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Sophos shares edge lower as it confirms drop-off in first-quarter billings growth

Sophos warned investors earlier this month that growth in the first quarter hadn’t been as strong as expected, although its long-term outlook is unchanged
Even with the recent falls, Sophos shares are still worth more now than they were this time last year

Sophos Group PLC (LON:SOPH) saw its shares edge lower on Thursday after confirming lower-than-expected billings growth in its fiscal first quarter.

The cybersecurity specialist warned investors earlier this month that growth in the opening few months hadn’t been as strong as hoped, albeit against strong comparatives. The news sent the share price plunging by a fifth.

READ: Sophos' warning catches market on the hop

As it had guided for in that update, group billings rose 2% on a constant currency basis to US$174.9mln (Q1 17: US$164.3mln), compared with growth of 16% in the preceding quarter.

Speaking earlier this month, Hargreaves Lansdown equity analyst Nicholas Hyett said: “Sophos is meant to be a high growth stock – so a 2% underlying increase in billings was never going to cut the ice with investors."

The group said the drab growth was primarily down to its Enduser security business, which in the corresponding period a year earlier, had enjoyed a sparkling performance, thanks to high-profile ransomware attacks such as the WannaCry virus.

“As we look forward, we expect a return to mid-teens constant currency billings growth in the second-half of the year,” said chief executive Kris Hagerman.

“In H2, prior-year comparisons become more favourable, the temporary effects of legacy product transitions diminish, and the renewal rate is expected to return to a more normal range.

“This, combined with the expected strong growth in our future renewal book into FY20, continues to give us confidence in our long-term outlook.”

Shares were down 2.9% to 508p.

View full SOPH profile View Profile

Sophos Group Timeline

November 11 2015

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