Sophos share price rockets after full-year results ahead of expectation and $1bn billings target for 2020

 
Lynsey Barber
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CeBIT 2013 Technology Trade Fair
Sophos' performance has pleased investors (Source: Getty)

Shares in cyber security firm Sophos are on a run again, having already received a boost as result of the huge Wannacry ransomware cyber attack this week, after earnings beat expectations.

The figures

Shares climbed nearly 10 per cent higher to a fresh all-time high of 407.30 pence per share.

Billings grew by 18.2 per cent to $632.1m (£489m) in the year to the end of March.

Its operating loss widened to $44.3m, from $32.7m a year earlier as a result of cost increases associated with the strong growth in billings, the firm said, "whilst the majority of revenue is deferred and recognised over time".

Revenue climbed 10.8 per cent to $529.7m and the firm narrowed pre-tax losses to $49.3m from $68.4m a year earlier, while cash flow has tripled to $133m.

It has upped its full-year dividend of 3.3 cents per share, from 1.1 cents last year.

Why it's interesting

Its ransomware protection product Intercept X, which analysts pointed to as an attractive offering in light of WannaCry, has gained 8,000 customers since launching in September.

Deutsche Bank earlier this week upgraded its price target for Sophos, which floated in 2015, in expectation of a good set of full-year results.

What Sophos said

Chief executive Kris Hagerman said:

“Full-year 2017 was another strong year for Sophos, in which we made significant progress against our strategic goals, and delivered operational and financial performance above our expectations. We have a differentiated strategy of delivering innovative, simple, and highly effective cybersecurity solutions for mid-market enterprises, synchronizing across enduser and network security – all in partnership with our channel.

"Encouragingly, the strong momentum at the heart of this performance was manifest across all major regions and products, and in both new business and renewals. We have issued a medium term outlook as a sign of our confidence in delivering sustainable growth in billings and profitability over the longer-term.”

What the analysts say

Shorecap's Ben McSkelly:

"In addition to giving guidance of mid to high teens billing growth for the current year, management have for the first time given medium term guidance. By 2020, management expects billings of $1bn, cash flow of $220-$240m and 100-150bps of cash earnings before interest, tax, depreciation and amortisation margin improvement.

"Clearly Sophos has performed very strongly this year and has confidence of continued performance. Whilst we retain some concerns over fundamental valuation and medium term competition in the mid-market, we acknowledge pressure on our SELL recommendation and will proffer further thoughts post the analyst meeting."

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