Sage Group shares lifted by cloud business boost as software firm hails ‘significant strategic progress’

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  • Sage Group’s annual revenue increased by 5% to £1.95 billion.
  • The Group’s Board of Directors declared a final dividend of 12.1 shares per year.

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Shares of Sage Group rose after the company reported higher revenue in its latest full-year results, driven by growth in its cloud business.

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The group told investors that it had achieved “Significant strategic progress” in the last financial year as revenue increased 5% to £1.95bn and organic total revenue rose 6% to £1.92bn.

The FTSE 100 software company’s organic operating income topped 8% year-on-year in the 12 months to September 30 at £383m, although its operating income fell 2% to £367m.

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Annual results: Sage Group announces “significant strategic progress”

Sage is divided rose 7.65%, or 57.80 pence, to 813.60 pence this afternoon, up more than 11 percent over the past year.

The group’s EBITDA rose 3% to £468m, with margins down slightly to 24% from 24.2%, mainly due to the impact of asset disposals.

Basic earnings per share fell 3% to 25.47 pence, while basic earnings rose 8% to 25.74 pence per share.

The company’s operating margin fell 1.3 percentage points year on year to 18.9%, while its organic operating margin was up 0.4 percentage points at 19.9%.

The group’s Board of Directors declared a final dividend of 12.1p per annum, up 4%, bringing the annual distribution to 18.4p. A year ago, the total dividend payout was 17.68 per share.

Sage described “continued strong cash income”, with a cash conversion rate of 107%, reflecting continued growth in subscription revenue.

His balance sheet remains “strong” with around £1.3bn of cash and available liquidity, he said.

Share Price: A chart showing the change in Share Group's share price over the past year.

Share Price: A chart showing the change in Share Group’s share price over the past year.

Looking ahead, Sage said it entered fiscal year 2023 with “strong” momentum, making strategic progress to accelerate growth.

He expects organic regular revenue growth to be stronger than last year thanks to the strength of Sage Business Cloud, while other revenues decline in line with the company’s strategy.

The operating margin is expected to grow from 2023 “onwards” as it aims to efficiently scale the group.

Boss Steve Hare said: “Sage had a good year, we made good progress on our strategic priorities.

“We significantly increased revenue across all key products and regions, increased our organic operating margins and generated strong cash flow.

“The 12% year-on-year regular revenue growth, underpinned by a rising level of new customer acquisition, is particularly encouraging and puts us well-positioned for the year ahead.”

Hare added that Sage’s goal of “breaking down barriers so everyone can thrive” was more important than ever.

He said: “Sage Business Cloud solutions enable small and medium businesses to streamline their processes and increase productivity, helping them achieve more with less.

“While we are mindful of macroeconomic uncertainties, I am confident that our sustainable business model, together with our strategy of delivering efficient growth based on our expanding digital network, will enable us to create additional long-term value for all of our stakeholders.”

Victoria Shkolar, head of investment at Interactive Investor, said: “Looking ahead, the software company said it expects organic revenue growth higher than last year, with operating margins expected to rise. JP Morgan raised its target price for shares this morning.

“Sage Group shares have performed well recently, up more than 15% over the past six months.

“The software company is focused on scaling the business to help sustain margin and profit growth. Its cloud business performed particularly well, with growth of 24% despite pressure from macroeconomic uncertainty highlighted by CEO Steve Hare.”

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