Morse, the IT services company, saw shares plummet by 17.7 per cent yesterday after the announcement of flat annual earnings and the departure of Kevin Alcock, the chief executive, with immediate effect.
According to the full-year trading update, revenues to the end of June are expected to be marginally below last year's £257m and earnings broadly flat at £12.2m. The company blames "some deterioration in short term services in the final quarter of the year as clients have reduced discretionary spend".
Following Mr Alcock's departure, Kevin Loosemore, the chairman, is to take on the more operationally focused executive chairman role, and he plans to restructure the business into five major units.
"Over the past few months,in a deteriorating business climate, we have undertaken a review of the company's operations," Mr Loosemore said. "The board has concluded that the structure of the group needs to be simplified to allow the individual business units to concentrate on their core competencies."
Analysts are not convinced by the rhetoric about the wider economy. "Morse is trying to lay the blame on the macroeconomic situation but to a large extent it is an architect of its own demise and, while it is convenient to talk about the downturn, the truth is it has been doing the wrong things to the wrong people, badly, in terms of its core offering," George O'Connor, at Panmure Gordon, said.
But Mr Loosemore – who is also the chairman of Micro Focus, a UK software house – is widely credited with having turned that company around since his arrival in 2005. "He has a good track record in fixing stuff, and Morse needs a lot of fixing," Mr O'Connor said.
The drop in the share price reflects the company's cautious outlook rather than investors' views on the management changes.
"Around 3 per cent of the fall was due to broad softness in the sector yesterday, and the balance comes from the earnings downgrades," a City analyst said. "Mr Loosemore has a following in the sector as a function of his leadership at Micro Focus."