Sage boosts investor confidence with £400m share buyback programme
Shares surge as the company reports strong earnings
Sage Group shares surge to a record high after better-than-expected earnings and a share buyback announcement.
Sage Group, a leading provider of financial, HR, and payroll software for small and medium-sized enterprises (SMEs) saw its shares surge to a record high on Wednesday after reporting better-than-expected earnings and a significant share buyback announcement.
The company reported a 43% increase in statutory operating profit to £452 million for the year ended 30th September, driven by a 9% growth in revenue to £2.3 billion.
Underlying operating profit increased 21% to £529 million.
The company attributed the robust performance to a combination of factors, including new customer acquisitions, increased product and service uptake from existing customers, and strong growth in the North American market.
"The US tends to be a pretty buoyant place for small, mid-sized businesses," Chief executive Steve Hare told the Financial Times.
"It's a very big market so you tend to have customers who can build pretty big businesses without needing to export outside the US market because the US is so big."
Sage posted a 30% increase in free cash flow to £524 million.
It has also announced a £400 million share buyback programme, reflecting its confidence in future growth and strong financial position.
The share buyback, which will be executed through brokers J.P. Morgan Securities and Morgan Stanley & Co. International, commenced on 20th November 2024, and will conclude no later than 3rd June 2025.
"The share buyback programme is consistent with the group's disciplined capital allocation policy, and reflects the board's confidence in Sage's future prospects, together with Sage's strong cash generation and robust financial position," the company said in a notice to the London Stock Exchange.
Sage increased its full-year dividend by 6% to 20.45p per share.
Hare expressed satisfaction with the company's performance, stressing its commitment to innovation, particularly in the areas of cloud solutions and AI-powered tools like Sage Copilot.
He also highlighted the success of Sage Intacct, a cloud-based financial management solution, as well as the continued reliance of SMBs on Sage's solutions to improve productivity and efficiency.
"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," the company said.
Analysts at Citi welcomed the results, noting that they alleviate concerns about potential growth deceleration. They believe that Sage's solid operating execution and steady growth dynamics will be well-received by investors.
Hare expressed hope that Sage's strong performance would contribute to a positive sentiment towards UK-based technology companies.
"We're a global business," he told the FT.
"We have no problem getting access to capital. We have no problem recruiting people we need and, in fact, we also have no problem attracting US investors."
The recent listings of Raspberry Pi and the acquisition of Darktrace by Thoma Bravo are further indications of the growing momentum in the UK tech sector.