Investors log off cyber firm after fall in clients
ONLINE security firm Sophos had little good news for investors after admitting it was dogged by subdued performance for the last three months of 2018.
The software firm – which issued a profit warning in November – said that billing grew just 2pc in the final three months of the year as higher spending from existing customers was largely offset by a decline in new clients.
Sophos said it expected the lacklustre performance to continue over the next three months, the final quarter of its financial year, which would mean a modest decline in billings for the full year.
Nicholas Hyett, an analyst at Hargreaves Lansdown, said shareholders would be displeased that management’s previous predictions of a slight improvement in trends had not materialised.
He said: ‘Our real concern is the repeated cuts to guidance with little in the way of explanation.
‘It raises serious questions about management’s grip on the business and has perhaps irreparably damaged the group’s credibility with investors.’ Founders Jan Hruska and Peter Lammer, who both own 8.9pc of the firm, each saw £29.5m wiped off the value of their shares as the FTSE 250 business plummeted 17.6pc, or 66.4p, to 310.2p.
Bidding to reassure shareholders, chief executive Kris Hagerman said: ‘Sophos remains strongly positioned from a technology, product, and strategic perspective.’
Revenue is picking up and rose 18pc in the nine months to December as customer subscriptions – rather than one-off purchases – grew. Profit also swung into the black as Sophos made £39.5m over the same period compared to a £19.4m loss the year before. The firm, which creates cyber-security products for homes and businesses, has around 327,000 customers.
It was a turbulent end to the week for airlines as Ryanair slashed its full-year profit expectations from between £969m and £1.1bn to between £881m and £969m.
The budget airline’s shares fell as much as 4pc as markets opened, after boss Michael O’Leary said further cuts to guidance could follow if unexpected Brexit developments push up costs for his airline.
Ryanair revealed it has been forced into discounting fares more heavily than planned to keep up with the competition and fill seats.
It noted more customers are choosing lower cost options for their flights and bags.
Russ Mould, investment director at AJ Bell, said airlines only have themselves to blame for lower fares. The cheaper pricing is often a side-effect of rapid expansion, which has resulted in too much space on short-haul flights.
Ryanair’s shares managed to regain lost ground later in the day, and ended 0.9pc, or 0.1p, higher at 10.11p. As the ripples spread across the sector, Easyjet was also battered by a critical note from analysts at JP Morgan Cazenove.
Though they said both Ryanair and Easyjet should provide longterm opportunities to shareholders, and have solid growth prospects, the analysts added the poor performance of Ryanair’s shares recently make it a more interesting buying opportunity. Easyjet fell 5.7pc on the open, but ended the day up 0.3pc, or 3p, at 1172p.
The FTSE 100 had its best day of the week, as it was buoyed by reports that Washington is considering lifting some or all of the tariffs imposed on Chinese imports.
It climbed 2pc, or 133.41 points, to 6968.33 points as only two stocks – Ocado and Fresnillo – fell. The online retailer dropped 1.9pc, or 17.2p, to 883p and the metals miner 1.5pc, or 13.2p, to 887.6p.
Entertainment One, creator of children’s hit TV show Peppa Pig, soared 5.2pc, or 19.2p, to 387.6p after a promotional clip for a film featuring the character went viral in China.