Sage Group profits fall as margins are squeezed

Software company Sage Group said annual operating profits fell 10% as margins were squeezed.

The company on Wednesday said organic operating profit for the year to September 30 fell to £343m as margins decreased to 19.3% from 22% a year ago, but still in line with guidance.

Organic recurring revenue rose 5.4%, slightly ahead of a market consensus of 5.2%, driven by growth in Sage Business Cloud of 19%.

"Having reshaped and invested significantly in the group over the last three years, we are now focused on growing the business in absolute terms, both organically and through acquisitions," said chief executive Steve Hare.

“We expect to achieve organic recurring revenue growth in the region of 8% to 9% in full-year 2022, driven by continuing strength in Sage Business Cloud, and in cloud native revenues in particular.”

“We also expect other revenue (SSRS & processing) to continue to decline, in line with our strategy. Consistent with previous guidance, organic operating margin is expected to trend upwards in FY22 and beyond, as we now focus on scaling the group.”