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 can’t be ignored. Unfortunately, Monitise (LSE: MONI) has lost three of its executives this year, and it’s starting to look as if the company’s 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 Petzer’s decision to leave Monitise comes only a few months after former CEO Elizabeth Buse decided to leave the company after the group reported full-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 company’s founder and co-chief executive Alastair Lukies left his position following a strategic review. Elizabeth Buse was supposed to be Monitise’s saviour as she came to the company from Visa Europe, the European arm of global payments giant Visa, and had a wealth of experience in running payment processors. However, Ms Buse’s decision to leave Monitise, and return to the US for personal reasons, after only six months on the job raised plenty of red flags.
Monitise’s management turmoil could be a sign of a company in distress. CEOs don’t usually flee positions after only six months on the job unless the company’s prospects are looking increasingly bleak. Monitise hasn’t provided any trading updates since its full-year 2015 results issued at the beginning of September, so it’s unclear if the company’s trading has improved or deteriorated further. But unless Monitise’s 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 company’s rate of cash burn could slow, which would give management more time to instigate a turnaround. Nonetheless, it’s likely that Monitise’s seemingly endless stream of management changes will impact the company’s growth and there’s a chance it could take longer to hit EBITDA profitability than currently predicted.
So overall, while today’s news that Monitise’s CFO is leaving the company seems like bad news to me — Monitise needs a committed management team to return to growth, and the constant changes at the top don’t signal management’s commitment to the cause — the market’s positive reaction this meaning could mean that it’s in favour of “clearing the decks”…
