SOFTWARE company Autonomy yesterday announced record first-half revenues and profits amid signs of a “gentle” recovery.

The Cambridge-based company reported sales of US$415.3million (�273.3m) for the six months to June 30, up 28% on last year’s first half and including organic growth of 14%.

Gross profits were 26% ahead at US$363.4m (�239.1m) and pre-tax earnings came in at US$182.7m (�120.2m), an increase of 24%, with earnings per share up 22% on last year’s first half.

Autonomy chief executive Mike Lynch, who lives in Suffolk, said: “The first half of 2010 continued to show a gentle recovery with discretionary spend continuing. In considering the macro environment our customers are positive but still cautious.”

He added: “Our government business, which is mainly focused on national security, has proved robust in the current climate of curtailed government expenditure and we do not expect to see any deterioration in this area.”

Although the first half revenues and earnings figures were within the range of analysts’ expectations, Autonomy’s shares dropped sharply in value yesterday amid concerns over the outlook for margins.

Gross margins for the first half were 88%, against 89% for the same period last year, with a wider decline seen during the second quarter, to 86% against 88%.

However, Autonomy said the variation in gross margins during the second quarter was in line with its expectations and reflected sales mix issues reported at the time of its first quarter figures.

Dr Lynch added: “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.”