Workers hunkered down at home increased their vigilance against cyber security threats earlier this year © REUTERS

Working from home has meant locking down in more ways than one. Workers hunkered down in their domestic bunkers. And at the same time they raised their guard against cyber criminals primed to cut through inadequate online defences. 

Avast!, the home office-workers may as well have cried at the digital pirates. Demand for London-listed tech company Avast’s products surged in the wake of local lockdowns earlier this year — as did its share price. 

At its half-year results in August, the freemium virus software group reported like-for-like billings growth of more than 9 per cent as domestic desktop users downloaded its protection. Paying customer numbers climbed 5 per cent in the six months to June. The Czech company made it into the FTSE 100 that month. It is now worth about £5.2bn. 

But even by August the lockdown lift Avast enjoyed was waning. On Wednesday, the company confirmed that growth in billings — a leading indicator for revenues — had slowed, with growth in its consumer desktop protection business “in line with pre-pandemic levels”. Its share price has stalled in recent months.

Avast may yet receive a lasting boost if higher rates of working from home endure. Paying customers sign up for a year: renewal rates in 2021 could be higher than they have been before. But customer churn has been high in the past. Avast held on to only two-thirds of subscribers in its consumer desktop business last year. 

Growth could come from new privacy products instead. But in both businesses Avast faces potential challenges from Big Tech, which could make the Czech group’s products increasingly redundant if they boost their own security and privacy features. 

London’s blue-chip index is short on true tech success stories. Since its initial public offering in May 2018, Avast’s shares have doubled. Twelve out of 15 analysts rate it a buy, according to FactSet, even though at 19 times forecast earnings to rival NortonLifeLock’s 14 times, its shares are close to their priciest. 

But of London’s listed tech stocks, the bigger pandemic beneficiary has been not lately-listed Avast but Stakhanovite Computacenter.

Its UK revenues climbed 7 per cent in the first half of the year, though they were partly offset by weak performance in other countries. Unlike Avast, its trading boost continued through July and August. Computacenter’s shares are up 40 per cent this year, to Avast’s 13 per cent. At 22 times earnings, its shares are pricey too. But at least the lockdown uplift may be more enduring. 

Not-so-super superfunds

Few topics have generated as much heat in the UK pensions world recently as superfunds, Oliver Ralph writes. These vehicles, which have been in the works for years, plan to collect together multiple corporate pension schemes and run them together. 

To some, they offer a new way for companies to rid themselves of burdensome pension promises, many of which were made decades ago. To others, they are nothing but regulatory arbitrage, offering big returns for investors but big risks for scheme members. 

What superfunds offer is an alternative to insurance. At the moment, companies that want to get rid of pension schemes can hand them to insurers via deals called buyouts. But these deals can be expensive. Insurers operate under the EU’s Solvency II capital regime and are regulated by the Prudential Regulation Authority. 

Superfunds will operate under a different set of rules and will be overseen by The Pensions Regulator. They are likely to be a far cheaper option for companies than buyouts with insurers. Unsurprisingly, the insurers hate them. 

So far it’s been all hot air and no action. Superfunds are yet to get their first deal over the line. But the crunch moment is approaching. On Wednesday, TPR put out guidance on how trustees and employers should go about assessing superfunds. 

The guidance makes all the right noises. Companies and trustees shouldn’t consider a superfund if a scheme could go for a buyout instead, or if a buyout is on the horizon. Any transfer to a superfund should increase the chance that scheme members will receive all their promised benefits — an important consideration for those attached to troubled companies. And TPR will vet superfunds before schemes go into them. The TPR says it has “set a high bar” for the new vehicles. 

That’s all very well, but trustees should be gearing up for tough conversations when it comes to superfunds. Company finance directors will be pushing them to go down the superfund route: it’s far cheaper than a buyout. But trustees act on behalf of members, not employers, and they need to ask themselves: who is running the fund and what is their track record? Which investors are backing the superfund? What is their time horizon? How are they planning to make money? Will they be willing or able to put in more capital if the scheme struggles? Where will they be investing the scheme assets? What happens if the superfund fails? 

Superfunds need to be ready to give clear answers. Otherwise, trustees should treat them with extreme caution.

Avast: cat.rutterpooley@ft.com
Superfunds: oliver.ralph@ft.com


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