FTSE 100-listed Sage Group witnessed a growth in organic recurring revenue during H1 FY21

Summary

  • SGE had shown organic recurring revenue growth of around 4.4% during H1 FY21.
  • SGE will pay an interim dividend of 6.05 pence per share on 18 June 2021.
  • SGE had anticipated FY21 recurring revenue growth at the top end of the range between 3% and 5%

Sage Group PLC (LON: SGE) is the technology Company listed on the London stock exchange. SGE’s shares have generated a return of around 3.98% in the last 12 months. SGE is listed on the FTSE 100 index.

 Company Overview

Sage Group PLC (LON: SGE) is an FTSE 100-listed provider of business software and solution in North America, North Europe, Central Europe, Africa, the Middle East, Asia, and Latin America.

(Source: Company presentation)

H1 FY21 Financial Highlights (for six months ended 31 March 2021 as of 14 May 2021)

Decent growth in Annualized Recurring Revenue (ARR) - SGE had delivered a decent organic recurring revenue growth of 4.4% to £811 million during H1 FY21, benefitted by software subscription revenue growth of 11% to £608 million. However, the revenue related to SSRS and processing went down by around 21% to £79 million. Moreover, the total organic revenue had shown a modest growth of around 1.4% to £890 million during the period. The recurring revenue growth had illustrated strong customer retention during the period.

Disposal of Polish business – SGE had simplified its business model by completing the sale of Poland based business during the period. Moreover, the Company had also announced the disposal of Sage's business in Switzerland and its business in Australia & Asia.

Increased investment in cloud-based platforms – SGE had developed new technology platforms enabling cloud-connected customers to shift to a cloud-native solution. Furthermore, the Company had taken the initiative to start Sage FutureMakers aiming to inspire people in AI (Artificial Intelligence) and educating them on the benefits of technology.

Growth in Interim dividend – The Company will pay an interim dividend of 6.05 pence per share on 18 June 2021, while the ex-dividend date will be 27 May 2021. SGE had shown around 2% growth in interim dividend driven by strong cash generation and a robust liquidity position. The net debt of the Company stood at £96.0 million as of 31 March 2021, while the net debt to EBITDA leverage ratio remained around 0.2x. Furthermore, the return on capital employed remained around 20.3% during H1 FY21.

One Year share price performance of Sage Group PLC

 

(Source: Refinitiv, Thomson Reuters)

SGE shares were trading at GBX 642.70 and were up by close to 3.06% as of 14 May 2021 at 12:25 PM GMT. The 14-day RSI stood at ~57.75, while the 20-day simple moving average was around GBX 636.60. SGE’s 52-week Low and High were GBX 543.20 and GBX 774.40, respectively. Sage Group PLC had a market capitalization of around £6.72 billion.

Business Outlook

The Company had delivered decent business performance during H1 FY21. Moreover, SGE had anticipated FY21 recurring revenue growth at the top end of the range between 3% and 5%. As a part of the strategy, the SSRG and processing revenue would be expected to decline during 2021. On the profitability front, the FY21 operating margin would remain around 3% lower than FY20 because of the additional strategic investment made in the business. Overall, the Company had hoped to witness an upward trend in margins beyond FY21, benefitted by recurring revenue growth and operational efficiencies.


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