“Sage Africa and Middle East have shown impressive performance in the financial year, building on the strong momentum established in the first half of FY23. Our focus on helping small and mid-sized businesses enhance their productivity and resilience has resulted in sustainable and efficient growth for our business. We are proud to report a significant increase in revenue, with an overall growth of 12%, along with notable growth of 13.9% in Recurring Revenue (RR). Our success in gaining new clients, migrating clients from on-premises software to cloud native solutions, and encouraging renewals among our expanding cloud user base is demonstrated by a 39.1% increase in cloud native ARR. These results reflect Sage’s unwavering commitment to innovation and customer satisfaction, as well as our ability to adapt to the evolving needs of our customers. We remain dedicated to breaking down barriers for SMB success across the region, empowering them to be resilient and productive in the face of challenges,” said Pieter Bensch, Executive Vice President, of Sage Africa and Middle East.
“Our cloud native and cloud connected solutions empower businesses with increased productivity, resilience, and flexibility. Through continuous innovation, we enhance our network of applications and services, fostering customer connection, collaboration, and streamlined business operations. Embracing cutting-edge technologies like artificial intelligence (AI), machine learning (ML), and robotic process automation (RPA), among others, remain central to our innovation efforts on behalf of SMBs worldwide. We strive to elevate human work, liberating business owners from repetitive tasks and facilitating higher-value contributions. Moreover, our expanding digital network is pivotal in propelling digital transformation, solidifying our position as the accounting, financial, HR and payroll technology leader for SMBs.
Underlying Financial APMs[i]
FY23
FY22[ii]
Change
Organic
Change
Annualised Recurring Revenue (ARR)
£2,188m
£1,964m
+11%
+11%
Underlying Total Revenue
£2,184m
£1,982m
+10%
+10%
Underlying Recurring Revenue
£2,096m
£1,875m
+12%
+11%
Underlying Operating Profit
£456m
£386m
+18%
+22%
% Operating Profit Margin20.9%
19.5%
+1.4 ppts
+2.2 ppts
EBITDA
£553m
£477m
+16%
% EBITDA Margin25.3%
24.1%
+1.2 ppts
Underlying Basic EPS (p)
32.3p
26.4p
+22%
Underlying Cash Conversion
116%
107%
+9 ppts
Statutory Measures
FY23
FY22
Change
Revenue
£2,184m
£1,947m
+12%
Operating Profit
£315m
£367m
-14%
% Operating Profit Margin14.4%
18.9%
-4.5 ppts
Basic EPS (p)
20.7p
25.5p
-19%
Dividend Per Share (p)
19.3p
18.4p
+5%
Please note that tables may not cast and change percentages may not calculate precisely due to rounding.
Steve Hare, Chief Executive Officer, commented:
“We continue to help small and mid-sized businesses succeed, providing them with the tools and expertise they need to simplify their accounting and HR processes, streamline their operations, and make more informed business decisions. Through the Sage Network, we are delivering innovative, AI-powered services to customers, faster and more efficiently than ever before.
“Small and mid-sized businesses are continuing to digitalise, despite the macroeconomic uncertainty. We are building a resilient platform to deliver sustained, efficient growth, and I am confident that Sage is well positioned to take advantage of the market opportunity in 2024 and beyond.”
Financial highlights
· Underlying recurring revenue increased by 12% to £2,096m, underpinned by Sage Business Cloud growth of 25% to £1,628m. Underlying total revenue increased by 10% to £2,184m.
· Underlying operating profit grew by 18% to £456m, with margin increasing by 140 bps to 20.9% driven by operating efficiencies as we scale the Group.
· EBITDA increased by 16% to £553m, with margin increasing by 120 bps to 25.3%.
· Statutory operating profit decreased by 14% to £315m, including one-off gains on business disposals in FY22, together with property restructuring and M&A-related charges in FY23.
· Underlying basic EPS increased by 22% to 32.3p.
· Strong underlying cash conversion of 116% reflecting growth in subscription revenue and continued good working capital management.
· Robust balance sheet, with £1.3bn of cash and available liquidity and net debt to EBITDA of 1.0x.
Shareholder returns
· Proposed final dividend of 12.75p, increasing the full year dividend by 5% to 19.3p, in line with our progressive policy.
· Share buyback programme of up to £350m announced separately this morning, reflecting the Board’s confidence in Sage’s future prospects, together with Sage’s strong cash generation and robust financial position.
Strategic and operational highlights
· Underlying annualised recurring revenue (ARR) up 11% to £2,188m, reflecting broad-based growth across all regions balanced between new and existing customers.
· £190m of ARR added through new customer acquisition on an organic basis, up from £180m in FY22.
· Cloud native ARR up 28% to £684m (FY22: £534m), driven largely by new customers, with a continued strong performance from Sage Intacct.
· Renewal rate by value of 102% (FY22: 101%), ahead of last year, reflecting increased sales to existing customers and good retention rates.
· Sage Business Cloud penetration of 84% (FY22: 75%), enabling more customers to connect to Sage’s cloud services and ecosystem via the Sage Network.
· Subscription penetration of 79% (FY22: 75%), reflecting continued growth from subscription contracts.
· Strong strategic progress including further growth in global cloud solutions across our markets, with continued investment in innovation complemented by the acquisitions of Spherics and Corecon.
Outlook
Sage enters FY24 with good momentum driven by consistent strategic execution. Looking ahead, we expect organic total revenue growth in FY24 to be broadly in line with FY23. Operating margins are expected to trend upwards in FY24 and beyond, as we focus on efficiently scaling the Group.
