20th Nov 2020 08:34
(Alliance News) - Sage Group PLC on Friday posted a rise in profits for financial 2020 despite a slight reduction in revenue as it forecast an improvement in its earnings for the year ahead.
Shares in the FTSE 100 accounting software firm were trading 10% lower at 611.80 pence each on Friday morning in London.
For its financial year ended September 30, Sage reported pretax profit of GBP310 million, up 17% from GBP266 million recorded the year prior. This was despite statutory revenue falling 1.7% year-on-year to GBP1.90 billion from GBP1.94 billion, as income from the SSRS and processing units declined by 26% to GBP176 million.
SSRS refers to software and software related services, including training and implementation.
On an organic basis, revenue was up 3.7% to GBP1.77 billion. Organic recurring revenue rose 8.5% to GBP1.59 billion, underpinned by a 21% rise in software subscription revenue to GBP1.14 billion, which was driven by customer growth especially in North America and Northern Europe, Sage said.
A final dividend of 11.32p was declared, taking its full year dividend to 17.25p, a 2.0% increase from 16.91p paid the year prior.
Looking to the new financial year, Sage said it expects organic recurring revenue growth to be around 3% to 5%, weighted towards the second half.
"We also expect other revenue (SSRS and processing) to continue to decline, in line with our strategy. Organic operating margin is expected to be up to three percentage points below financial 2020, depending on the level of additional investment we make during the year," the firm added.
The Newcastle-upon-Tyne-based company said Sage Business Cloud adoption and growth will remain its "key objective" this coming financial year and beyond, adding it intends to increase its investment in sales and marketing and product development. This is expected to result in a planned reduction in organic operating margin of up to three percentage points.
Beyond the 2021 financial year, though, Sage expects margins to trend upwards "over time".
Chief Executive Steve Hare said: "We've delivered a strong performance in financial 2020, achieving recurring revenue growth in line with the guidance we gave at the beginning of the year, despite the Covid-19 pandemic. I am confident that our additional investment in Sage Business Cloud, and in particular cloud native solutions, will deliver stronger growth and drive the future success of the group."
Cash held as at September-end was GBP831 million, up from GBP371 million on September 30,2019.
By Ife Taiwo; [email protected]
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