Misys hit by cuts in banks’ spending

Shares in Misys fell after the software company said banks and financial institutions had slowed spending on IT and announced it would have to make cost savings to keep its final results on track.

Misys, which last year was the subject of a failed takeover approach, on Thursday reported adjusted operating profit of £30m for the six months to the end of November, down 9 per cent from the previous year, and slightly below market forecasts. The company blamed “challenging market conditions” and procrastination by customers for the decline.

“Our customers took longer over their purchase decisions as financial market conditions deteriorated,” said Mike Lawrie, Misys chief executive. “Banks aren’t stopping, this isn’t 2008 all over again, but there is caution out there.”

Misys’s products are used by banks and other financial services groups, and its core banking unit has a 1,200-strong customer base that includes all of the world’s 50 largest banks. Mr Lawrie also said he was looking for new acquisitions to help boost sales at the company’s treasury and capital markets division.

He also said the company was cutting back on some of its planned marketing and general administration spending in response to the delays, reducing annual operating costs by £6m-£8m.

Shares in Misys fell 20.2p to close at 305.3p.

However, Mr Lawrie said that the company was starting to see strong interest in new products, such as its new BankFusion software, which has so far been installed in just 11 banks but which has a growing pipeline of orders. Mr Lawrie still expects 250 banks to be using BankFusion by 2015.

For the six months to November 30, Misys swung to a pre-tax loss of £3.6m from a profit of £18.8m in the same period last year, mainly due to the amortisation of goodwill from its £235m acquisition of Sophis in 2010.

Turnover rose from £160.1m to £196.9m, the diluted loss per share was 0.8p compare with earnings of 117.1p last time and there was no dividend.

FT Comment

A 6 per cent fall in share price does not signal a disaster in the technology sector. Tech shares can lose 10 per cent of their value in a blink of an eye and 20 to 30 per cent on truly bad news. Misys was only mildly disappointing. The shares have risen more than 30 per cent over the last month on hopes that the company will once again become a takeover target, putting it at slight premium to European software sector peers, which trade at about 15 times forward earnings. Those gains have now been pared back slightly. Medium-term, however, analysts see potential upside in the shares, if the new BankFusion software takes off with customers. Some are also keeping their fingers crossed that Fidelity National Information Services, the US payment processing group, which was in talks to buy Misys last summer for £1.4bn, could rekindle discussions. It would be free to do so from next month.

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