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Sophos shares soar on higher-than-expected annual earnings

Reuters

(Reuters) - Sophos Group Plc shares rose more than 16% on Thursday, after the cyber security company reported higher-than-expected annual earnings, months after it warned of slightly lower billings as hardware upgrades and sales to new customers fell.

The company, which makes antivirus and encryption products and competes with U.S.-based Symantec Corp and FireEye Inc, said billings fell 1.1 percent to $760.3 million (592 million pounds) for the year ended March 31. But the figure was 1% above consensus estimates, according to Liberum analysts.

"The demand environment for cybersecurity solutions continues to be robust, and we are confident that we are well positioned competitively, especially as more organisations move to adopt next-generation cybersecurity offerings," Chief Executive Officer Kris Hagerman said.

The company, whose customers include Under Armour Inc, Ford Motor Co, Toshiba Corp and Pixar, said revenue grew 11.2% and cash core earnings jumped 15.7%, both higher than analyst estimates.

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Sophos' shares were 15.3% higher at 392.1 pence at 0726 pence, taking them to the top of London's midcap index.

"We see these results as positive, but the outlook comment of 'returning to operating profit margin leverage after FY20' is far more vague than previous year guidance, giving scope to a wide range of interpretation," Liberum analyst Alexandre Schmidt

said.

Sophos, founded in 1985 in Oxford, had cut its billings forecast in November as it struggled to match the "dramatic acceleration in demand" it had seen in the previous year for cybersecurity products.

Several cybersecurity firms were in high demand over the past few years after high-profile ransomware attacks such as the WannaCry virus and BadRabbit disrupted operations at factories, hospitals and shops. However, Sophos lost about a third of its value in 2018 in a highly competitive market.

(For graphic on Sophos reports higher-than-expected annual earnings, click https://tmsnrt.rs/2WN5dgI)

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr)