Accountancy and enterprise software firm Sage’s (SGE) slow start to the year to 31 September 2018 is clearly annoying investors. Shares in the FTSE 100 company (one of only two tech firms in the blue-chip index) top the Footsie loser board in early trade on Wednesday, sliding 6% to 772.2p.
With first quarter organic revenue up 6.3% performance is largely in line with management guidance, although it’s behind the 8% being targeted for the full year.
UPS & DOWNS
The operational side of the business continues trends seen through 2017 with a rise in organic recurring revenue of 7%, which includes good subscription growth of 26%.
On the down side, France remains soggy and the company continues to work against exchange rate headwinds (dollar/euro).
The story to watch through 2018 is the company’s launch of Sage Business Cloud, which brings together several Cloud-enabled product suites under a single roof. This is evidenced by the strong performance in the US (although no metrics are given) where Sage Business Cloud is already up and running and clearly bringing home the bacon.
Sage is hosting a capital markets day on Thursday 25 January, where it hopes to press home its Sage Business Cloud plans with the City.
ANALYSTS STICK WITH FORECASTS
Analysts largely remain sanguine post today’s update.
Shore Capital is currently forecasting full year September 2018 adjusted pre-tax profit of £490m (up 11%) and 33.4p per share of earnings, with a 17p per share dividend (2.2% yield).
Shore Capital continues to believe that its 24-times price to earnings multiple and 925p share price target ‘does not feel like a stretch’, though it is predicated on acceleration of organic revenue growth.
Stifel analysts also leave estimates unchanged.
‘Like last year growth is second half weighted with an acceleration in growth from the second quarter - again all as expected,’ says Stifel analyst George O’Connor today.
Sage remains one of Shares top picks for 2018, and you can read our reasoning here.
