Sage Group Share News (SGE)

(Sharecast News) - Sage Group has reported solid full-year growth on Wednesday, driven by the execution of its subscription-based recurring revenue model and disciplined cost management.

The FTSE 100 software company said annualised recurring revenue (ARR) rose 11% to £2.34bn, while underlying total revenue also increased, by 9% to £2.33bn.

Its underlying operating profit surged 21% to £529m, boosting the operating profit margin by 2.2 percentage points to 22.7%.

EBITDA grew 16% to £622m, with its margin rising to 26.6%.

Statutory measures also demonstrated strength, with operating profit jumping 43% to £452m and basic earnings per share increasing 55% to 32.1p.

Free cash flow increased 30% to £524m, underpinned by subscription revenue growth and strong working capital management.

Sage also highlighted its balance sheet, with £1.1bn in liquidity and net debt-to-EBITDA at a manageable 1.2x.

Reflecting confidence in its financial position, Sage announced a share buyback programme of up to £400m and a 6% increase in the full-year dividend to 20.45p per share.

Strategically, Sage said it continued to expand its cloud offerings, with Sage Business Cloud revenue growing 16% to £1.87bn, including a 23% rise in cloud-native revenues.

Subscription penetration rose to 82%, and the company reported a renewal rate by value of 101%, underscoring strong customer retention.

Looking ahead, Sage forecasted organic total revenue growth of 9% or higher for 2025, with operating margins expected to continue trending upwards as the company scales efficiently.

"Sage has delivered another successful year, achieving strong, broad-based revenue growth together with significantly higher profits and cash flows," said chief executive officer Steve Hare.

"We also invested further in our products and continued to execute well against our strategic priorities.

"Our high pace of innovation continues, as we enhance existing products and expand key cloud solutions throughout our markets."

Hare said the 'Sage Network' platform was enabling the company to accelerate the delivery of new services, adding that it made good progress with Sage Copilot, its generative AI-based digital assistant, now integrated with selected products across its portfolio.

"Small and mid-sized businesses remain resilient, despite the ongoing macroeconomic uncertainty, and they continue to choose Sage to help them become more productive and efficient.

"Building on our progress to date, we look forward to delivering further sustainable growth in the year ahead."

Reporting by Josh White for Sharecast.com.