Losing one member of your senior management team is something that can be overlooked, but losing three senior managers in the space of a year cant be ignored. Unfortunately,Monitise (LSE: MONI) has lost three of its executives this year, and its starting to look as if the companys executives are fleeing the company as losses increase and sales stagnate.
Today, Monitise announced that chief financial officer Brad Petzer is stepping down and will resign from the board with immediate effect, although he will remain with the company until a successor has been appointed. Mr Petzers decision to leave Monitise comes only a few months after former CEO Elizabeth Buse decided to leave the company after the group reportedfull-year pre-tax losses of 227.4m for 2015, up from 63.4m a year earlier.
Elizabeth Buse took control of Monitise back in March after the companys founder andco-chief executive Alastair Lukies left his position following a strategic review.Elizabeth Buse was supposed to be Monitises saviour as she came to the company from Visa Europe, the European arm ofglobal payments giant Visa, and had a wealth of experience in running payment processors. However, Ms Buses decision to leave Monitise, and return to the US for personal reasons, after onlysix months on the job raised plenty of red flags.
Monitises management turmoil could bea sign of a company in distress. CEOs dont usually flee positions after only six months on the job unless the companys prospects are looking increasingly bleak. Monitise hasnt provided any trading updates since its full-year 2015 results issued at the beginning of September, so its unclear if the companys trading has improved or deteriorated further. But unless Monitises trading improves significantly over the next six months, I think the company is going to struggle to survive. Indeed, City forecasts suggest that the company will report operating losses of 61m for 2016, 54m for 2017 and 54m for 2018.
That said, the company still believes that by cutting costs, it can reach EBITDA (earnings excluding exceptional items, depreciation, amortisation, impairments and share-based payment charges) profitability next year. EBITDA is often used as a proxy to indicate cash flow. And if Monitise does move to EBITDA profitability next year, the companys rate of cash burn could slow, which would give management more time to instigate a turnaround. Nonetheless, its likely that Monitises seemingly endless stream of management changes will impact the companys growth and theres a chance it could take longer to hit EBITDA profitabilitythan currently predicted.
So overall, while todays news that Monitises CFO is leaving the company seems likebad news to me Monitise needs a committed management team to return to growth, and the constant changes at the top dont signal managements commitment to the cause the markets positive reaction this meaning could mean that its in favour ofclearing the decks
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