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Sage shares rose by almost a fifth as the UK software group reported a jump in annual operating profits, launched a £400mn share buyback and increased its dividend.
The FTSE 100 company, which provides financial, HR and payroll software for small and medium-sized enterprises, said statutory operating profit had risen 43 per cent in the year to the end of September to £452mn as it posted organic revenue growth of 9 per cent.
Chief executive Steve Hare told the Financial Times that Sage was delivering “consistent growth in both revenue and profits” and “continuing to invest heavily in innovation”.
He added that SMEs “remain resilient, despite the ongoing macroeconomic uncertainty”.
Free cash flow increased 30 per cent to £524mn, which the company said was supported by underlying cash conversion of 123 per cent “reflecting growth in subscription revenue and continued good working capital management”.
Shares in the company rose 19 per cent in early trading in London.
Hare said key drivers of the increases in revenue, profits and cash flow were the acquisition of new customers and existing customers purchasing more products and services, with North America its fastest-growing region.
“The US tends to be a pretty buoyant place for small, mid-sized businesses,” added Hare, who has been in the top job since 2018. “It’s a very big market so you tend to have customers who can build pretty big businesses without needing to export outside the US market because the US is so big.”
Sage Intacct, a financial software package, is a key growth driver for the company, which in 2017 acquired Intacct, a provider of cloud financial management in North America, for £654mn. The group is also continuing to roll out its generative AI assistant, Sage Copilot.
The jump in statutory operating profit reflected strong growth in underlying operating profit, lower merger and acquisition-related expenses and the non-recurrence of prior year restructuring charges, it added.
Sage also proposed a final dividend of 13.5p, increasing its full-year dividend by 6 per cent to 20.45p.
The share buyback programme of up to £400mn will start from Wednesday. Sage said the move was consistent with its “disciplined capital allocation policy”, and reflected the board’s confidence in the technology group’s future prospects, “strong” cash generation and “robust” financial position.
The FTSE 100 company said it expected organic revenue growth in its 2025 financial year to be 9 per cent or higher and that operating margins were expected to “trend upwards” this year and beyond as it focuses on “efficiently scaling the group”.
Analysts at Citi said in a note that there had been “persistent fear of further growth deceleration” among investors and that they expected “steady growth dynamics and solid operating execution to be seen favourably”.
Hare said he hoped Newcastle-based Sage’s annual results would create “a bit of a halo effect” around UK-based technology companies.
“We’re a global business,” he told the FT. “We have no problem getting access to capital. We have no problem recruiting people we need and in fact we also have no problem attracting US investors.”
British microcomputer maker Raspberry Pi listed in London in June, providing a boost for technology stocks in the UK market. The initial public offering followed US private equity firm Thoma Bravo agreeing in April to take London-listed cyber security group Darktrace private.
https://www.ft.com/content/3cf28736-7255-4675-8e6c-045e5cdd289d
