Sage Group profit boosted by acquisitions

Sage Group profit boosted by acquisitions

Newcastle-based Sage Group PLC has announced its annual results to 30 September, reporting organic revenue and profit growth boosted by acquisitions.

The software company saw pre-tax profit increase 41% to £342m from £242m in the previous year.

Organic revenue grew by 6.6%, underpinned by recurring revenue growth of 9.0% and an improved SSRS performance with a decline of 1.4%.

Revenue was boosted in the last year by Sage’s acquisitions of Fairsail, now Sage People, and Intacct, now Sage Intacct.

Sage acquired Intacct in July for $850m and took full ownership of Fairsail in March for an undisclosed sum.

The FTSE 100-listed company declared a final dividend per share of 10.2 pence, representing a 9.1% increase on 9.35 pence the year before.

Sage CEO Stephen Kelly said financial 2017 "marks the completion of the transformation" that Sage outlined in June 2015.

"For each of the past three years we have delivered management's guidance for at least 6% organic revenue growth and 27% underlying operating margins, whilst fundamentally transforming Sage", Kelly explained.

"We now have the leadership, organisational alignment, brand and comprehensive suite of cloud solutions, to accelerate momentum in our markets. We will continue to drive efficiencies and productivity throughout the organisation and this is now 'business as usual'."

Steve Clayton, fund manager of the HL Select funds, which both hold around 4.5% positions in Sage said: “The numbers themselves are solid and largely in line with expectations. Organic revenues rose by 6.6% to £1.7bn and operating profits pushed 10% ahead to £475m.

Encouragingly the group is now seeing rapid take up of its cloud-based software offerings, helping subscription revenues to leap by 30%. The group saw double digit organic growth in half of its key territories.

Recently acquired Intacct is growing at over 30% and the group are confident of finding cost savings to offset any growth pains in the business. Margin guidance for next year looks strong, at an expected 27.5%, usefully ahead of consensus. No surprise then that the group felt able to push the dividend ahead by 9% to 15.42p per share for the year.

Key challenges for the group in the next year are to raise the performance in the USA, this year’s weak spot and keep the momentum in the cloud-based offerings. Overall, future growth prospects look better than for some time at Sage. The shares have been strong performers, hitting an all-time high yesterday, so a little profit taking is not that surprising today. But with organic growth running at high single digit levels Sage is looking well set.