2019 Annual Report and Accounts 2019 Annual Report and Ac and Report Annual 2019 Counts
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2019 Annual Report and Accounts 2019 Annual Report and Ac counts Sophos Group plc The Pentagon, Abingdon Science Park, Abingdon, OX14 3YP, United Kingdom. Tel: +44 1235 559933 www.sophos.com Cybersecurity evolved 2019 Annual Report and Accounts 181 Innovative, simple and highly effective cybersecurity Introduction solutions, for organisations Financial calendar of any size Announcement of results The results of the Group are normally published at the following times: Sophos delivers award-winning At Sophos we know that the • Half-year results for the six months to 30 September endpoint protection harnessing the solution to complexity is not more in mid-November. power of artificial intelligence (“AI”), complexity. We tackle security Preliminary announcement for the year to 31 March enabling unmatched defence challenges with clarity and • in late May. against malware, exploits, and confidence, knowing that simple ransomware. Our network security security is better security. • Annual Report and Accounts for the year to 31 March offers the world’s best visibility, in mid-June. protection, and response, powered Find out more at ReportStrategic Dividend payments by deep learning and synchronized www.sophos.com security. And we combine the Our current policy is to make dividend payments at the power of AI and automation to following times: simplify compliance, governance, • Interim dividend in December. and security monitoring in the public cloud. • Final dividend as reasonably practicable following the AGM, which in 2019 is on 25 September. 2019 final dividend timetable: • Record date: 20 September. • Dividend paid: 11 October. Corporate Governance 2019 Highlights Cautionary statement This Annual Report and Accounts has been prepared for, and Revenue Adjusted Operating Profit only for, the members of Sophos Group plc (“the Company”), as a body, and no other persons. The Company, its Directors, employees, agents or advisers do not accept or assume responsibility to any other person to whom this document is +11% +87% shown or into whose hands it may come and any such responsibility or liability is expressly disclaimed. By their Business Highlights nature, the statements concerning the risks and uncertainties facing the Group in this Annual Report and • Strong growth in subscription • Renewal rates within the Group’s Accounts involve uncertainty since future events and revenue, up 16% year-on-year subscription business remain circumstances can cause results and developments to differ at healthy levels at 124% StatementsFinancial • Strong demand for our cloud solutions, materially from those anticipated. The forward-looking with over 135,000 of our customers • The Group remains well-positioned statements reflect knowledge and information available at managing their security via the Sophos competitively, with industry-leading the date of preparation of this Annual Report and Accounts Central cloud platform technology and a differentiated and the Company undertakes no obligation to update these strategy for synchronized security forward-looking statements. Nothing in this Annual Report • Sophos is now established as and Accounts should be construed as a profit forecast. a leader in the fast-growing market • Step change in profitability, for next-gen cybersecurity solutions, reflecting good revenue growth founded on powerful artificial and operating leverage intelligence capabilities Additional InformationAdditional 403838c 2019 Annual Report and Accounts 01 CHAIRMAN’S INTRODUCTION Introduction Our strategic progress has positioned Sophos as one of the CONTENTS world’s leading next-generation cybersecurity vendors. Despite the challenges we faced in FY19 selling against an exceptional prior-year Introduction comparative which resulted in a 1 per cent reduction in billings, our subscription- 00 Highlights based business model together with continued demand delivered a 124 per cent 01 Chairman’s Introduction renewal rate and 35,000 net new customers, and enabled us to achieve growth of 02 At a Glance 11.2 per cent in revenue, driven by a 15.9 per cent growth in subscription revenue. 04 Our Investment Proposition Additionally, as we’ve continued to grow the number of customers deploying both Strategic Report ReportStrategic our endpoint and UTM/next-gen firewall to approximately 12.1 per cent, our now Key Product and Technology 335,000-strong customer base represents a compelling opportunity as we look 08 Developments to continue to increase adoption rates of multiple products across our portfolio. 10 Network Security 13 Enduser Security We continue to prioritise investment in innovation, which has produced important 14 Our Markets advances this year. Sophos Intercept X Advanced with EDR automates much of 16 Our Business Model the process of active threat hunting via some of the world’s most advanced deep 18 Strategic Framework learning, neural network-based artificial intelligence. With the latest Sophos XG 20 Key Performance Indicators Firewall, customers are able to manage their Sophos security solutions fully 22 Chief Executive’s Statement within the Sophos Central cloud platform. These and other innovations, and 28 Financial Review Risk Management and Principal looking forward, a robust development calendar for the near and medium term, 36 contribute to our evolution – already well underway – to become one of the Risks & Uncertainties 40 Corporate Responsibility Report world’s leading next-generation cybersecurity vendors. Already 47 per cent of our FY19 billings came from our next-generation products. As this evolution Governance Corporate Governance continues, we believe our differentiated strategy around synchronized security 54 Board of Directors spanning endpoint, network, and public cloud will further drive demand. 56 Corporate Governance Statement 68 Nomination Committee Report We also continue our investments in our sales and marketing operations, 71 Audit and Risk Committee Report emphasising continued partner support, customer service, and productivity. 77 Disclosure Committee Report Annual Statement of the Our strategy of channel partnering along with our relentless culture to serve 78 Remuneration Committee Chairman our customers and partners we believe has enhanced our visibility and market 80 Remuneration at a Glance reach, our customer following, and our growth opportunities as we continue to 82 Directors’ Remuneration Policy strengthen our next-generation offerings. 91 Annual Report on Remuneration 102 Directors’ Report Our market continues to show significant demand for cybersecurity solutions Financial Statements across an increasingly complex landscape of devices, networks, and applications in organisations of all sizes. We believe our rigorous and strategic focus on 110 Independent Auditor’s Report Consolidated Financial Statements StatementsFinancial 118 security solutions managed centrally through the cloud, our focus on channel and Notes partners serving these customers, our differentiated offerings in the market, Company Financial Statements 174 our robust product roadmap, our substantial customer base, and the scale and and Notes momentum of our next-generation offerings represent powerful ingredients Additional Information for our continued growth and market leadership. 178 Glossary 179 Company Information On behalf of our Board, thank you very much to our Sophos team members 180 Shareholder Information and partners around the world for your hard work and dedication to deliver value to our customers and returns to our shareholders. To our partners, customers, and investors, thank you very much for your continued support and confidence. We maintain our relentless focus to keep earning it. Find out more at: InformationAdditional Peter Gyenes www.sophos.com Non-Executive Chairman 02 Cybersecurity evolved AT A GLANCE IRELAND 20 employees UK Cybersecurity evolved, 589 employees FRANCE CHINA Sophos is a global leader 64 employees 16 employees in 3 locations NETHERLANDS TAIWAN in next-gen 42 employees in 2 locations 10 employees GERMANY 310 employees in 3 locations SOUTH KOREA 3 employees CANADA SWEDEN 305 employees in 2 locations 11 employees JAPAN Sophos is at the forefront at a pivotal moment of evolution 51 employees FINLAND in the cybersecurity industry. The Group is a global leader 2 employees in next-gen, cloud-managed network and enduser cybersecurity, and consequently is helping to drive change POLAND that is reshaping the market, as it harnesses the power of 4 employees world-leading artificial intelligence, through deep learning neural networks, to adapt ever more quickly to the emerging threat landscape. At the heart of the strategy lies the US concept of synchronized security, where all of the Group’s 607 employees in 4 locations INDIA products actively work together in order to provide faster, 819 employees in 10 locations more accurate detection, and greater levels of automation UAE 16 employees than ever before. PHILLIPINES TURKEY 146 employees 5 employees MALAYSIA HUNGARY 6 employees 99 employees INDONESIA Geographic footprint 5 employees AUSTRIA Sophos is a truly global company with more than 50 offices AUSTRALIA 58 employees in 2 locations around the world, with major offices in the UK, USA, Canada, 80 employees India and Germany. ITALY SINGAPORE 42 employees in 2 locations 21 employees SWITZERLAND PARTNERS END USER CUSTOMERS OFFICES EMPLOYEES 13 employees THAILAND 47,000 382,000 51 3,400 SPAIN 4 employees 26 employees GAAP financial highlights Revenue Profit/(Loss) Before Tax Net Cash Flow