Mr Lawrie. He added that there were “some encouraging signs,” such as a 2 percentage point rise in like-for-like operating margins, excluding restructuring costs, due to cost-cutting.

Shares in the company rose 7.5 per cent to 252p in early trading. They have gained about a third since Mr Lawrie’s arrival.

Difficulties at Misys’s troubled healthcare unit, which provides software for hospitals, doctors and homecare professionals, caused its overall revenues to drop 4 per cent from the £583.3m it reported last year at its continuing operations.

Analysts said the trading update was a mixed bag. A Panmure analyst said: ”The big thing is that costs are in line, which is a positive surprise as I was expecting more restructuring as part of the turnaround.”

Mr Lawrie said: “We are getting pretty good traction on the cost take-out we outlined in March.” The new management team at its healthcare business, installed in February, was rushing to fill gaps in the business’s product range, he said.

“To put it bluntly, the performance is not good and there are certainly some execution issues in the [healthcare] division itself and not having the right products in the market, that is an execution issue and we know it,” he said.

The London-based company said its banking unit, which provides software to 1,200 banks in 120 countries, had signed several new contracts, such as with Grupo Santander and Credit Suisse. This lifted revenues at the division by 3 per cent, although initial licensing fee revenues fell slightly.

Mr Lawrie said the banking arm would only start to increase licensing fee revenues once new products were launched from the end of the year.

The treasury and capital markets unit won 20 new customers in a buoyant market, and Mr Lawrie said he would invest more in this unit, one of the few growth engines. Healthcare revenues fell 9 per cent as initial license fee income dropped 12 per cent.

The sale of Sesame, which sells IT support to independent financial advisors, was completed this month, resulting in a £25m-£30m loss. That will contribute to about £60m of exceptional costs when the full-year results are unveiled on July 24.

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