Sophos (SOPH) had a quarter of its market value wiped out on results day after the cyber security specialist failed to reiterate full-year targets in relation to billings and adjusted operating profit. The group had previously dampened expectations – partly on the basis of tough comparators – as it had enjoyed enormous growth through FY2018, with renewal rates buoyed by high-profile global breaches. But it now looks as though it will struggle to achieve “mid-teens” billings growth in the second half, obviously to the annoyance of investors. Billings for the period rose by 2 per cent at constant currencies to $361m, but this pales against the 22 per cent growth rate achieved at the same point in 2017.
Management might secretly be praying for a few more high-profile data breaches in coming months, as analysts digest the lower-than-expected billing numbers. The good news is that renewal rates firmed during the second quarter, partly due to "more sustainable levels" at its Enduser business. Innovation may also come to the aid of Sophos; the period under review saw the release of Intercept X for Server, while new versions of its flagship endpoint and firewall products will become available during the second half.
Broker Stifel forecasts adjusted pre-tax profits of $44.8m and EPS of 9.4ȼ for the year to March 2019 (from $33.8m and 9.4ȼ in FY2018).
| SOPHOS (SOPH) | ||||
| ORD PRICE: | 341p | MARKET VALUE: | £1.63bn | |
| TOUCH: | 341-341.8p | 12-MONTH HIGH: | 675p | LOW: 281p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | na | |
| NET ASSET VALUE: | 36ȼ* | NET DEBT: | 77% | |
| Half-year to 30 Sep | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
| 2017** | 297 | -35.5 | -8.3 | 1.4 |
| 2018 | 350 | 26.0 | 2.3 | 1.5 |
| % change | +18 | - | - | +7 |
| Ex-div: | 15 Nov | |||
| Payment: | 14 Dec | |||
*Includes intangible assets of $852m, or 178ȼ a share **2017 numbers restated to reflect IFRS15 implementation £1=$1.32 | ||||
