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UK’s Sage Group (SGE) stock boosted despite profit fall

By Jenni Reid

11:16, 17 November 2021

Sage Group building in Warsaw, Poland
Software company Sage Group saw operating profit fall after investing in cloud systems – Photo: Shutterstock

British software firm Sage Group (SGE) lead share price gains among FTSE 100 firms Wednesday morning, despite the company reporting a decline in annual profits in full-year results. 

SGE was up more than 8% in the late morning on the London Stock Exchange, as it reached its highest level since Febuary 2020. 

The company reported organic revenue of £1.778bn ($2.397bn) in the full-year to 30 September, up 3% annually, and recurring revenue up 5% to £1.637bn.

However, its organic operating profit fell 10% to £343m, while underlying earnings before interest, taxes, depreciation and amortisation fell 9% to £443m.

Mixed bag

Both revenue and profit came in below consensus estimates published by the Newcastle-based company, which produces accounting and financial management software. 

Sage said the decline in profit was due to planned strategic investments in its cloud-based products, and pointed to 44% growth in cloud native annual recurring revenue due to new customers and migrations to newer products. 

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The software firm also reported underlying cash conversion of 126%, which it said reflected continued growth in subscription revenue and improvements in working capital.

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Market happy

Investors appeared cheery about the firm’s growth prospects, as it forecast further revenue growth of 8% to 9% in the full-year 2022 and said it planned to scale the group. 

Meanwhile, Sage’s final dividend was up 2.7% to 11.63p, putting its full-year dividend at 17.68p.

“Having reshaped and invested significantly in the group over the last three years, we are now focused on growing the business in absolute terms, both organically and through acquisitions,” said CEO Steve Hare. 

“The small and mid-sized businesses that power the global economy are adopting digital solutions at a faster rate than ever before, and through our trusted technology and human approach, Sage is well positioned to support them,” Hare added.

Read more: Sage Group pre-tax profits fall sharply in first year half

Markets in this article

Sage Group plc
11.375 USD
0.04 +0.360%
Sage Group plc
11.375 USD
0.04 +0.360%

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