Sage Group shares fall on guidance downgrade

Sage Group shares were well into the red on Thursday morning, despite reporting a robust first-half performance, as the company downgraded its guidance.

The FTSE 100 software company said it now expected organic total revenue growth for the 2024 financial year to be broadly in line with the approximately 9% seen in the first half.

For the six months ended 31 March, pre-tax profit rose to £203m from £139m a year earlier.

Adjusted operating profit reached £254m, exceeding consensus estimates.

Revenue advanced 10% to £1.15bn, which was slightly below consensus forecasts, while underlying annualised recurring revenue advanced 11% to £2.25bn.

The renewal rate by value stood at 102%, surpassing the previous year's rate due to increased sales to existing customers and strong retention rates.

Sage Business Cloud revenue increased 18% to £915m, including 25% growth in cloud native revenue to £353m.

Subscription penetration rose to 81%, driven by a 14% growth in subscription revenue to £937m.

Strategically, Sage said it expanded its global cloud solutions and deepened vertical-specific capabilities in the period, further strengthened by the acquisition of Bridgetown Software.

The company also noted the introduction of new AI-powered products and services such as Sage Copilot, a generative AI-powered digital assistant, although it provided no comment on its performance.

The board proposed an interim dividend of 6.95p per share, compared to 6.55p a year earlier.

“Sage performed well in the first half of the year, delivering broad-based revenue growth and significant margin expansion,” said chief executive officer Steve Hare.

“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.”

Hare said the company was continuing to introduce new AI-powered products and services to 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.”

At 0835 BST, shares in the Sage Group were down 11.51% at 1,059.72p.

Reporting by Josh White for Sharecast.com.