Shares in UK tech firm Micro Focus and lender Amigo have taken a pounding after both warned of deteriorating economic conditions – while bellwether recruitment firm Hays also sounded a gloomy note.
Micro Focus said it would miss sales targets after anxious customers reined in spending while Amigo forecast flat growth in lending, with the prospect of a no-deal Brexit a key factor – sending shares in both companies down 30%.
Hays warned of weakening business confidence in the UK as economic uncertainty takes its toll on client firms looking at whether to hire, as well as pointing to tough conditions in recession-haunted Germany.
The warnings come a day after markets were taken by surprise by Boris Johnson’s plans to suspend parliament – restricting MPs’ ability to block a no-deal exit – sending the pound sliding as well as knocking UK-focused housebuilding and airline shares.
Companies and investors are also worried about the impact of the trade war between the US and China, the world’s two biggest economies, and the looming possibility of a recession in Europe’s powerhouse, Germany.
Micro Focus, which manages older software for clients including banks and airlines, said its recent trading performance meant it did not expect to meet its previously-stated guidance on revenue for the year to the end of October.
It blamed this on “weak sales execution” as well as a “deteriorating macro environment”.
The latter had resulted in “more conservatism and longer decision-making cycles” by the companies who are its customers.
Hays, a global firm whose results are often seen as a bellwether for broader corporate sentiment, reported that “macroeconomic conditions became increasingly difficult” in many markets in the year to the end of June though it still saw like-for-like growth of 6% in fees and higher underlying profits.
“We saw clear signs of reduced business confidence… as the year progressed,” the group said.
Hays said it expected growth in “headcount”, a key performance measure, would be slower in the first quarter of the current year than in the same period a year ago.
It said that in the UK and Ireland “market activity has recently softened, with signs that continued economic uncertainty is impacting business confidence in the private sector”.
Hays also said conditions were weakening in industrial powerhouse Germany, Europe’s biggest economy, “with reduced business confidence and slower client investment decisions, particularly in the engineering and automotive sectors”.
Its shares fell 4%.
Meanwhile Amigo Holdings, the guarantor loans provider, reported a 6.4% fall in profits for the three months to the end of June partly thanks to its assessment of the risk that it could be hit by a no-deal Brexit as well as customer complaints.
It also said it was adopting a more cautious approach to lending given the “deteriorating economic outlook” and now sees a higher-than-expected level of impairments – loans going bad – as well as flat growth in its loan book for the full year.