Autonomy reported a second-quarter fall in pre-tax profits and margins yesterday, sending the darling of the British software industry's shares down by more than 12 per cent in early trading.
Revenues at the company – which makes software which searches unstructured data sources such as email – rose by 13 per cent to $221m (£145m) in the three months to the end of June, and net profits came in up nearly 3 per cent at £52m. But pre-tax profits dropped by 5.9 per cent to $67.5m and operating margins dropped 3 percentage points, raising concerns that growth is slowing at the fast-expanding group.
The stock price recovered slightly over the course of the afternoon, but Autonomy shares still closed off by 9 per cent at 1,649p despite six-monthly totals showing revenues up by 28 per cent to $415m and pre-tax profits up 12 per cent to $136m.
The company also reported a string of major contract wins in the period, with big names including BP, Kraft and Sainsbury's, as well as governments, defence and intelligence agencies around the globe. But investors reacted sharply to results that missed expectations and showed first-half margins also squeezed, by 2 percentage points.
Growth is also slowing at the fast-growing Original Equipment Manufacture (OEM) division – which sells to hardware makers such as IBM. Yesterday's results revealed just nine new deals, compared with up to 12 in previous periods.
But Mike Lynch, the chief executive of Autonomy, remained bullish. "Overall we face the rest of the year with a strong balance sheet, and in light of the continuing macro recovery, we are confident in our ability to continue to deliver strong growth for the full year," he said.
The first half of the year has seen a "gentle recovery", but the outlook remains uncertain, he admitted. "In considering the macro environment our customers are positive but still cautious."
In February the company raised £500m through a convertible bond to fund future acquisitions. A deal is expected in the second half of the year, but Autonomy offered no further updates yesterday.