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Decent final dividend of 12. 1p and the shorters are on the run. Big increase in debt for acquisitions, looks like Sage are in a growth spurt building up customer base, recurring revenue and margins. Underlying position looks promising
I've just come off this morning's call and it was strikingly positive, as borne out by today's SP bounce. Got stuff to do but will post some details later, all in all very good set of results and very positive forward guidance.
Results and outlook might not be stellar but still pretty good. Subscription model (aside for Netflix) should be defensive against inflation.
Results 1H22 - Strong underlying performance, as always, masked by the transformation, planned wind-down of services revenue and disposals (removing revenue). The tone is increasingly confident with a rebranding and relaunch of the Sage Brand.
So, looking through the statutory numbers to underlying performance the highlights are:
>> Organic Revenue up 5%
>> Organic Recurring Revenue up 8% (Annualised Recurring Revenue(ARR) up 10%)
>> Subscription penetration 74% (68%)
>> Business Cloud penetration 72% (65%)
>> Renewal by value 100% (97%)
>> Underlying cash conversion 120%
>> Underlying Op Margin 19.6 (20.4%)
The Op Margin reflects increased marketing spend and product development with the guidance that it will widen again in H2.
The key positives are the new customer acquisition (+£150m of ARR) driven by the Cloud Native products up 43% (ARR). Of this new customers comprised 75% and re-activations of 25% with Intacct again the star product delivering +31% recurring revenue in the competitive North American Market.
They have finally completed the disposal programme and the declining legacy services revenue is becoming less significant - so the optics should start to improve. Clearly, the global economic outlook isn't looking good but the trend to digitisation and Sage's resilience suggests they will continue to progress. The re-instatement of the progressive dividend policy should help support the share price.
Technology stocks have struggled recently, hopefully that will change.
Generally the SP spent all of last year rising and all of this year falling. The falls started before the trading update, so maybe that wasn't the main cause. They looked pretty good, certainly a huge improvement on last years, when the falls seemed to be down to tactically reduced margins. A couple of brokers had targets of £9 or more fairly recently, and most are above £7. Maybe the falls should be attributed more to the bond issue - the assumption of a large new chunk of debt - or worries over the US economy?
Mary previously did some good trading on dips, based on careful attention to the trading range, which established a loose pattern for a while. Risky, quite a lot of work, but fun if you are good at it. Mary is, so hopefully she gets another opportunity if this starts yo-yo-ing again.
I didn't say that I didn't like it, I said the market didn't like it.
I don't have any opion, all my investing is based on momentum, I don't bother trying to understand the individual companies I invest in. There's nothing I could find that the market isn't aware of.
OWLS could you be a bit more specific, what exactly you didn't like as it seems reasonable results and future growth
What was your take may I ask
Did you not know there was a trading update ? Obviously the market didn't like it.
@MaryBr190 Thanks a lot
Perspective, the same thing happened last year and down down down to 556. Got caught on the first entry and then topped up on the falls and traded to a great return.
Hard to call buy low £6 I am a buyer but the falls could be the same or greater.
I never got the £8.50p but from 570 got towards £8 although redced on way up.
I will watch and wait for it to settle.
I read every post/ news.... why is dropping? I can't find anything to trigger such drop and a sell rating. What it is going on? Any thoughts?
TECH STRIKES BACK! (0849 GMT)
Quite a spectacular rebound for European tech stocks this
morning!
The sector's index is up well over 2% about 30 minutes after
the opening bell, which suggests many traders believe
yesterday's retreat was somewhat overdone.
I have bought in here based on good recent momentum.
Sage today reporting 1.1bn shares in issue, after cancelling 0.02bn which were held in treasury (where bought back shares go). With 0.076bn left in treasury, they give the current total voting shares at 1.024bn, slightly higher than the LSE figure.
If they have funds to buy back another 24 million, they can get that voting total down to a nice round number ( :
"770 an easy target in the next week or so" - Darren, a week ago.
What's it doing next week Darren? Lottery numbers? ( :
Closed another short just now at 81 from 801. Will rinse and repeat if get opportunity. Anything above 800 I think is a sell.
But to be honest only got 9 pips which is less than I hoped for. Triple witching today so trying to sit this one out although am tempted to try again at 803.... I think it needs a retest of 740 before it can go much higher personally.
Mr Market seems to have liked the results, with the shares up to 790p as I post.
The top-line figs always look a bit mixed on a first look - as the business transitions into a cloud-based SaaS business. The decline in old-style licencing revenue and activities masks some highly positive growth particularly in H2. This momentum is anticipated to continue into the current year, so the outlook is positive.
A few highlights:
Annual Recurring Revenue +8%
Cloud Native Products +44%
Renewals by Value 99% (H2 c.101%) this is without any price increases.
Cash conversion 126% - driven by the move to subscriptions.
The star in Sage's product portfolio is Intacct aimed at medium-sided firms. In North America (USA and Canada) it's driving recurring revenue growth of 22% primarily through new customer acquisition. This is excellent performance in what is seen as Sage's competitively toughest market. Intacct is only just being rolled-out into other markets - if it can replicate the NA performance geographically it should have a big impact. Currently, 50% of Sage's revenue comes from the medium-sized business sector. So, something to keep an eye on.
With Sage Business Cloud penetration up to 67% from 60% last fin year the transition still has some way to go. However, the bright and shinny Cloud-based SaaS business is becoming more apparent and a very attractive business it's shaping up to be.
Regards Maddox
Jeffries upped their target price to £9 today, but Darren's short seems smarter in the "short" term. Well timed, sir!
Worth noting that Sage are in the middle of yet another round of share buybacks. Still over a billion in issue though!
Goldman Sachs downgrade a couple of months ago looking somewhat embarrassing! The results could arguably be interpreted as unimpressive in isolation, but it's the way the company is positioned for a phase of strong growth which is attracting buyers. It was unusual to see the price rising all day, rather than the typical surge and fade.
Am short from 800.4 at close. Think this has gone up way too much on what was not amazing news. Might be wrong but I see 770 an easy target in the next week or so. Let's see.
Really good news on share price