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One concern about the improving capabilities of artificial intelligence (AI) is the potential for an increased volume of cyber attacks. To counter this, companies will need better defences, which should benefit cyber security company Darktrace.
A year ago, it released research showing a 135 per cent increase in novel “social engineering attacks”. In other words, fraudsters are using generative AI products to write emails convincing people to share information and passwords.
It is not that Darktrace is in desperate need of a tailwind. For the six months to December, revenue grew 27 per cent year on year to $330mn (£261mn), and adjusted operating profit rose 119 per cent to $71mn, due to increased “scale efficiencies”.
The theory with software companies is their margins expand as they grow. Research and development costs should not increase as quickly as revenue because the product only needs tweaks once someone has designed it. That does not always play out because other bureaucratic and marketing costs stack up. The 105 per cent annual recurring revenue retention rate shows customers are generally happy with Darktrace’s product.
Alongside all this seemingly positive news, chief strategy officer Nicole Eagan decided to sell £3.9mn of shares across two transactions on March 15 and 19. On March 20, chief executive Poppy Gustafsson sold a further £701,000.
Darktrace’s share price is still fighting to recover from a sell-off at the end of 2021, running through 2022. A combination of Peel Hunt’s ‘sell note”, “channel stuffing” accusations by Quintessential Capital Management and rising interest rates meant the share price dropped 70 per cent between mid-2021 and mid-2023.
However, since then, an EY audit has cleared Darktrace of Quintessential’s accusations, and a series of positive results have shown profitability improving. The share price has risen 70 per cent in the last year, which could explain why the directors have cashed out.
Vodafone CFO buys in
Vodafone is selling its low-growth assets and trying to consolidate in its larger markets.
This month, the company confirmed the deal with Swisscom to sell its Italian business for €8bn (£6.87bn). It then confirmed it would be halving its dividend and starting a buyback programme while being able to pay off some of its over €50bn debt pile.
An optimist might point to its organic service revenue which grew 4.7 per cent in the last quarter. In particular, the company highlighted its Vodacom businesses in Africa, where service revenue rose 8.8 per cent, while its cloud and “internet of things” service grew over 20 per cent.
In a vote of confidence for the direction of the business, chief financial officer Luka Mucic has just purchased £1.69mn worth of shares in the company.
After almost a decade of underperforming, history suggests a turnaround is not imminent. But at least, trading at just 10 times its forward earnings, Vodafone’s valuation may look like an opportunity to some investors.
