Sage Group reports strong year, launches share buyback

(Sharecast News) - Accounting software firm Sage Group reported underlying recurring revenue growth of 12% in its full-year results on Wednesday, reaching £2.096bn, driven by 25% growth in Sage Business Cloud to £1.628bn. The FTSE 100 company said that overall, the underlying total revenue increased 10% to £2.184bn.

Underlying operating profit saw substantial growth of 18% to £456m, with an accompanying increase in margin by 140 basis points to 20.9%, driven by operational efficiencies as the group scaled its operations.

EBITDA also saw a healthy increase of 16% to £553m, with a margin increase of 120 basis points to 25.3%.

However, the statutory operating profit fell 14% to £315m, attributed to one-off gains on business disposals in 2022, property restructuring, and merger and acquisition charges in 2023.

Underlying basic earnings per share were ahead 22% at 32.3p.

Sage Group recorded a strong cash conversion rate of 116%, driven by growth in subscription revenue and efficient working capital management.

The firm said it maintained a strong balance sheet with £1.3bn in cash and available liquidity and a net debt-to-EBITDA ratio of 1.0x.

Regarding shareholder returns, Sage proposed a final dividend of 12.75p, resulting in a 5% increase in the full-year dividend to 19.3p, aligning with its progressive policy.

Additionally, the company announced a share buyback programme of up to £350m.

Strategically, Sage Group achieved an 11% increase in underlying annualised recurring revenue to £2.188bn, driven by broad-based growth across all regions, encompassing new and existing customers.

The company added £190m in annualised recurring revenue through new customer acquisition organically, up from £180m in the previous fiscal year.

Sage's cloud-native annualised recurring revenue soared 28% to £684m, primarily attributed to new customers, with Sage Intacct continuing to perform exceptionally well.

The renewal rate by value reached 102%, ahead of the previous year, reflecting increased sales to existing customers and strong retention rates.

Sage Business Cloud achieved a penetration rate of 84%, enabling more customers to connect to Sage's cloud services and ecosystem through the Sage Network.

Subscription penetration also saw growth, reaching 79%.

The company also emphasised its substantial strategic progress, further expanding its global cloud solutions across markets and continuing to invest in innovation, complemented by the acquisitions of Spherics and Corecon.

Looking ahead, Sage Group had a positive outlook for the 2024 financial year, driven by consistent strategic execution.

The company said it expected organic total revenue growth in 2024 to be in line with 2023, with a focus on upward-trending operating margins as it efficiently scales the group.

"Sage performed well in 2023, delivering double-digit revenue growth, increased profitability and strong cash flows," said chief executive officer Steve Hare.

"We sustained good momentum throughout the year in all regions, driven by consistent strategic execution."

Hare said small and mid-sized businesses continued to digitalise despite the macroeconomic uncertainty.

"We are building a resilient platform to deliver sustained, efficient growth, and I am confident that Sage is well positioned to take advantage of the market opportunity in 2024 and beyond."

At 0843 GMT, shares in the Sage Group were up 9.01% at 1,087p.

Reporting by Josh White for Sharecast.com.