Sophos value down by 39pc as fore­cast bucks trend set by ri­vals

The Daily Telegraph - Business - - Technology Intelligence - By Han­nah Boland

MORE than a third was wiped off Sophos Group’s value af­ter it sur­prised in­vestors by trim­ming its fore­casts for the sec­ond half of its fi­nan­cial year, even as ri­vals posted strong growth.

Shares in the FTSE 250 cy­ber-se­cu­rity com­pany closed down 29pc at 339p as it said it was now ex­pect­ing “a mod­est im­prove­ment” in con­stant cur­rency billings growth in the six months to the end of March, hav­ing pre­vi­ously said it ex­pected growth fig­ures to hit the mid-teens.

Sophos blamed “chal­leng­ing yearon-year com­par­a­tives” for the cut to fore­casts and said, look­ing for­ward to the fol­low­ing fi­nan­cial year, it was an­tic­i­pat­ing a “sig­nif­i­cant im­prove­ment” in con­stant cur­rency billings growth.

In­vestors took fright at the up­date, putting the com­pany on track for its big­gest one-day share price fall since list­ing on pub­lic mar­kets. At mid­day, its shares were trad­ing around 26pc lower.

Liberum’s Alexan­dre Schmidt said the re­sults had “caught ev­ery­body by sur­prise and hence the big share drop, es­pe­cially be­cause peers have been re­port­ing quite some sub­stan­tial num­bers in the past few weeks”.

“What’s to be seen is what the real value of this busi­ness is,” he added.

Dur­ing the first half of the year, Sophos posted 3.3pc growth in billings, to $353m (£269m), slightly miss­ing an­a­lyst ex­pec­ta­tions, although it swung to a profit in the pe­riod. Pre-tax profit came in at $26m com­pared with a loss of $35.5m a year ear­lier.

The Ox­ford­shire-based group had al­ready trimmed its ex­pec­ta­tions for the first quar­ter of the year in July, af­ter it said it was un­able to keep up the sales growth it had recorded in the wake of the Wan­naCry out­break in May 2017. The at­tack on NHS com­put­ers had forced many com­pa­nies to up­grade their cy­ber de­fences.

Sophos re­it­er­ated ear­lier com­ments on its in­terim re­sults, say­ing: “The year-on-year growth rate was im­pacted by a chal­leng­ing com­pa­ra­ble in our En­duser busi­ness [which sells soft­ware that guards against hack­ers], given the dra­matic ac­cel­er­a­tion in de­mand we wit­nessed in the com­par­a­tive pe­riod as cus­tomers ur­gently in­vested in pro­tec­tion against high-pro­file, global ran­somware out­breaks.

“The ef­fect of this ex­traor­di­nary boost to de­mand was most ev­i­dent in the el­e­vated re­newal rates we saw a year ago, at 142pc, re­flect­ing height­ened lev­els of cross-sell­ing ac­tiv­ity to ex­ist­ing cus­tomers.

“This ac­tiv­ity has re­turned to more sus­tain­able lev­els in the first half of the fi­nan­cial year, with a re­newal rate of 118pc for the six-month pe­riod.”

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