Shares Of Sophos Tank After Issuance Of ‘Subdued Performance’ Warning

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In early morning trading, the shares of Sophos Group were down by 23 percent. It comes after the company reported a “subdued performance” in its third-quarter trading update.

The IT security firm said that a “challenging” previous year was the context for the disappointing results, which saw the earnings of the company plunge by eight percent year-on-year for the nine months to the 31st of December to $104 million (£80.2 million), down from the $113 million that was recorded during the previous year.

The company saw a “modest decline in billings from new customers as well as a decline in hardware billings,” prompting the sell-off this morning.

Sophos reported two percent billings – or new business invoiced – growth for the third quarter, against the two percent in the first two quarters, placing it on course to miss its projections of “modest improvement” in growth during the second half of the financial year.

The revenue of the company was up by 7.3 percent to $178 million, while its operating profit amounted to $23.9 million, an increase from a small loss this time last year.

Meanwhile, the cash flow for the Oxfordshire-based firm was up by 6.9 percent to $18.7 million.

The chief executive of Sophos, Kris Hagerman, stated: “Sophos remains strongly positioned from a technology, product, and strategic perspective. We are confident in our strengthening product platform and how it positions us for the future.”

In one research note, some analysts at Shore Capital Markets said that earnings before tax of the firm were “light versus full year expectations, though profitability and net new customer additions read more positively.”

An Equity Analyst at Hargreaves Lansdown, Nicholas Hyett, stated:  “There are a lot of problems in this announcement, not least the fact that management guidance once again has proven overly optimistic. The networks business looks like it’s running into real problems – and while there’s some positive noises on recent product launches, there’s little in the numbers to back that up.”

He added: “Our real concern is that repeated cuts to guidance. Little in the way of explanation raises serious questions about management’s grip on the business and has perhaps irreparably damaged the group’s credibility with investors”.