Sage Group FY23 Financial Results: Strong performance driven by consistent strategic execution

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Steve Hare, Chief Executive Officer, commented:

“Sage performed well in FY23, delivering double-digit revenue growth, increased profitability and strong cash flows. We sustained good momentum throughout the year in all regions, driven by consistent strategic execution.

“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.”

Underlying Financial APMs[1] FY23 FY22[2] 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 Margin 20.9% 19.5% +1.4 ppts +2.2 ppts
EBITDA £553m £477m +16%
     % EBITDA Margin 25.3% 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 Margin 14.4% 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.

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.

[1] See Appendix 1 for full definitions and guidance on the usage of the Alternative Performance Measures.

[2] To aid comparability, underlying and organic measures for the prior period have been retranslated at current period exchange rates, while organic measures also adjust for the impact of acquisitions and disposals. A reconciliation of underlying and organic measures to statutory measures is set out on pages 6 and 9.

All references to revenue, profit and margin are on an underlying basis unless otherwise stated.