Finance and payroll software firm Sage (SGE) pleased investors not just with its better-than-expected annual results but with a surprise share buyback on top of the raised dividend.

Sage shares topped the FTSE 100 leader board with an advance of 8% to a new lifetime high of £10.76.

STRONG ORGANIC GROWTH

For the year to the end of September, the Newcastle-upon-Tyne based company posted ARR (annualized recurring revenue) of £2.19 billion, an increase of 11% both on a headline and an organic basis as there were no acquisitions during the period.

Underlying operating profit increased 22% on like-for-like basis to £456 million thanks to cost efficiencies as the group scales up, taking the operating margin to 20.9% against 19.5% in 2022.

Underlying EPS (earnings per share) rose 22% to 32.3p and the final dividend of 12.75p per share takes the full-year payout to 19.3p, a 5% increase on last year.

‘We sustained good momentum throughout the year in all regions, driven by consistent strategic execution’, commented chief executive Steve Hare.

‘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.

‘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’, added Hare.

The cherry on top for investors was the news of a share buyback for up to £350 million on the back of the firm’s strong cash flow generation and the board’s confidence in the outlook.

GOOD NEWS FOR LINDSELL TRAIN

Among the largest investors in Sage is Lindsell Train, which holds the shares in its UK Equity Fund (B18B9X7) as well as investment trust Finsbury Growth & Income (FGT).

Today’s news and the pop in the shares will come as a relief after poor performances from some other top 10 holdings such as luxury goods firm Burberry (BRBY) and spirits maker Diageo (DGE) and recent volatility in data provider Experian (EXPN).

Manager Nick Train has described data as ‘the new oil’ and has clearly oriented both funds towards firms which are rich in producing data.

‘We sense that global investors are looking for owners of globally relevant and unique data and, despite warranted caution about the UK market, are finding candidates in London. I hope so’, offered Train in his September fund commentaries.

LEARN MORE ABOUT SAGE

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