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Mike Lawrie, appointed chief executive of Misys five months ago, on Thursday outlined his plans to revitalise the once high flying UK-based software group.
The new strategy, which was prompted by the change in chief executive after an attempted management buy-out failed, includes a decision to sell a majority stake in its Sesame, an outsourcing service for independent financial advisers subsidiary, to its management.
It also includes the reinvestment of £70m of cost savings made in the financial years 2008 to 2011 and a new focus on customer services as opposed to pure sales of packaged software.
Mr Lawrie, a former IBM and Siebel Systems executive, said, however, that the turnaround would be no “quick fix” and would take three to five years to accomplish: “To help me achieve this”, he said “I have built a seasoned executive team who can execute with urgency”.
Misys, with principal strengths in banking and healthcare software, was very much the creation of former chairman and chief executive Kevin Lomax, who left last summer after a failed attempt at a management buy-out and declining sales in some markets. Mr Lawrie’s plan is designed to return some of the group’s lost lustre with the aim of achieving annual group revenue growth of 2 to 4 per cent by the mid-point of the three -to-five year turn-around programme rising to 4 to 6 per cent annual revenue growth by the end.
The Sesame subsidiary, which reported sales £188m for the first six months of the year, had long been seen as non-core to the business. Some 60 per cent will be sold to its management subject to regulatory approvals. Misys will take a non-cash asset write down of £60m-£70m related to the loss on the sale. Worries about the scale of the write-down sent Misys shares lower after a higher opening. In mid-morning trading they were off 6¾p at 234¼p.
In January, Misys reported flat group revenues for the six months to November 30 and a 17 per cent decline in operating profits. This followed a 55 per cent slump in annual pre-tax profits in the last full financial year.
Mr Lawrie paid tribute to its strengths in the banking and healthcare markets and said there would be a new emphasis on providing computing services and solutions to customers as well as packaged software which would allow the company to expand “along more of the available value chain”.
Computing services, these days, provide better margins than software sales. Misys, was not, however, becoming a services company.
The plan calls for annual savings of £25m in the financial year 2007-2008, rising to £40m a year from financial year 2008-2009. This is expected to be achieved through improved productivity and a more efficient cost structure with the consolidation of real estate and development sites and the introduction of a global operating model for back office integration.