What to Watch: Micro Focus shares plummet, Amigo warning, carmakers' woes and Brexit jitters

Tom Belger
Finance and policy reporter
Shares tanked in UK firm Micro Focus on Thursday. Photo: Eddie Keogh/Reuters

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Micro Focus shares nosedive as sales fall

Shares in British IT firm Micro Focus (MCRO.L) nosedived by almost 30% on Thursday morning after it cut its full-year sales forecasts and announced a review of its operations. They then recovered slightly, down 25% at around 10am in London.

It blamed “conservatism” among consumers and a “deteriorating economic environment” for revising its guidance on revenue downwards, predicting sales will slip by 6% to 8% in the year to 31 October.

It marks a significant blow for the company as it struggles to recover from problems integrating a software arm of Hewlett-Packard it bought in 2017.

“Micro Focus manages older software for customers including banks and airlines, yet it cannot seem to manage its own business challenges effectively,” said Russ Mould, investment director at AJ Bell.

He said “big changes” could be on the way at the firm because of the review, with a “long period of uncertainty” ahead for staff and shareholders.

“Question marks certainly hang over the merits of the HP acquisition and the situation is a reminder that large acquisitions are inherently risky and businesses typically underestimate integration challenges,” Mould added.

Amigo shares suffer on warning over lending crackdown

Consumer credit firm Amigo (AMGO.L) saw its shares slide even further on Thursday, down more than 32% as it announced it would cut re-lending to existing customers.

Its CEO Hamish Paton described the move as “proactive and pragmatic,” amid fears of a crackdown by regulators on its specialism in guarantor lending.

“The change in economic outlook, and the potential for regulatory change, means we are taking a more cautious approach to lending and have increased provisioning,” the company said in its first quarter results.

“We have enhanced our credit policy around relending through adopting a more conservative view on frequency and timing and are now prioritising lending to new customers.”

The company said it had also “enhanced and tightened” its credit policy, and was investing in operations, compliance and complaints.

The lender said consumer numbers were up 17.3% in its first quarter, but warned the impact of the changes on growth would be “noticeable” in the second quarter.

Car production slumps as Brexit, trade tensions and diesel decline hit exports

Mike Hawes, CEO Society of Motor Manufacturers and Traders. Photo: PA

New car production slid in Britain in July for a 14th month in a row, with exports suffering as Brexit, trade tensions and diesel’s decline in Europe hit demand.

Figures from the Society of Motor Manufacturers and Traders (SMMT) showed UK car factories produced just over 108,000 cars.

Export sales, which make up four in five sales, were down 14.6%, only partially offset by a 10.2% rise in sales at home.

"The importance of maintaining the UK’s global competitiveness has never been more important so we need a Brexit deal," said the SMMT’s chief executive Mike Hawes.

Brexit jitters hit the pound

The pound slid again versus the dollar on Thursday morning as prime minister Boris Johnson plunged the country into “constitutional warfare” by announcing he would suspend parliament. Sterling was down just under 0.2% shortly before 10am, trading just below $1.22.

Sterling sank as hopes faded that Britain could avoid a no-deal Brexit catastrophic for business, with MPs’ ability to block or delay Brexit now severely limited.

But MPs will return to parliament for one week next week, with all eyes on whether they can grab control of the agenda or even win a no-confidence vote in the government.

Markets higher on hopes of ‘calm’ Chinese approach to US

The FTSE 100 (^FTSE) opened higher on Thursday, up 1% after sterling dipped as many of its companies earn significant profits abroad.

The British index and other European indices all edged higher on comments by China’s commerce ministry, which said it wanted to solve the US trade dispute with a “calm” approach and did not want any further escalation.

The Euronext 100 (^N100) and France’s CAC 40 (^FCHI) were both up 1.1%, while the German DAX (^GDAXI) was up 0.9% at around 10am in London.

Overnight in Asia, Japan’s Nikkei (^N225) and China’s Shanghai Composite index (000001.SS) were both down 0.1%. The Hong Kong Hang Seng Index (^HSI) was up 0.3% on hopes of a resolution to the US-China trade row.

US stocks also looked set for a higher open, with S&P500 futures (ES=F) up 0.8%, Dow Jones futures (YM=F) up 0.9% and Nasdaq futures (NQ=F) 1.2% higher.