Sage Group plc (LON:SGE) has announced its results for the six months to 31 March 2024 (unaudited).
Steve Hare, Sage Group Chief Executive Officer, commented:
“Sage performed well in the first half of the year, delivering broad-based revenue growth and significant margin expansion. Demand for our solutions remains robust, with small and mid-sized businesses continuing to trust Sage to automate their accounting, HR and payroll workflows.
“We are resolutely focused on innovation, as both a source of near-term competitive advantage and a foundation for our long-term success. We continue to introduce new AI-powered products and services that deliver enhanced productivity and insights, driving value for both existing and new customers.
“As we look forward, despite the ongoing macroeconomic uncertainty, I am confident that Sage’s proven strategy, underpinned by continued investment, will enable us to deliver further efficient growth.”
| Underlying Financial APMs[1] | H1 24 | H1 23[2] | Change | OrganicChange |
| Annualised Recurring Revenue (ARR) | £2,253m | £2,034m | +11% | +11% |
| Underlying Total Revenue | £1,152m | £1,052m | +10% | +9% |
| Underlying Operating Profit | £254m | £215m | +18% | +18% |
| % Operating Profit Margin | 22.0% | 20.4% | +1.6 ppts | +1.6 ppts |
| EBITDA | £299m | £262m | +14% | |
| % EBITDA Margin | 25.9% | 24.9% | +1.0 ppts | |
| Underlying Basic EPS (p) | 18.2p | 14.8p | +23% | |
| Underlying Cash Conversion | 127% | 117% | +10 ppts | |
| Statutory Measures | H1 24 | H1 23 | Change | |
| Revenue | £1,152m | £1,087m | +6% | |
| Operating Profit | £215m | £157m | +38% | |
| % Operating Profit Margin | 18.7% | 14.4% | +4.3 ppts | |
| Basic EPS (p) | 15.3p | 9.8p | +57% | |
| Dividend Per Share (p) | 6.95p | 6.55p | +6% |
Please note that tables may not cast and change percentages may not calculate precisely due to rounding.
Financial highlights
· Underlying total revenue increased by 10% to £1,152m, reflecting continued robust demand for our solutions and services.
· Underlying operating profit increased by 18% to £254m, with margin increasing by 160 basis points to 22.0% driven by operating efficiencies as we scale the business.
· EBITDA increased by 14% to £299m, with margin increasing by 100 basis points to 25.9%.
· Statutory operating profit increased by 38% to £215m reflecting growth in underlying operating profit together with lower restructuring and M&A-related charges.
· Underlying basic EPS increased by 23% to 18.2p.
· Strong underlying cash conversion of 127%, reflecting continued growth in subscription revenue and good working capital management.
· Robust balance sheet, with £1.1bn of cash and available liquidity, and net debt to EBITDA of 1.4x.
· Interim dividend up 6% to 6.95p, in line with our progressive policy.
Strategic and operational highlights
· Underlying annualised recurring revenue (ARR) up 11% to £2,253m, reflecting growth across all regions balanced between new and existing customers.
· Renewal rate by value of 102%, ahead of last year (H1 23: 101%), reflecting increased sales to existing customers and continued good retention rates.
· Sage Business Cloud revenue increased by 18% to £915m (H1 23: £777m), including cloud native revenue growth of 25% to £353m (H1 23: £283m).
· Subscription penetration increased to 81% (H1 23: 79%) driven by growth in subscription revenue of 14% to £937m (H1 23: £826m).
· Strong strategic progress as we further expand our global cloud solutions across the Group and deepen our vertical-specific capabilities, complemented by the acquisition of Bridgetown Software.
· We continue to scale the Sage Network to power innovative features and services, including the recent introduction of Sage Copilot, our generative AI-powered digital assistant.
Outlook
Looking ahead, we expect organic total revenue growth for full year FY24 to be broadly in line with the first half. We continue to expect operating margins to trend upwards in FY24 and beyond, as we focus on efficiently scaling the Sage Group.
