Sophos Group plc is a security software and hardware company. Sophos develops products for communication endpoint, encryption, network security, email security and mobile security as well as unified threat management. Sophos is focused on providing security software to organizations, businesses, and individual users. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.
Admission to trading on the London Stock Exchange 1 July 2015
LSE: SOPH

Liberum Capital today initiates coverage of Sophos Group Plc (LON:SOPH) with a buy investment rating and price target of 530p.

StockMarketWire.com
Cyber security company Sophos Group swung to a first-half profit as it boosted sales, though underlying earnings were hurt by lower margins.

Pre-tax profit for the six months through September amounted to $26.0m, compared to a loss of $35.5m on-year.

Cash Ebitda, however, fell 19% to $54.0m.

The fall in earnings reflected lower-than-expected billings and spending on R&D and marketing.

'Sophos continues to make solid progress in advancing our strategy of delivering advanced and highly effective cybersecurity solutions to IT professionals at organizations of all sizes,' chief executive Kris Hagerman said.

'We now expect a modest improvement in constant currency billings growth in the second half compared to the first half, as we continue to work through challenging year-on-year comparatives.'

For the 2020 financial year, we enter the year with strong growth in our subscription renewals base, and hence, assuming a stable renewal rate, we would anticipate a significant improvement in the rate of overall constant currency year-on-year billings growth.'

Liberum Capital today reaffirms its buy investment rating on Sophos Group Plc (LON:SOPH) and cut its price target to 400p (from 530p).

Deutsche Bank today reaffirms its hold investment rating on Sophos Group Plc (LON:SOPH) and cut its price target to 370p (from 530p).

Trading update

Summary Financial Performance

· Constant currency Billings1 grew 2% for the third-quarter and 2% for the nine-months year-to-date ("YTD")
o Continued subdued performance is set against the context of a challenging prior-year comparable
o A further sequential improvement in the renewal rate to existing customers in the third-quarter
to 122%
o Offset by a modest decline in billings from new customers as well as a decline in hardware billings
o Sophos Central billings up by 22% YTD and 29% in the third-quarter at constant currency
o Enduser billings rose by 6% in the third-quarter at constant currency, an improvement over the small constant currency decline experienced in the first-half of the fiscal year
o Positive initial customer response to Intercept X Advanced with EDR, following a successful launch at the end of the third-quarter
o Network saw a small benefit from the launch of XG Firewall v17.5 late in the period, albeit overall Network subscription growth was offset by lower hardware billings
o We now expect the trends in the third quarter to generally continue into the fourth quarter, which would result in a modest decline in full-year constant currency billings
· Revenue increased by 14% YTD on both a reported and constant currency basis, principally driven by continued growth in subscription revenue
o Subscription revenue increased by 18% YTD and 15% in the third-quarter at constant currency, benefiting from prior-period subscription billings and offsetting a reduction in hardware revenue
o Deferred revenue increased by 8% year-over-year ("YOY"), as a result of the deferral of billings net of the impact of currency movements from the strengthening of the US dollar in the period
· Profitability significantly improved
o Adjusted operating profit2 increased by 157% YTD, driven by strong growth in revenue
o Reported operating profit of $51 million YTD, compared to a prior-period loss of $25 million
o Cash EBITDA3 declined 8% YTD reflecting the subdued billings performance
· Cash flow performance was strong, in the context of a strong prior-year comparative period
o Net cash flow from operations of $100 million and unlevered free cash flow4 broadly unchanged YTD
· Over 25,000 net new customers added YTD, including more than 9,000 in the third-quarter, with total customers
of 327,000

Liberum Capital today downgrades its investment rating on Sophos Group Plc (LON:SOPH) to hold (from buy) and cut its price target to 320p (from 400p).