Sage (SGE) pressed on with its voyage towards becoming a software-as-a-service (SaaS) business during the half-year to March 2019. On the one hand, this meant software subscription sales were up 27.7 per cent. But on the other hand, a planned decline in licence revenue contributed to an 11.8 per cent fall in software and software-related services (SSRS) – as did underperformance in SSRS in the US and France. Nonetheless, “high quality” organic recurring revenues still improved by a tenth to £779m – leading to a 6.2 per cent organic increase in the top line.
The accounting software group’s organic operating margin came in at 23.2 per cent; down from 24.8 per cent, but in line with management’s guidance. This reflected the impacts of variable compensation, and increased investment to “accelerate strategic execution”.
To the latter point, Sage has been injecting money into its ‘Business Cloud’ – “the one and only business management solution that customers will ever need”. Recurring revenues here soared 85 per cent to £291m, while recurring revenues for the ‘future’ business cloud opportunity – pertaining to products that are in, or that could “have a clear pathway” to the platform – rose 12 per cent to £663m.
Sage expects full-year organic recurring sales growth to be at the upper end, or slightly above, its guided range of 8-9 per cent. It expects SSRS and processing revenues to be “at the lower end or below the guided range”. Broker Stifel expects adjusted EPS of 30.7p for FY2019, against 34.3p in FY2018.
| SAGE (SGE) | ||||
| ORD PRICE: | 720p | MARKET VALUE: | £ 7.82bn | |
| TOUCH: | 719.6-720.6p | 12-MONTH HIGH: | 750p | LOW: 491p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 25 | |
| NET ASSET VALUE: | 127p* | NET DEBT: | 32% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 899 | 171 | 12.5 | 5.65 |
| 2019 | 957 | 198 | 14.2 | 5.79 |
| % change | +6 | +16 | +14 | +2 |
| Ex-div: | 30 May | |||
| Payment: | 14 Jun | |||
| *Includes intangible assets of £2.24bn or 206p a share | ||||
