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I've sold today, having built up s take in the low 600's almost a year ago , and despite a good product ,well marketed and well supported,I have been somewhat amazed at the SP rise since then .My decision is primarily because I am risk averse and profit -oriented and feel that with a P/E of somewhere between 30 and 40 and a MC of almost £10 bill, the SP has got a good bit ahead of reality. I expect good figures for this year and excellent progress to be maintained but cannot see justification for significant SP rises from here. If I leave profits on the table then so be it , I wish continued holders good luck.
The penetration into the US market looks like the most exciting thing in the Q3 report. US seems to be the most buoyant and dynamic economy right now, and plenty of room for growth if the product is right.
Q3 nine month update today. Growth is continuing and on-track for FY23 of 10% growth overall. No impact seen from macro-economic factors - interest rates/inflation.
The renewal rate is 101% consistent with past 18 months indicating a stable competitive environment.
Looking beneath the headline numbers - there are some positive growth drivers building momentum. Intacct US growth 30% and >40% in new territories - albeit from a low base. The launch in Europe has started well and I note Q3 growth was 7% up from 3% at 1H. The Sage Business Cloud organic growth at 28%.
Margins are targeted to rise - with 20.8% for FY23 and to continue widening thereafter. The aim is for SGE to be a 'Rule of 40' SaaS business.
In recent years, Rule of 40 has gained widespread usage as a yard-stick target measure of growth by investors in SaaS firms, first coined by Brad Feld. The Rule of 40 states that if a company's revenue growth rate is added to its profit margin, the total should exceed 40%. No breakdown offered on the mix today - and it'd be very interesting to know what their thoughts are?
The rationale is ofc that a SaaS Rule of 40 firm will command a premium rating, but again not stated, and on a p/e of 27 as mentioned above SGE is already considered highly valued in the context of the UK market.
"For the nine months ended June 30, the ... business reported total revenue of GBP1.63 billion, up 10%"
double digit growth is pretty impressive, they are doing something right
Small.
Sage hit a 23 year high today, after an upgrade by JP Morgan.
The highest ever closing price was £9.3074 in Feb 2000, but there was a 77 for 81 consolidation in 2013, which made the SP artificially higher thereafter. Adjusting for that makes the equivalent all time high about £9.79
Spot on Maddox. Pretty bouyant. Remarkably, the all time high occurred more than 23 years ago, during the dotcom boom: £9.3074 (Feb 9th 2000) - are we nearly there yet?
Can anyone explain why this is trading at around 33x earnings and with a not so great balance sheet?
The market is truly corrupt and has its favourites.
That's tough OWLS, seems like you bought near the all time high. What could possibly go wrong, eh? At least you recouped most of your losses, plus a decent dividend. You may have got out a bit early, but probably just happy to see the back of this one for now (:
Reading the runes - a few indications that SGE's business transformation is largely complete. The presentation of accounts has been revamped to give 'greater emphasis to underlying revenue and profit measures'. Accompanying this, the cloud-based SaaS firm supporting small and mid-sized company's digitisation needs has had a face-lift with a jazzy new branding, sports sponsorships and a load more awareness building advertising.
Then looking at the rns history there has been some chunky insider share purchases indicating internal confidence in the outlook.
My crystal ball is telling me to expect an up-beat set of results and outlook.
Bought here a year ago based on momentum.
It has been a disappointment with a 10% loss but you can't win them all.
Key points :
The last couple of years have been about positioning for the migration to a cloud-based service(provided by the Microsoft Azure product- for which incidentally one of my kids was until recently a consultant seller ). The major costs incurred by the transitioning planning/execution are behind us and the migration is going very well.
Market rationalisation (ie exiting some low-growth markets, is almost complete) and the focus on English-speaking markets is providing rapid, profitable growth - North America up 40%, that market is less affected by oil costs and is a tight labour market and rapidly growing labour cost hence the need for automation of systems. Sage expect continued good progress.Also growing strongly in France and Germany
In response to questions, no recent drop off in growth, the last four quarters all ~3.5% - 4%
Forward guidance strong, and many customers now cloud-based are enquiring about additional services. Many SMB's with manual systems seeking to automate to cut rapidly growing labour costs.
The atmosphere was very positive from both company and analysts , IMV another year (or more ) of strong growth in prospect, forward guidance unchanged, expect a number of analysts upgrades, I will be adding.
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?